Dive Brief:
- Big box retailer PriceSmart is leveraging third-party distribution channels and expanding its own network as part of its overall growth strategy, according to its fiscal Q3 2024 earnings report.
- In Q3, the company began using third-party-run distribution centers in Guatemala, Honduras, Nicaragua and El Salvador, PriceSmart CFO Michael McCleary said on a July 11 earnings call. The retailer also signed a promissory lease agreement for a new distribution center in Guatemala, according to the report.
- “The benefits of opening distribution centers includes reduced debt landing cost, reduction in lead time and improvement of working capital,” McCleary told investors.
Dive Insight:
PriceSmart is looking beyond working capital upgrades with its distribution network expansion. The company sees additional facilities as key cogs in its pivot to becoming an omnichannel retailer.
“We believe that there are significant growth opportunities in our digital channel, and we will continue to invest in this part of our business to provide an enhanced omnichannel experience and additional value to our members,” McCleary said.
The company increased digital merchandise sales by 27% year over year in fiscal Q3, making up 5.5% of the company’s total sales for the quarter, according to the earnings call.
A growing distribution network is also meant to aid the retailer in bypassing current and future supply chain disruptions, including port congestion and labor unrest. In its Q3 earnings report, the company said the expansion of its distribution facility locations has “has facilitated alternative shipping routes, increased merchandise throughput, and provided flexibility to mitigate our supply chain challenges and risks more effectively.”
PriceSmart’s current distribution evolution comes nearly six years after it began shifting its model in the wake of increasing tariffs, particularly on goods from China. The company operates facilities in 11 countries, including its global distribution center in Miami and a Panama site it opened in fiscal Q2 2024, according to a July investor presentation. The facilities service the company’s 54 store locations spread across Central America and the Caribbean.
Beyond growing its distribution network, PriceSmart is also working to improve the overall operations of its supply chain. The company began the implementation of supply chain technology platform Relex to boost inventory management in 2023, McCleary said on the earnings call, noting PriceSmart plans to complete the process by the end of fiscal 2025.
“PriceSmart is making significant investments in technology to both improve the online shopping experience for its Members and to enhance operating efficiencies in its supply chain and the back office,” the company said in its Q3 earnings report.
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