PriceSmart : 2023 Annual Report

December 19 2023

Dear Stockholders

Congratulations to our management team and employees in San Diego, Miami, and the countries where we operate for another strong performance in fiscal year 2023 We achieved another record year in revenues $4 .4 billion--along with record earnings of $109 million, or $3. 50 per diluted share, despite non-recurring charges during the year of $24 million.

Our financial metrics remained strong with operating cash flow of $257 million, a current ratio of 138% total third- party year-ending debt of $148 million, and $1.1 billion of total stockholder equity During fiscal year 2023 we opened a new club in San Miguel, El Salvador and on September 1 we opened another club in Medellin Colombia

We are now well into the fiscal year 2024 We recently opened our sixth location in Guatemala, in the city of Escuintla, which is located in the south of the country. In February 2024 we plan to open our fourth location in El Salvador in the city of Santa Ana in the northwest part of the country. After the Santa Ana club opening we will operate 54 clubs. Although most of you

have probably never visited a PriceSmart location, you would feel right at home shopping in any of our locations including Escuintla and Santa Ana. Similar to Costco PriceSmart has a wide assortment of private label products our "Member 's

Selection®" brand. Our locations are about one-half the size of a typical Costco We carry a similar range of products, although with a much more limited selection of clothing and furniture. Another difference between PriceSmart and Costco is that we import a much larger proportion of products because the countries where we operate generally have small economies and limited

manufacturing. In addition our imports differentiate us from our competitors and are an important part of the experience we aim to offer our Members. Our mission in operating our business is to as nearly as possible, offer our Members a "U.S ." shopping experience in terms of value and quality. Our goal is clear: to continue to strengthen the member value proposition in terms of

pricing and range of offerings in both merchandise and services

PriceSmart is doing much more than running a warehouse club business I want to highlight for our stockholders that PriceSmart is the only U. S. membership warehouse club doing business in our markets. We are making a significant positive

difference in the markets where we operate PriceSmart is an important wholesale supplier for small businesses, a large purchaser of locally produced products a major employer paying excellent wages and benefits and a significant taxpayer providing

important revenues to local governments. Through the PriceSmart Foundation and Aprender y Crecer, PriceSmart has a robust philanthropic presence in our markets, providing school supplies and eyeglasses to thousands of children in public schools and investing in workforce development to provide meaningful jobs to men and women entering the workforce.

At PriceSmart we pride ourselves on being the most trusted and respected brand in the countries where we operate. Our aim is to deepen this trust and become an even more integral part of our Members' lives. To achieve this we are enhancing

our supply chain efficiencies through technology to support our workforce, coupled with strategic investments in distribution centers to reduce costs and to shorten supply lines. Additionally recognizing the significant impact of traffic and urban density

on our Members in Latin American cities we are continuously upgrading our digital channels This enhancement offers more accessible and convenient online shopping options, enabling our Members to purchase our merchandise and services online and

offline. We remain committed to introducing new products and services tailored to our Members' needs, as evidenced by the recent introduction of pharmacies in our Costa Rica and Panama PriceSmart clubs.

As a stockholder myself I and our board are focused on strengthening the value of stock ownership for our investors.

First and foremost I believe excellence in operating our business is the foundation for enhancing investor value. In addition to the day-to-day operations of the business our board and I will continue to address the best and most creative ways to enhance

investor value. We recently completed a $75 million stock buyback program and will continue to consider all alternatives for enhancing stockholder value.

In conclusion I would like to thank our employees for their commitment to PriceSmart Every one of our employees from the most senior executives to the sheet cake decorators is amazing. We are so lucky to have such a wonderful group of people working in our offices, distribution centers and at our PriceSmart clubs

On behalf of myself and our board, best wishes for a joyous holiday and a healthy and prosperous new year Sincerely,

Robert E. Price

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PRICESMART INC.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND

OTHER INFORMATION

August 31 2023

Selected Financial Data		Page
	1
Management's Discussion and Analysis of Financial Condition and Results of Operations		3
Report of Independent Registered Public Accounting Firm		31
Consolidated Balance Sheets as of August 31 2023 and 2022		33
Consolidated Statements of Income for each of the three years in the period ended August 31	2023	35
Consolidated Statements of Comprehensive Income for each of the three years in the period ended August 31 2023	36
Consolidated Statements of Equity for each of the three years in the period ended August 31	2023	37
Consolidated Statements of Cash Flows for each of the three years in the period ended August 31 2023	38
Notes to Consolidated Financial Statements		40
Market for Registrant's Common Equity Related Stockholder Matters and Issuer Purchases of Equity Securities	79
Additional Information		83
Directors & Officers of PriceSmart Inc.		84

i

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PRICESMART INC.

Selected Financial Data

The selected consolidated financial data presented below is derived from the Company's consolidated financial statements and accompanying notes. This selected financial data should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the consolidated financial statements and accompanying

notes thereto included elsewhere in this report

																																																																																																																																										SE		LE		CTED FI		NANCIAL DATA
																																																																																																																																																				Years Ended August 31
																																																																																																					2023																		2022																			2021																								2020																				20 19
																																																																																																																																(in thousands,	exce pt income per		common share)
	OPERATING RE		SU		LTS DATA:
										merc
Ne				handis							e			sa	le		s																										$	4	,300	,7	06								$	3	,944	,8		17								$			3	,46			5,	442									$				3,		19			1,		762							$		3,		09			1,	648
Ex			port sales								31,741										45,217										41,520													34,374								30,981
																		er																									come
								mb	sh	ip	in
																																																																																											87																	49
Me																																											66,048										60	,8							56,030													54	01			52	,1
																																																																																														,5
	Other revenue and income							13,347										15,172										56,879													48,551								49,140
								ta									revenues
								l
	To																																																																4,41			1,		842										4,066,	093										3,61				9,		871													3	,329,				188									3,	22	3,91					8
Total co st of goods sold							3,652,511										3,384,945										2,975,338													2,774,778								2,695,691
														g,			genera								an
	Se			ll		in	l	d
																																																																																																							55		2		,055													51		1,		346													484,6	37														429,9	54									409,	25					5
	a		dmini	st	ra	ti	ve
Reserve for AMT settlement							7,179
					pa	ra					on					co	st	s			as			so							at
	Se		ti					ci	ed	wit	h
																																																																																																										7,		74		7
	Ch		ie	f	Ex	ec		ut		iv	e				Of	fi	cer	de		pa		rt	ure
Pre-opening expens es							1,432										1,471										849													1,545									2,726
								se	t											pa							me		nt				an											osure
As				im			ir										d					cl
	cos	ts																																																																																															5,		658
Lo ss on dispos al of as sets							744									1,265										1,027													443									1,079
								er	at									g												come
	Op	in	in
																																											18		4,516														16	7,	066										15	8,020													12	2		,468								11	5,	16	7
Total other expens e							(15,305)									(10,645)									(10,834)											(6,428)							(4,057)
			come																		re		pr															on							r
					be	ovi	si
In				fo	fo
		come		ta	xes				an											ss
in	d	lo
										of
																												16	9,	21	1										15	6,421										14	186													11	6,040								11	1,	11	0
																																																											7,
uncons																		at
	ol	id	ed		filia	te		s
					af
Provision for income taxes							(59,951)									(51,858)									(48,969)											(37,764)							(37,560)
				ss									uncons											at
									of		ol	id	ed	fili	at	es								(55)									(10)									(5	8)									(95)							(6	1)
Lo											af
Net income	$	109,205			$	104,553				$				98,159					$			78,181						$	73,489
							ss		:				ne		t												come		at	tr							utable		to
Le										in	ib
																																																																																																																																								(1			9)													(1		96	)																(7	2)									(2		98		)
noncon	tr	ol	li	ng					in	te	re	st
Net income attributable to
$	109,205			$	104,534				$	97,963					$			78,109						$	73,191
PriceSmart Inc.
																																																																																																																																																																																																																	:
NET			IN	CO	ME				AT			TRIBUT	AB	LE		TO			PR	IC	E	SMA	RT				IN	C.		PER		SHARE	AVAILA	BL	E		FO	R		DI	ST	RIBUTI	ON
Basic	$	3 .51	$	3.38			$		3.18		$			2.55					$	2.40
										te
Di	lu	d																																$	3		.5	0	$								3.	38			$		3	.18		$			2.	55					$	2	.40
Weighted average common							30,763									30,591								30,403												30,259						30,195
	shares basic
					ighted			aver		age			common
We
																																																																																																								30	,7	86														30,600												30,403														30,25		9								30		,1	95
	sh		ares			di	lu		te	d

1

BALANCE SHEET DATA:

Cash and cash equivalents

Short-term investments

Short-term and long-term restricted cash

Total As sets (1)

Long-term debt

Total PriceSmart stockholders equity

attributable to PriceSmart Inc. stockholders

Dividends paid on common stock attributable to

PriceSmart Inc. stockholders (2)

														SE		LE		CTED FI		NANCIAL DATA		(Continued)
																																As of August 31
		2023											2022										2021										2020											20 19
																																(in thousands)
$
239,98	4	$					23	7,	710	$		20	2	,06	0	$		2	99,48		1	$		10	2				,653
		91,081				11,160				50,233		46,509			17,045
				12		,2		18										13			,663								13		,4		19							4,		29		0			3	,5	83
$	2,005,608	$	1,808,400	$	1,705,790	$	1,656,825		$	1,296,411
			1		39,68	0				1		37,2	71							1		29,50	5		1		32,047						89	,5	86
		1,107,043				991,073				915,345			831,719			797,351
$	2	0	$	$	2	1	$	$	2
	8	,54	26	59	1,	53	21	,4	26	1,	34	1
											,5

(1) Effective September 1, 2019 we adopted the requirements of Accounting Standards Update (ASU) 2016-02, "Leases (Topic 842)" (ASC 842) using the modified retrospective approach under which financial results reported in prior periods were not restated As a result the Total Assets as of August 31, 2023, August 31, 2022 August 31, 2021, and August 31, 2020, are not comparable with that as of August 31, 2019

1. On February 3, 2023 February 3, 2022, February 4, 2021 February 6, 2020, and January 30 2019 the Company declared cash dividends on its common stock.

2

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 This Annual Report on Form 10-K contains forward-looking statements concerning PriceSmart Inc. 's ("PriceSmart", the "Company", "we" or "our") anticipated future

revenues and earnings, adequacy of future cash flows, omni-channel initiatives, proposed warehouse club openings, and the

Company's performance relative to competitors and related matters. These forward-looking statements include, but are not limited to statements containing the words "expect," "believe," "will," "may," "should," "project," "estimate," "anticipated," "scheduled," "intend," and like expressions, and the negative thereof. Forward-looking statements are only as of the date they are made and we do not undertake to update these statements except as required by law. These statements are subj ect to risks and

uncertainties that could cause actual results to differ materially including, but not limited to the risks detailed in this Annual Report on Form 10-K under the heading Part I. "Item 1A Risk Factors. " These risks are not the only risks that the Company faces. The Company could also be affected by additional factors that apply to all companies operating globally and in the U. S.

as well as other risks that are not presently known to the Company or that the Company currently considers to be immaterial

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 53 warehouse clubs in 12 countries and one U.S. territory (ten in Colombia; eight in Costa Rica; seven in Panama; six in Guatemala; five in the Dominican Republic; four in Trinidad; three each in in Honduras and El Salvador, two each in Nicaragua and Jamaica; and one each in Aruba, Barbados, and the United States Virgin Islands). We have also purchased land and plan to open our fourth warehouse club in El Salvador, located in Santa Ana, approximately 40 miles west from the nearest club in the capital of San Salvador. The club is being built on a five-acre property and is anticipated to open in early 2024. Once this new club is open, we will operate 54 warehouse clubs. 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 Our mission is 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 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 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

3

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.

For fiscal year 2023 inflation in all of our markets and devaluations of local currencies especially in Colombia for part of the year created significant headwinds. However, some markets, especially Costa Rica, benefited from currency appreciation

which helped offset the currency devaluations we experienced in other countries. Substantial product cost increases due to inflation or 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 the novel coronavirus outbreak (COVID-19) have resulted in market and supply-chain disruptions. These factors have increased the complexity of managing our inventory

flow and business; however, during fiscal year 2023, we saw a general improvement in transit days and a reduction in freight rates of our shipping containers We are working 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 mitigating factor has been our expanded network of distribution centers which has facilitated alternative shipping routes increased 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, as we have

experienced in prior fiscal years, because many of our markets are susceptible to foreign currency exchange rate volatility During fiscal year 2023 approximately 78.8% of our net merchandise sales were in currencies other than the U. S. dollar Of those sales,

48 .4% consisted of sales of products we purchased in U. S. dollars.

• 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 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 Our Colombia market experienced significant foreign currency devaluation during the first three quarters of fiscal year 2023 compared to fiscal year 2022 Notwithstanding inflation and this currency devaluation in Colombia beginning in the third quarter of fiscal year 2023 we strategically decreased sales prices in select items across all of our imported merchandise categories in Colombia During the fourth quarter of fiscal year 2023, the Colombian peso began to appreciate against the U. S. dollar and stabilize, but we continue to maintain our pricing

actions in the meantime. Despite the foreign currency difficulties we continue to see Colombia as a key market for growth and have continued to invest in this market recently opening our tenth warehouse club in the country, located in Medellín 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, roadblocks were set up in Guatemala in October 2023 due to election results, limiting access to certain of our warehouse clubs. In addition roadblocks also arose in Panama in October 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 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. Nicaragua and Honduras experienced anti-government protests in 2019 ; Costa Rica also had a general strike against tax reform measures that significantly impeded regular economic

activity in 2018

4