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Item 1A. Risk Factors

In evaluating the Company’s business, you should consider the following discussion of risk factors, in addition to other information contained in this report and in the Company’s other public filings with the U.S. Securities and Exchange Commission. Any such risks could materially and adversely affect our business, results of operations, cash flow, financial condition, liquidity and prospects. However, the risks described below are not the only risks facing us. Our business operations could also be affected by additional factors that apply to all companies operating in the U.S. and globally. Additional risks and uncertainties not currently known to us or those we currently view to be immaterial may also materially and adversely affect our business, financial condition, results of operations, cash flow and prospects.

External Factors that Could Adversely Affect Us

Our financial performance is dependent on international operations, which exposes us to various risks.

Our international operations account for nearly all of our total revenues. Our financial performance is subject to risks inherent in operating and expanding our international membership warehouse club business, which include:

•changes in, and inconsistent enforcement of, laws and regulations, including those related to tariffs and taxes;

•the imposition of foreign and domestic governmental controls, including expropriation risks;

•natural disasters;

•trade restrictions, including import-export quotas and general restrictions on importation;

•difficulty and costs associated with international sales and the administration of an international merchandising business;

•crime and security concerns that can adversely affect the economies of the countries in which we operate and which require us to incur additional costs to provide additional security at our warehouse clubs;

•political instability, such as anti-government protests in Panama and Guatemala in 2023 and civil unrest in Colombia in 2022 and 2021;

•product registration, permitting and regulatory compliance;

•volatility in foreign currency exchange rates;

•limitations on our ability to convert foreign currencies;

•general economic and business conditions;

•pandemics; and

•interruption of our supply chain.

These risks may result in disruption to our sales, banking transactions, operations and merchandise shipments, any of which could have a material adverse effect on our business and results of operations. For example, the Colombian peso exchange rate with the U.S. dollar devalued approximately 15% on average throughout fiscal year 2023 compared to fiscal year 2022, reducing our U.S. dollar value of sales and negatively affecting overall demand for our merchandise in Colombia during that year. In order to mitigate the significant price increase to our Members that would be required to maintain our target margins, we absorbed the increase in the costs of goods resulting from the devaluation and we took pricing actions on certain product categories that reduced our Total gross margin during that period until the exchange rate normalized and we were able to return to a more normalized margin profit. However, if the Colombia peso were to weaken again and we were to again absorb the costs of the devaluation or take pricing actions to lower the cost to our Members to mitigate a decrease in demand, consolidated Total gross margins could be negatively impacted. Fluctuations in exchange rates for foreign currencies have and could continue to reduce the U.S. dollar value of sales, earnings and cash flows we receive from our non-U.S. markets, increase our supply costs (as measured in U.S. dollars) in those markets, negatively impact our competitiveness in those markets or otherwise adversely impact our business results or financial condition.

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Our business depends heavily on the uninterrupted operation of our distribution facilities located in Miami, Florida and San Jose, Costa Rica, our warehouse clubs located in Colombia, Central America and the Caribbean, and our headquarters and buying operations in San Diego, California. Our operations were disrupted by the COVID-19 pandemic and actions government authorities in our markets took to mitigate the spread of COVID-19, including travel restrictions, border closings, restrictions on public gatherings, stay-at-home orders and other quarantine and isolation measures. The pandemic also resulted in delays or difficulty sourcing products and threatened the health of our employees and Members. Pandemics or events of this sort have had, and may have in the future, an adverse effect on our business.

Political and other factors in each of our markets may have significant effects on our business. For example, protestors set up roadblocks in Guatemala in October 2023 general elections. In addition, protestors set up roadblocks in Panama in October and November 2023 disrupting traffic to our clubs throughout most of the market as a reaction to an agreement between the Panamanian government and a mining company. Civil unrest in Colombia paralyzed significant portions of the country’s infrastructure as roadblocks and riots disrupted normal economic activity during the third quarter of fiscal year 2021. Austerity and tax reform measures for Colombia and other Latin American countries with high national debt levels and income disparity pose a risk for political instability.

Negative economic conditions created or exacerbated by inflation, and higher interest rates could adversely impact our business in various respects.

A slowdown in the economies of one or more of the countries in which we operate or adverse changes in economic conditions affecting discretionary consumer spending could adversely affect consumer demand for the products we sell, change the mix of products we sell to a mix with a lower average gross margin, cause a slowdown in discretionary purchases of goods, adversely affect our net sales or result in slower inventory turnover and greater markdowns of inventory.

Sales of food and groceries are especially sensitive to general changes in economic conditions. Economic conditions in our markets can be adversely affected by contractions in financial markets, increased governmental ownership or regulation of the economy, higher interest rates, high rates of inflation or deflation, higher fuel prices, increased barriers to entry such as higher tariffs and taxes, and other macroeconomic factors.

The economic factors that affect our operations may also adversely affect the operations of our suppliers, which can result in an increase in the cost to us of the goods we sell to our customers or, in more extreme cases, in certain suppliers not producing goods in the volume typically available to us.

Our profitability is vulnerable to cost increases.

Future increases in costs, such as the cost of merchandise, wage and benefits costs, shipping rates, freight costs, fuel costs, utilities and other store occupancy costs, may reduce our profitability. We seek to adjust our product sales pricing, operate more efficiently, and increase our comparable store net sales to help offset inflation as well as currency rate changes, changes in tax rates or in the methods used to calculate or collect taxes on our sales or income and other factors that can increase costs. We might not be able to adjust prices, operate more efficiently or increase our comparable store net sales in the future to a great enough extent to offset increased costs. Although we have seen recent inflationary pressures subsiding, substantial product cost increases and commodity price increases have and could continue to impact our financial results and could lead to reduced sales, fewer units sold, and/or margin pressure. Please see Part II. “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations,” of this Form 10-K for further discussion of the effect of currency rate changes, inflation and other economic factors on our operations.

We face significant competition.

Our international warehouse club business competes with exporters, importers, wholesalers, local retailers and trading companies in various international markets. Some of our competitors have greater resources, buying power and name recognition than we have. We also face competition from online retailers who serve our markets, and we expect that this type of competition will grow and intensify in the future.

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In the countries in which we operate, we do not currently face direct competition from membership warehouse club operators. However, we do face competition from various retail formats such as hypermarkets, supermarkets, cash and carry outlets, home improvement centers, electronic retailers and specialty stores, including those within Latin America that are owned and operated by large U.S. and international retailers, including Walmart Inc. in Central America and Grupo Éxito and Cencosud in Colombia. We have noted that certain retailers are making investments in upgrading their locations or opening of new stores which may result in increased competition. Further, it is possible that other warehouse club operators may decide to enter our markets and compete more directly with us in a similar warehouse club format. Our ability to operate profitably in our markets, particularly small markets, may be adversely affected by the existence or entry of competing warehouse clubs or discount retailers.

We compete in a variety of ways, including the value and prices at which we sell our merchandise, merchandise selection and availability, services offered to Members, location, store hours, safety protocols and the shopping convenience and overall shopping experience we offer. We may be required to implement price reductions to remain competitive if any of our competitors reduce prices in any of our markets. In response to the increasing threat associated with online retailers, we are making technology investments, which may result in increases in the use of cash and reduced profitability in the near term.

Our sales could be adversely affected if one or more major international online retailers were to enter our markets or if other competitors were to offer a superior online experience.

Although online sales are currently a smaller proportion of total sales in our markets for the types of merchandise we offer than in the U.S., online shopping is becoming more prevalent in our markets as we and our competitors begin to offer more opportunities for online shopping and as delivery systems in our markets improve. While major international online retailers have not established a significant penetration in any of our markets, AmazonGlobal continues to expand its online marketplace and ships into most of our markets. However, other regional online retailers, such as MercadoLibre, have continued to increase their presence in our markets. In the case of Rappi in Colombia, we have a partnership with them in which our Members can use their platform to place online orders; however, this may not be the case for other online retailers. It is possible that Amazon or other major international retailers will establish a direct presence, or smaller regional companies will increase their penetration of online shopping. In either case, sales through our online platform or warehouse clubs could be adversely affected.

We are exposed to significant weather events and other natural disaster risks that might not be adequately compensated by insurance, and we are susceptible to the long-term impacts of climate change.

Our operations are subject to volatile weather conditions and natural disasters, such as earthquakes, hurricanes and volcanic activity, which are encountered periodically in the regions in which our warehouse clubs and other facilities are located. Natural disasters could result in physical damage to, or the complete loss of, one or more of our properties, the closure of one or more clubs or distribution centers, limitations on store or club operating hours, the lack of an adequate work force in a market, the inability of customers and employees to reach our clubs, the unavailability of our digital platforms to our customers, disruption in the supply of products or increases in the costs of procuring products. For example, in early fiscal year 2018, operations at our USVI warehouse club were adversely affected by Hurricanes Irma and Maria. The warehouse club was closed for nine days, and after re-opening, the warehouse club operated with limited hours for 16 days due to a government-imposed curfew. Damaged and destroyed roads restricted traffic flow, adversely affecting customer access for some time after the hurricane. Future losses from business interruption may not be adequately compensated by insurance and could have a material adverse effect on our business, financial condition, and results of operations.

Furthermore, the long-term impacts of climate change, whether involving physical risks (such as extreme weather conditions, drought, or rising sea levels) or transition risks (such as regulatory or technology changes) are expected to be widespread and unpredictable. Physical risks include extreme storms that damage or destroy our buildings and inventory or interrupt our business operations and supply chain and temperature changes that increase the heating and cooling costs at clubs and distribution and fulfillment centers. We also may experience changes in energy and commodity prices driven by climate change as well as new regulatory requirements resulting in higher compliance risk and operational costs.

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We face difficulties in the shipment of, and risks inherent in the importation of, merchandise to our warehouse clubs.

Our warehouse clubs typically import nearly half or more of the merchandise that they sell. This merchandise originates from various countries and is transported over long distances, over water and over land, which results in:

•substantial lead times needed between the procurement and delivery of products, thus complicating merchandising and inventory controls;

•the possible loss of products due to theft or potential damage to, or destruction of, ships or containers delivering goods;

•product markdowns due to the prohibitive cost of returning merchandise upon importation;

•product registration, tariffs, customs and shipping regulation issues in the locations we ship to and from;

•the possibility of business interruption due to transportation and port strikes;

•ocean freight and duty costs; and

•possible governmental restrictions on the importation of merchandise.

In addition, as a result of COVID-19 and the measures designed to contain the spread of the virus, we faced and may again face delays or difficulty sourcing products, which could negatively affect our business and financial results. Certain of our suppliers had their manufacturing operations disrupted by the coronavirus outbreak and, even when goods had been completed, they often were subject to weeks-long shipping delays. If our third-party suppliers’ operations are curtailed, again, or transportation systems are disrupted, we may need to seek alternate sources of supply, which may be more expensive. If the production and distribution closures were to resume for an extended period of time, the impact on our supply chain could have a material adverse effect on our results of operations and cash flows.

Civil unrest in certain countries in which we operate may adversely affect the flow of goods through those countries. For example, protestors set up roadblocks in Panama during October and November 2023 as a reaction to an agreement between the Panamanian government and a mining company, disrupting traffic to our clubs throughout most of the market. Roadblocks in Guatemala in October 2023 relating to election protests also limited access to certain of our warehouse clubs. Civil unrest in Colombia in response to tax reform and austerity measures paralyzed significant portions of the country’s infrastructure as roadblocks and riots disrupted normal economic activity during the third quarter of fiscal year 2021.

Moreover, each country in which we operate has different governmental rules and regulations regarding the importation of foreign products. Changes to the rules and regulations governing the importation of merchandise may result in additional delays, costs or barriers in our deliveries of products to our warehouse clubs or may affect the type of products we select to import. In addition, only a limited number of transportation companies service our regions. The inability or failure of one or more key transportation companies to provide transportation services to us, any collusion among the transportation companies regarding shipping prices or terms, changes in the regulations that govern shipping tariffs or the importation of products, or any other disruption to our ability to import our merchandise could have a material adverse effect on our business and results of operations.

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We are subject to payment related risks, including risks to the security of payment card information.

We accept payments using an increasing variety of methods, including cash, checks, wire transfers, our co-branded credit cards and a variety of other credit and debit cards. Our operations, like those of most retailers, require the transmission of information associated with cashless payments. As we offer new payment options to our Members, we may be subject to additional rules, regulations and compliance requirements, along with the risk of higher fraud losses. For certain payment methods, we pay interchange and other related card acceptance fees, along with additional transaction processing fees. We rely on third parties to provide secure and reliable payment transaction processing services, including the processing of credit and debit cards, and it could disrupt our business if these companies become unwilling or unable to provide these services to us. We are also subject to payment card association and network operating rules, including data security rules, certification requirements and rules governing electronic funds transfers, which could change over time. If we fail to comply with these rules or transaction processing requirements, we may not be able to accept certain payment methods. In addition, if our internal systems are breached or compromised, we may be liable for banks’ compromised card re-issuance costs, we may be subject to fines and higher transaction fees and lose our ability to accept credit and/or debit card payments from our Members, and our business and operating results could be adversely affected. Failures or disruptions in data communication and transfer services also could significantly impact our ability to transact payments to vendors and process credit and debit card transactions. Lastly, we or our customers may experience “spoofing” transactions, particularly with respect to wire transfers, which could cause us to make payments to impostor vendors or result in our not receiving timely payment from customers for merchandise we have sold.

We face the possibility of operational interruptions related to union work stoppages.

We currently have unionized employees in three of our markets (Trinidad, Barbados and Panama), and our operations depend on shipping, trucking, ports and other elements of the supply chain that often rely on unionized labor. A work stoppage or other limitation on operations from union or other labor-related matters could occur for any number of reasons, including as a result of disputes under existing collective bargaining agreements with labor unions or in connection with negotiation of new collective bargaining agreements. For example, while it did not impact our export activities, we experienced a brief disruption to the flow of imported merchandise into our Miami distribution center operations because of the U.S. dockworkers strike in October 2024. A lengthy work stoppage or significant limitation on operations could have a substantial adverse effect on our financial condition and results of operations.

Risks Associated with Our Business Strategy and Operations

Any failure by us to manage our widely dispersed operations could adversely affect our business.

As of August 31, 2024, we had 54 warehouse clubs in operation, located in 12 countries and one U.S. territory (ten in Colombia; eight in Costa Rica; seven in Panama; six in Guatemala; five inDominican Republic; four each in Trinidad and El Salvador; three in Honduras; two each in Nicaragua and Jamaica; and one each in Aruba, Barbados and the United States Virgin Islands). We will need to continually evaluate the adequacy of our existing infrastructure, systems and procedures, financial controls, operating controls, inventory, and safety controls and make upgrades from time to time. Moreover, we will be required to continually analyze the sufficiency of our inventory distribution channels and systems and may require additional or expanded facilities in order to support our operations. We may not adequately anticipate all the changing demands that will be imposed on these systems. Any failure of our systems or our inability to effectively update our internal systems or procedures as required could have a material adverse effect on our business, financial condition and results of operations.

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We depend on maintaining and expanding our membership base, and any harm to our relationship with our Members could have a material adverse effect on our business, net sales and results of operations.

Our membership provides a competitive advantage. Membership has been a basic operating characteristic in the warehouse club industry, beginning over 48 years ago at Price Club, the first membership warehouse club business. We believe membership promotes Member loyalty, and membership fees contribute to our ability to operate our business on lower margins than conventional retailers and wholesalers. The extent to which we achieve growth in our membership base and sustain high renewal rates materially influences our profitability. Further, our net sales are directly affected by the number of membership cardholders, the frequency with which our Members shop at our clubs and online and the amount they spend, which means the loyalty and enthusiasm of our Members directly impacts our net sales and operating income. Accordingly, anything that would harm our relationship with our existing Members or our ability to continue to attract new Members could materially adversely affect our net sales, membership fee income and results of operations.

Factors that could adversely affect our relationship with our Members include: our failure to provide good value to Members on the goods and services we offer; our failure to provide the expected quality of merchandise; our failure to offer the right mix of merchandise; events that harm our reputation or the reputation of our “Member’s Selection®” brand; our failure to provide convenience online and in-store shopping; increases to our membership fees; and increased competition.

We might not identify in a timely manner or effectively respond to changes in consumer preferences for merchandise, which could adversely affect our relationship with Members, demand for our products and market share.

Our success depends, in part, on our ability to identify and respond to trends in demographics and changes in consumer preferences for merchandise. It is difficult to consistently and successfully predict the products and services our Members will demand. Failure to timely identify or respond effectively to changing consumer tastes, preferences or spending patterns could adversely affect our relationship with our Members, the demand for our products and our market share. If we are not successful at predicting sales trends and adjusting purchases accordingly, we might have too much or too little inventory of certain products. If we buy too much of a product, we might be required to reduce prices or otherwise liquidate the excess inventory, which could have an adverse effect on margins (net sales less merchandise costs) and operating income. If we do not have sufficient quantities of a popular product, we might lose sales and profits we otherwise could have made. As our customers expect a more personalized experience, our ability to collect, use, retain, and protect relevant customer data is important to our ability to effectively meet their expectations. Our ability to collect and use that data, however, is subject to a number of external factors, including the impact of legislation or regulations governing data privacy, data-driven technologies such as artificial intelligence, and data security, as well as customer expectations around data collection, retention, and use.

Future sales growth depends, in part, on our ability to successfully open new warehouse clubs in our existing and new markets.

Sales growth at existing warehouse clubs can be impacted by, among other things, the physical limitations of the warehouse clubs, which restrict the amount of merchandise that can be safely stored and displayed in the warehouse clubs and the number of Members that can be accommodated during business hours. As a result, sales growth will depend, in part, upon our acquiring suitable sites for additional warehouse clubs. Land for purchase or lease, or buildings to be leased, in the size and locations in those markets that would be suitable for new PriceSmart warehouse clubs may be limited in number or not be available or financially feasible. In this regard, we compete with other retailers and businesses for suitable locations. Additionally, local land use, environmental and other regulations restricting the construction and operation of our warehouse clubs may impact our ability to find suitable locations, and increase the cost of constructing, leasing and operating our warehouse clubs. We have experienced these limitations in Colombia, primarily in Bogotá, and in some of our other existing markets, which has negatively affected our growth rates in those markets. Limitations on the availability of appropriate sites for new warehouse clubs in the areas targeted by us could have a material adverse effect on the future growth of PriceSmart.

In some cases, we have more than one warehouse club in a single metropolitan area, and we may open new warehouse clubs in certain areas where we already have warehouse clubs. A new warehouse club in an area already served by existing warehouse clubs may draw Members away from existing warehouse clubs and adversely affect comparable store sales performance. We operate in relatively small markets. Given the growth of our sales over the past few years, market saturation could impact the rate of future sales growth.

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We might open warehouse clubs in new markets in the future. The risks associated with entering a new market include potential difficulties in attracting Members due to a lack of familiarity with us and our lack of familiarity with local Member preferences. In addition, entry into new markets may bring us into competition with new competitors or with existing competitors with a large, established market presence. As a result, our new warehouse clubs might not be successful in new markets.

Failure to grow our e-commerce business through the integration of physical and digital retail channels and the investments we are making to develop a robust e-commerce platform could materially adversely affect our market position, net sales and/or financial performance.

The retail business is quickly evolving, and consumers are increasingly embracing shopping online and through mobile commerce applications. As a result, the portion of total consumer expenditures with all retailers and wholesale clubs occurring online and through mobile commerce applications is increasing and the pace of this increase could accelerate. As demonstrated by our launch of our PriceSmart.com and our mobile app and the upgrade of our point-of-sale system, we are increasing our investments in e-commerce, technology and other customer initiatives. The success of our e-commerce initiative continues to depend in large measure on our ability to build and deliver a seamless shopping experience across the physical and digital retail channels. Operating an e-commerce platform and fulfillment of online orders is a complex undertaking, and there is no guarantee that the resources we have applied to this effort will result in increased revenues or improved operating performance. If we do not maintain a successful and relevant omni-channel experience for our Members, our ability to compete and our results of operations could be adversely affected. In addition, a greater concentration of e-commerce sales could result in a reduction in the amount of traffic in our warehouse clubs, which would, in turn, reduce the opportunities for cross-club sales of merchandise that such traffic creates and could reduce our sales within our clubs, materially affecting the financial performance of the physical retail side of our operations. In addition, our investments in e-commerce and technology initiatives will adversely impact our short-term financial performance, and our failure to realize the benefits of these investments may adversely impact our financial performance over the longer term.

We are subject to risks associated with our dependence on third-party suppliers and service providers, and we have no assurances of continued supply, pricing or access to new merchandise.

We have important ongoing relationships with various third-party suppliers of services and merchandise. These include, but are not limited to, local, regional, and international merchandise suppliers, information technology suppliers, equipment suppliers, financial institutions, credit card issuers and processors, and lessors. Significant changes in the relationships or the agreements that govern the terms through which business is conducted could have a material adverse effect on our business, financial condition and results of operations. We have no assurances of continued supply, pricing or access to new merchandise, and any supplier could at any time change the terms upon which it sells to us or discontinue selling to us. One of our significant suppliers operates a warehouse club business and may in the future seek to compete with us in some of our markets. In addition, the manner in which we acquire merchandise, either directly from the supplier’s parent company or through a local subsidiary or distributor, is subject to change from time to time based on changes initiated by the supplier and for reasons beyond our control. Significant changes or disruptions in how we acquire merchandise from these suppliers could negatively affect our access to such merchandise, as well as the cost of merchandise to us and hence our Members, which could have a material adverse effect on our business and results of operations.

Our failure to maintain our brand and reputation could adversely affect our results of operations.

Our success depends on our ability to continue to preserve and enhance our brand and reputation. Damage to the PriceSmart brand could adversely impact merchandise sales, diminish Member trust, reduce Member renewal rates and impair our ability to add new Members. A failure to maintain and enhance our reputation also could lead to loss of new opportunities or employee retention and recruiting difficulties. Negative incidents, such as a data breach or product recall, can quickly erode trust and confidence, particularly if they result in adverse publicity, governmental investigations or litigation. In particular, the propagation of negative publicity on social media, whether merited or not, can have a damaging effect on our business in one or more markets. In addition, we sell many products under our private label “Member’s Selection®” brand. If we do not maintain consistent product quality of our “Member’s Selection®” products, which generally carry higher margins than national brand products carried in our warehouse clubs, our net warehouse sales and gross margin results could be adversely affected and Member loyalty could be harmed. Also, accidents or personal injuries that sometimes occur in our facilities, such as a Member slipping and falling or injuries caused by product falling from a rack, could result in negative publicity or otherwise damage the Company's reputation.

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We face the risk of exposure to product liability claims, a product recall and adverse publicity.

If our merchandise, such as food and prepared food products for human consumption, medication, children's products, pet products and durable goods, do not meet or are perceived not to meet applicable safety standards or our Members’ expectations regarding safety, we could experience lost sales, increased costs, litigation or reputational harm. The sale of these items exposes us to the risk of product liability claims, a product recall and adverse publicity. We may inadvertently redistribute food products or prepare food products that are contaminated, which may result in illness, injury or death if the contaminants are not eliminated by processing at the food service or consumer level. We package and market fresh produce products within our markets, so we may be exposed to additional risk of product liability and adverse publicity if those fresh food products are contaminated, which may result in illness, injury or death if the contaminants are not eliminated by processing at our packaging service centers.

We generally seek contractual indemnification and proof of insurance from our major suppliers and carry product liability insurance for all products we sell to or package for our Members. However, if we do not have adequate insurance or contractual indemnification available, product liability claims relating to products that are contaminated or otherwise harmful could have a material adverse effect on our ability to successfully market our products and on our financial condition and results of operations. In addition, even if a product liability claim is not successful or is not fully pursued, the negative publicity surrounding a product recall or any assertion that our products caused illness or injury could have a material adverse effect on our reputation with existing and potential Members and on our business, financial condition and results of operations.

We rely extensively on computer systems to process transactions, summarize results and manage our business. Failure to adequately maintain our systems or disruptions of our systems could harm our business and adversely affect our results of operations.

Given the high number of individual transactions we have each year, we seek to maintain uninterrupted operation of our business-critical computer systems. Our computer systems, including back-up systems, are subject to damage or interruption from power outages, computer and telecommunications failures, computer viruses, internal or external security breaches, catastrophic events such as fires, earthquakes, tornadoes and hurricanes, and errors by our employees. Our information systems are not fully redundant, and our disaster recovery planning cannot account for all eventualities. If our computer systems and back-up systems are damaged or cease to function properly, we may have to make significant investments to fix or replace them, and we may suffer interruptions in our operations in the interim. Any material interruption in our computer systems could have a material adverse effect on our business or results of operations.

We depend on third-party service providers to support transaction and payment processing, data security and other technology services. Any interruption in the operations of these service providers could, in turn, have a material adverse effect on us. For example, in 2022, a third party that supported our point-of-sale system became insolvent, which required us to quickly develop and implement short-term workarounds and delayed our migration to a cloud-based system integrating in-store and online functionality.

From time to time, we make technology investments to improve or replace our information processes and systems that are key to managing our business. The risk of system disruption increases when system changes are undertaken. Targeting the wrong opportunities, failing to make the right investments, or making an investment commitment significantly above or below our needs could result in the loss of our competitive position and adversely impact our financial condition and results of operations. Additionally, the potential problems and interruptions associated with implementing technology initiatives could disrupt or reduce the efficiency of our operations in the short term. These initiatives might not provide the anticipated benefits or may provide them on a delayed schedule or at a higher cost. For example, we have begun migrating to the EleraTM point-of-sale system, which is a Toshiba product, and if we are not able to successfully implement this product, or experience significant delays, it may jeopardize our operations or result in additional costs.

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Not updating our systems on a timely basis could leave us at a disadvantage relative to our competitors. We will be at a competitive disadvantage if, over time, our competitors are more effective than us in their utilization and integration of rapidly evolving technologies, including artificial intelligence and machine learning technologies. Our current ERP (Enterprise Resource Planning) system is no longer supported by the developer of the software, which could increase the risk of a system disruption. In addition, there are newer versions available from the vendors of some of our other internal systems offering greater functionality and reliability that we have not yet implemented. We also continue to rely on other systems we developed internally a number of years ago, and we are in the process of migrating these systems to more industry-standard technologies. Several years ago, we began evaluating options to replace our ERP system. However, we intentionally deferred this project as originally contemplated in order to more thoroughly assess our overall IT landscape. We decided that the risk, cost, and implementation cycle time of a holistic ERP system was not a sound strategy. We instead turned our focus to a coordinated program of upgrading packaged applications and replacing in-house applications with packaged applications designed to improve our capabilities with less risk, and in less time. We are continuing to work on the implementation of a packaged forecast and replenishment system (RELEX) for buying and upgrades to our packaged WMS (Warehouse Management System) and TMS (Transportation Management System) for logistics. We believe these upgrades plus several other projects, such as our point-of-sale system replacement and e-commerce replacement, will modernize our key revenue-generating systems and reduce risk of disruption. However, if we are not successful in this strategy, we might be required to operate with obsolete technology and will be subject to risks of system disruption, which would put us at a disadvantage relative to our competitors.

We have also begun evaluation of a modern financial management application and an integrated human resources information system for timekeeping, payroll and other HR functions to replace older applications that rely mostly on internal support. These initiatives might not provide the anticipated benefits, may provide them on a delayed schedule or at a higher cost or may cause disruptions in our business.

Any failure by us to maintain the security of the information that we hold relating to our Company, Members, employees and vendors, could damage our reputation with them, could disrupt our operations, could cause us to incur substantial additional costs and to become subject to litigation and could materially affect our operating results.

We receive, retain, and transmit personal information about our Members and employees and entrust that information to third-party business associates, including cloud service-providers that perform activities for us. In addition, we and our third-party service providers store and maintain health-related personal information, pharmacy, and medical records in connection with our health and wellness and pharmacy businesses. We also utilize third-party service providers for a variety of reasons, including, without limitation, cloud services, back-office support, and other functions. In addition, our online operations depend upon the secure transmission of confidential information over public networks, including information permitting cashless payments. Each year, computer hackers, cyber terrorists, and others make numerous attempts to access the information stored in companies’ information systems. The increased use of remote work infrastructure has also increased cybersecurity risk, as remote work continues even post COVID-19. Additionally, the rapid evolution of artificial intelligence and integration of machine learning technologies into our internal systems may intensify our cybersecurity risks and create new risks to our business, operations, and financial condition.

The use of data by our business and our business associates is regulated in all of our operating countries. Privacy and information-security laws and regulations change, and compliance with them may result in cost increases due to, among other things, systems changes and the development of new processes. If we or those with whom we share information fail to comply with these laws and regulations, we could be subjected to legal risk as a result of non-compliance.

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We or our third-party service providers may be unable to anticipate one or more of the rapidly evolving and increasingly sophisticated means by which computer hackers, cyber terrorists and others may attempt to defeat our security measures or those of our third-party service providers and breach our or our third-party service providers' information systems. Cyber threats are rapidly evolving and are becoming increasingly sophisticated. As cyber threats evolve and become more difficult to detect and successfully defend against, one or more hackers, cyber terrorists or others might defeat our security measures or those of our third-party service providers and obtain the personal information of Members, employees and vendors that we hold or to which our third-party service providers have access, and we or our third-party service providers may not discover any security breach and loss of information for a significant period of time after the security breach occurs. We or one of our third-party service providers also may be subject to a ransomware or cyber-extortion attack, which could significantly disrupt our operations. In the enterprise context, ransomware attacks involve restricting access to computer systems or vital data until a ransom is paid. Error or malfeasance by our employees and consultants, faulty password management or other irregularities may result in a defeat of our or our third-party service providers’ security measures and breach our or our third-party service providers’ information systems (whether digital or otherwise).

Any breach of our security measures or those of our third-party service providers and loss of our confidential information, which could be undetected for a period of time, or any failure by us to comply with applicable privacy and information security laws and regulations, could cause us to incur significant costs to protect any Members and/or employees whose personal data was compromised and to restore Member and employee confidence in us and to make changes to our information systems and administrative processes to address security issues and compliance with applicable laws and regulations.

In addition, such events could have a material adverse effect on our reputation with our Members, employees, vendors and stockholders, as well as our results of operations, financial condition and liquidity; could result in the release to the public of confidential information about our operations and financial condition and performance; and could result in litigation against us or the imposition of penalties or liabilities. Moreover, a security breach could require us to devote significant management resources to address the problems created by the security breach and to expend significant additional resources to upgrade further the security measures that we employ to guard such important personal information against cyberattacks and other attempts to access such information, resulting in a disruption of our operations.

We regularly reassess these risks in response to the evolving cybersecurity landscape, and any significant changes are promptly communicated to executive management and our Board or Audit Committee. There are no assurances that our cybersecurity risk management program, policies, controls, or procedures will be fully implemented, complied with, or effectively protect our systems and information. We have not identified and are not aware of any risks from cybersecurity threats, including as a result of any prior cybersecurity incidents, which have materially affected or are reasonably likely to materially affect us, including our operations, business strategy, results of operations, or financial condition. Despite our security measures, however, there can be no assurance that we, or third parties with which we interact, will not experience a cybersecurity incident in the future that will materially affect us.

Our use of artificial intelligence in our business or more rapid adoption of artificial intelligence by our competitors could result in harm to our brand and adversely affect our results of operations.

Some of our computer systems currently, and might in the future, incorporate artificial intelligence (“AI”) solutions, including machine learning and generative AI tools that collect, aggregate, and analyze data to assist in the development of our services and products and in the use of internal tools that support our business. These applications may become increasingly important in our operations over time. This emerging technology presents a number of risks inherent in its use. For example, AI algorithms are based on machine learning and predictive analytics, which can create accuracy issues, unintended biases, and discriminatory outcomes that could harm our brand, reputation, business, or customers. Additionally, any investments we make in AI technologies might not actually make us more efficient. Our competitors or other third parties may incorporate AI into their businesses more rapidly or more successfully than us, which could hinder our ability to compete effectively and adversely affect our results of operations. The technologies underlying AI are rapidly developing, and it is not possible to predict all of the legal, operational or technological risks related to the use of AI. While new AI initiatives, laws, and regulations are emerging and evolving, what they ultimately will look like remains uncertain, and our obligation to comply with them could entail significant costs, negatively affect our business, or limit our ability to incorporate certain AI capabilities into our business.

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Any failure by us to protect our trademarks, trade secrets and other intellectual property, or our actual or alleged infringement of other companies’ intellectual property, could harm our business.

We depend on our brands, such as the PriceSmart name and logo, to attract Members and make sales of goods and services.We monitor and protect against activities that might infringe, dilute or otherwise violate our trademarks and other intellectual property, and rely on trademark and other laws of the United States and other countries in which we operate.We also rely on copyright, trade secret and other intellectual property laws, as well as nondisclosure and confidentiality agreements and other methods, to protect our trademarks, trade names, proprietary information, technologies, and processes. Moreover, the steps we take to protect our intellectual property may not adequately protect our rights or prevent third parties from infringing or misappropriating our proprietary rights, and we may be unable to broadly enforce all of our trademarks. Any unauthorized use of our trademarks or other intellectual property could harm our competitive position and have a material adverse effect on our financial condition, cash flows or results of operations.

Additionally, we cannot be certain that we do not, or will not in the future, infringe on the intellectual property rights of third parties. Any intellectual property infringement claims against us could be costly, time-consuming and harmful to our reputation or could result in injunctive or other equitable relief that may require us to make changes to our business, any of which could have a material adverse effect on our financial condition, cash flows or results of operations.

We may need to engage in litigation or similar activities to enforce our intellectual property rights, to protect our trade secrets, or to determine the validity and scope of proprietary rights of others. Any such litigation, whether or not resolved in our favor, could require us to expend significant resources and divert the efforts and attention of our management and other personnel from our business operations.

Business acquisitions or divestitures and new business initiatives could adversely impact the Company’s performance.

From time to time, we may consider acquisition opportunities and new business initiatives. During fiscal year 2018, we acquired Aeropost, Inc. (“Aeropost”). Acquisitions and new business initiatives involve certain inherent risks, including the failure to retain key personnel from an acquired business; undisclosed or subsequently arising liabilities or accounting, internal control, regulatory or compliance issues associated with an acquired business; challenges in the successful integration of operations, and alignment of standards, policies and systems; future developments that may impair the value of our purchased goodwill or intangible assets; and the potential diversion of management resources from existing operations to respond to unforeseen issues arising in the context of the integration of a new business or initiative.

We sold the legacy casillero and marketplace businesses operated by Aeropost in October 2021. In connection with this sale, we retained the technology and intellectual property rights required for the furtherance of our business interest in PriceSmart.com and related capabilities. We could incur unforeseen expenses or other issues in connection with the separation of these businesses. In addition, we and the buyer of the legacy casillero and marketplace businesses agreed to indemnify each other for any breach of representations and warranties we made to one another in the purchase agreement. Pursuant to these indemnification obligations, during fiscal year 2023, we wrote off approximately $700,000 of accounts receivable from Aeropost to fully settle claims from Aeropost’s acquiror alleging that we breached representations and warranties regarding cybersecurity matters and worker classification.

Failure to attract and retain qualified employees could materially adversely affect our financial performance.

Our success depends, to a significant degree, on the continued contributions of members of our senior management and other key operations, merchandising and administrative personnel, and the loss of any such persons could have a material adverse effect on our business. We must attract, develop and retain a growing number of qualified employees, while controlling related labor costs and maintaining our core values. We compete with other retail and non-retail businesses for these employees and invest significant resources in training and motivating them. There is no assurance that we will be able to adequately attract, develop and retain highly qualified employees in the future or to execute management transitions when members of the Company’s senior leadership retire or otherwise leave the Company, which could have a material adverse effect on our business, financial condition and results of operations. We do not maintain life or disability insurance for our key executives.

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Legal and Compliance Risks

We face compliance risks related to our international operations.

In the United States and within the international markets where we operate, there are multiple laws and regulations that relate to our business and operations. These laws and regulations are subject to change, and any failure by us to effectively manage our operations and reporting obligations as required by the various laws and regulations can result in our incurring significant legal costs and fines as well as disruptions to our business and operations. Such failure could also result in investors’ loss of confidence in us, which could have a material adverse effect on our stock price.

In foreign countries in which we have operations, a risk exists that our employees, contractors or agents could, in contravention of our policies, engage in business practices prohibited by U.S. laws and regulations applicable to us, such as the Foreign Corrupt Practices Act and the laws and regulations of other countries. We maintain policies prohibiting such business practices and have in place global anti-corruption compliance programs designed to ensure compliance with these laws and regulations. Nevertheless, we remain subject to the risk that one or more of our employees, contractors or agents, including those based in or from countries where practices that violate such U.S. laws and regulations or the laws and regulations of other countries may be customary, will engage in business practices that are prohibited by our policies or circumvent our compliance programs and, by doing so, violate such laws and regulations. Any violations of anti-corruption laws, even if prohibited by our internal policies, could adversely affect our reputation, business, or financial performance.

We could be subject to additional tax liabilities or subject to reserves on the recoverability of tax receivables.

We are subject to income taxes in the U.S. and many foreign jurisdictions. Significant judgment is required in determining our consolidated provision for income taxes. In the course of our business, there are many transactions and calculations where the ultimate tax determination is uncertain. We may recognize additional tax expense and be subject to additional tax liabilities due to changes in tax laws, regulations, and administrative practices and principles, including changes to the global tax framework, in various jurisdictions and any changes we make to our intercompany transaction structure. In recent years, multiple domestic and international tax proposals were proposed to impose greater tax burdens on large multinational enterprises. For example, the Organisation for Economic Co-operation and Development ("OECD") continues to advance proposals or guidance in international taxation, including the establishment of a global minimum tax.

We compute our income tax based on enacted tax rates in the countries in which we operate. As the tax rates vary among countries, a change in earnings attributable to the various jurisdictions in which we operate could result in an unfavorable change in our overall taxes. Changes in tax laws, increases in the enacted tax rates, adverse outcomes in connection with tax audits in any jurisdiction, or any change in the pronouncements relating to accounting for income taxes could have a material adverse effect on our financial condition and results of operations. In one of the countries where we operate, the government made changes several years ago in the method of computing minimum tax payments, under which the government sought to require retailers to pay taxes based on a percentage of sales if the resulting tax were greater than the tax payable based on a percentage of income (Alternative Minimum Tax or "AMT"). As a result, the Company has made and may continue to make income tax payments substantially in excess of those it would expect to pay based on taxable income, and the rules that allow the Company to obtain refunds or to offset payments that are substantially in excess of taxes payable based on taxable income are unclear or complex.

For example, in fiscal year 2023, we recorded a $7.2 million charge to settle the minimum tax payment dispute in one country. Of this amount, $1.0 million is a reserve we recorded against an income tax receivable for one of the tax years for which we sought a refund and the remaining $6.2 million for the unpaid years of the dispute in which we made tax payments using the original computation based on taxable income. As part of the settlement, we will pay the minimum tax on a go-forward basis.

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A few of our stockholders own approximately 15.3% of our voting stock as of August 31, 2024, which may make it difficult to complete some corporate transactions without their support and may impede a change in control.

Robert E. Price, the Company’s Chairman of the Board and Interim Chief Executive Officer, and affiliates of Mr. Price, including Price Philanthropies, The Price Group, LLC, The Robert & Allison Price Charitable Remainder Trust and various other trusts, collectively beneficially own approximately 15.3% of our outstanding shares of common stock. Of this amount, approximately 71.1% (i.e., 10.9% of our total outstanding shares) is held by charitable entities. As a result of their beneficial ownership, these stockholders have the ability to significantly affect the outcome of all matters submitted to our stockholders for approval, including the election of directors. In addition, this ownership could discourage the acquisition of our common stock by potential investors and could have an anti-takeover effect, possibly depressing the trading price of our common stock.

Financial and Accounting Risks

We are subject to volatility in foreign currency exchange rates and limits on our ability to convert foreign currencies into U.S. dollars.

As of August 31, 2024, we had a total of 54 warehouse clubs operating in 12 foreign countries and one U.S. territory, 42 of which operate under currencies other than the U.S. dollar. For fiscal year 2024, approximately 79.5% of our net merchandise sales were in foreign currencies. We may enter into additional foreign countries in the future or open additional locations in existing countries, which may increase the percentage of net merchandise sales denominated in foreign currencies.

Our consolidated financial statements are denominated in U.S. dollars, and to prepare those financial statements we must translate the amounts of the assets, liabilities, net sales, other revenues, and expenses of our operations outside of the U.S. from foreign currencies into U.S. dollars using exchange rates for the current period. As a result of such translations, fluctuations in currency exchange rates from period-to-period may result in our consolidated financial statements reflecting significant adverse period-over-period changes in our financial performance or reflecting a period-over-period improvement in our financial performance that is not as robust as it would be without such fluctuations in the currency exchange rates.

In addition, devaluing foreign local currencies compared to the U.S. dollar could negatively impact the purchasing power of our Members for imported merchandise in those countries. Merchandise imported into our markets is generally purchased by the Company in U.S. dollars and priced and sold in the local currency of that country. If the local currency devalues against the U.S. dollar, we may elect to increase prices in the local currency to maintain our target margins, making the products more expensive for our Members. We may also decide to reduce or modify the flow of merchandise into those markets. Depending on the severity of the devaluation and corresponding price increase (as experienced in Colombia in fiscal 2023), the demand for, sales of, and profitability of those products could be negatively impacted.

From time to time, we have experienced a lack of availability of U.S. dollars in certain markets (U.S. dollar illiquidity). This impedes our ability to convert local currencies obtained through merchandise sales into U.S. dollars to settle the U.S. dollar liabilities associated with our imported products or otherwise fund our operations. This illiquidity also increases our foreign exchange exposure to any devaluation of the local currency relative to the U.S. dollar. Additionally, the Company may incur significant premium costs to convert our local currencies into available tradable currencies and U.S. dollars. For instance, since fiscal year 2017, we have experienced this situation in Trinidad and have been unable to source a sufficient level of tradable currencies. We are working with our banks in Trinidad and government officials to convert all of our Trinidad dollars into tradable currencies. For instance, during fiscal year 2021, we experienced significant limitations on our ability to convert Trinidad dollars to U.S. dollars or other tradable currencies. Our balance as of August 31, 2024 of Trinidad dollar denominated cash and cash equivalents and short and long-term investments measured in U.S. dollars was $60.2 million, a decrease of $40.3 million from the peak of $100.5 million as of November 30, 2020. However, as the Trinidad central bank strictly manages the exchange rate of the Trinidad dollar with the U.S. dollar and affects the level of U.S. Dollar liquidity in the market through its interventions, we are subject to continued challenges in converting our Trinidad dollars to U.S. dollars, as well as being exposed to the risk of a potential devaluation of the currency.

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Additionally, during fiscal year 2023, the Honduran Central Bank began limiting the availability and controlling the allocation of U.S. dollars for the conversion from Honduran lempiras to U.S. dollars. As of August 31, 2024, our Honduran subsidiary had approximately $22.3 million of cash and cash equivalents denominated in lempiras, which cannot be readily converted to U.S. dollars for general use within the Company. We are actively working with our banking partners and government authorities to address this situation.

Volatility and uncertainty regarding the currencies and economic conditions in the countries where we operate could have a material impact on our operations in future periods.

Changes in accounting standards and assumptions, projections, estimates and judgments by management related to complex accounting matters could significantly affect our financial condition and results of operations.

Generally accepted accounting principles and related accounting pronouncements, implementation guidelines and interpretations with regard to a wide range of matters that are relevant to our business are highly complex and involve many subjective assumptions, projections, estimates and judgments by our management. These include, but are not limited to assumptions, projections, estimates and judgements related to contingencies and litigation, income taxes, value added taxes, and long-lived assets. Changes in these rules or their interpretation or changes in underlying assumptions, projections, estimates or judgments by our management could significantly change our reported or expected financial performance.

For example, because of Accounting Standards Update ASU 2016-02 – Leases (Topic 842), which the Company adopted September 1, 2019, the Company is required to recognize a “Right-of-Use” (ROU) asset and lease liability for each of the Company’s long-term leases. Accounting Standard Codification (ASC) 842 requires that the ROU asset be designated as a non-monetary asset and the lease liability as a monetary liability. Therefore, when accounting for a lease that is denominated in a foreign currency, if remeasurement into the lessee’s functional currency is required, the lease liability is remeasured using the current exchange rate. We have leases in several of our subsidiaries in which the lease payments are denominated in a foreign currency that is not the functional currency of that entity. Therefore, we are subject to additional volatility in foreign currency exchange rates as a result of this accounting standard update. The monetary lease liability subject to revaluation as of August 31, 2024 was $31.5 million. Due to the mix of foreign currency exchange rate fluctuations during fiscal year 2024, the impact to the consolidated statements of income of revaluing this liability was immaterial.

Item 1B. Unresolved Staff Comments

None.

Item 1C. Cybersecurity

Cybersecurity Risk Management and Strategy

PriceSmart has developed, implemented, and maintained a cybersecurity risk management program intended to protect the confidentiality, integrity and availability of our critical technology systems, data and information. We have implemented processes and protocols designed to monitor, identify, mitigate and prevent material risks associated with cybersecurity threats and incidents relevant to internal networks, business applications, customer-facing applications, customer payment systems, and business operations. Cybersecurity represents an important component of our overall cross-functional approach to risk management. Our cybersecurity practices are integrated into the Company's enterprise risk management ("ERM") approach, and cybersecurity risks are among the core enterprise risks identified for oversight by the Board through our annual ERM assessment.

Our cybersecurity risk management program utilizes information and guidance derived from industry-recognized frameworks, including the International Organization for Standardization (ISO) 27001 Framework and the National Institute of Standards and Technology (NIST) Cybersecurity Framework 2.0 (CSF), specifically the NIST 800-53 and NIST 811-171 publications. While we have based our cybersecurity risk management program on these frameworks, we have not obtained these specific certifications to date. Our cybersecurity risk management program is overseen by our

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Chief Information Officer ("CIO") and/or our First Vice President of Information Security ("FVPIS") and reviewed annually.

Our cybersecurity risk management program includes but is not limited to the following:

•risk assessments performed both internally and by external vendors to assist in the identification of material cybersecurity risks to our critical systems, information, products, services, and our broader enterprise Information Technology (IT) environment;

•contracting with and use of third-party service providers, where deemed necessary, to assess, test or otherwise assist with aspects of our security controls;

•cybersecurity awareness training for our employees;

•adoption of a cybersecurity incident response plan that includes procedures for responding to cybersecurity incidents; and

•a risk management process for selecting and working with key service providers, suppliers, and vendors that takes into account our assessment of their criticality to our operations and their respective risk profiles.

We continuously monitor, assess, and strategically invest to improve the effectiveness and resiliency of our information security systems to keep abreast of the dynamic and complex cybersecurity landscape.

We use third-party vendors to review and test our IT systems and utilize our internal team of experienced personnel to evaluate and assess the efficacy of cybersecurity systems and to make recommendations and identify opportunities for improvements to our cybersecurity risk management program. We report the results of these assessments to our Audit Committee regularly and to our Board of Directors at least annually.

In the event of a potential cybersecurity incident, or a series of related cybersecurity incidents, we have cybersecurity incident response frameworks in place. These frameworks are a set of coordinated procedures and tasks that our incident response teams execute with the goal of ensuring timely and accurate identification, resolution and reporting of cybersecurity incidents both internally and externally, as necessary. We regularly test and update these frameworks to ensure timely and accurate identification, resolution, and reporting of cybersecurity incidents.

We have not identified and are not aware of any risks from cybersecurity threats, including as a result of any prior cybersecurity incidents, which have materially affected or are reasonably likely to materially affect us, including our operations, business strategy, results of operations, or financial condition. Despite our security measures, however, there can be no assurance that we, or third parties with which we interact, will not experience a cybersecurity incident in the future that will materially affect us. For more information about the cybersecurity risks we face, see "Item 1A — Risk Factors — Any failure by us to maintain the security of the information we hold relating to our Company, Members, employees and vendors, could damage our reputation with them, could disrupt our operations, could cause us to incur substantial additional costs and to become subject to litigation and could materially adversely affect our operating results."

Cybersecurity Governance

Our Board considers cybersecurity risk as part of its risk oversight function and has delegated to the Audit Committee oversight of cybersecurity and other information technology risks. The Audit Committee oversees management's implementation of our cybersecurity risk management program. The Audit Committee receives quarterly reports from our CIO and/or our FVPIS regarding any significant cybersecurity incidents, as well as any incidents with lesser impact potential. The CIO and FVPIS report quarterly to the Audit Committee and Board regarding cybersecurity risks and the status of our cyber risk management program. Our CIO and/or FVPIS also periodically make presentations to Board members on cybersecurity topics as part of the Board's continuing education on topics that impact our company.

Our Cybersecurity team also provides reports to the Board’s Digital Transformation Committee. The Digital Transformation Committee is charged with oversight of the Company’s omni-channel development and digital transformation to enhance membership and stockholder value. In this capacity, the Digital Transformation Committee oversees the Company’s design and implementation of various IT systems, with emphasis on maintaining a secure digital environment.

Our Cybersecurity team informs executive management about ongoing efforts to prevent, detect, mitigate, and remediate cybersecurity risks and incidents through various means. This may include briefings from internal security personnel; sharing publicly or privately available threat intelligence and other information obtained from governmental, public or private sources, including external consultants engaged by us; and forwarding alerts and reports produced by network monitoring and security tools we deploy.

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Our CIO and FVPIS collectively have over eight decades of IT and cybersecurity experience, including five decades in senior-level leadership roles. Our FVPIS spent over three decades in federal law enforcement working in cyber related roles.

Item 2. Properties

At August 31, 2024, PriceSmart operated 54 membership warehouse clubs, as detailed below:

Location Own landand building Lease landand/or building

COLOMBIA SEGMENT

Colombia 9 1

CENTRAL AMERICA SEGMENT

Costa Rica(1) 8 —

El Salvador 4 —

Guatemala(2) 3 3

Honduras 2 1

Nicaragua 2 —

CARIBBEAN SEGMENT

Aruba — 1

Barbados 1 —

Dominican Republic 5 —

Jamaica 2 —

Trinidad 3 1

USVI — 1

(1)The Company purchased land located in Cartago, Costa Rica, where we plan to open our ninth warehouse club in Costa Rica in the spring of 2025.

(2)The Company expects to formalize a land lease in the first quarter of fiscal year 2025 for land in Quetzaltenango, Guatemala, where we plan to open our seventh warehouse club in Guatemala in the summer of 2025.

(3)In January 2024, the Company purchased one of its club's buildings and land, which was previously leased, in Panama City, Panama.

Although we have entered into real estate leases in the past and will likely do so in the future, our current preference is to own rather than lease real estate. We lease land and in some cases land and buildings when appropriate sites within market areas are not available to purchase. The term on these leases for our warehouse clubs generally run for 20 to 30 years and contain options to renew from 5 to 20 years. We actively seek to secure lease extensions or find suitable replacement properties before our leases expire. We have successfully negotiated extensions in the past and believe we will continue to be able to do so in the future; however, each lease renewal is subject to its own facts and circumstances, so we cannot be sure that we will be able to renew each lease on economically favorable terms. For instance, we've recently entered into a lease agreement to relocate our Miraflores, Guatemala club, for which the current lease was due to expire on December 31, 2025, to a new location adjacent to the current club location. We expect to relocate our Miraflores club to this new location in fiscal year 2026. We expect minimal impact to the continuity of our operations for this club. Refer to Part II. “Item 8. Financial Statements and Supplementary Data: Notes to Consolidated Financial Statements, Note 9 – Commitments and Contingencies” for additional details on our Miraflores club relocation.

As of August 31, 2024, sales floors of the Company’s warehouse club buildings occupied a total of approximately 2,646,130 square feet, of which 400,191 square feet were on leased property.

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We operate two large regional distribution centers, one in Miami, Florida and the other in San Jose, Costa Rica, along with several smaller local distribution centers for the consolidation and distribution of merchandise shipments to our warehouse clubs. Our corporate headquarters is located in San Diego, California, and we maintain other regional offices in the Miami distribution facility and our international locations. We own our regional dry merchandise distribution facility in Miami, Florida, but we otherwise lease most non-warehouse club facilities and expect to continue to lease these types of facilities as we expand. Our leases for non-warehouse club facilities typically provide for initial lease terms between five and 30 years, with options to extend. We believe this leasing strategy for non-warehouse club facilities enhances our flexibility to pursue expansion opportunities when the needs of our business require. As current leases expire, we believe that we will be able to obtain lease renewals, if desired, for these present locations, or to obtain leases for equivalent or better locations in the same general area.

Item 3. Legal Proceedings

We are often involved in claims arising in the ordinary course of business seeking monetary damages and other relief. Based upon information currently available to us, none of these claims is expected to have a material adverse effect on our business, financial condition or results of operations. Refer to Part II. “Item 8. Financial Statements and Supplementary Data: Notes to Consolidated Financial Statements, Note 9 – Commitments and Contingencies” for additional information regarding our legal proceedings.

Item 4. Mine Safety Disclosures

Not applicable.

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PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

The Company's common stock has been quoted and traded on the NASDAQ Global Select Market under the symbol “PSMT” since September 2, 1997. As of October 25, 2024, there were approximately 385 holders of record of the common stock. This number does not include beneficial owners whose shares were held in street name.

Dates Stock Price

From To High Low

Recent Sales of Unregistered Securities

In September 2022, the Company issued restricted stock awards (RSAs) and performance stock units (PSUs) covering 156,225 shares of the Company’s common stock, $0.0001 par value per share. The RSAs and PSUs were issued from the pool of shares available for issuance under the Company’s Amended and Restated 2013 Equity Incentive Award Plan, as amended. The securities were exempt from registration under the Securities Act of 1933, as amended (the "Securities Act") in reliance upon Section 4(a)(2) of the Securities Act as transactions not involving any public offering. The recipients of the securities in each of these transactions are accredited investors, and appropriate legends were placed upon the stock certificates issued in these transactions. All recipients had adequate access, through their relationships with us, to information about the Company. Resale of these shares by the holders has since been registered under the Securities Act.

Dividends

Declared Amount First Payment Second Payment

RecordDate DatePaid Amount RecordDate DatePaid Amount

On April 3, 2024, the Company's Board of Directors declared a one-time $1.00 per share special dividend paid on April 30, 2024 to stockholders of record on April 19, 2024 to distribute excess cash to stockholders. The $1.00 per share special dividend was in addition to the Company’s annual cash dividend in the total amount of $1.16 per share, with $0.58 per share paid on February 29, 2024 to stockholders of record as of February 15, 2024 and $0.58 per share paid on August 30, 2024 to stockholders of record as of August 15, 2024. The declaration of future dividends (ongoing or otherwise), if any, the amount of such dividends, and the establishment of record and payment dates is subject to final determination by the Board of Directors at its discretion after its review of the Company’s financial performance and anticipated capital requirements, taking into account the uncertain macroeconomic conditions on our results of operations and cash flows.

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Repurchase of Equity Securities

Upon vesting of restricted stock awarded by the Company to employees, the Company repurchases shares and withholds the amount of the repurchase payment to cover employees’ tax withholding obligations. In addition, in July 2023 we announced a program authorized by our Board of Directors to repurchase up to $75 million of our common stock. We began repurchases in the fourth quarter of fiscal year 2023 and successfully completed the share repurchase program in the first quarter of fiscal year 2024. We purchased a total of approximately 1,007,000 shares of our common stock under the program. The repurchases were made on the open market pursuant to a trading plan established pursuant to Rule 10b5-1 under the Securities Exchange Act of 1934, as amended, which permitted us to repurchase common stock at a time that we might otherwise have been precluded from doing so under insider trading laws or self-imposed trading restrictions. We have no plans to continue repurchases or adopt a new repurchase plan at this time. However, the Board of Directors could choose to commence another program in the future, at its discretion, after its review of the Company’s financial performance and anticipated capital requirements.

The following table sets forth information on our common stock repurchase activity for fiscal year 2024 (dollars in thousands, except per share data):

Item 6. Reserved.

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Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis should be read in conjunction with our audited consolidated financial statements and related notes thereto included elsewhere in this Annual Report on Form 10-K.

Overview

PriceSmart, headquartered in San Diego, California, owns and operates U.S.-style membership shopping warehouse clubs in Latin America and the Caribbean, selling high quality merchandise and services at low prices to our Members. We operate 54 warehouse clubs in 12 countries and one U.S. territory (ten in Colombia; eight in Costa Rica; seven in Panama; six in Guatemala; five inDominican Republic; four each in Trinidad and El Salvador; three in Honduras; two each in Nicaragua and Jamaica; and one each in Aruba, Barbados and the United States Virgin Islands). We have purchased land and plan to open our ninth warehouse club in Costa Rica, located in Cartago, approximately 10 miles east from the nearest club in the capital of San Jose. The club will be built on a six-acre property and is anticipated to open in the spring of 2025. Additionally, we expect to formalize a land lease in the first quarter of fiscal year 2025 and build our seventh warehouse club in Guatemala, located in Quetzaltenango, approximately 122 miles west from the nearest club in the capital of Guatemala City. This club will be built on a four-acre property and is anticipated to open in the summer of 2025. Once these two new clubs are open, we will operate 56 warehouse clubs in total. Our corporate headquarters, U.S. buying operations and regional distribution centers are located primarily in the United States. Our operating segments are the United States, Central America, the Caribbean and Colombia. All intercompany balances and transactions have been eliminated in consolidation.

Mission and Business Strategy

PriceSmart exists to improve the lives and businesses of our Members, our employees and our communities through the responsible delivery of the best quality goods and services at the lowest possible prices. We aim to serve as a model company, which operates profitably and provides a good return to our investors, by providing Members in emerging and developing markets with exciting, high-quality merchandise sourced from around the world and valuable services at compelling prices in safe U.S.-style clubs and through PriceSmart.com. We prioritize the well-being and safety of our Members and employees. We provide good jobs, fair wages and benefits and opportunities for advancement. We strive to treat our suppliers right and empower them when we can, including both our regional suppliers and those from around the world. We try to conduct ourselves in a socially responsible manner as we endeavor to improve the quality of the lives of our Members and their businesses, while respecting the environment and the laws of all the countries in which we operate. We also believe in facilitating philanthropic contributions to the communities in which we do business. We charge Members an annual membership fee that enables us to operate our business with lower margins than traditional retail stores. As we continue to invest in technological capabilities, we are increasing our tools to drive sales and operational efficiencies. We believe we are well positioned to blend the excitement and appeal of our brick-and-mortar business with the convenience and additional benefits of online shopping and services and, meanwhile, enhance Member experience and engagement.

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Factors Affecting the Business

Overall economic trends, foreign currency exchange volatility, and other factors impacting the business

Our sales and profits vary from market to market depending on general economic factors, including GDP growth; consumer preferences; foreign currency exchange rates; political and social conditions; local demographic characteristics (such as population growth); the number of years we have operated in a particular market; and the level of retail and wholesale competition in that market. The economies of many of our markets are dependent on foreign trade, tourism, and foreign direct investments. Uncertain economic conditions and slowdown in global economic growth and investment may impact the economies in our markets, causing significant declines in GDP and employment and devaluations of local currencies against the U.S. dollar.

Although we have seen recent inflationary pressures subsiding, substantial product cost increases and commodity price increases have and could continue to impact our financial results and could lead to reduced sales, fewer units sold, and/or margin pressure. Events directly or indirectly related to COVID-19 resulted in market and supply-chain disruptions, which increased the complexity of managing our inventory flow and business and resulted in substantial inventory markdowns on certain non-food product categories in the third quarter of fiscal year 2022. In addition, shipping and freight rates increased dramatically during that time. While supply chains and transportation rates have normalized, we continue to work to hold down and/or mitigate the price increases passed on to our Members while maintaining the right inventory mix to grow sales. One key factor has been our expanded network of distribution centers, which has facilitated alternative shipping routes, increased merchandise throughput, and provided flexibility to mitigate our supply chain challenges and risks more effectively.

Currency fluctuation can be one of the largest variables affecting our overall sales and profit performance because many of our markets are susceptible to foreign currency exchange rate volatility. For fiscal year 2024, some markets, especially Costa Rica, benefited from currency appreciation, which helped offset currency devaluations we experienced in some of the other countries. During fiscal year 2024, approximately 79.5% of our net merchandise sales were in currencies other than the U.S. dollar. Of those sales, 49.0% consisted of sales of products we purchased in U.S. dollars.

A devaluation of local currency reduces the value of sales and membership income that is generated in that country when translated to U.S. dollars for our consolidated results. In addition, when local currency experiences devaluation, we may elect to increase the local currency price of imported merchandise to maintain our target margins, which could impact demand for the merchandise affected by the price increase. However, during fiscal year 2023, the currency in Colombia devalued approximately 15%, but we held pricing steady or took pricing actions to mitigate declines in demand that negatively impacted our consolidated Total Gross Margin rate. We may also modify the mix of imported versus local merchandise and/or the source of imported merchandise to mitigate the impact of currency fluctuations. Information about the effect of local currency devaluations is discussed further in “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Net Merchandise Sales and Comparable Sales.”

Our wallet-share capture of total retail and wholesale sales can vary from market to market due to competition and the availability of other shopping options for our Members. Demographic characteristics within each of our markets can affect both the overall level of sales and future sales growth opportunities. Certain island markets, such as Aruba, Barbados and the U.S. Virgin Islands, offer limited upside for sales growth given their overall market size.

We continue to face the risk of political instability which may have significant effects on our business. For example, protestors set up roadblocks in Panama during October and November 2023 as a reaction to an agreement between the Panamanian government and a mining company, disrupting traffic to our clubs throughout most of the market. Roadblocks in Guatemala in October 2023 relating to election protests also limited access to certain of our warehouse clubs. Civil unrest in Colombia in response to tax reform and austerity measures paralyzed significant portions of the country’s infrastructure as roadblocks and riots disrupted normal economic activity during the third quarter of fiscal year 2021.

Our operations are subject to volatile weather conditions and natural disasters. In November 2020, Hurricanes Eta and Iota brought severe rainfall, winds, and flooding to a significant portion of Central America, especially Honduras, which caused significant damage to parts of that country’s infrastructure. Although our warehouse clubs were not significantly affected and we were able to manage our supply chain to keep our warehouse clubs stocked with merchandise, similar natural disasters could adversely impact our overall sales, costs and profit performance in the future.

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Our operations depend on shipping, trucking, ports and other elements of the supply chain that often rely on unionized labor. A work stoppage or other limitation on operations from union or other labor-related matters could occur for any number of reasons, including as a result of disputes under existing collective bargaining agreements with labor unions or in connection with negotiation of new collective bargaining agreements. For example, while it did not impact our export activities, we experienced a brief disruption to the flow of imported merchandise into our Miami distribution center operations because of the U.S. dockworkers strike in October 2024.

Changes in tax laws, increases in the enacted tax rates, adverse outcomes in connection with tax audits in any jurisdiction, or any change in the pronouncements relating to accounting for income taxes could have a material adverse effect on our financial condition and results of operations. In one of the countries where we operate, the government made changes several years ago in the method of computing minimum tax payments, under which the government sought to require retailers to pay taxes based on a percentage of sales if the resulting tax were greater than the tax payable based on a percentage of income (Alternative Minimum Tax or "AMT"). We, together with our tax and legal advisers, appealed these interpretations and litigated our cases in the country’s court system. Nevertheless, in fiscal year 2023, we recorded a $7.2 million charge to settle the minimum tax payment dispute. To address the inherent risk of operating in a country in which tax legislation changes can significantly impact our low margin business model and in which our ability to successfully appeal the application of these taxes is limited, we have increased prices in this market to offset or partially offset the rise in costs to comply with the annual AMT payment. These and other challenges may persist or become more acute and could have a material adverse effect on our business and results of operations.

Additionally, during fiscal year 2023, the Honduran Central Bank began limiting the availability and controlling the allocation of U.S. dollars for the conversion from Honduran lempiras to U.S. dollars. As of August 31, 2024, our Honduran subsidiary had approximately $22.3million of cash and cash equivalents and short-term investments denominated in lempiras, which cannot be readily converted to U.S. dollars for general use within the Company.We are actively working with our banking partners and government authorities to address this situation.

At times we face difficulties in the shipment of, and the risks inherent in the importation of, merchandise to our warehouse clubs. One of those difficulties is possible governmental restrictions on the importation of merchandise. In late May 2023, disputes with Nicaraguan customs and tax authorities resulted in delays in the issuance of our importation clearance, and general delays in the customs inspection process. While this situation has occurred frequently in the last few years, we generally have been able to plan around these import blockages and resume within a manner of days. However, the most recent delay in obtaining importation clearance, resulted in us being unable to import merchandise into Nicaragua for several weeks in June of 2023. While at this time our tax clearances and imports seem to have returned to a more normal cadence, we continue to monitor this situation closely and are working with local officials to seek continuity of imports into Nicaragua as well as the other jurisdictions in which we operate.

Financial highlights for the fourth quarter of fiscal year 2024 included:

•Total revenues increased 9.6% over the prior year period.

•Net merchandise sales increased 9.5% over the prior year period. We ended the quarter with 54 warehouse clubs compared to 51 warehouse clubs at the end of the fourth quarter of fiscal year 2023. Net merchandise sales - constant currency increased 9.3% over the prior year period.

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•Comparable net merchandise sales (that is, sales in the 51 warehouse clubs that have been open for greater than 13 1⁄2 calendar months) for the 13 weeks ended September 1, 2024 increased 6.2%. Comparable net merchandise sales - constant currency for the 13 weeks ended September 1, 2024 increased 6.0%.

•Membership income for the fourth quarter of fiscal year 2024 increased 14.1% to $19.7 million over the comparable prior year period.

•Total gross margins (net merchandise sales less associated cost of goods sold) increased 10.3% over the prior-year period, and merchandise gross profits as a percent of net merchandise sales were 15.7%, an increase of 10 basis points or 0.1% from the same period in the prior year.

•Selling, general and administrative expenses increased $3.4 million or 2.2% compared to the fourth quarter of fiscal year 2023, primarily due to higher compensation costs, professional fees, depreciation expense and bank fees which were partially offset by costs associated with the reserve for the AMT settlement and asset impairment and closure costs which occurred during the fourth quarter of fiscal year 2023.

•Operating income for the fourth quarter of fiscal year 2024 was $49.2 million, an increase of 53.1%, or $17.1 million, compared to the fourth quarter of fiscal year 2023.

•We recorded a $7.4 million net loss in total other expense, net in the fourth quarter of fiscal year 2024 compared to a $1.5 million net loss in total other expense, net in the same period last year primarily due to an increase in other expense of $4.2 million, primarily driven by an increase in total foreign currency transaction losses and a decrease of $1.2 million in interest income.

•Our effective tax rate decreased in the fourth quarter of fiscal year 2024 to 30.4% from 49.9% in the fourth quarter of fiscal year 2023. The decrease in the effective rate versus the prior year was primarily attributable to the non-recurrence of the comparably unfavorable impacts in the prior year of 11.6% due to the AMT settlement and 5.4% from asset impairment and related closure costs.

•Net income for the fourth quarter of fiscal year 2024 was $29.1 million, or $0.94 per diluted share, compared to $15.4 million, or $0.49 per diluted share, for the fourth quarter of fiscal year 2023. The fourth quarter of fiscal year 2023 included a negative impact of $0.30 per diluted share for costs related to the reserve for the AMT settlement and $0.18 per diluted share of asset impairment and closure costs.

•Adjusted net income for the fourth quarter of fiscal year 2024 was $29.1 million, or an adjusted $0.94 per diluted share, compared to adjusted net income of $20.4 million, or $0.65 per diluted share, for the fourth quarter of fiscal year 2023. The fourth quarter of fiscal year 2023 included a negative impact of $0.30 per diluted share for costs related to the reserve for the AMT settlement.

•Adjusted EBITDA for the fourth quarter of fiscal year 2024 was $70.7 million compared to $57.2 million in the same period last year.

Financial highlights for fiscal year 2024 included:

•Total revenues increased 11.4% over the prior year period.

•Net merchandise sales increased 11.2% over the prior year period. We ended the year with 54 warehouse clubs compared to 51 warehouse clubs at the end of fiscal year 2023. Net merchandise sales - constant currency increased 8.6% over the prior year period.

•Comparable net merchandise sales (that is, sales in the 51 warehouse clubs that have been open for greater than 13 1⁄2 calendar months) for the 52 weeks ended September 1, 2024 increased 7.7%. Comparable net merchandise sales - constant currency for the 52 weeks ended September 1, 2024 increased 5.2%.

•Membership income increased 13.9% to $75.2 million.

•Total gross margins (net merchandise sales less associated cost of goods sold) increased 11.1% over the prior year, and merchandise gross profits as a percent of net merchandise sales remained constant at 15.8% compared to the prior year.

•Selling, general and administrative expenses increased $51.2 million in fiscal year 2024 or 8.9% compared to fiscal year 2023, primarily due to higher compensation cost, professional fees, depreciation expense, and bank fees.

•Operating income was $220.9 million in fiscal year 2024, an increase of 19.7%, or $36.4 million, compared to fiscal year 2023.

•We recorded a $19.5 million net loss in total other expense, net in fiscal year 2024 compared to a $15.3 million net loss in total other expense, net in the same period last year primarily due to an increase of $3.5 million of other expense, which is primarily foreign currency transaction losses, and an increase of $1.9 million in interest expense, partially offset by an increase of $1.2 million in interest income.

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•The effective tax rate for fiscal year 2024 was 31.1% as compared to the effective tax rate for fiscal year 2023 of 35.4%. The decrease is primarily driven by the non-recurrence of the comparably unfavorable impact in the prior year of write-offs of VAT receivables, Aeropost write-offs and asset impairment and related closure costs of 2.2%, and a 1.8% unfavorable impact due to the AMT settlement.

•Net income for fiscal year 2024 was $138.9 million, or $4.57 per diluted share, compared to $109.2 million, or $3.50 per diluted share, for fiscal year 2023. Fiscal year 2023 included a negative impact of $0.30 per diluted share for costs related to the reserve for the AMT settlement and $0.18 per diluted share of asset impairment and closure costs.

•Adjusted net income for fiscal year 2024 was $138.9 million, or an adjusted $4.57 per diluted share, compared to adjusted net income of $126.5 million, or an adjusted $4.06 per diluted share, for fiscal year 2023. Fiscal year 2023 included a negative impact of $0.30 per diluted share for costs related to the reserve for the AMT settlement.

•Adjusted EBITDA for fiscal year 2024 was $303.6 million compared to $275.7 million in the prior year.

Non - GAAP (Generally Accepted Accounting Principles) Financial Measures

The accompanying Consolidated Financial Statements, including the related notes, are presented in accordance with U.S. GAAP (Generally Accepted Accounting Principles). In addition to relevant GAAP measures, we also provide non-GAAP measures including adjusted net income, adjusted net income per diluted share, adjusted EBITDA, net merchandise sales - constant currency and comparable net merchandise sales - constant currency because management believes these metrics are useful to investors and analysts by excluding items that we do not believe are indicative of our core operating performance. These measures are customary for our industry and commonly used by competitors. However, these non-GAAP financial measures should not be reviewed in isolation or considered as an alternative to any other performance measure derived in accordance with GAAP and may not be comparable to similarly titled measures used by other companies in our industry or across different industries.

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Adjusted Net Income and Adjusted Net Income per Diluted Share

Adjusted net income and adjusted net income per diluted share metrics are important measures used by management to compare the performance of our core operations results between periods. We define adjusted net income as net income, as reported, adjusted for: separation costs associated with the departure of our former Chief Executive Officer, the write-off of certain Aeropost receivables, the write-off of certain VAT receivables following unfavorable court rulings, asset impairment on our assets held for sale and closure costs, the gain on the acquisition of a building, and the tax impact of the foregoing adjustments on net income. We define adjusted net income per diluted share as adjusted net income divided by the weighted-average diluted shares outstanding.

We believe adjusted net income and adjusted net income per diluted share are useful metrics to investors and analysts because they present more accurate year-over-year comparisons for our net income and net income per diluted share because adjusted items are not the result of our normal operations. We note that no adjustments to net income or net income per diluted share have been made for the three-month and twelve-month periods ended August 31, 2024.

Three Months Ended Years Ended

Adjustments:

Aeropost-related write-offs (2) — — — 2,786

VAT receivable write-off (3) — — — 2,309

Asset impairment and closure costs (4) — 5,658 — 5,658

Gain on acquisition of building (5) — (948) — (948)

Tax impact of adjustments to net income (6) — 266 — (284)

Separation costs associated with Chief Executive Officer departure — — — 0.23

Aeropost-related write-offs — — — 0.09

VAT receivable write-off — — — 0.08

Asset impairment and closure costs — 0.18 — 0.18

Gain on acquisition of building — (0.02) — (0.02)

Adjusted net income per diluted share $ 0.94 $ 0.65 $ 4.57 $ 4.06

(1) Reflects $7.7 million of separation costs associated with the departure of our former Chief Executive Officer in February 2023.

(2) Reflects $2.1 million of Aeropost-related write-offs in the first quarter of fiscal year 2023 and $660,000 of a receivable written-off in connection with the settlement in the third quarter of fiscal year 2023 of a claim for indemnification from the buyer of the Aeropost business.

(3) Reflects $2.3 million of VAT receivables deemed not recoverable and written-off in the third quarter of fiscal year 2023 following unfavorable court rulings.

(4) Reflects $5.7 million of impairment charges primarily related to the write down of assets in connection with our decision in the fourth quarter of fiscal year 2023 to seek to sell our Trinidad sustainable packaging plant.

(5) Reflects a $950,000 gain related to a building we acquired upon the early termination of a lease in which we were the lessor of the land on which the building was constructed by and abandoned by one of our tenants.

(6) Reflects the tax effect of the above-mentioned adjustments.

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Adjusted EBITDA

Adjusted EBITDA is defined as net income before interest expense, net, provision for income taxes and depreciation and amortization, adjusted for the impact of certain other items, including interest income; other income (expense), net; separation costs associated with Chief Executive Officer departure; asset impairment and closure costs; Aeropost write-offs; and the write-off of certain VAT receivables following unfavorable court rulings. The following is a reconciliation of our Net income to Adjusted EBITDA for the periods presented:

Three Months Ended Years Ended

Adjustments:

Aeropost-related write-offs (3) — — — 2,786

VAT receivable write-off (4) — — — 2,309

Asset impairment and closure costs (5) — 5,658 — 5,658

(1) Primarily consists of foreign currency losses or gains due to the revaluation of monetary assets and liabilities (primarily U.S. dollars). This line item includes a gain of $950,000 associated with the acquisition of a building upon a lease termination in the fourth quarter of fiscal year 2023.

(2) Reflects $7.7 million of separation costs associated with the departure of our former Chief Executive Officer in February 2023.

(3) Reflects $2.1 million of Aeropost-related write-offs in the first quarter of fiscal year 2023 and $660,000 of a receivable written-off in connection with the settlement in the third quarter of fiscal year 2023 of a claim for indemnification from the buyer of the Aeropost business.

(4) Reflects $2.3 million of VAT receivables related to prior periods deemed not recoverable and written-off in the third quarter of fiscal year 2023 following unfavorable court rulings.

(5) Reflects $5.7 million of impairment primarily related to the write down of assets in connection with our decision in the fourth quarter of fiscal year 2023 to seek to sell our Trinidad sustainable packaging plant.

Net Merchandise Sales - Constant Currency

As a multinational enterprise, we are exposed to changes in foreign currency exchange rates. The translation of the operations of our foreign-based entities from their local currencies into U.S. dollars is sensitive to changes in foreign currency exchange rates and can have a significant impact on our reported financial results. We believe that constant currency is a useful measure, indicating the actual growth of our operations. When we use the term "net merchandise sales - constant currency," it means that we have translated current year net merchandise sales at prior year monthly average exchanges rates. Net merchandise sales - constant currency results exclude the effects of foreign currency translation. Similarly, when we use the term "comparable net merchandise sales - constant currency," it means that we have translated current year comparable net merchandise sales at prior year monthly average exchange rates. Comparable net merchandise sales – constant currency results exclude the effects of foreign currency translation. Refer to “Management’s Discussion & Analysis – Net Merchandise Sales” and Refer to “Management’s Discussion & Analysis – Comparable Net Merchandise Sales” for our quantitative analysis and discussion. Reconciliations between net merchandise sales - constant currency and comparable net merchandise sales - constant currency and the most directly comparable GAAP measures are included where applicable.

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Comparison of Fiscal Year 2024 to 2023

The following discussion and analysis compares the results of operations for the fiscal years ended August 31, 2024 and 2023 and should be read in conjunction with the consolidated financial statements and the accompanying notes included elsewhere in this report. For a comparison of the fiscal years ended August 31, 2023 and 2022, please see Part II. “Item 7. Management’s Discussion and Analysis of Results of Operations and Financial Condition” in the Company’s Annual Report on Form 10-K for the fiscal year ended August 31, 2023 filed with the SEC on October 30, 2023. Unless otherwise noted, all tables present U.S. dollar amounts in thousands. Certain percentages presented are calculated using actual results prior to rounding. Our operations consist of four reportable segments: Central America, the Caribbean, Colombia and the United States. The Company’s reportable segments are based on management’s organization of these locations into operating segments by general geographic location, which are used by management and the Company's chief operating decision maker in setting up management lines of responsibility, providing support services, and making operational decisions and assessments of financial performance. Segment amounts are presented after converting to U.S. dollars and consolidating eliminations. From time to time, we revise the measurement of each segment's operating income, including certain corporate overhead allocations, and other measures as determined by the information regularly reviewed by our chief operating decision maker. When we do so, the previous period amounts and balances are reclassified to conform to the current period's presentation.

Net Merchandise Sales

The following tables indicate the net merchandise sales in the reportable segments in which we operate and the percentage growth in net merchandise sales by segment during fiscal years 2024 and 2023:

Years Ended

Amount % of netsales Increase from prior year Change Amount % of netsales

Overall, net merchandise sales grew by 11.2% for fiscal year 2024 compared to fiscal year 2023, driven by an 8.6% increase in transactions and a 2.4% increase in average ticket. Transactions represent the total number of visits our Members make to our warehouse clubs resulting in a sale and the total number of PriceSmart.com curbside pickup and delivery service transactions. Average ticket represents the amount our Members spend on each visit or PriceSmart.com order. We had 54 clubs in operation as of August 31, 2024 compared to 51 clubs as of August 31, 2023.

Net merchandise sales in our Central America segment increased 11.0% during fiscal year 2024. This increase had a 670 basis point (6.7%) positive impact on total net merchandise sales growth. All markets within this segment had positive net merchandise sales growth for the twelve-month period ended August 31, 2024. We opened our third and fourth warehouse clubs in El Salvador in May 2023 and February 2024, respectively. We also opened our sixth warehouse club in Guatemala in November 2023.

Net merchandise sales in our Caribbean segment increased 6.4% during fiscal year 2024. This increase had a 190 basis point (1.9%) positive impact on total net merchandise sales growth. All of our markets in this segment had positive net merchandise sales growth.

Net merchandise sales in our Colombia segment increased 26.4% during fiscal year 2024. This increase had a 260 basis point (2.6%) positive impact on total net merchandise sales growth. The primary driver of the increased sales for the twelve-month period ended August 31, 2024 was due to the significant appreciation of the Colombian peso for much of the year, which has positively impacted reported sales when compared to the comparable prior year period. We added one new club to the segment when compared to the prior year. We opened our tenth warehouse club in Colombia in September 2023.

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The following table indicates the impact that currency exchange rates had on our net merchandise sales in dollars and the percentage change from the twelve-month period ended August 31, 2024. When we use the term "net merchandise sales - constant currency," it means that we have translated current year net merchandise sales at prior year monthly average exchanges rates. Net merchandise sales - constant currency results exclude the effects of foreign currency translation. Impact of foreign currency is the effect of currency fluctuations on our net merchandise sales.

Overall, the effects of currency fluctuations within our markets had an approximately $114.1 million, or 260 basis point (2.6%), positive impact on net merchandise sales for the twelve-months ended August 31, 2024.

Currency fluctuations had a $78.4 million, or 300 basis point (3.0%), positive impact on net merchandise sales in our Central America segment for the twelve months ended August 31, 2024. These currency fluctuations contributed approximately 180 basis points (1.8%) of positive impact on total net merchandise sales for fiscal year 2024. The Costa Rica colón appreciated significantly against the dollar when compared to the prior year, and was a significant factor in the contribution to the favorable currency fluctuations in this segment.

Currency fluctuations had a $29.5 million, or 240 basis point (2.4%), negative impact on net merchandise sales in our Caribbean segment for the twelve months ended August 31, 2024. These currency fluctuations contributed approximately 70 basis points (0.7%) of negative impact on total net merchandise sales growth for the current fiscal year period. This negative impact was primarily driven by the devaluation of the Dominican Peso as compared to the prior year.

Currency fluctuations had a $65.2 million, or 1,520 basis point (15.2%), positive impact on net merchandise sales in our Colombia segment for the twelve months ended August 31, 2024. These currency fluctuations contributed approximately 150 basis points (1.5%) of positive impact on total net merchandise sales for the current fiscal year period.

Net Merchandise Sales by Category

The following table indicates the approximate percentage of net sales accounted for by each major category of items sold during the fiscal years ended August 31, 2024 and 2023:

Years Ended August 31,

Foods & Sundries 49 % 50 %

Softlines 5 5

Food Service and Bakery 4 4

Health Services 1 1

Net Merchandise Sales 100 % 100 %

The mix of sales by major category changed slightly. Foods & Sundries increased approximately 8% between fiscal year 2024and 2023but decreased by 1% as a percent of Net Merchandise Sales. Fresh Foods increased approximately 12% between fiscal year 2024 and 2023 and increased by 1% as a percent of Net Merchandise Sales. Shifts in consumer preferences contributed to the changes in category mix.

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Comparable Net Merchandise Sales

We report comparable net merchandise sales on a “same week” basis with 13 weeks in each quarter beginning on a Monday and ending on a Sunday. The periods are established at the beginning of the fiscal year to provide as close a match as possible to the calendar month and quarter that is used for financial reporting purposes. This approach equalizes the number of weekend days and weekdays in each period for improved sales comparison, as we experience higher merchandise club sales on the weekends. Further, each of the warehouse clubs used in the calculations was open for at least 13 1⁄2 calendar months before its results for the current period were compared with its results for the prior period. As a result, sales related to three of our clubs opened during fiscal year 2024 will not be used in the calculation of comparable sales until they have been open for at least 13 1⁄2 months. Therefore, comparable net merchandise sales includes 51 warehouse clubs for the 52-week period ended September 1, 2024.

The following table indicates the comparable net merchandise sales in the reportable segments in which we operate and the percentage changes in net merchandise sales by segment during the 52-week periods ended September 1, 2024 and September 3, 2023 compared to the prior year:

52 Weeks Ended

Central America 7.7 % 10.9 %

Consolidated comparable net merchandise sales 7.7 % 7.1 %

Comparable net merchandise sales for those warehouse clubs that were open for at least 13 1⁄2 months for some or all of the 52-week period ended September 1, 2024 increased 7.7%.

Comparable net merchandise sales in our Central America segment increased 7.7% for the 52-week period ended September 1, 2024. With the exception of El Salvador, all of our markets in Central America had positive comparable net merchandise sales growth. We opened one new club in El Salvador in February 2024 that has not entered into the calculation of comparable net merchandise sales, and the transfer of sales from the existing clubs included in the comparable net merchandise sales calculation to the new club not yet included adversely affected comparable net merchandise sales in El Salvador. The positive comparable net merchandise sales growth for our Central America segment contributed approximately 460 basis points (4.6%) of positive impact in total comparable merchandise sales.

For the 52 weeks ended September 1, 2024, strong performance in our largest market, Costa Rica, contributed approximately 250 basis points (2.5%) of positive impact to total comparable net merchandise sales. During the year, Costa Rica experienced significant appreciation of the Costa Rica colón versus the comparable prior year period, which positively affected comparable net merchandise sales. The relatively smaller markets of Guatemala, Honduras, Nicaragua, and El Salvador, along with our second largest market, Panama, contributed approximately 210 basis points (2.1%) of positive impact on total comparable net merchandise sales.

Comparable net merchandise sales in our Caribbean segment increased 6.0% for the 52-week period ended September 1, 2024. This increase contributed approximately 180 basis points (1.8%) of positive impact in total comparable net merchandise sales. Our Jamaica market continued its strong performance in the 52-week period, with 12.2% comparable net merchandise sales growth.

Comparable net merchandise sales in our Colombia segment increased 12.9% for the 52-week period ended September 1, 2024. This increase contributed approximately 130 basis points (1.3%) of positive impact to the increase in total comparable net merchandise sales. The current year increase is primarily due to the appreciation of the Colombian peso for most of the year.

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When we use the term "comparable net merchandise sales - constant currency," it means that we have translated current year comparable net merchandise sales at prior year monthly average exchanges rates. Comparable net merchandise sales - constant currency results exclude the effects of foreign currency translation. The following tables illustrate the comparable net merchandise sales - constant currency percentage growth and the impact that changes in foreign currency exchange rates had on our comparable merchandise sales percentage growth for the 52-week period ended September 1, 2024:

Fifty-Two Weeks Ended September 1, 2024

Central America 7.7 % 4.7 % 3.0 %

Consolidated comparable net merchandise sales 7.7 % 5.2 % 2.5 %

Overall, the mix of currency fluctuations within our markets had 250 basis points (2.5%) of positive impact on comparable net merchandise sales for the 52-week period ended September 1, 2024.

Currency fluctuations within our Central America segment accounted for approximately 180 basis points (1.8%) of positive impact on total comparable merchandise sales for the 52-week period ended September 1, 2024. Our Costa Rica market was the main contributor as the market experienced currency appreciation when compared to the same period last year.

Currency fluctuations within our Caribbean segment accounted for approximately 70 basis points (0.7%) of negative impact on total comparable merchandise sales for the 52-week period ended September 1, 2024. Our Jamaica and Dominican Republic markets experienced currency devaluation when compared to the same period last year.

Currency fluctuations within our Colombia segment accounted for approximately 140 basis points (1.4%) of positive impact on total comparable net merchandise sales for the 52-week period ended September 1, 2024. This reflects the appreciation of the Colombia peso's foreign currency exchange rate when compared to the same period last year.

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Membership Income

Membership income is recognized ratably over the one-year life of the membership.

Years Ended

The number of Member accounts at the end of fiscal year 2024 was 4.7% higher than the prior year. Membership income increased 13.9% compared to the prior year.

Membership income increased in all of our segments in the twelve months ended August 31, 2024. The consolidated increase in membership income is primarily due to the $5 increase to our membership fee in all but one market during fiscal year 2024 and an increase in the membership base since the prior year. In our Central America segment, membership income increased compared to fiscal year 2023, attributable to the opening of two new clubs. Similarly, in the Caribbean segment, membership income rose compared to fiscal year 2023, primarily attributable to the $5 increase to our membership fee. In the Colombia segment, membership income increased compared to fiscal year 2023 due to the appreciation of the Colombian peso against the U.S. dollar and the opening of a new club. Additionally, all of our segments have increased their membership base since August 31, 2023.

We offer the Platinum Membership program in all locations where PriceSmart operates. The annual fee for a Platinum Membership in most markets is approximately $75 to $80, depending on the market in which the Member lives. The Platinum Membership program provides Members with a 2% rebate on most items, up to an annual maximum of $500. We record the 2% rebate as a reduction of net merchandise sales at the time of the sales transaction. Platinum Membership accounts are 12.3% of our total membership base as of August 31, 2024, an increase from 8.9% as of August 31, 2023. Platinum Members tend to have higher renewal rates than our Diamond Members. During fiscal year 2024, we ran platinum promotional campaigns, resulting in an increase in the total number of Platinum Members.

Our trailing twelve-month renewal rate was 87.9% and 86.9% for the fiscal years ended August 31, 2024 and August 31, 2023, respectively.

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Other Revenue

Other revenue primarily consists of our interest-generating portfolio from our co-branded credit cards and rental income from operating leases where the Company is the lessor.

Years Ended

Amount Increase from prior year % Change Amount

Comparison of Fiscal Year 2024 to 2023

The primary driver of the increase in other revenue for the year ended August 31, 2024 was an increase in Miscellaneous income driven primarily by an increase in incentive fee revenue due to Members having higher average outstanding balances on our co-branded credit cards compared to the prior year.

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Results of Operations

Years Ended

Results of Operations Consolidated August 31, 2024 August 31, 2023

(Amounts in thousands, except percentages and number of warehouse clubs)

Net merchandise sales

Total gross margin percentage 15.8% 15.8%

Revenues

Percentage change from prior period 11.4% 8.5%

Comparable net merchandise sales

Total comparable net merchandise sales increase 7.7% 7.1%

Total revenue margin

Total revenue margin percentage 17.2% 17.2%

Selling, general and administrative

Selling, general and administrative percentage of total revenues 12.7% 13.0%

Operational data

Warehouse clubs at period end 54 51

Warehouse club sales floor square feet at period end 2,646 2,524

Years Ended

Operating income by segment

(1)The reconciling items reflect the amount eliminated upon consolidation of intersegment transactions.

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The following table summarizes the selling, general and administrative expense for the periods disclosed:

Years Ended

August 31, 2024 % ofTotal Revenue August 31, 2023 % ofTotal Revenue

Reserve for AMT settlement — — 7,179 0.2

Separation costs associated with Chief Executive Officer departure — — 7,747 0.2

Asset impairment and closure costs — — 5,658 0.1

Loss on disposal of assets 2,168 — 744 —

Total gross margin is derived from our Revenue – Net merchandise sales less our Cost of goods sold – Net merchandise sales and represents our sales and cost of sales generated from the business activities of our warehouse clubs. We express our Total gross margin percentage as a percentage of our Net merchandise sales.

On a consolidated basis, total gross margin as a percent of net merchandise sales for the twelve months ended August 31, 2024 was 15.8%, unchanged from the prior year.

Total revenue margin is derived from Total revenues, which includes our Net merchandise sales, Membership income, Export sales, and Other revenue and income less our Cost of goods sold for Net merchandise sales, Export sales, and Non-merchandise revenues. We express our Total revenue margin as a percentage of Total revenues.

Total revenue margin remained unchanged at 17.2% for the twelve months ended August 31, 2024 compared to the prior year.

Selling, general, and administrative expenses consist of warehouse club and other operations, general and administrative expenses, reserve for settlement of AMT, separation costs associated with the Chief Executive Officer departure, pre-opening expenses, asset impairment and closure costs, and loss (gain) on disposal of assets. In total, selling, general and administrative expenses increased $51.2 million compared to the prior year, and decreased as a percentage of total revenues 30 basis points (0.3%) to 12.7% of total revenues for fiscal year 2024 compared to 13.0% of total revenues for fiscal year 2023 offset, in part, by our Interim Chief Executive Officer's election not to receive compensation.

Warehouse club and other operations expenses increased to 9.5% of total revenues for fiscal year 2024 compared to 9.4% for fiscal year 2023, primarily due to our Colombia market which increased 20 basis points (0.2%) as a percentage of revenue year over year due to the appreciation of the Colombian peso and opening of one new club during the year as well as an increase of 10 basis points (0.1%) each in El Salvador and Guatemala due to the opening of one new club in each of these markets. This was partially offset by our Panama, Honduras, and Dominican Republic markets, each of which decreased 10 basis points (0.1%) as a percentage of revenue year over year.

General and administrative expenses increased to 3.2% of total revenues for the current year compared to 3.1% for fiscal year 2023. The 10 basis points (0.1%) increase is primarily due to investments in technology and an increase in compensation expense from stock grants to executive leadership.

In fiscal year 2023, we recorded costs for separation and other related termination benefits for our former Chief Executive Officer who resigned effective February 3, 2023. We accrued for the related charges and substantially fulfilled all payment obligations in fiscal year 2023; however, some vesting of performance stock units occurred in the first quarter of fiscal year 2024. On a go-forward basis, our Interim Chief Executive Officer has declined to receive compensation for his services during his term; therefore, we expect Selling, general and administrative expenses will be positively impacted by $2.5 million of savings each quarter during his term, reduced by salary increases for other executives related to the change in leadership.

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In fiscal year 2023, we recorded a $7.2 million charge to settle litigation regarding several AMT cases in one of our markets where the application of complex tax laws are subject to interpretation. In that country, we had challenged AMT rules requiring us to pay taxes based on a percentage of sales if the percentage of sales method resulted in a higher amount of tax payable than the amount payable based on taxable income at the statutory rate. Of this amount, $1.0 million relates to our write-off of an income tax receivable we had recorded with respect to taxes we previously paid on the percentage of sales basis in one tax year and for which we had sought a refund that we now no longer expect to receive. We also made payments of $6.2 million to resolve amounts due for tax years in which we made tax payments using the original computation based on taxable income rather than the percentage of sales method. As part of the settlement, going forward we will pay the higher of the minimum tax or the amount based on taxable income at the statutory rate.

Additionally, in fiscal year 2023, we recorded $5.7 million of asset impairment and closure costs primarily related to the write down of the assets held for sale of our Trinidad sustainable packaging plant to their estimated fair value upon our decision to seek to sell the plant. We planned to use the plant to increase efficiencies by eliminating intermediaries in packaging and labeling and manufacturing some of our packaging materials using compostable or recyclable inputs. However, we found that achieving economic feasibility for this business proved challenging. Therefore, we decided to refocus our efforts on our core competencies as a retailer and redeploy the assets we could use in our club business and seek a buyer for the remainder.

Operating income in fiscal year 2024 increased to $220.9 million (4.5% of total revenues) compared to $184.5 million (4.2% of total revenues) for the prior year.

Interest Income

Interest income represents the earnings generated from interest-bearing assets held by PriceSmart, Inc. and our wholly owned foreign subsidiaries. These assets include investments in fixed income securities and deposits held with financial institutions. The interest income is derived from the interest payments received on these assets, which serve to enhance our overall financial returns.

Years Ended

Amount Change Amount

Interest income increased for the twelve-month period ended August 31, 2024 primarily due to an increase in investments at higher yields throughout the year when compared to the prior year.

Interest Expense

Years Ended

Amount Change Amount

Interest expense related to hedging activity 2,354 1,149 1,205

Interest expense reflects borrowings by PriceSmart, Inc. and our wholly owned foreign subsidiaries to finance new land acquisition and construction for new warehouse clubs and distribution centers, warehouse club expansions, the capital requirements of warehouse club and other operations, and ongoing working capital requirements.

Interest expense increased for the twelve-month period ended August 31, 2024, primarily due to higher interest expense related to hedging activity and less capitalized interest when compared to the prior year.

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Other Expense, net

Other expense, net consists of currency gains or losses, as well as net benefit costs related to our defined benefit plans and other items considered to be non-operating in nature.

Years Ended

Amount Change Amount

Monetary assets and liabilities denominated in currencies other than the functional currency of the respective entity (primarily U.S. dollars) are revalued to the functional currency using the exchange rate on the balance sheet date. These foreign exchange transaction gains/(losses) are recorded as currency gains or losses. Additionally, gains or losses from transactions denominated in currencies other than the functional currency of the respective entity also generate currency gains or losses.

For the twelve months ended August 31, 2024, the primary drivers of Other expense, net were transaction costs associated with increased spreads and converting the local currencies into available tradable currencies before converting them to U.S. dollars in some of our countries with liquidity issues of $13.1 million as well as $4.8 million of losses due to revaluation of monetary assets and liabilities (primarily U.S. dollars) in several of our markets during the twelve months ended August 31, 2024.

Provision for Income Taxes

The tables below summarize the effective tax rate for the periods reported:

Years Ended

Amount Change Amount

Effective tax rate 31.1 % 35.4 %

For fiscal year 2024, the effective tax rate was 31.1% compared to 35.4% for fiscal year 2023. The decrease in the effective rate versus the prior year was primarily attributable to the non-recurrence of the comparably unfavorable impact in the prior year of write-offs of VAT receivables, Aeropost write-offs and asset impairment and related closure costs of 2.2%, and a 1.8% unfavorable impact due to the AMT settlement.

Following the implementation of certain tax optimization initiatives at the end of fiscal year 2024, we expect a decrease in the effective tax rate by approximately 2-4% in fiscal year 2025.

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Other Comprehensive Income (Loss)

Other comprehensive income (loss) for fiscal years 2024 and 2023 resulted primarily from foreign currency translation adjustments related to assets and liabilities and the translation of the statements of income related to revenue, costs and expenses of our subsidiaries whose functional currency is not the U.S. dollar. When the functional currency in our international subsidiaries is the local currency and not U.S. dollars, the assets and liabilities of such subsidiaries are translated to U.S. dollars at the exchange rate on the balance sheet date, and revenue, costs and expenses are translated at average rates of exchange in effect during the period. The corresponding translation gains and losses are recorded as a component of accumulated other comprehensive income or loss. These adjustments will not affect net income until the sale or liquidation of the underlying investment. The reported other comprehensive income or loss reflects the unrealized increase or decrease in the value in U.S. dollars of the net assets of the subsidiaries as of the date of the balance sheet, which will vary from period to period as exchange rates fluctuate.

Years Ended

Amount Change From Prior Year % Change Amount

Other comprehensive loss for fiscal year 2024 of approximately $0.6 million was primarily the result of $2.2 million of unrealized losses on the changes of fair value of our derivative obligations partially offset by $0.9 million related to unrealized gains on changes in the fair value of accrued pension obligations and the comprehensive gain of $0.7 million from foreign currency translation adjustments During fiscal year 2024, the largest translation adjustments were related to the appreciation of the local currency against the U.S. dollar of our Costa Rica subsidiary partially offset by the devaluation of the local currency against the U.S. dollar for our Dominican Republic subsidiary.

LIQUIDITY AND CAPITAL RESOURCES

Financial Position and Cash Flow

Our operations have historically supplied us with a significant source of liquidity. We generate cash from operations primarily through net merchandise sales and membership fees. Cash used in operations generally consist of payments to our merchandise vendors, warehouse club and distribution center operating costs (including payroll, employee benefits and utilities), as well as payments for income taxes. Our cash flows provided by operating activities, supplemented with our long-term debt and short-term borrowings, have generally been sufficient to fund our operations while allowing us to invest in activities that support the long-term growth of our operations. We also have returned cash to stockholders through a semiannual dividend, a one-time special dividend in the third quarter of fiscal year 2024, and by repurchasing shares of our common stock pursuant to the stock repurchase program we commenced in the fourth quarter of fiscal year 2023 and completed in the first quarter of fiscal year 2024. We evaluate our funding requirements on a regular basis to cover any shortfall in our ability to generate sufficient cash from operations to meet our capital requirements. We may consider funding alternatives to provide additional liquidity if necessary. Refer to Part II. “Item 8. Financial Statements and Supplementary Data: Notes to Consolidated Financial Statements, Note 11 - Debt” for additional information regarding amounts outstanding on our short-term facilities and our long-term borrowings, and any repayments.

Repatriation of cash and cash equivalents held by foreign subsidiaries may require us to accrue and pay taxes for certain jurisdictions. If we decide to repatriate cash through the payment of a cash dividend by our foreign subsidiaries to our domestic operations, we will accrue taxes if and when appropriate.

The following table summarizes the cash and cash equivalents, including restricted cash, held by our foreign subsidiaries and domestically (in thousands):

Total cash and cash equivalents, including restricted cash $ 136,311 $ 252,202

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The following table summarizes the short-term investments held by our foreign subsidiaries and domestically (in thousands):

Amounts held domestically — 16,787

As of August 31, 2024 and August 31, 2023, there were no certificates of deposit with a maturity of over one year held by our foreign subsidiaries or domestically.

Our cash flows are summarized as follows (in thousands):

Years Ended

Net increase (decrease) in cash, cash equivalents $ (115,891) $ 829 $ (116,720)

Net cash provided by operating activities totaled $207.6 million and $257.3 million for the twelve months ended August 31, 2024 and 2023, respectively. Net cash provided by operating activities decreased primarily due to shifts in working capital resulting from changes in our merchandise inventory and accounts payable positions, which contributed $58.0 million to the overall decrease. The primary cause of this was higher inventory compared to the prior year due to three additional clubs that opened in fiscal year 2024 and to a shift in our inventory mix towards more non-food items. Additionally, a net change in our other various operating assets and liabilities contributed $21.5 million of additional cash used. This was partially offset by an increase in net income without non-cash items which contributed $29.8 million for the twelve months ended August 31, 2024.

Net cash used in investing activities totaled $175.5 million and $222.1 million for the twelve months ended August 31, 2024 and August 31, 2023, respectively. The $46.6 million decrease in cash used in investing activities is primarily due to a $116.3 million increase in proceeds from settlements of short-term investments. This was partially offset by a $44.9 million increase in purchases of short-term investments and a $26.0 million increase in property and equipment expenditures to support growth of our real estate footprint, compared to the prior year. We opened three additional clubs during fiscal year 2024.

Net cash used in financing activities totaled $150.0 million and $41.1 million for the twelve months ended August 31, 2024 and 2023, respectively. We use cash flows provided by financing primarily to fund our working capital needs, our warehouse club and distribution center acquisitions and expansions, and investments in technology to support our omni-channel initiatives. The $109.0 million increase in cash used in financing activities is primarily the result of repurchases of treasury stock during fiscal year 2024, a special dividend payment in April 2024, and lower proceeds, net of repayments, from long-term bank borrowings compared to the same period a year ago.

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The following table summarizes the dividends declared and paid during fiscal years 2024, 2023 and 2022 (amounts are per share):

First Payment Second Payment

Declared Amount RecordDate DatePaid Amount RecordDate DatePaid Amount

Capital Expenditures

Capital expenditures were $168.5 million for the year ended August 31, 2024, of which the mix between maintenance and growth expenditures were $72.3 million and $96.2 million, respectively. Capital expenditures for fiscal year 2023 were $142.5 million, of which the mix between maintenance and growth expenditures were $69.3 million and $73.2 million, respectively. In January 2024, the Company purchased its previously leased club building and land in Panama City, Panama for $33.0 million. The Company also purchased land located in Cartago, Costa Rica, where we plan to open our ninth warehouse club in Costa Rica in the spring of 2025. Maintenance expenditures are typically for operational fixtures and equipment, building refurbishment, solar, technology and other expenses. Growth expenditures are for new clubs, purchases of previously leased clubs, investments to move existing clubs to better locations, supply chain improvements, and major remodels and expansions.

Short-Term Borrowings and Long-Term Debt

Our financing strategy is to ensure liquidity and access to capital markets while minimizing our borrowing costs. The proceeds of these borrowings were or will be used for general corporate purposes, which may include, among other things, funding for working capital, capital expenditures, acquisitions, dividends and repayment of existing debt. Refer to Part II. “Item 8. Financial Statements and Supplementary Data: Notes to Consolidated Financial Statements, Note 11 - Debt” for further discussion.

Future Lease and Other Commitments

We place a strong emphasis on managing future lease commitments related to various facilities and equipment that support our operations. We believe our current liquidity and cash flow projections can cover future lease commitments. As of August 31, 2024, we have signed one lease agreement for a facility to be built by the lessor on which construction has not yet commenced. Refer to Part II. "Item 8. Financial Statements and Supplementary Data: Notes to Consolidated Financial Statements, Note 9 - Commitments and Contingencies" for further discussion.

Derivatives

Please refer to Part II. “Item 8. Financial Statements and Supplementary Data: Notes to Consolidated Financial Statements, Note 13 – Derivative Instruments and Hedging Activities” for further discussion.

Off-Balance Sheet Arrangements

The Company does not have any off-balance sheet arrangements that have had, or are reasonably likely to have, a material current or future effect on its financial condition or consolidated financial statements.

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Repurchase of Common Stock and Reissuance of Treasury Shares Related to Employee Stock Awards

At the vesting dates for restricted stock awards to our employees, we repurchase a portion of the shares that have vested at the prior day's closing price per share and apply the proceeds to pay the employees' tax withholding requirements, not to exceed the maximum statutory tax rate, related to the vesting of restricted stock awards. The Company expects to continue this practice going forward.

Shares of common stock repurchased by us are recorded at cost as treasury stock and result in the reduction of stockholders’ equity in our consolidated balance sheets. We may reissue these treasury shares in the future.

The following table summarizes the equity securities repurchased as part of the Company's stock-based compensation programs during fiscal years 2024, 2023 and 2022:

Years Ended

Cost of repurchase of shares (in thousands) $ 3,512 $ 7,245 $ 6,259

We reissued 3,000 treasury shares as part of our stock-based compensation programs during fiscal year 2024, 6,333 treasury shares during fiscal year 2023 and 8,314 treasury shares during fiscal year 2022.

Share Repurchase Program

In July 2023 we announced a program authorized by our Board of Directors to repurchase up to $75 million of our common stock. We began repurchases in the fourth quarter of fiscal year 2023 and successfully completed the share repurchase program in the first quarter of fiscal year 2024.We purchased a total of approximately 1,007,000 shares of our common stock under the program. The repurchases were made on the open market pursuant to a trading plan established pursuant to Rule 10b5-1 under the Securities Exchange Act of 1934, as amended, which permitted us to repurchase common stock at a time that we might otherwise have been precluded from doing so under insider trading laws or self-imposed trading restrictions. We have no plans to continue repurchases or adopt a new repurchase plan at this time.However, the Board of Directors could choose to commence another program in the future at its discretion after its review of the Company’s financial performance and anticipated capital requirements.

Share repurchase activity under the Company’s repurchase programs for the periods indicated was as follows (total cost in thousands):

Years Ended

Average price per common share acquired $ 74.13 $ 78.54

Total cost of common share acquired $ 69,362 $ 5,618

For further information, refer to Part II. “Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.”

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Critical Accounting Estimates

Our financial statements are prepared in accordance with GAAP in the United States. The preparation of our consolidated financial statements requires that management make estimates and judgments that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Some of our accounting policies require management to make difficult and subjective judgments, often as a result of the need to make estimates of matters that are inherently uncertain. Management continues to review its accounting policies and evaluate its estimates, including those related to business acquisitions, contingencies and litigation, income taxes, value added taxes, and long-lived assets. We base our estimates on historical experience and on other assumptions that management believes to be reasonable under the present circumstances. Using different estimates could have a material impact on our financial condition and results of operations.

PSMT US Equity

PSMT · 10-K · period ended 2024-08-31

Item 1A. Risk Factors

Item 1B. Unresolved Staff Comments

Item 1C. Cybersecurity

Item 2. Properties

Item 3. Legal Proceedings

Item 4. Mine Safety Disclosures

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Item 6. Reserved.

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations

PSMT US Equity☆

PSMT · 10-K · period ended 2024-08-31

Item 1A. Risk Factors

Item 1B. Unresolved Staff Comments

Item 1C. Cybersecurity

Item 2. Properties

Item 3. Legal Proceedings

Item 4. Mine Safety Disclosures

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Item 6. Reserved.

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations

PSMT US Equity