PriceSmart, Inc. Stock

Good afternoon, everyone, and welcome to PriceSmart, Inc.'s earnings release conference call for the fourth quarter of fiscal year 2026, which ended on August 31, 2026. After remarks from our company's representatives, David Price, Chief Executive Officer; and Gualberto Hernandez, Chief Financial Officer, you will be given an opportunity to ask questions as time permits.

As a reminder, this conference call is limited to 1 hour and is being recorded today, Tuesday, October 27, 2026. A digital replay will be available following the conclusion of today's conference call through November 3, 2026, by dialing toll-free 1 (833) 309-1852 for domestic callers or 1 (929) 828-5978 for international callers and by entering the replay access code 419902549.

For opening remarks, I would like to turn the call over to PriceSmart's Chief Financial Officer, Gualberto Hernandez. Please proceed, sir.

Thank you, operator, and welcome to PriceSmart, Inc.'s earnings call for the fourth quarter of fiscal year 2026, which ended on August 31, 2026. We will be discussing the information that we provided in our earnings press release and our 10-K, which were both released yesterday afternoon, October 26, 2026. Also in these remarks, we refer to non-GAAP financial measures. You can find a reconciliation of our non-GAAP financial measures to the most directly comparable GAAP measures in our earnings press release and our 10-K. These documents are available on our Investor Relations website at investors.pricesmart.com, where you can also sign up for e-mail alerts.

As a reminder, all statements made on this conference call other than statements of historical fact are forward-looking statements concerning the company's anticipated plans, revenues, and related matters. Forward-looking statements include, but are not limited to, statements containing the words expect, believe, plan, will, may, should, estimate, and similar other expressions. All forward-looking statements are based on current expectations and assumptions as of today, October 27, 2026. These statements are subject to risks and uncertainties that could cause actual results to differ materially, including the risks detailed in the company's report on Form 10-K filed yesterday and other filings with the SEC, which are accessible on the SEC's website at www.sec.gov. These risks may be updated from time to time. The company undertakes no obligation to update forward-looking statements made during this call.

Now I will turn the call over to David Price, PriceSmart's Chief Executive Officer.

Thank you, Gualberto, and good morning, everyone. Thank you for joining us today. I want to begin where I always do with a big thank you to every one of our employees across our 14 countries, including our new team in Chile. This was a demanding year. Our teams worked through currency swings, economic and trade uncertainty, and natural disasters while also rolling out new systems and processes inside the company. To our teams, your passion for serving our members is what made this year's results happen, and I'm deeply grateful.

Before getting into the numbers, I want to take a moment to acknowledge the recent earthquakes that affected our communities in Colombia and Panama. Our thoughts are with everyone impacted. In Colombia, a magnitude 7.4 earthquake struck on August 10, hitting Cali and Pereira hardest. We lost only a minimal number of operating hours and all of our clubs are open today. Our teams moved quickly to restore inventory, so our clubs could keep serving members and neighbors when they needed us most, and we temporarily opened our clubs in Pereira and Cali to non-members, so more families could access essential goods.

With the PriceSmart Foundation and Price Philanthropies Foundation, we have collected more than 75 tons of essential products for distribution. In Panama, where a 7.7 magnitude earthquake struck on October 9, our clubs came through without major impact. We launched Grupo Sport Panama, so members could donate in club, and we provided critical supplies to the government's humanitarian hub. We will continue supporting recovery in both countries. I'm grateful to our employees in both countries who showed up for each other and their communities with care and resilience.

Panama is where this company's story began. This month marks 30 years since we opened our first club in Panama City. Today, we serve almost 2.2-million-member accounts through 59 clubs with more than 13,000 employees. Thank you to our members, our partners, and our team for 3 decades of trust.

Now to the numbers. Our business achieved another strong quarter and fiscal year. In the fourth quarter, net merchandize sales reached almost $1.5 billion, with total revenue exceeding $1.5 billion. Net merchandize sales increased by 13.8% or 7.8% in constant currency. Comparable net merchandize sales in U.S. dollars increased by 12.2% and comparable net merchandize sales in constant currency increased by 6.2%. Three of our recent club openings, Quetzaltenango, La Romana, and Ciudad Quesada are not yet included in our comparable sales numbers.

For the fiscal year ended August 31, 2026, total net merchandize sales reached almost $5.8 billion and total revenues were almost $5.9 billion. Net merchandize sales increased by 11.7% or 8.4% in constant currency, and comparable net merchandize sales increased by 9.6% or 6.4% in constant currency for the 12-month and 52-week periods, respectively. During the fourth quarter, our average sales ticket grew by 7.5% and transactions grew by 5.9% compared with the fourth quarter of the prior fiscal year. For the full fiscal year, our average ticket grew by 4.2% and transactions grew 7.2% compared with the prior full year. Also for the full fiscal year, the average price per item increased 5%, while average items per basket decreased 0.7% compared with the prior year. Overall, members came more often and they spent more when they did.

Every one of our regions contributed to the growth we saw in the fiscal year. First, in Central America, where we had 32 clubs at quarter end, net merchandize sales for the fourth quarter increased 9.5% or 5.9% in constant currency with an 8% increase in comparable net merchandize sales or 4.4% in constant currency. Our Central America segment contributed approximately 480 basis points of positive impact to the growth in total consolidated comparable net merchandize sales for the quarter.

Second, in the Caribbean, where we had 15 clubs at quarter end, net merchandize sales for the fourth quarter increased 9.9% or 8.4% in constant currency, and comparable net merchandize sales increased 6.7% or 5.3% in constant currency. Our Caribbean region contributed approximately 180 basis points of positive impact to the growth in total consolidated comparable net merchandize sales for the quarter.

Last, in Colombia, where we had 10 clubs open at the end of our fourth quarter, net merchandize sales for the fourth quarter increased 43.2% or 15.9% in constant currency and comparable net merchandize sales increased 44.2% or 16.3% in constant currency. Colombia contributed approximately 560 basis points of positive impact to the growth in total consolidated comparable net merchandize sales for the quarter. Colombia's growth was again meaningfully influenced by the appreciation of the Colombian peso relative to the same period last year.

Next, merchandizing. Comparing our fourth quarter sales to the same period in the prior year, our foods category grew approximately 13.9%. Part of that growth comes from remodels of the fresh area in our clubs, which has given more selling space to those items. Fresh food is an important driver of visits to our clubs and dedicating more space to those items is paying off. Our non-foods category increased approximately 13.8% with casual apparel posting the highest growth within non-foods. Our World Cup celebration was another great example with TV sales up 25%.

Moving to other categories. Our food service and bakery category increased approximately 13.5%. Our health services, including optical, audiology, and pharmacy increased approximately 9.6%. One change to note, at the end of the fourth quarter, we decided to discontinue audiology services in our clubs and repurpose that space to selling merchandize. This lets us focus our health offering on optical and pharmacy where members visit more often.

Turning to our member selection private label brand. This remains a powerful differentiator for PriceSmart. Private label penetration on a comparable basis, excluding a reclassification of the produce category, increased 20 basis points year-over-year. Using our updated methodology, penetration of private label was 26.9% of total merchandize sales.

Member selection remains an important focus for us. In the fourth quarter, we added several new private label items. One to highlight is our member selection freeze-dried flavored coffee in Colombia, which exceeded our expectations from the day it launched. Members choose it because it delivers quality and value that they can count on. We see this brand as a long-term competitive advantage, and we will continue to invest in expanding and improving the assortment in the years ahead.

Now membership. We serve almost 2.2-million-member accounts, up 8.7% year-over-year with over 4 million cardholders across our markets. Our trailing 12-month renewal rate was 90.4% for fiscal year 2026, up from 88.8% a year ago. That tells us members see the value we deliver and are choosing to renew year after year. Platinum is our premium tier designed for our most engaged members. It costs more than our diamond tier and in return, members get exclusive benefits and enhanced rewards.

Platinum grew from 17.9% of our membership base at the end of fiscal 2025 to 23.4% at the end of fiscal 2026, a 550 basis point shift in 1 year. This was driven by our teams running targeted campaigns and delivering a membership experience that earns the upgrade. Fiscal year 2026 membership income reached $100.8 million, up 17.8%, driven primarily by higher Platinum penetration. As a percentage of revenue, membership income was 1.7% in fiscal 2026, up from 1.6% in fiscal 2025.

Now let me turn to the growth initiatives shaping our next chapter, starting with our club network. In August, we opened our 10th warehouse club in Costa Rica in Ciudad Quesada, about 47 miles northwest of the nearest club in San Jose. The club sits on a 6-acre site with a sales floor of roughly 42,000 square feet. We built it with sustainability in mind, including LED lighting, a CO2-based cooling system and its own wastewater treatment plant. It's still early, but we're encouraged by the initial reception from members in the area.

In the first quarter of fiscal year 2027 we opened our third warehouse club in Jamaica, located in Montego Bay, approximately 100 miles west from the nearest club in the capital of Kingston. The club sits on a 5-acre site and has a sales floor of roughly 42,000 square feet. We designed and built it with similar sustainable standards as the Costa Rica club. Looking further ahead, we have 4 other warehouse clubs currently in our pipeline. Our fourth location in Jamaica, on South Camp Road in Kingston, anticipated to open in December 2026. Our 8th club in Guatemala in Villa Nueva anticipated to open in late winter of 2027. Our 11th club in Costa Rica in Santo Tomas de Santo Domingo, Heredia, anticipated to open in spring of 2027. And our first club in Chile located within the Mallplaza Los Dominicos Shopping Center in Santiago's Comuna Las Condes anticipated to open in spring of 2027. Once these 4 new clubs are open, we will operate 63 warehouse clubs in total.

Chile represents a meaningful milestone for this company and a market we believe has significant long-term potential. We have entered into executory agreements with 2 additional potential sites beyond our first club, have hired a country general manager, and a local buying team, established our central office and are working to open a third-party operated distribution center in fiscal year 2027 to support our operations there. We look forward to sharing more specific milestones as they develop.

In addition to new club openings, we believe increasing club size and expanding parking at high-volume locations are effective ways to drive sales, improve efficiency and enhance the member experience. In line with this strategy, we have nearly completed the parking lot expansion in Via Brasil, Panama. Later in the fiscal year, we will begin the remodel of our Barbados Club, a parking lot expansion of our Aranda Club in Guatemala, and both a parking lot expansion and warehouse remodel of our Fraijanes Club in Guatemala.

In fiscal 2026, we opened new distribution centers in Trinidad and Colombia. We also completed our third-party run distribution centers in China during the second quarter, which consolidate merchandize sourced there, improving our net landed cost. Looking into fiscal 2027, we plan to open 3 more distribution centers: In Jamaica, in the Dominican Republic, and in Chile, where it will be third-party operated. We are also completing the relocation of our cold regional distribution center, which began last fiscal year from a leased facility just down the road into our existing Miami Dry facility, consolidating 2 sites into 1.

Next, let me walk through the technology work that continues to shape how we operate and serve our members. In our digital channel, sales reached $387.4 million in fiscal year 2026, up 26.3% year-over-year and represented 6.7% of total net merchandize sales. Orders placed directly through our website or app grew 9.2% and average transaction value increased 15.5% compared to last fiscal year. As of August 31, 2026, approximately 76.6% of our members have created an online profile and 27.1% of our membership base has made a purchase on pricesmart.com or our app.

Turning to RELEX, our forecasting and replenishment system. Our international buying team is fully onboarded, setting up our local vendors in each country and some of the merchandize management pieces is taking longer than we expected. That means we will not finish by the second quarter of fiscal 2027 as previously communicated, but we are continuing to work towards completing implementation as soon as practicable. We still expect RELEX to help us keep products in stock and reduce spoilage, and we want to get it right. We believe this upgraded technology will enhance employee productivity, improve inventory management, reduce spoilage, and increase in-stock availability over the long run. And we remain committed to getting this implementation right.

On the human capital side, I'm pleased to report that the first phase of our Workday implementation was completed in the first quarter of fiscal year 2027 and is live for PriceSmart employees. This technology upgrade is enhancing the employee experience with modern, user-friendly tools while improving processes and efficiencies, strengthening compliance and providing scalable integrated data to support future growth across our over 13,000 employees in 14 markets, including Chile.

We continue to make good progress on our membership omnichannel transformation, which we call MOT. We are building MOT to bring member identity, transaction history, and interaction data together in one place, so we have a single view of each member across our clubs and digital channels. That should improve data quality, reduce friction for members, and make our teams more efficient. It will also help us understand member preferences and trends so we can serve them better.

Finally, turning to our point-of-sale transformation. ELERA is now running in all of our English-speaking Caribbean clubs, in Guatemala, and, as of the end of September, in Costa Rica, our second Spanish-speaking country in Central America. We are completing the Dominican Republic now. And once it's done, every club in the Caribbean will be on ELERA. Another first, our Montego Bay Club became the first club in the company to open with ELERA at the registers from day 1.

Early indicators show ELERA is delivering faster checkout times, improved employee productivity and expanded payment options for our members, tangible improvements to the in-club experience. We are continuing the rollout of ELERA across the remainder of our markets in Central America and Colombia. And based on the success we have seen to date, we are confident in the value ELERA will deliver as implementation continues.

Before I turn it over to Gualberto, I want to share how we're thinking about the external environment. The risks we're watching are increasingly interconnected rather than tied to a single country. The scenario we're most focused on is a combination of higher fuel, freight, and food costs. U.S. diesel prices have reached record levels. A very strong El Nino is forecasted through the winter and global ocean shipping schedules have been unreliable. Capacity at the Panama Canal also remains something we're monitoring closely. These are broad external pressures that affect our competitors as well as PriceSmart. For us, the more relevant question is how these pressures affect our specific cost structure and operating environment. If these pressures occur together, they could affect merchandize and transportation costs as well as local food prices.

With that, I'll turn it over to Gualberto to continue with the financial review.

Thank you, David. Let me take you through the numbers. Starting with gross margin. Total gross margin for the fourth quarter of fiscal year 2026 was 15.8% of net merchandize sales, up 10 basis points from 15.7% in the fourth quarter of fiscal year 2025. In dollars, gross margin increased $30 million or approximately 14.7% versus the same quarter of the prior fiscal year. For the full fiscal year, total gross margin was 16% of net merchandize sales compared to 15.7% in fiscal year 2025. The increase was primarily driven by changes in the product mix.

Total revenue margin for the fourth quarter increased 20 basis points to 17.6% of total revenue compared to the same period last year. For the full fiscal year, total revenue margin was 17.7% of total revenue, up 30 basis points. The increase in both periods is driven by the higher gross margin.

Turning to SG&A. Total SG&A expenses increased to 13.8% of total revenues in the fourth quarter of fiscal year 2026 compared to 13.5% in the fourth quarter of fiscal year 2025, and to 13.2% for the full fiscal year 2026 compared to 12.9% for fiscal year 2025. The increase in the fourth quarter was primarily driven by higher general and administrative expenses, which rose to 3.9% of total revenue in the fourth quarter from 3.6% in the prior year period.

However, we were able to leverage warehouse club and other operational expenses slightly as a percentage of revenue, which decreased 10 basis points compared to prior year. For the full fiscal year, general and administrative expenses increased to 3.5% from 3.4% in fiscal year 2025. This reflects our ongoing investments in technology and an increase in executive compensation. In both periods, losses on disposal of assets added approximately 10 basis points to the total SG&A increase.

Operating income in the fourth quarter increased 8.1% to $57 million. However, as a percentage of total revenue, operating income was 3.8% compared to 4% in the prior year period, reflecting the higher G&A expenses. For the full fiscal year, operating income increased 12.3% to $261 million and held steady at 4.4% of revenue.

Below the operating line, in the fourth quarter, we recorded total other expense of $6.9 million compared to $6.4 million in the same period last year. The increase was primarily driven by $0.4 million of higher interest expense, net of interest income, reflecting higher average debt levels during the quarter. For the full fiscal year, total other expense was $33.3 million compared to $26 million in the prior year, primarily reflecting an increase in transaction costs associated with converting local currencies into available tradable currencies.

On taxes, our effective tax rate for the fourth quarter of fiscal 2026 was 25% versus 32% a year ago. For the full fiscal year, the effective tax rate was 26.8%, down from 28.4% in fiscal year 2025. The lower fourth quarter and fiscal year rates reflect 2 discrete items: Favorable adjustments related to tax contingencies and tax credits that directly reduced income tax expense.

Net income for the fourth quarter of fiscal year 2026 was $37.6 million or $1.21 per diluted share compared to $31.5 million or $1.02 per diluted share in the fourth quarter of fiscal year 2025, an increase of approximately 19% in diluted earnings per share. For the full fiscal year, net income was $166.6 million or $5.40 per diluted share compared to $147.9 million or $4.82 per diluted share, a 12% increase in diluted earnings per share.

Adjusted EBITDA for the fourth quarter of fiscal year 2026 was $83.5 million compared to $75.5 million in the same period last year. For the full fiscal year, adjusted EBITDA was $360.5 million compared to $320.7 million, an increase of $39.8 million from the prior year or 12.4%.

Turning to the balance sheet and cash flow. We ended the fiscal year with cash, cash equivalents, and restricted cash totaling $264.7 million, plus approximately $111.4 million of short-term investments. Net cash provided by operating activities was $307.7 million for the fiscal year, an increase of $46.4 million versus the prior year, driven primarily by higher net income adjusted for non-cash items and the net positive change in operating assets and liabilities, partially offset by higher inventory balances. Net cash used in investing activities increased by $124.9 million, primarily due to a net increase in goods purchased less proceeds of short-term investments and an increase in property and equipment expenditures to support growth of our real estate footprint.

Net cash used in financing activities increased by $96.2 million, primarily driven by a decrease in proceeds of long-term bank borrowings net of repayments. We also paid $43 million in dividends during the year, an increase of $4.2 million over the prior year. As of August 31, 2026, we had $53.8 million of cash, cash equivalents, and short-term investments denominated in Trinidad dollars that we could not readily convert into U.S. dollars compared to $44.1 million as of May 31, 2026. We continue to explore options, but the U.S. dollar liquidity situation in Trinidad remains challenging.

Looking at the start of our fiscal 2027 first quarter, comparable net merchandize sales for the 8 weeks ended October 25, 2026, increased 11.8% or 6% in constant currency. Fiscal year 2026 was a year of solid financial execution. Our business model anchored by a loyal and growing membership base, a productive club network, and hard-working employees continue to perform and grow.

I would like to thank our members and employees for a successful quarter and fiscal year. We remain focused on deploying capital thoughtfully, managing our cost structure with discipline and delivering the consistent performance that builds long-term shareholder value. On behalf of David and the entire PriceSmart team, thank you for your continued interest and support. We look forward to updating you on our progress in the quarters ahead.

I will now turn the call over to the operator to take your questions. Operator, you may now start taking our callers' questions.

[Operator Instructions] Your first question comes from the line of Jon Braatz with Kansas City Capital.

Could you touch on the pressures you're feeling in Colombia? The operating margins were down in the quarter again. And I know in the last quarter, you touched on the minimum wage increases and overtime and so on. And I guess the question is, what are you doing to address that? And what's the ability to return margins to sort of prior levels?

Thank you, Jon. That's a good question. Colombia is a country we follow, of course, closely, super important for us. As you correctly point out, there is an increase in sales, very strong. That's mainly driven by the excellent work of our team in the field, but also helped, if you look at that in U.S. dollar aspect, some tailwind for us. It's important to consider that when you look at U.S. dollars for Colombia, the positive that we have in the sales, it's a challenge in the expenses, right, because every dollar -- every Colombian peso we sell is more dollars, but every Colombian peso we expense is also more dollars.

On the impact on the margin, particularly in this quarter and this year, there are some items I would like to highlight and that are impacting the numbers of operating margin. One is Chile. All the start-up costs for Chile of about $4.2 million in the year are reported within the Colombia segment, not in the Colombia financials, but the numbers that you're looking at, the Colombia segment include about $4.2 million of Chile expenses. As you correctly pointed out, we have in Colombia $0.8 million impact for the wealth tax in fiscal year '26 that we didn't have before. There's also a plastic tax that impacted our Colombia operation of about $0.5 million, $450,000, I believe.

And most importantly, following transfer pricing rules, we're allocating more expenses to Colombia in the year for about $9 million. So all this is impacting the operating margin. We are looking closely at the evolution. We believe we have a solid business and it's -- the numbers this quarter and this year are a little distorted by this FX that I have just described.

David, since -- let's say, the second quarter of 2025, you will have opened or have opened or will open about 9 stores and maybe 2 more in Chile. And so I think the growth rate in the stores has been pretty significant over the last 2.5, 3 years. And I guess my question is, is that -- do you see that pace continuing? Or do you see it beginning to abate a little bit? And beyond the additional costs associated with Chile, the new market expansion, what kind of pressure does this store expansion have on sort of the near-term earnings?

Thanks for the question, Jon. So as you know, we don't give guidance on store openings kind of like how we're looking at future club openings. However, I think certainly, it's our intention to keep growing the business. But I'll tell you that we have to do that in a balanced way that is where our investments meet our return standards, those that we set with the Board and those that we've set internally. So we want to set a sustainable pace, and we look at the business in the long term. And so while I can't share specific numbers with you, we're thinking very carefully to have our cadence be something that we can look at in a sustainable way over the long term. So I hope that's helpful in providing some context for you on store openings.

Now you touched on something important, which is when we have additional club openings, there are additional expenses associated with those and we put them in categorized as preopening expenses. So there is an expense pressure as we have more openings, but that's something we have to manage in terms of how we look at streamlining those openings and minimizing what there are new -- there are expenses that are incurred in those openings. But as we gain scale and continue to build our processes, looking at things like standardization, looking at things like continuing to decentralize certain processes. So I think those are costs that we can control and at least minimize.

If I can add on that, David, yes, of course, in the case of Chile, for instance, where we're opening in a new country, there are opening and preopening expenses. There are also -- there are start-up costs that are going to hit our P&L or hitting our P&L, as just mentioned, $4.2 million in fiscal year '26. And yes, the revenues will come later. But there is a phase during the month that is true for every club, but particularly when we open in a new country, where you see expenses hitting the P&L first than the revenue is, of course, very -- but it's something to remember.

I think it's a good call out, Gualberto, that a new market is going to have higher preopening expenses than the existing market. I mean it sounds kind of obvious, but I think it's important to call out because there's definitely different dynamics associated with getting the business up and running in Chile.

Your next question comes from the line of Hector Maya with Scotiabank.

First, corporate G&A, we saw that it was up 25% year-over-year and about $7.5 million sequentially. You are attributing this to technology and executive compensation. But could you please give us a sense of how much each contributed and how much of increase you view as non-recurring? And also, the Q4 tax rate was 25%, held by contingency adjustments and credits. But could you please give us more details on that and how we should think about the effective rate for next year?

Thank you, Hector. Those are super good question. Thank you for that. I'll start with SG&A. Yes, as you highlighted and we mentioned in our remarks, let me focus on the full year, SG&A is at 13.2%. This is definitely not where we want to be in the long term, but there are investments in technology driving that. The 2 main drivers, if you look at last year versus this year is -- so we moved from 12.9% to 13.2%, is 30 basis points, 20 basis points is coming from additional investments in technology. And 10 basis points are driven by the impact of full year compensation of our CEO versus 0 in fiscal year '25. So it's pretty much 20 basis points technology, 10 basis points executive.

Technology investments, as David mentioned in his remarks, are here and will continue. We expect that as we -- as some of these initiatives go live, we are confident, we know that will result in better performance and better opportunities to serve our members and also to be more efficient. But we still need to get there, and there are other technology initiatives that we are evaluating. It's a much needed catch-up.

I mean there are other elements. If you look at total SG&A, not only G&A, we also have one-time impacts like disposition of assets. David mentioned, we closed a audiology, that has a hit of about $1.8 million. But particularly on G&A, it's the 2 drivers that I mentioned, the technology and executive compensation.

The second question was on the effective tax rate. You're right. In Q4, we had a favorable tax rate compared to prior year. Even in the full year, we closed better than prior year. Particularly for Q4, there are 2 main drivers that are bringing about $2.5 million. One is the reversal of the U.S. tax contingency for about $1.9 million. And the other one is a long due credit from one of our countries from the Dominican Republic related to solar panels that were installed in 2023 and were finally recognized, now that's $0.6 million. So those are the 2 main drivers that helped us in terms of effective tax rate in Q4 and fiscal year '26.

It's very difficult to project what the effective tax rate should be used to model our future periods. It's a difficult environment. Taxes are always complicated and operating in, as you know, multicurrency and multi-country dimensions adds another layer of complexity. And as you know, we don't guide, so I cannot be very helpful on that. But at least you know now what are the 2 clear impacts that we had in fiscal '25.

Very, very clear. The last one, if I may, on the tech road map on RELEX, what caused the RELEX delay? And what is the new completion date? And what cost and margin benefits should we expect once it's live?

Thanks for the question, Hector. So a couple of things. Our U.S. buying, as you know, and when I spoke about international buying, I'm speaking about the teams located in the United States. And those teams are located in Miami and San Diego. And so processes for the -- this is a process question, right? So technology investments, while the -- we want to leverage machine learning and AI. At the end of the day, when companies go through process transformation and technology investments, it's really looking at processes and designing processes that are going to support the business that we're building, not necessarily a business that we've had in the past, right? What got us here won't get us there is the old adage.

And so in the U.S., those are 2 discrete teams that it was, I guess, relatively simpler to get those processes redesigned and get those teams on the system. And then when you look -- we also have buying teams that are doing forecasting and replenishment processes across 13 countries. Not every country has -- there are some countries that don't have. So it's not really quite 13, like Aruba and USVI don't have their own buyers. But many of the major countries have their own buying staff. And then we have a buying staff that's regional. So you can imagine somewhat different processes across all these teams. So to standardize those, to standardize data, I think what we realized is that this is a bit more complex than maybe we had appreciation for when we initially set out those dates.

And so I really try to go by the mantra of let's go slow to go fast because I would rather get this right and have the implementation and change management handled well than to rush it and to damage the business. And so that's what we're doing. And so we're taking kind of a close look with the right change management measures in place and some outside support to look at, hey, how do other companies that are in our sector, particularly with our business model, how do they handle forecast and replenishment and how -- what's the best thing for PriceSmart. And so we intentionally didn't provide a specific closure date, but I can tell you, we obviously don't want to delay. I mean we want to get this thing done ideally in a reasonable time frame, if it means by the end of the fiscal year or sometime in the future.

I'm reluctant to give that to you in specifics, though, because we're really taking a careful look now real time to ensure that we can complete this thing in a way that's additive to the business. And compared to, if you take Workday or even ELERA, this particular set of process is so core to what we do. So it's a real change management effort and a real learning experience for all. And so again, I'd rather go slow to go fast and make sure we get it right. Does that answer your question?

Got it. Yeah, perfectly.

There are no further questions at this time. I will now turn the call back to Gualberto Hernandez for closing remarks.

Thank you, operator, and thank you, everybody, for joining the call and for the very good questions. Looking forward to our next update next quarter. Thank you very much.

This concludes today's call. Thank you for attending. You may now disconnect.

Good morning or good afternoon, everyone, and welcome to PriceSmart Inc.'s Earnings Release Conference Call for the Third Quarter of Fiscal Year 2026, which ended on May 31, 2026. After remarks from our company's representatives, David Price, Chief Executive Officer; and Gualberto Hernandez, Chief Financial Officer; you will be given an opportunity to ask questions as time permits. As a reminder, this conference call is limited to 1 hour and is being recorded today, Thursday, July 9, 2026. A digital replay will be available shortly following the conclusion of the call through Thursday, July 16, 2026. By dialing 1 (800) 770-2030 for domestic callers or 1-647 362-9199 for international callers and entering replay access code 5898084#. For opening remarks, I would like to turn the call over to PriceSmart's Chief Financial Officer, Gualberto Hernandez. Please proceed, sir.

Thank you, operator, and welcome to PriceSmart's earnings call for the third quarter of fiscal year 2026, which ended on May 31, 2026. We will be discussing the information that we provided in our earnings press release and our 10-Q, which were both released yesterday on July 8, 2026. Also in these remarks, we refer to non-GAAP financial measures. You can find a reconciliation of our non-GAAP financial measures to the most directly comparable GAAP measures in our earnings press release and our 10-Q. These documents are available on our Investor Relations website at investors.pricesmart.com, where you can also sign up for e-mail alerts. As a reminder, all statements made on this conference call other than statements of historical fact, are forward-looking statements concerning the company's anticipated plans, revenues and related matters. Forward-looking statements include, but are not limited to statements containing the words expect, believe, plan, will, may, should, estimate and some other expressions.

All forward-looking statements are based on current expectations and assumptions as of today, July 9, 2026. These statements are subject to risks and uncertainties that could cause actual results to differ materially, including the risks detailed in the company's most recent annual report on Form 10-K, the quarterly report on Form 10-Q yesterday and other filings with the SEC, which are accessible on the SEC's website at www.sec.gov. These risks may be updated from time to time. The company undertakes no obligation to update forward-looking statements made during this call. Now I will turn the call over to David Price, PriceSmart's Chief Executive Officer.

Thank you, Gualberto, and good morning, everyone. Thank you for joining us today. We are happy with the strong results from the third quarter. These results reflect the strength of our offering, the loyalty of our members and the dedication and passion of every employee across our 14 countries who show up every day to do right by our members and to live our values. I want to take a moment to sincerely thank each of them. Their hard work and creativity is the foundation of everything we do. We've delivered these results against the backdrop of continued global uncertainty. Currency volatility, evolving trade policy and broader macroeconomic pressures that every multinational is navigating right now.

But our teams stay focused and disciplined, and I'm proud of how they executed. We're encouraged by how the business is trending as we move into the final quarter of the fiscal year. Before I get into the financial highlights, I want to share a few important leadership updates. We're pleased to welcome Shweta Bhatia as our new Chief Information Officer. Shweta brings more than 25 years of leadership experience across major global retailers and has a strong track record of improving operations, strengthening teams and driving meaningful business impact. Her people-centered collaborative approach aligns closely with our culture and our expertise in retail operations, modernization, data and AI will support our next phase of growth.

We also want to thank Wayne Sadan for his leadership and meaningful contributions to PriceSmart during his time with us, Wayne, we are grateful for everything you brought to this company. We're also excited to welcome Sherri White, who joined us in January and as of June 1, has made the transition to Chief Merchandising Officer. Sherry brings deep merchandising experience from Petco, Target and Unilever. Since joining PriceSmart, Sherry has made an immediate and meaningful impact on our merchandising organization. and this appointment reflects our confidence in her leadership and vision for the road ahead.

Paul Kovalevsky has assumed the role of Executive Vice President, other businesses, with oversight of pharmacy, optical, audiology, food service, bakery and tire center. Paul has been with PriceSmart for many years and has made significant contributions across both merchandising and operations. We are excited about what this expanded scope means for those categories going forward. With that, let's turn to the highlights from the quarter.

During the third quarter, net merchandise sales and total revenue reached almost $1.5 billion. Net merchandise sales increased by 12.5% or 8.5% in constant currency. Comparable net merchandise sales increased by 10.7% or 6.9% in constant currency. 3 of our recent club openings, Cartago, Kessltonango and La Romana, are not yet included in our comparable sales numbers. During the first 9 months of our fiscal year, net merchandise sales reached almost $4.3 billion, and total revenue was almost $4.4 billion. Net merchandise sales increased by 11% or 8.6% in constant currency. Comparable net merchandise sales increased by 8.8% or 6.4% in constant currency.

During the third quarter, our average sales ticket grew by 5% and transactions grew 7.1% versus the same prior year period. The average price per item increased 6% year-over-year, while average items per basket decreased 1%. As we mentioned on the second quarter call, the timing of Simonasanca shifts each year. This year, it fell earlier than it did in the prior year. So for a cleaner apples-to-apples view, it's worth looking at the 8-week period that captures Simonasanta in both years.

For the 8 weeks ended April 26, 2026, comparable net merchandise sales increased 11.2% or 7.5% in constant currency. Now let's take a look at our regions. First, in Central America, where we had 32 clubs at quarter end, net merchandise sales increased 10.6% or 7.7% in constant currency. Comparable net merchandise sales increased 7.9% or 5.2% in constant currency. Our Central America segment contributed approximately 480 basis points of positive impact to the growth in total consolidated comparable net merchandise sales for the third quarter.

Second, in the Caribbean, where we had 15 clubs at quarter end, net merchandise sales increased 6.8% or 6.2% in constant currency. Comparable net merchandise sales increased 6.2% or 5.6% in constant currency. Our Caribbean region contributed approximately 170 basis points of positive impact to the growth in total consolidated comparable net merchandise sales for the third quarter.

Last, in Colombia, where we had 10 clubs at quarter end, net merchandise sales increased 35.3% or 18.6% in constant currency. Comparable net merchandise sales increased 35.7% or 18.9% in constant currency. Colombia contributed approximately 420 basis points of positive impact to the growth in total consolidated comparable net merchandise sales for the quarter. The increase was driven in part by the appreciation of the Colombian peso when compared to the same period last year, among other operational and market-driven impacts.

In terms of merchandise categories, when comparing our third quarter sales to the same period in the prior year, our foods category grew approximately 12.5%, and our non-foods category increased approximately 12.3% and -- on the nonfood side, we reconfigured our sales floor and our warehouse club layouts to enhance the visibility of our softline offerings. And since making these changes, we have continued to see the benefits with improved sales performance in these categories. New product innovation and seasonal events also continue to play a strong role in our sales growth.

We saw notable momentum from a range of limited time and seasonal offerings, apparel, housewares, small appliances and sporting goods, which reinforces the treasure hunt experience our members come to our clubs for. The 2026 FIFA World Cup is also a major global moment, and we always like to share in that excitement in our warehouse clubs and online with special merchandise and savings for that event. It's an occasion that naturally brings members together and we see it as a meaningful opportunity to drive engagement and showcase our value. We built out a broader assortment around it, food, beverage, electronics and soccer themed offerings, along with digital campaigns featuring match schedules, watch parties and credit card promotions in select markets.

We've also seen our members share content around these promotions organically, which is really just the modern version of word of mouth and it reinforces the kind of community feel that's always been at the heart of Price mark. And moving on to other merchandise categories. Our food service and bakery category increased approximately 12.6%. And our health services, including optical, audiology and pharmacy, increased approximately 14.3%.

Next, let's turn to membership. We continue to grow our membership base with accounts increasing 8.6% year-over-year to over 2.1 million accounts. We saw a particularly strong account growth in Colombia, up 11.6%, driven in part by the stronger peso and Colombia has been 1 of our market leaders in Platinum membership sign-ups as well. We also reintroduced an auto renewal program and are seeing strong adoption across most of our markets. As Latin America and the Caribbean become increasingly digital, auto renewals, 1 of the ways we're actively reducing friction in the member experience.

For the quarter, membership income increased 17.6% over the prior year period and platinum upgrades have been a significant contributor to that growth. This year is built for our most engaged members, annual cash back on eligible purchases that reinforces loyalty and encourages higher spending. As of May 31, platinum accounts represented 21.3% of our total membership base, up from 16.1% in the same period last year. Our Smart Platinum promotions, which we typically run in March and November, have resonated well with our members and have given them a clear moment to see and act on that value. Membership income as a percentage of revenue held steadily at 1.7% in the third quarter, consistent year-over-year and indicative of a resilient membership base.

Our 12-month renewal rate was 90.5%, as of May 31, a new all-time high for the second consecutive quarter and a result that we're really proud of. I'll now highlight our progress in real estate, supply chain transformation and technology and how these investments are strengthening our ability to better serve members and continue growing the business. We are excited to announce that in the third quarter, we executed a lease for our first warehouse club in Chile, which will be in ComunaLasconnes in Santiago. This club will be located within the Mall Plaza Los Stomanico shopping center and is anticipated to open in the spring of 2027. This will be our first warehouse club located within the mall setting and will offer excellent accessibility in a retail environment that will resonate with the quality and value-focused members we will serve in Chile. This club establishes the foundation for what we believe can become a meaningful multi-club market over time.

In addition to our plan warehouse at Mall Plaza Lotominicos, we have entered into executory agreements to acquire land for 2 additional potential warehouse websites in Chile. I would like to provide additional color on the scope of our investment in this market. We expect to spend approximately $100 million in capital expenditures on our first 3 warehouse clubs and our central offices in Chile over the next several fiscal years. This represents our first phase of investment, and we see potential for future phases given the opportunity that we see in the market. We have also begun building a strong team in Chile, including an experienced country general manager and a local buying team that we're really excited about. To date, we have approximately 20 employees operating out of leased office space as we plan for a larger, permanent central office.

Consistent with our approach in other markets, we intend to offer a mix of local and imported goods. We also see an opportunity to meaningfully grow exports out of Chile. We already import a variety of products from Chile into our existing markets, and we believe we can grow that business further. In terms of growth in our existing markets, in the fourth quarter of fiscal year 2026, we purchased land for our 11th Club in Costrica in Santo Tomas de Santo Domingo in the Aledia province. This club is approximately 4 miles east from our nearest club in Adia and will be built on a 6-acre property with an anticipated opening in the spring of 2027. While the new location is geographically close, the reality is that traffic congestion in Adia is significant and meaningfully reduces mobility in the city.

Consumer demand in this market continues to exceed expectations and supports the need for an additional warehouse club in this part of the city. We see a clear need for both clubs to effectively serve members, reduce travel time and capture the full growth potential of the region. In addition to these 2 new clubs, we have also previously announced 4 other warehouse clubs currently in our pipeline, a new club in SoCasada, Costa Rica, which is scheduled to open next month, 2 clubs in Jamaica, 1 in Montego Bay and the other on South Camp Road in Kingston and a new club in Diane Guatemala.

Once these 16 clubs are opened, we will operate 63 warehouse clubs in total. We also recently opened our sixth warehouse club in the Dominican Republic in Larman in May 2026. We are proud to have incorporated sustainable design practices into that build and are encouraged by its initial performance since opening. In addition to new club growth, we plan to initiate warehouse and parking lot expansions as well as remodeling projects in fiscal 2026 and '27 for our via Brazil, Panama and Barbados clubs. On the supply chain front, a central part of our transformation strategy is optimizing distribution to support our value proposition on price.

Currently, we operate major distribution centers in Miami, Costa Rica, Panama, Trinidad and Guatemala. During the third quarter, we began operations at a new distribution center in Colombia. This facility is especially important for us. It is in Bogota prime and highly strategic location from a logistics standpoint. Establishing our DC there allows us to take advantage of the strong concentration of local production in that region, and it underscores how significant Colombia has become within our long-term strategy and how much room for growth we still see in that market.

In addition, we plan to open a distribution center in Jamaica during fiscal year 2026 and the Dominican Republic during fiscal year 2027. We also expect to relocate and consolidate our Miami cold regional distribution center into our existing Miami regional drive facility during fiscal year 2027, which will help us better leverage space, reduce redundancy and improve efficiency across both operations. Alongside these new distribution centers, in the second quarter, we completed our implementation of our third-party distribution centers in China, to consolidate merchandise source in the country. These DCs have already helped reduce landed cost and lead times through direct shipments from Asia to our local markets, which is exactly what we were looking for.

Our vision for our global distribution center network is to help improve product availability, reduce lead times and lower landed costs among other efficiency gains. Alongside our physical footprint, we are continuing to make progress on the rollout of the relaxed forecasting and replenishment platform and expect to complete the full implementation in the second quarter of fiscal year 2017. We completed the onboarding our U.S.-sourced inventory procurement process, and now we are focused on our local goods procurement process.

We are taking the time to ensure we implement RELEX correctly and set up our teams for long-term success. This thoughtful approach has extended the time line slightly, but it reflects our commitment to getting the transition right. During the third quarter of fiscal year 2026, we progressed further in our multiphase implementation of the EtaOpenGlobal trade management platform, which is designed to improve automation, trade compliance and controls across global import and export operations. Over time, we expect it to improve data visibility and support the scalability of our international business. Moving on to other ways we're enhancing membership. Private label penetration on a comparable basis, excluding a reclassification of the produce category, increased 40 basis points in the first 9 months of FY 2026, reflecting continued progress toward our long-term goal of growing this part of our business.

Using our updated methodology, penetration of private label was 26.7% of total merchandise sales. Recent additions like macadamia nuts honey and private label coffee, all from Guatemala, demonstrate our focus on delivering exceptional value across key everyday categories and our ability to leverage unique local suppliers in our markets. In addition, we are in the process of developing a new membership platform that internally, we are calling the membership omnichannel transformation, MT -- we plan to use this unified platform to manage the full membership life cycle across all channels and serve as our essential system of record for member identity, transactions and interactions.

We expect MOT to replace several legacy processes with 1 consistent auditable framework and ensure that activities like enrollment, renewal upgrades and both in club and digital transactions are low friction and provide consistent and clean member data across our markets. Down the road, we believe MOT will enable personalized communications, targeted promotions and a frictionless sign-up and renewal experience for our members.

Now let's turn to our digital and technology growth pillar. In the third quarter, digital channel sales reached $99.6 million, our highest dollar volume to date, up 26.2% year-over-year and representing 6.9% of total net merchandise sales. Orders placed directly through our website or app grew with average transaction value up 4.4%. As of May 31, 75.8% of our members had created an online profile and 27.1% of members had made a purchase through pricesmart.com or our app. We are encouraged by the continued momentum in digital engagement, and we'll keep investing in this channel. On the club technology front, we completed implementation of our new point-of-sale system, Alera across all English-speaking Caribbean markets and 1 of our Spanish-speaking countries, and we are continuing to roll out across our remaining Spanish-speaking markets.

Early indicators Alera is delivering faster checkout times, improved productivity, and expanded payment options for our members, tangible improvements to the in-club experience. On the back office side, we made meaningful progress on our implementation of Workday's human capital management system, rolling out Phase 1 of the project this past quarter. This is part of our broader effort to modernize our HR infrastructure, improving usability for employees, driving greater efficiency and compliance and supporting scalable growth through a more integrated data environment. Before I turn it over to Gualberto, I want to address a few geopolitical topics.

Across our region, we are seeing several political transitions, including Columbia's recent presidential elections, with a new administration set to take office in August. Along with recent leadership changes in Chile, Costa Rica and Honduras, these developments are being accompanied by early times of a more market-oriented and business-friendly approach in these markets. While it is still too early to assess the full direction and pace of policy changes, we are closely monitoring potential implications for the operating environment and the overall business climate.

At the same time, the global geopolitical environment remains complex and fluid, trade policy uncertainty and ongoing tensions in the Middle East continue to affect key cost drivers, including fuel, freight and energy. These pressures have contributed to inflation across many of our markets, which in turn is impacting consumer purchasing power and increasing price sensitivity. Lastly, I want to provide a brief preview of our June sales. Looking forward into our current fourth quarter, our comparable net merchandise sales for the 4 weeks ended June 28, 2026, were up 11.2% or 6.5% in constant currency. With that, I'll turn it over to Gualberto to walk you through the financial details.

Thank you, David. Continuing with the income statement. Total gross margin for the quarter as a percentage of net merchandise sales increased 20 basis points to 16% versus Q3 last year. This increase is primarily due to improved margins in our nonfood category. Margins may fluctuate up and down, but our strategy remains the same, and our philosophy continues to be identifying cost savings and operational efficiencies and passing on those savings to the meters to ensure the lowest possible price. Total revenue margins improved 30 basis points to 17.7% of total revenue from 17.4% in the same period last year. This was mainly driven by the increase in our total gross margin, as I just mentioned, and good results in membership renewals and platinum growth as called out by David.

On overhead costs, total SG&A expenses increased slightly to 13.3% of total revenues for the third quarter of fiscal year 2026 compared to 13.2% for the third quarter of fiscal year 2025. It was primarily due to higher warehouse club and other operational costs. In particular, warehouse glass and other operation costs increased from 9.7% of total revenue from 9.6% in the same period last year. primarily due to expenses related to supporting our launch in Chile.

General and administrative expenses decreased to 3.5% of total revenue from 3.6% in the same period last year, primarily due to the absence of onetime expenses we had in the third quarter of fiscal year 2025 related to the relocation of the San Diego corporate headquarters. SG&A is an important metric that we monitor closely. These expenses can fluctuate from quarter-to-quarter based on the timing of necessary investments to support the business. Our focus remains on making thoughtful disciplined decisions that position the company for long-term growth and operational strength.

Operating income for the third quarter of fiscal year 2026 increased 16.7% from the same period last year to $65.6 million or 4.4% as a percentage of revenue versus 4.3% in the prior year period. Operating income for the first 9 months of fiscal year 2026 increased 13.5% from the same period last year to EUR 204 million or 4.7% as a percentage of revenue versus 4.6% in the prior year period. Below the operating income line, in the third quarter of fiscal year 2026, we recorded a $10.5 million net loss in total other expense, an increase from a $7.2 million net loss in total other expense in the same period last year.

The primary cost is a result of additional foreign currency transaction costs. In terms of income tax, our effective tax rate for the third quarter of 2026 decreased slightly to 28% compared to 28.4% for the third quarter of fiscal year 2025. For the 9 months ended May 31, 2026, our effective tax rate is almost in line at 27.4% compared to 27.3% for the comparable prior year period. Finally, net income for the third quarter of fiscal year 2026 was $39.7 million or $1.28 per diluted share, an increase of 12.3% up from $35.2 million or $1.14 per diluted share in the third quarter of fiscal year 2025.

Adjusted EBITDA for the third quarter of fiscal year 2026 was $90.4 million. compared to $79 million in the same period last year, a growth of 14.5%. Net income for the first 9 months of fiscal year 2026 was $128.9 million. or $4.18 per diluted share, an increase of 10%, up from $116.3 million or $3.80 per diluted share in the first 9 months of fiscal year 2025. Adjusted EBITDA for the first 9 months of fiscal year 2026 was $277 million compared to $245.1 million in the same period last year, a growth of 13%. Moving on to our balance sheet. We ended the quarter with cash, cash equivalents and restricted cash totaling EUR 254.6 million, plus approximately $113.7 million of short-term investments typically had in certificates of the past.

When reviewing our cash balances, it is important to note that as of May 31, 2026, we had $44.1 million of cash, cash equivalents and short and long-term investments denominated in local currency in Trinidad, which we could not really convert into U.S. dollars. Turning to cash flow. Net cash provided by operating activities reached $192.2 million for the first 9 months of fiscal year 2026, an increase of $13.1 million versus the prior year period. The increase is primarily driven by a $17.5 million increase in net income without noncash items and $4.6 million of overall net positive changes in other various operating assets and liabilities. This is partially offset by sales in working capital, mainly due to higher overall inventory balances, which consumed $9 million of cash used in operating activities.

Inventory levels are trending higher than they have been in the past as we are taking a more deliberate approach to ensure we're in a stronger in-stock position, particularly in not foods, so we can better meet member demand and support a momentum. Additionally, in the third quarter, the company entered into nondelivery forward foreign exchange contracts to mitigate foreign currency exchange rate risk associated with forecasted U.S. dollar-denominated inventory expenditures in our Colombian subsidiary. These contracts are designated as cash flow hedges and are intended to reduce exposure to currency fluctuations while providing great predictability around expected inventory costs in Colombia and support more stable pricing.

Net cash used in investing activities increased by $93.3 million for the first 9 months of fiscal year 2026 compared to the prior year, primarily due to a net increase in purchases less proceeds of short-term investments of $46.2 million, a $42.5 million increase in property and equipment expenditures, and an $11.9 million increase in purchases of long-term investments. This was partially offset by a $6.2 million increase in proceeds from disposals of property and equipment, mainly due to the sale of our product distribution center in Guatemala, and $1.1 million of cash received due to the proceeds from the dissolution for our joint venture. Net cash used in financing activities increased by $4.9 million for the first 9 months of fiscal year 2026, compared to the prior year, primarily due to a $19.8 million increase in repayments of short-term bank borrowings, net of proceeds, a $3.1 million increase in the purchases of treasury stock upon vesting of restricted stock awards to cover inpostax withholding obligations and a $2.3 million increase in cash dividend payments.

This was partially offset by a $20.3 million increase in proceeds from long-term bank borrowings, net of repayments. Looking ahead, we remain focused on sustainable growth, operational excellence and delivering exceptional value to our members. While macroeconomic conditions across our region remain dynamic, our diversified geographic footprint and disciplined operating model position us well for the remainder of the fiscal year. We appreciate the continued support of our members, employees and shareholders, and we thank our teams for their ongoing efforts. Thank you for joining our call today. I will now turn the call over to the operator to take your questions. Operator, you may now start taking our callers' questions.

[Operator Instructions] And your first question comes from Jon Braatz with Kansas City Capital.

David, I just want to start with your Chile expansion. Obviously, this is your first new market since Colombia, I think, in 2011. And Chile is obviously a different market. It's smaller, but the GDP per capita is maybe 2x that of Colombia. And I guess my question is, how are you approaching Chile maybe versus Colombia? It took a while to scale up in Colombia and achieve a decent level of profitability. Can you compare the 2 markets and how you're approaching it. I don't think you were necessarily with the company at the time when Chile expansion began. But obviously, you had people there that were. But can you talk a little bit about Chile versus Colombia? .

Yes, I'd be happy to talk about that, John. I think it's a good question. It's something we've thought about and looked out really closely internally. We, of course, always want to learn from experiences that we've had. And there's a lot of things that are different I guess objectively between the 2 markets, like you referenced, they're dramatically different in size. They're quite dramatically different in GDP per capita, while the GDPs in the aggregate are actually quite similar. Colombia is kind of multinucleic from a city standpoint, while Chile does have multiple cities, vast majority of the -- over -- around 50%, let's say, of the population is in Santiago with a major port around 1.5 hours away versus multiple ports in Colombia.

So there's some -- on the other hand, it's not in the Caribbean basin, and it's on the Pacific and several thousand more miles away than Colombia. But there are some factors that back in the mid-2000s that impacted Columbia significantly. And you'll probably recall that when we opened Barranquilla, a peso was 1,800:1. And were -- I would describe that first location as a smashing success. We went back and looked at the data and we had big sign-ups of memberships and people were flying from Bogota to shop and send those goods back home. And what happened was that there was a significant devaluation in the peso where it got well over 4,000:1. And that was a big hit to us, but also a big hit to all consumers in Colombia and multinationals.

And since that time, Casino exited, macro has exited now in most of the multinationals have really exited Colombia, and we've taken our lines, you could say and have improved. And for sure, we don't want Chile to take that long. But I'd say there are some factors that are separate. Now looking at the things for sure that we've learned and that we're aiming to ensure that we get right. I mean it's, one is we're building up our local team and really taking the time to make sure we have the right team locally from a management standpoint, the right buyers. We know that that's critical. We know that there's going to be a mix of local and imported goods you have to give before you get in this business.

So it's going to be really important for us to focus on pricing in a true great value proposition for the member. And so that will take time to get that scale and volume and having multiple locations will help. But really, we got to get before we get in the market. And that's critical because this is a business based on doing right by the member and being good fiduciary in their interest, and we aim to do that in Chile.

Thank you, David. When you think about Chile, the -- when would you first begin -- well, 2 things. Number one, are the locals familiar with membership clubs? And then secondly, when might you first begin accepting taking new membership in the Santiago store?

Sure. So there is not a membership warehouse club today, but there's a couple of things I'll note. One is for many Latinos around the region, especially those that are middle upper income, it's not uncommon for people to travel to the United States to business family into shop. And certainly, Costco is a place where people tend to stop. That being said, there's a number of membership like, I guess, what you call recurring revenue type programs for other retailers and services. For example, there's Uber one, which is a monthly rate. There's Jumbo Prime, which is a monthly rate and others. So people are not unfamiliar with paying a membership fee for a subscription service. That was the word I was looking for a subscription service.

Now we have an annual fee versus the monthly fees. And we like to think about our fee being saved and earned for the member by the value that they get on the purchases, right? So that's going to be somewhat new. But I think I'm not concerned about reception of the idea of paying membership because it's something that is happening for sure in the market already that we've seen RapiPrime is another one. I mean, all the last milers and some of the retailers happen.

Now in terms of the membership, we haven't announced -- we have not announced when we're going to start selling memberships. We certainly will start selling membership several months at least before the opening. We always do that actually. And when we open a new club, even in the new region of a country or a new part of a city, we'll start selling memberships at least 3 months before, if not more. And it really depends. We look at how much cannibalization there would be from other clubs. And in this case, since it's the first club, we'll probably start a little earlier just because it's going to be a brand-new concept.

Okay. One last question. In the quarter, you were able to reduce your turn at ad balances quite sharply. And the currency transaction costs were $8.5 million versus $3.7 million a quarter ago. Was there just an opportunity that rose to take advantage of it? Or is this something that we might see more of? .

John, this is Gualberto. Thank you for the question. Yes, yes, you're totally right. We sourced more U.S. dollars in Trinidad in this quarter. if you compare, for instance, versus last quarter, and that was -- will allow us to go down to $44.1 million of fracas in nonconvertible cash and trade at today. If you remember in Q2, we had lower transactional costs versus the same quarter of the prior year. And that's exactly for the reason you just mentioned. We want to be very strategic and very opportunistic in sourcing our dollars. And we only buy what we believe we can get a good -- very good transaction cost to access these U.S. dollars. There are no changes in the policy or the strategy, we continue permanently looking for options to get access to dollars in different ways. We have a strong partnership with our financial institutions also internally with the team we are evaluating other avenues. But for now, no major change in our policy, and it just will continue to fluctuate from quarter-to-quarter depending on the availability of U.S. dollars in the market.

Your next question comes from the line of Héctor Maya with Scotiabank.

[Foreign Language] First on Colombia, could you please share a few details on why the operating income declined despite the compete? And then I have a follow-up, if I may, or I can also rejoin the queue as instructed, no problem.

Please, the question is about Colombia profitability.

Yes. And why the operating income declined despite the comp yes.

Okay. Colombia had a little bit -- as you know, we have a higher running operating compared to our other markets. It's a little bit of the mix of warehouse expenses that have been going up. This is something that, again, -- we don't see this as a trend. We are working closely the evolution of every line in the P&L in particular, Colombia in such a strategic and key market for us. But we are tracking closely. -- and we're working hard to get back in line.

Yes. One factor, I think, to Vector, which you may be aware of, but there's been a lot of policy changes in Colombia. And we talked about on earlier calls around the minimum wage change, which we were well above there. But we always like to make sure that not only are we above but that we pay a premium versus other retailers and it's part of our value as a company that we want to ensure that we're paying an ethical wage even at the lowest levels. But the other thing that happened in Colombia that's happening is that the work week has actually gone down in terms of the hours that are allowable for work without over time. So we've gone from 44 to actually 42 hours. So that's a component of what's going on there as well.

And in particular, the latest comment that exactly the warehouse cloudier exactly. Hope that helps shed a little light there.

Yes. Perfect. Perfect. And also, if I may, sorry, are you seeing better that dollars to U.S. dollars conversion conditions? And would that reduce the need to charge a premium in goods in the country looking ahead? .

No, we're not seeing any material change in the conditions in the market, like I mentioned a bit earlier, it continues the same level liquidity. I mean, we're following closely every macroeconomic announcement and evolution in Trinidad. I mean, I'm not in a position to say that, that would change. So we continue with our premium in our cost to cover for this. And as I said before, I think the most important thing is that all other things that we are evaluating internally to either reduce our need for U.S. dollars in ended or get more creative ways, always, of course, complying with all the regulation to get access to those dollars. But the market difficult for me to anticipate. We don't see any reason to believe it would change -- it's a tough situation. quarter-to-quarter, but we don't see any change in the underlying loan trend.

Got it. Got it. And last one, could you quantify the impact that Chile is having on warehouse clubs SG&A line? And how should we think about this impact over the coming quarters? .

In this quarter, so we are starting already, as you probably saw in the 10-Q, investing and a steady explain in preopening expenses. So in SG&A, it's about 10 basis points, the hit that we had this quarter for the preopening expenses in Chile.

And that concludes our question-and-answer session. I would now like to turn the conference back over to Gualberto Hernandez for closing comments.

Okay. Thank you, operator, and thank you, everybody, for joining this call. It's very important we continue this communication, we enjoy every of our interactions. So thank you very much.

Thanks, everyone.

Ladies and gentlemen, this does conclude today's conference call. Thank you for your participation, and you may now disconnect.

Good day, ladies and gentlemen. I'd like to welcome you to the results conference. We're going to discuss the results of Q1 2026 Modivo Platform. We're running this conference in Warsaw in the stock exchange -- Warsaw Stock Exchange building. And since it's taking place in Warsaw and at the same time, there are large demonstrations in the [city centre, capital], we're going to delay the start of the meeting by the conference by roughly 15 minutes to ensure that everybody can reach us at the stock exchange.

So we'd ask you to be patient. We'll ask you to come back at 2:15. Thank you very much for your understanding.

Good afternoon. We'd like to welcome you to the results of Modivo for Q1 2026. We're starting with a little bit of a delay because of the demonstrations that made it more difficult for our guests to arrive at today's meeting on the stock exchange floor in the Warsaw Stock Exchange. We're now all ready and poised to kick off.

So if we talk about the results, let's begin by discussing the EBITDA result for Q1 of 2026. So the metric we're showing you is the adjusted EBITDA result, so things that aren't comparable. So to make sure that we're talking about the underlying actual result, having in mind the core business in comparable conditions. And so if we focus on this metric, as you can see in Q1, the EBITDA generated by the group was 6% higher than the EBITDA result generated in the corresponding period of the previous quarter -- year in the first quarter.

Of course, our ambitions were greater. Our appetite was greater. But in the relatively difficult conditions with unstable weather unstable geopolitical situation, which appeared in this quarter, we believe that this result is pretty decent.

And so this means that our EBITDA margin on an adjusted basis is very comparable on a year-on-year basis. We're talking about adjusted EBITDA. So let's think about this a little more in depth to see how these results were determined, how they were calculated. So if we think about last year's performance -- we start with the reported EBITDA and then we extracted FX losses and gains. Well, last year, they had a very major impact.

And this year, the result was instead of FX gains or FX losses. And so these impacts were the opposite. And so the SEC impact is in excess of PLN 70 million year-on-year. Another factor, a second factor, which is not comparable on a year-on-year basis, this is Worldbox. And so in the first quarter of this year, it was consolidated in full for the first time in the results of the group. And so in Worldbox, it's red. So it's minus PLN 49 million.

This is a major negative impact -- what we need to say that Q1 was a result of the profound integration operationally, logistically with the group structures, this infrastructure. This integration process took time for objective reasons, this is not something that we could have prepared earlier.

So February and March were a period in which the sales potential wasn't fully tapped into. And so we were a little bit quite late in terms of replacing the collections. So in April, things start to look pretty much better. And the other thing is margin replacing the previous collection with the new collection. So during Q1, the gross margin achieved by Worldbox moved from 2% in the first weeks of the quarter up to 54% -- so I could say that we were reaching pretty decent levels. Of course, our intentions and our ambitions are much greater.

So this is not a result that's satisfactory. This inclines us to work intensively to ensure that as quickly as possible, we're going to be able to achieve the profitability in this concept, Worldbox concept. And then in a controlled fashion, we're going to want to make sure that it's going to contribute to the profitability profile of the overall group. We're going to ramp up this concept. Of course, the CEO will speak to this more closely a little bit later during the presentation. If we look at the group's revenue in Q1 of 2026, it was roughly PLN 2.4 billion. The gross -- or the sales growth rate was 4%. So the various brands had different -- varying performance.

So CCC was flat, slightly negative year-on-year. And so this has a high level of saturation. It's well established on the market. And so relatively limited capabilities to continue growing the sales there. Halfprice continues to be the motor. The engine is 35%. It's growing not only because of new openings, but it's also growing because of very clear like-for-like sales growth. That's something that pleases us and portends well for the future.

Then we have Modivo.com Here, we can see that sales year-on-year is down by 8%, but this is an anticipated effect. As we had intended and announced, we decided not to pump sales utilizing performance marketing. And so the impact was PLN 50 million. And so we reduced [indiscernible] revenue in -- by 6 percentage points to 12%. So we believe this is a pretty good level, even though sales were lower, having in find sales efficiency in terms of performance marketing. And thanks to the other efforts we took to grow volumes in terms of our licensed brands, the profitability of this business has grown clearly. I'll speak to that in greater detail in just a moment.

If we look at like-for-like, we can see that like-for-like is positive at 1% during the expansion, having in mind the dynamically evolving conditions with volatile weather, this is a pretty decent result, which shows that with such major expansion, there's a risk of pretty big cannibalization. So that has been limited or curtailed. And so the results in Q1 means that the gross margin is 51.8%. So it's the highest level of gross margin. We've achieved this as a group in recent years. So it's higher by 1.3 percentage points.

Now if we look at like-for-like sales performance, I started talking about that in Halfprice and CCC. So you can see that it's in Halfprice, it's clearly in the black. So it's 6% on the screen, it's green, but -- so it's moving up. And so we're showing you the ability to generate like-for-like driven by traffic varied greatly. The most successful month was March. And this difficult April difficult because of weather, we were able to have a minimum level on the positive side, 0.1pp. We're talking about dynamic expansion. If we were to decompose these like-for-like figures, we had negative traffic. We're not worried by that because we're touting that expansion. What's important is the conversion. Conversion is growing. We're adding additional percentage points.

Conversion in Q1 was 21%. So that's a very decent result. If we're thinking about the retail sales sector, this shows that the work we're doing on the products, improving the products, making sure that our product range in 17 areas is producing results. In CCC in turn, we can say that like-for-like performance is negative at 3%, minus 3%, driven primarily by traffic. It was lower in April above all because of the difficult weather conditions because this affects sellers of footwear to a much greater extent than, let's say, Halfprice. Even though traffic was down, we had positive conversion, which is better year-on-year.

So this means the licensed products in our offering are being well received by the customers. In terms of CCC, we need to say is that this is a highly saturated concept. It's well received. It's well established. And so expansion is going to be much more selective in nature and probably more abroad than in Poland in terms of our key markets where we're present in, let's say, Europe, Central and Eastern Europe.

The next subject is gross margin. Across the group, we can say that it's at the highest level within the last 10 years. It's above 51%, nearly 52%. So it's up by 1.3 percentage points across the group. And we've been able to improve the gross margin in every one of our businesses. So we have the gross margin in CCC above 60% watermark -- in Halfprice, it's up by 0.5 percentage point. And in Modivo.com, we were able to improve the gross margin year-on-year by 0.1 percentage points.

So it's clearly almost at 46%. And so these are good results for an e-commerce business. So starting with first quarter of this year, we're breaking down the licensing fees per brands. So if we were to utilize the previous methodology, then the increase in margins in Halfprice and Modivo would have been higher, more or less by 1 percentage point, they would have been higher.

So this confirms that the results are good, robust. In all of these brands, we can say that we've achieved this result. by having a greater percentage of licensed brands in all 3 of these businesses. And so CCC and Halfprice are growing by some 7 percentage points. And we can say in Modivo.com, this is quite important factor right at 20%. So it's up by 8 percentage points year-on-year. This is a good concept. It's proven itself.

And let me dwell a little bit longer on Modivo.com. I want to tell you where we started 3 years ago. In 2023, our margin was 38%. So 8 percentage points below the margin watermark we received or generated in Q1. So we're focusing on our own brands, licensed brands, -- this is something that is proving itself, delisting other people's other entities, brands.

So we've delisted some 700 brands, other brands. And we're focusing on the 100 most strategic brands, which generate the greatest potential for sales on higher margins where we can generate good conditions. We have our own brands, our licensed brands. As I said, in Q1, we were at 20% in the mix. And so it continues to grow, and it will continue to be increased until we achieve the 50% watermark.

And so this was possible, thanks to efforts that we took to sell off the ends of collections for other or third-party brands. And so now we can say that, that inventory has been optimized, has been reduced to a great extent, and it's down by 12% year-on-year. So this effect should no longer be visible. What's important are costs. On one hand, this picture with respect to costs, from your point of view, this might not seem to be entirely clear. We can see that costs have grown, but growing slower than the sales area -- the selling area. So what we have available in the group. So this is something that's quite good.

Our fixed expenses are rigorously treated. They're not growing. We can say that general admin in some areas like in CCC have, in fact, fallen. But the new selling area has not yet fully shown its total potential. So Halfprice, for example, is a brand once a store is opened, this is where we have the largest number of openings. We need some time for the stores to mature. And that's why the cost-to-income ratio, that's why we see that there's a slightly higher cost impact. So this is a transitory or transitional effect. So we should be around 30%, 37% once that's fully exploded.

And so this cost ratio is a temporary impact because in all of our other lines of cost accounting where we have fixed expense, we can say that we haven't seen those type of increases. We only have costs coming from new stores. If you look at Modivo.com, I talked about reducing costs for performance marketing. And so we're savings -- making savings here, and that's PLN 50 million. And so we're reducing the ratio of performance media to revenue, and we're in pretty good levels for e-com business.

And I'd like to sum up my portion of the presentation by talking about the profitability, the EBITDA profitability in CCC, it's quite stable and comparable year-on-year. And we're looking at adjusted EBITDA here. If we look at Halfprice because the magnitude of operations is growing, and we're continuing to work on our profitability, we can see that EBITDA is growing quite strongly by some 30-odd percent. And if you compare that and look at Modivo, we see a positive impact as EBITDA has grown by some 9% -- and so we're coming back to levels that are quite good.

For example, e-com, that's an increase of 9%. This is just a stop along the way for us to achieve 20% and above. That would be more or less it with respect to what I wanted to say. Our CEO will tell us what's going on with inventories.

Thank you very much, Lukasz. Good afternoon, ladies and gentlemen. We agreed with Lukasz that he wouldn't say too much about business, but he would only talk about the numbers, but he pretty much said everything. Let me talk about inventories because inventories are my area of responsibility of management within the organization.

As you can see, the inventory is falling, but it's not entirely borne out by the figures. When we took over Worldbox, we had [ShopX]. And so that's why the inventories grew a little bit. And so let's say, inventories are down by 2%. We've opened 40% more stores. And so we can see how much the inventory has fallen per square meter of open stores. In each one of our brands, things look pretty good. But in Halfprice, this is a little bit of a misleading methodology.

I would tell you on a different slide, how far we've gone in terms of special collections and the licenses. -- which are going to be offered in Halfprice stores. And this period is extending by some 60-odd days because of transportation time. And so it's roughly 90 days. The purchasing process is longer because we want to get the goods more quickly. And so we're the first ones doing it in Europe. But there's a difference in the margin of 20% in terms of what we were buying previously and the margin we're going to be able to extract now.

So thinking about inventory, I'm not yet happy with this level of inventory. So this is something we're focusing on. It deserves our attention. So we want to reduce that by some 20%. We need to need some time to open new stores. And we want to be financed to a large extent by our suppliers to make sure that this would be in line with the, let's say, trade credit that we're getting.

Let's -- starting with Worldbox. Here, we can say that it's not earning money. But as I promised you, this is a concept that will earn money, and it's going to be a similar concept to what we have in CCC. If we look at the result of integration, the merchandise arrived late. When it started to show up to the stores, then we started to have margins. Well, you have the average margin achieved on old merchandise and new merchandise having in mind the company that was taken over.

And so our licensed percentage is growing. And so the margin in May is 57%, and we'll quickly achieve the promised margin in excess of 60%. So you see stores and somebody say it's the world of cotton. This is not the product yet that we're going to have in 1 or 2 months from today or in Q3 and Q4, what we're going to have in the stores that we're preparing for that. This is taking longer than perhaps we had originally thought, but we're gradually achieving what we want. And the traffic is missing. We can work on that traffic. So when we change the collection, we can add the Modivo Club and some of the other things that we're doing within the group.

We're happy with the conversion. because we're selling 50%, 60% more through conversion because you have footwear, accessories and things like that, apparel. So we're happy with the margin. We're happy with the conversion. We're not happy with traffic. And so some questions have been posed about the stores you're not seeing this type of traffic. You're thinking about Warsaw. This is the top -- the bottom 10%. Maybe this is not a concept for the big cities.

If we look at the revenue in the smaller towns communities, we're quite happy with that. We're starting to tweak our tactics. Let's take a look at what's happening with the margin. Well, let me put it this differently. So this is the margin that was promised. In the most recent presentation, we talked about how we are going to achieve the margin on Worldbox. So we now have 50%, which is more or less in line with what we promised.

In the second half of the year, we want to achieve a 60% margin. And at the end of the day, our target is to achieve a 62% watermark. So this is a concept addressed to the same customer and Worldbox stores are frequently -- they share a wall with CCC. So this is not a normal margin. We have a multi-brand concept, the margin, the maximum margin that you can usually achieve is 40%. So we're better by some 20 percentage points. And this is where I see the success of this concept, this network that we have a high-margin product.

Here's our road map. In Q3, we should be happy. In Q4, we should be very happy with our performance. But we need to walk through, of course, this intermediate phase. Let me tell you about the product portfolio we have, what's the brand mix. So we have partnership brands. Everybody has those brands and everybody is giving discounts. It's not possible to have more than a 40%. So that's 20% of our sales on these brands.

And then we have 3 own brands, brand in Americanos, GoSoft and the other ones are licensed brands. So this is a mix of casual and sporting clothes. And so this fulfills all of our expectations. There's one other brand -- and one brand called me recently. It's a good brand. They called me recently, but I'm not going to share the name of the brand. We're pretty happy with this mix. So we have licenses to produce everything, footwear, accessories, apparel. And if we want to produce, for example, bed sheets, we can also do that.

Well, let's move on. What's important here? -- when business is not running as well as we want. We wanted to -- we decided to tweak things, and we talked about 150 stores per annum. We're going to take that down to about 50 per year. So our expansion will go at a smaller pace. And then we're going to do international expansion of WorldBox. -- if that matures, once that matures, then we can revisit the expansion plan. Today, we're going to -- we're tweaking that. We're going to slow that down a bit. So we had 96 KS stores. We have small stores. There's things that we're closing, and we're going to have around 290 Worldbox stores.

I think I've already addressed what's on this slide. What's very important, you might not see in these results, the bulk of these contracts have clauses with an OCR cap, we would not pay more than 12% or 14% of our top line. So once we see the annual top line, we'll see how much money we're going to get back from the rents.

So if we're going to have 60% margin and then 14% repay, we're going to pay, we're going to be able to adjust staff costs because we have most of our staff work on an hourly basis. So there's no -- it wouldn't be possible for this not to be profitable once we have the full margin achieved. And so we're selecting the sites.

So the best cities for us are 20,000, 30,000, 40,000 inhabit sized cities. And so for now, we've decided to stop. It's obvious that we didn't want to go further with the larger cities. Now if we can look at off-price. Off-price is now celebrating its 5-year anniversary. I don't know if you remember when I talked -- when I started talking about off-price, we had a lot of stock. We had a crisis. We had contacts with brands. Everybody had problems with goods, merchandise.

So it was a good time for us to kick those operations off. I didn't think this up myself. I had just seen what was happening on the American market. So in the United States, it's 18% of off-price, something that's been growing very nicely. If we look at some of those companies that run off-price business, they've been successful across the board. So I can't imagine -- that's what I was thinking then that it's not possible for us not to achieve a success in Europe as well.

And so we can say that there's nobody else in Europe with that type of off-price. So Poland represents 2%. U.K. is 6% and the U.S. has 18%. I was in the States recently looking at those models. There are different off-price models. There's more than 10 different off-price models at different price points. There are experts in sports, also home goods, home decor for off-price.

There was a big snowstorm blizzard in New York City, and I went to Miami instead, and I was looking at off-price stores on the map. And it turned out that every 200, 500 meters in the United States, I was able to find an off-price store. So there are quite a few of them. This map shows that in the near -- in a very short period, we became the leader of off-price in Central and Eastern Europe. We were quickly the leader. We became the leader quickly in year 2. So we don't have competition.

So I have to teach people what off-price is in the landlords in other markets. I do it less and less, but originally, I had to teach people what off-price is. So maybe if you can give me the clicker that way, I can click the slides more quickly.

The logistics center, as we told you, we're building a new logistics center. So in Halfprice, we were using a temporary solution for quite a while. So it was a little bit like a manual approach. Now we're building a modern center in Polkowice. We're going to be able to support 500 off-price stores. And this will be 40% less expensive.

So within a period of 4 to 5 years, having the scale that we have, we'll be able to have that payback. We'll be able to spend out goods more quickly, less expensively. And so we're very pleased here, I'm showing you we're going to have about 2,000 baskets like that. And this is very quick, very efficient, very economical. And so we have stacked shelves. So most of our processes are automated.

So we have Phase 1, Phase 2. So at the beginning of next year, we should kick off the construction of Phase 2. Then we have to move some of the old raze that to the ground and then build the new building on the right side there. And if we look at the improvement in the gross margin, we continue to improve our gross margin by purchasing more, purchasing better.

And above all, thanks to these licenses. Well, the licensing impact, I'm going to try to illustrate that. It's not so big yet. But 52% margin in off-price, that's an unheard of margin. This has been cleaned up the licensing costs. So the average margin in the off-price is 35%, 38% if you look at American companies and their figures. So we're achieving something that's quite extraordinary in this industry.

Here, we're showing you where we started. The black is what -- the purchasing we did on the market. We were taking advantage of the crisis on the market, what happened with COVID. So we were buying things from the market. And so the margin was less attractive. Today, the margin is growing. SMUs have a higher and higher share of mix. And so this is for -- and our licenses as well.

So the SMUs are done specifically for our models. So we want to have 40% licenses, 40% SMUs and only 50%(sic) [15%] would be purchases from the marketplace. There's a big cost attached to market purchases. You have to buy it. You have to change the tags. You have to give labels for each country. So the SMU, these are produced directly in Asia on FOB. They're already labeled. So there's a big cost in off-price in order to exchange the tags. So we believe that we're going to have much lower cost to prepare goods. It will be properly packaged. It will go through the warehouse on a cross-dock basis, and then it will be in the stores. So this should improve the profitability.

Now the license itself, well, gives these licenses give us a higher margin, substantially higher margin. These are very substantial margins in an off-price approach. Let me remind you, we can produce apparel and many other things like perfumes, beauty, home, and we can do that with the licenses we have. We didn't have that initially. Today, -- we're at 2026. So we might be 20% licenses, 40% is SMUs.

That means we're not buying, let's say, men's yellow T-shirts. We're buying 70% in black, which are being sold, which sell well. And so we're saying that the products are more attractive, better fit -- there's a better fit or a better match with what customers really want to buy. Here, I wanted to tell you this year, 65% of the expansion in our selling area will be in off-price. So that means we're expanding our position because we have 3,000 square meters in every off-price store. And so it's something you can do quite well quite easily.

And so we want to add 100 new stores as a minimum per year. Of course, we're negotiating. We have a large number of offers, very good trade terms with fit out with LCR cap rates. So we're pleased with the work that has been done up until now. But we're picky in terms of what we choose. There are several determinants. Well, off-price is resilient. Also, there's a broad offering for fashion. There's a large number of product categories. We have 17 categories we utilize in off-price. And so if we have better sales in footwear, we add more footwear. We're selling more in home category. We have toys, we have animal products, products for animals and pets. We have books. We have gifts. We have Christmas decorations.

In Halfprice, we can pretty much sell anything, which has, let's say, a recognized brand attached to it. Some people come in and buy just candles because they want the candles. We have good, strong like-for-like sales performance. That's something that's very nice because we're opening stores close to one another, and we haven't seen any cannibalization with respect to neighboring stores like in Targowek in Warsaw. So we have 2 stores on either side of the street, and they've defended their position quite well. And in many cases, this is truly the case.

And there's a lot of potential to optimize costs. I mentioned logistics already. And we're alone in Central and Eastern Europe. We're desire to anchor in many new investments and very many new -- in many commercial centers. So in 2026, 65% of our new stores will be in off-price, -- then we have CCC and Worldbox and the others. So we're opening 100 stores CCC per annum. This will gradually be extinguished. We're not going to go outside of Central and Eastern Europe. That decision has been made. The full brunt of our strength is going to come through off-price. We want -- all of the markets are doing well with CCC.

So we have costs under control, and we're going to switch our attention to off-price. I think it's much safer when we're talking about operating abroad. And so CCC, Worldbox, others will its share will decline. And we can say that at the end of this period, 90% will be off-price new openings, new space. So you've heard from me, not from the marketplace. What we're trying to do, we have a new off-price concept. It's not something -- it's not a new world box or anything like that. This is off-price.

And if we look at the American market, there's 10, 15 stores listed on the stock exchange with a very high EBITDA with a very good valuation. And it's 29% more or less of profitability, EBITDA and revenue. Now off-price in every city meets different needs, Halfprice, Guess, Michael Kors, Karl Lagerfeld, Off-White. And there's a large number of premium brands or semi-premium brands. But Shockprice, we want to talk about having the best price. So these are less pronounced brands, but at much better prices for the consumers.

And so -- having in mind the 100 new stores we're going to be opening, some of these stores will be utilizing Shockprices as opposed to the great brands. So Halfprice in large cities, malls, higher price points, fashion marketing. So people are happy in Halfprice. Women are happy with the fashion. They've got nice bags. But with Shockprice, it's only going to be price. It's going to be a price-based approach. We won't even mention brands. We're only going to talk about having the best prices in small cities and commercial parks, but we're talking -- we have that today.

We have [indiscernible] in Sochaczew. They're all working very well. These are not customers that are well-suited to Halfprice. They're actually more suited to Shockprice. So Halfprice is TJ Maxx, Nordstrom Rack, Marshalls. So there are other networks that are offering, let's say, T-shirts for $6, but they, like TJ Maxx, Nordstrom, and Marshalls, are offering them for $9. We're talking about Ross, Burlington. What's the difference? Well, there's a lower margin here in the Shockprice, but it's higher than in the off-price model. Here's a higher margin, gross margin. Here, the -- you have 50% more quickly turnover. So the store, as a result, is earning the same amount of money because the turnover period is more quick. It's quicker. It's a shorter period.

Let me show you on this map what I have in mind. This is our base, our core Halfprice, then you also have Halfprice Luxury. That's in the higher position brands. We're not going to do Halfprice Luxury. We have stands within Halfprice. Well, at the beginning, the results weren't too strong. We did that within 50 stores. Now we did it with 30 stores. So we have good reactions. We are doing special collections for that in brands or stands within the Halfprice stores. It's only selected cities, large cities, large malls. We have basically the corner -- the luxury corner and Halfprice, that's around Zara, Zalando, IKEA, H&M. This is CCC Worldbox.

And so basically, this is equalizing or on equal footing with CCE and the others. Then you have the Shockprice. This is like discount value like Sinsay, New Yorker, Primark, Pepco, Action. This is that client. But here, you can see this customer represents 60% of the total number of customers. They're not interested in fashion or brands. They're trying to meet their needs. They need to buy socks even less expensive, tennis shoes and T-shirts less expensively. For them, price is the most important factor.

So if we can go back. Why have we achieved success in Halfprice? Rapid expansion, high scale magnitude, access to good merchandise, good premises, quick decision-making, logistics, efficient operations. We're not using e-commerce. You don't need e-commerce at all. You need the ability to look for good opportunities. If we were to be in e-commerce it would be available everywhere. We have an advantage here, an edge, we're saying to our partners that we don't have e-commerce. It's easier to produce things especially because we don't offer anything in e-commerce. This is a model that's based on surprise. You have to have individual units in the stores. So I have to explain to people.

Nobody in Europe has been successful at doing Halfprice. There's one American company that's done something, but no other company has done it. There are many attempts made. Well, things -- the timing wasn't there, and there wasn't a determination there. So we had a good kickoff to Q2. You already know that. I don't always want to be held to account. Today's conference is quite late. It was usually at the 10th day of the month, and everybody is interested to see how the new quarter is going. Well, we have 20% of the sales time. What's most important is the overall quarter, the total quarter period. We've already revealed to you that the quarter started well. We have higher margins. We have high like-for-like sales performance in Halfprice. And we see increase even in Modivo, we have increase of 7%.

As Lukasz told you already, we're focusing on the margin on our own brands because we're not interested in doing an excursion of 3% or 5% or an EBITDA of 10% because across the whole business, as you saw in Q4, if the EBITDA was missing, basically, well, e-commerce represented 40%. And as a result, we weren't able to report good results in our retail business. And the overall business wasn't defending itself. And so we're acting very cautiously, prudently. So omnichannel is our advantage. We're building stores, brick-and-mortar stores where we're selling our own goods, our own brands. We're advertising them, and we're encouraging customers to buy from us at high margins. That's not going to change.

So we want to sell 80% of our products in our own brick-and-mortar stores. And that's why we have the margin promised by -- and the profitability promised by Karol. So I want to show you the sales structure. But we have Worldbox other, that's 4% of our revenue. And then you have the 3 major channels, CCC, Halfprice and Modivo. It's more or less equivalent. So I think Halfprice should be the sales leader in our group. It's not really clear if we're in e-commerce, if we're a retail business, perhaps you would say that we're an off-price business.

And [Karol] says we're a platform. Okay, I can say we're a platform. Here's Modivo Group. Here's what we promised that we would achieve and what we have achieved. It was an intuitive risk that we combined all of our brands onto a single platform. We were successful. We've achieved that. Well, only the good ones have fortune. So we have 23 million club members. We have 1.7 million gold customers who've paid for their membership, and they're paying us to be a member of this club. I think some of you have the gold, you have to pay PLN 60. PLN 50 net stays with us. It probably doesn't stay with us because we have to give it back the PLN 60 in cashback programs because everybody will get back more than what they paid. So everybody will buy 2 or 3x more, they're spending 2 or 3x more because they have that tangible benefit, and they're tapping into that.

And we're adding brands to our Modivo Club, and we wouldn't rule out a situation in which in the near future, we're going to add some nice partners in that club for our club members to have nice opportunities, maybe not in the competitive field, but we might be able to create the best loyalty club in this part of Europe or the world. I'm not really sure how to frame that. Our goal was to have 3 million at the end of the year. I think we should achieve or beat that objective. More or less, 60,000 people a week are signing up to the Gold club, another 60,000 to the other club. And so we're adding for 86% of all the people signing up for the club were from Poland.

We're adding other countries. This is gaining ground. And so -- so Carlo is a head of that event, so he can say more about that subject and the growth numbers. Let me tell you who we are. We are the Modivo platform. We have sales channels. We're producing products. Let me reiterate, we produce. In the future, we want to sell 75% of our production in sales channels like Worldbox. CCC, -- Halfprice 40% and Modivo 50%. We want to sell as much as possible what we're producing ourselves. It's hard to earn money on partnership brands. Everybody has the same products. Everybody else is discounting it. They're all fighting for payable traffic, and they're fighting by the prices.

So then if you have those -- the intelligent assistant that's going to assist you, it's going to be a fight for PLN 1 on every product. So products will be sold just slightly above 0 or slightly below 0. Somebody is going to buy something wants to get rid of those products. So we want to utilize our production and our brands. And nothing has changed here in several quarters. We're just showing you that this is a process. We have more and more of that. So footwear, we need 9 months in order to produce and get those products through in our stores. We have many omnichannel approaches. We have brands. So we can forget about WSS and the Biegacza store, the runner store. that might account for 5% of our business.

But WSS, that's one store in the entire country. We have collaboration. We have people queuing up for 2 days just to buy things from us. So it's also true of the runner store, the basketball store, by Beverly Hills, [Boardriders]. This will develop the brand. You have CCC, World Box, Halfprice. Who are we? We are the platform. We have the foundations for the platform. It's not the case that you have a single business that we're looking for synergies elsewhere. We have synergy in terms of our rents, marketing. So if we're advertising Reebok shoes, then we're going to get a benefit in terms of sales of Reebok clothing and apparel. So all the channels are benefiting because of this marketing. Right now, we're pretty advanced. But over the next quarters, you can see across the country, that there are things that we're trying to do. We're preparing ourselves well, and we want to extract synergy in all of the channels where we're present.

Then also the supply chain within factories, logistics, technology, AI, our stores, brick-and-mortar network and then economies of scale and then one single loyalty club, the Modivo loyalty club. So now -- as you know, we've combined everything. This is a major synergy. It's all to get there, costs are falling. They will continue to fall, excuse me. And some functions aren't getting bigger like management team size. Things are growing. We're preparing for that. We changed the names to some of our companies, as you saw, not to reverse the downward trend that some people said or wrote in the newspapers that the names won't help us. This was not all the goal. We wanted to make sure that we didn't want the names CCC to appear on the tickets when we're printing out the receipts.

Modivo is a nice name. And then we have Modivo S.A. Then we have [indiscernible] . I won't explain but that's a joke, of course. But we have Modivo Tech, which is all of our technology is in a single location. We don't have these braces in terms about who's better. So all of our technology is done in one location. Then we have Modivo EU. This is our company that's doing all of the purchasing or sourcing. So it's all in a single hub. We do segmentation for the various store networks. The inventories in a single location, we have a single warehouse. We don't have to send things back in order to push it over to half price if it hasn't sold elsewhere. So we have 10% of our inventory and, let's say, half price, only 10%. So then we have Modivo.com. This is the only platform. Here, we have an app that we're still maintaining.

In the future, I want to have a single platform, Modivo.com. -- and the scale is small in -- so we have Modivo Slovakia, Croatia, Serbia. In Poland, we have a different situation. Since these are very large organizations, Poland is the biggest market. Since we started to work, we have Halfprice as a separate company, CCC, Boardriders and Worldbox, -- we have a director. We have somebody managing each one of those companies, but the scale is much bigger. But everything is elsewhere is done under the framework of a single company. So before we say thank you and invite you to pose any questions, I just want to go ahead and say one more thing.

Our -- the race we're participating in last longer than a single quarter. I reiterate constantly, we talk about those races in the '80s. The Polish team is controlling the race in 82nd kilometer, 83rd quarter that turned out that we didn't lose anything because we're always working together. So we're working together in terms of our results. Everybody had soft e-commerce. So we don't have to think so much about trading volume or profitability. And so you can see that the profitability will have achieved. We have some aces up our sleeves. And so communication will improve quarter-on-quarter.

So the goal for this quarter is 26% for our products. We had 20%. But last year, we had 8%. The difference on the margin is some 25 percentage points in terms of selling our products or our partnership product. That's a very big difference in terms of EBITDA depends on the difference here of 2%, 3%. So we're in Tour de France. We have a lot of experience. This is the biggest race, but it has 21 different stages. So we've completed only the first 2 stages. So we need more time in order to show that this model is the best model for retail, omnichannel across Europe, this part of Europe. And I don't think there are any obstacles that will be on our way. We're following this. We're in line with the plan, nothing standing in our way. We're at a stage where we can grow quickly and efficiently. We have a higher percentage of licensed brands in every one of our channels. This will be increased.

So licensed brands even prior to the conference, there was a question about whether or not we're earning money on these licenses. We are earning real money on these licenses. We can sell products with an 85% first margin. Of course, at the end of the day, things vary. But our inventory is small. We don't have to pay VAT. We don't have to pay customs duties. So we have a heavy inventory because they have -- we have to pay for their margin. We have to pay for their custom duties as well as the custom duties and VAT, then they start calling us. We haven't earned money yet and they want us to pay already. So we have the off-price channels where the margin will always be in line with what we want. So that would be more or less it. I think I've said everything I wanted to tell you today and convey to you.

So Lukasz, I'll invite you to join me on stage. So the more difficult question should be posed to Lukasz. I'm here to talk about the product and say inventories. I think we'll be able to do it.

Sylwia Jaskiewicz, I'm from the BOS Brokerage House. My question is about your geographic results. How many countries and how many stores are not profitable?

We don't have countries that aren't profitable. I'm talking about Halfprice and Modivo.

I can confirm we don't have any markets that aren't profitable. I don't know about any such markets. If there are individual stores that might be unprofitable, we would take remedial means. And if the situation is fixed, then we terminate such a contract.

In next year, there is no store that would be unprofitable with the exception of efootwear and Worldbox. So in CCC and Halfprice, we don't have any stores that aren't profitable. Last year, we talked about wholesale sales that you were going to grow wholesales. So Lukasz didn't mention that we had the wholesale sales result as an additional burden. Wholesales is a little bit of -- to be quite honest, it's a different term, different time. It's a bit of a problem for us. They want to have the product more quickly than we have it because these are wholesalers, intermediaries, middlemen. They want to have 70 different models. They want to have samples and then the order is only for 5 boxes.

So everything is changing. We were negotiating recently the terms and conditions with our licensors. Everybody believes that brands should be everywhere in every channel, retail, wholesale. And so nobody wants to kill off a brand in a single brand or channel. We want to have a large number of channels of sales. And so now they're gradually releasing us from that requirement. Let's say, there's -- I don't want to mention any specific brand. Let's say, we talk about footwear that's going to be in Lidl or something like that. It's going to be -- these shoes will be in multiple concepts within our approach. So we have a very nice coverage of the market.

So quite frankly, as we build our presence, if a shoe cost us PLN 20, we can sell it for PLN 100, we can even sell it for PLN 40. So there's going to be a problem with our wholesaler. They're going to say that you have so many stores around that I don't want to buy these products anymore. So it might turn out that all of the attention we paid to this wholesale, I think that somehow this might be the end game. we're doing some wholesale sales like Roxy, Quiksilver, [indiscernible]. Those are professional things. These are helmets and skis and things like that.

So we had promised that we would do this in the region, but gear for swimming. But we're doing a lot of these sales through our own channels. We don't see this need elsewhere. Well, the marketplace is developing very nicely. So I think we should have EUR 200 million in revenue. So Karol is nodding his head, so I'm speaking. What's the margin there, Karol, 60%? You're saying right now. But if you look only at our brands, -- the margin even goes up to 70%, not just in the marketplace. So EBITDA is roughly 25% from our marketplace. We're very pleased with that. So it's only shoes and bags in the marketplaces we're adding now. We're #1 everywhere where we're present with respect to footwear, that's Allegro, Zalando. We have a bigger offer than other brands. So there's no real impact.

I wanted to ask you how much selling area will you have in Shockprice?

We're not going to make a condition there. Let me put it this way. Well, we had 10 stores with shock price approach. I would admit that, but we did it too early. We had 600 square meter stores. It didn't work. Why didn't it work because we didn't have the products to fill the stores. So stores should be at least 1,200, 2,000, 2,500 square meters depending on the location, the size of the city and the environment. So this is a commercial park. So you should have a 2,000 square meter store, and it's a minimum of 1,200 square meters. So we have these stores and the stores are earning very well.

The question is whether there's a need for this to have these stores in every single city. We want to be able to distribute these stores across the marketplace.

I have a couple of questions. What are the cost of marketing? -- planned for this year. Is the trend in Q1? Will it be maintained? And what's the cost of licenses in Q1 2026? And what's the CapEx plan for full year 2026 licensing costs.

Well, it depends on the contract, and this is pro rata to sales, depending on the contract. I'm not sure if we can speak to that. We're a public company. We're not saying in a specific contract, it's somewhere. It ranges from 3% to 6%. The CEO is negotiating a contract with even lower rates.

I won't state the names. We have very good American brands, which don't have any coverage. And so the cost will be around 2%. So made in USA with 2% with a very nice brand. So this is something that will work out well for Shockprice. We shouldn't use the same brands in Shockprice and Halfprice. So we know how to do that. If you look at the collections that show up in the fall for e-footwear, better colors, better packaging, it's going to be better than what we have in e-footwear stores today. It's proven itself, and we'll be able to grow sales even in the lower ranking stores.

We don't see any major CapEx for marketing. The benchmark is below 100%, 1% in revenue. So Modivo Club is a very good marketing tool because it generates cross-sales -- and so it's not going to be a line item that will materially affect our P&L. But when we talk about CapEx, the benchmark is last year, we certainly do not want to exceed the CapEx figures from last year. We can steer that very flexibly. We have turnkey stores. There are stores that we prepare. So it's a decision that we make to a large extent. One other important element when we talk about CapEx and the CEO mentioned this previously. Initially, the original plans to start second phase of the Halfprice project our plans had assumed that we would begin this year and in the latter half, but we want to have a conservative approach and having in mind our cash flow, and we made the decision to start with this in the first half of next year.

It's not only about cash flow. The automated machinery has to work well. So if we raise the ground the old, let's say, warehouse, it won't work. So it's also about cash. Well, it's hard to give a response. We're negotiating some contracts now. Things are going better and better. We have stores where we have coverage fit-out as well as furniture. Negotiations are going well because everybody wants to have Halfprice as an anchor. Everybody wants to have Halfprice in their galleries, shopping galleries across Europe. So we're focused on having and running even better negotiations today than we had in the past.

[indiscernible] from XYZ. I have 3 questions. The first is short. Shockprices. How many of the off-price stores, 100 off-price stores, what percentage of those stores would offer a shockprice, perhaps 20%.

I would think we're at 20 stores, 20%. Well, we have those premises, but I'm thinking internally, but we've talked about great brands in [indiscernible] with Guess or Tommy Hilfiger. -- it's not sensible to do that. We have to say it's a good price. It can't be a no name or a discount. All of the products will have branded names. That's the strength. We'll buy selectively to buy less expensive products and things are going to work very well if we do it that way because I see how things are working in the U.S.

All of our ideas come from the U.S. I didn't think of anything. I'm just buying well and tested and proven models. My benefit or my advantage is that I have the braveness, the boldness to do these things. What's the second question? There's a third question, too. But the second question, how many square meters? How many square meters, 300, 150. We're quite flexible. We'll reduce the number of meters if things are running the way we want that. You have to have money to have additional 300,000 square meters, you have fit-out. So we'll stop things. We're very flexible in this respect.

We have more than 50%, 60% of our contracts with had OCR caps. All of us are capable of calculating even the price is low. So staff costs less than 10%. So we have high EBITDA performance in each one of our stores. Now we need to add some new business and new revenue and of course, make sure that the head office doesn't cost too much and then sell your high-margin products. This is what we've been doing for the last several months, nothing else.

So it's important, a must for us to have 300,000 square meters.

Hungary has 150 commercial parks after the change in government. And so once prices are good, they're going to come forward and seek that. Well, there are different conditions in different countries.

My final question is about Worldbox. How much have you pulleed back the target of EUR 1 billion in sales at 20% EBITDA. When will Worldbox start adding something? Today, we're fighting for profitability.

We're thinking about EUR 600 million in revenue. The plan for this year is EUR 600 million revenue. And so the EUR 1 billion is not so far away.

We're not talking about a large number of years. We'll speed things up once it starts earning some money. I'm not saying it's not earning money. We have the first month in which we have the full collection like-for-like is moving up. If you look at the trade per square meter, we have a good margin. Traffic is short, but conversion is very good. We just have to bring people through the doors. And Lukasz mentioned that the prices were too high, but I hadn't yet done the valuation of prices. So we didn't have influence over that company. Now it's our pricing. The margin is good. We're making purchases in Asia. There's nothing left to chance.

So we maintain our belief in Worldbox. So we want to lose as little as possible.

We know why we had some soft results. Two conferences ago, I said it's going to be our best business model. Why did I say that? 2 conferences ago. Because I have access to good premises on good terms and conditions, and I knew that I was going to have a higher margin. And I knew that nobody else had that concept close to us. I maintain that price. But as I look at Halfprice, maybe it's not going to be the best, but it's going to be good because Halfprice is doing very well. Well, the overall off-price approach, if you talk about maturation, well, the like-for-like performance is improving year-on-year. That's normal.

When we prepared that concept for 5 years, we're going to be improving our like-for-like sales performance. Then we'll add new categories. We'll build a new offering. As I explained to you, when you buy from stock, you have everything, you have the price, you have -- nobody buys pink T-shirts, but that's what they do in Italy. So we've never had stock of 70% that would be black T-shirts and so instead of 10%. So we'll have the name. We'll brand those products. This is also SMU. It's something that rotates well, has a nice turnover, but the margin is 50% plus on our licenses, we're going to have 65%, 70% margin, which is a wonderful margin in off-price.

So all of those American chains, they don't do things on chains. It's just a matter of they buy and sell. So it's a quick turnaround. Our model is based on production. We have good turnover, but it's in route this merchandise for quite a while, but a good off-price has a rotation, a full turnover within 35 days. We have work to do. Thank you very much.

I see that there's a question from the back of the room. Well, the brands, the farther you go down, even these companies that I mentioned, they have quicker turnaround periods, turnover periods. So the better the concept, the quicker turns over, but it has a smaller or lower price. So at the end of the day, staff costs, rental costs are lower with respect to higher revenue.

I have a question about your CapEx. How -- what was the CapEx in 2025? I want to have a benchmark for 2026.

The CapEx, it will be in the final report that we published in -- we will publish in the near future. I think it was around PLN 885 million. But there's also some CapEx for warehouses. This should be deducted. Roughly PLN 150 million should be subtracted. So generally, I assume that CapEx should not be higher than PLN 700 million this year.

Could you say something more about the impairments on [indiscernible]?

Let me explain a little bit. You have to think about the methodology for allocation of purchase price. If you do that exercise, prior to incorporation within the consolidated financial statements. Having in mind the company purchased 1 day before we have to do an artificial exercise, and we have to do an evaluation of the receivables from that company, barring the business plans that you have for that company and the ability to generate cash and everything else and all the other synergies, you have to extract the company from the plans that you have.

So it's a bit of an artificial concept, and you have to check the potential ability to pay back the revenue -- sorry, the amounts due. So we recognized the statistical impairment of PLN 24 million. This is not something that should be interpreted as a lack of faith in this business or the lack of confirmation for the strategic plans we have with respect to this business. This is just the methodology for doing a fair value assumption or fair value assessment of inventory in the company.

Is this from CCC from [inventory]?

Yes. These are our receivables that have been assessed or at a fair value basis. So at previous conferences, we said there are 2 major areas. So it's the price repaid -- then you have the off-price segment.

Why are you deciding to have another segment, which can, of course, divert your management attention from Halfprice from Worldbox. We have Worldbox, which is a new segment. The full management team spends a lot of time on that. And now we're going to have another brand, a new brand within the framework of the company.

I think we have to understand each other. You started well when you said that this is a category of off-price. Let's stick to that. It's the same thing, but with a better turnover period. So the same Reebok shoe. So let's say there's one shoe that's purchased for $9 or $7, and we're selling it at different price points in Shockprice, for example, as opposed to the regular approach. We're thinking about people who should come in and spend EUR 29 to buy products and not EUR 39 because I know that people in the surrounding area, they need that price. They need a better price to make their purchases. That's how off-price works.

If you look at the American market, the same Reebok T-shirt costs $5.99 in one place. It costs $7.99 elsewhere in the more expensive stores, and it might cost $20 elsewhere. The same T-shirt has different price points. We need that concept, then we'll have greater opportunities to escalate our off-price model. Let's take a look at the city of Lubartow. There's a shopping park or a commercial park there. And it was a previous -- it doesn't look nice, but it was a previous building material center. Business is working well. We won't open Halfprice there. We'll open Shockprice. It depends on the facility. I didn't do a visualization of that, which direction Halfprice is going in. We have very nice looking stores in Halfprice, whereas shock price, it's like action. It's sort of like something like [indiscernible].

That's the -- I was in Finland recently. They were trying to persuade us to open a store and the conditions were quite ridiculous, and there was one location that had been exited by HM quite a bit of traffic. It was the center, but it's an ugly shopping center. And I didn't even ask for the price, but the head of family want 6% is the rents of revenue. Well, all of the concepts around were very low price, and we saw how people were addressed. These are different customers. It wasn't a customer fit for us. A few meters down the road, we had beautiful stores and beautiful brands and a totally different customer was walking in. That's a totally different customer.

So 60% of customers in Poland would buy at Shockprice, whereas 30% would buy at Halfprice concept. So we're looking at this in the U.S. and applying it here. We're talking about those stores that should be opened as Halfprice, but we'll open them as Shockprice stores because we'll have a more simple advertising that's price-based. And Halfprice, we'll have marketing with fashion and leading brands. And so we showed you happily -- happy ladies that look very nice. Of course, it was with artificial intelligence, but the people were happy. Shockprice will only advertise the products and the price. They will not talk about the brand, the products themselves.

Are there any other follow-up questions here in the room? I see there's one more question.

I'm from PKO. In the smaller towns and communities, are you thinking about rebranding Halfprices into Shockprice?

No. All of our stores are profitable. The worst one generated EUR 1 million.

And this is close to my house in Polkowice. Everybody is going to worry that Halfprice isn't hurting me.

So CCC and Halfprice. And then I also built that center in Polkowice. There's no need to do that because Sochaczew. So we have great brands, Halfprice. Somehow it doesn't fit. I understand see how much traffic there is in these great locations. So all of the companies, all the brands I displayed, these are successful companies. not able to move the presentation change slides. Maybe my colleague, [Wojtek], will be able to do that. Please change the slide for me. I'm not able to click the slide to a different one. It looks like something got blocked.

Okay. Let's revisit the map for you to understand, there was the map just on the previous slide. So these are successful companies, New Yorker is 30% EBITDA, Sinsay, Primark. None of these companies with the exception of Sinsay, these are e-commerce stores, Temo and Shein. JYSK, Action, Pepco, they're not interested in e-commerce. They only have a brick-and-mortar approach. They have low base costs and the stores don't have a major fit out. So they have a smaller margin, but it's safe for the customer. 60% of their customers are in the Shockprice category. Why should we let that go?

That's not anything new. That's still within off-price, the same space, sometimes the same products, similar products, but the pricing will be different. And it will be display differently, merchandise differently. We have to do the things that the customer wants and not just do what we want -- what we think the customer wants. The customer in [eobuwie] wants Shockprice, whereas in [Worldbox], they want to have Halfprice. So we'll have a new presence in [Worldbox] beautiful store in somewhere else. And then you have in [Worldbox] and you have discounts around. It won't fit. It wouldn't fit if everybody else is trying to sell at base price.

There's Fort Wola. This is one of our more -- do you know Fort Wola? Basically, it's a shopping center that was recovered. It's not Wola Park, 3,500. It's a beautiful location, and I'll do a Halfprice there and then Shockprice. Then in Fort Wola we'll do the Shockprice because there are only discounted stores, discount stores there. There are no branded stores there. So if there's going to be an [indiscernible] have you. So we have a beautiful location in [Arkadia]. So nearly 3,000 square meters. So Halfprice is almost everywhere in the Galeria, [Katowicka], [Manufaktura] in [Lodz]. So we're half price. We've almost completed the expansion in Poland. This was a 5-year process.

It's not the case that finally, we get -- immediately, we get premises in [Arkadia]. We lost one case to Uniqlo. So a large number of grocery stores, all that reducing space. That's a big opportunity for us, and we can enter the space at very good prices. So the EBITDA in Halfprice is going to be higher than 30%. So it'd be hard to discuss with that. Okay. Have we -- can we complete the discussion with Shockprice? I wanted you to hear from me. So in Walbrzych, we're going to start on 24th of August. So I'll send you a film with the opening of that Shockprice store. We'll do everything to make sure it works.

Maybe somebody will drive over and see us there.

We're confident of the off-price model because it's something that's tested and proven itself. We want to be the king of off-price. That's our ambition. Any other questions? I have a question from the Internet. I'll happily respond to any questions here in the room because that's why I came here to respond to questions.

I don't think there are any other questions from the room. Maybe one question from the Internet.

Halfprice has a 45% percentage of licensed brands. I'm just reading the question, and you have a 40% SMU. Will it still be off-price? Or will it evolve in the direction of a normal store -- normal full-price store? No. The whole world is producing SMUs, but at lower cost licenses because the license is set at a lower price point. These are not full-price licenses.

Well, the same products will be sold in Modivo, the ones that will be produced, but at first prices. So first prices, well, half price. People buy in half-price stores because the prices are discounted by 50%. Otherwise, they would go to first price.

We have one more question about Shockprice. Could you state more precisely about this brand? Is this a concept in which you will sell what you weren't able to sell in your full-price channels? And then one follow-up question. Could you give an example of the brands that will be available in Shockprice?

Yes. Well, products will be shifted because it's always about price. even Halfprice, things that aren't sold after the season. It shouldn't come back to the Halfprice. We should always have a fresh offering that way we can pump up our margin by 2%. If we have a price-based approach, we'll always have faster turnover period. So it's -- as we showed you in history, this is a small number of percentage points in the old products.

The second question is about brands that will be available in the Shockprice. What brands? What brands would it be the same brands that you have in Halfprice? Let's think shock price is more about people's needs. Maybe it's chemical products, household products, toothbrushes, toothpaste. For children, it has to be less expensive. And we'll have a lot of inexpensive athletic gear, maybe not high quality, but special collections Forever 21, where we have a license, Eddie Bauer, Lucky Brands,[ sport craft].

There's a large number of American brands from ABG, we have minimum fees, but they have that American flare. There's a large number of brands. We're signing a lot of contracts, inexpensive brands for off-price. We know how to produce. We know at price points we need to have in smaller towns and communities off-price. So it's basically -- it's off-price or Halfprice and a totally different marketing setup and meeting different needs. We have a large number of offers. Our buyers have so many offers, and we're trying to pick and choose to make sure that the products aren't too cheap. This is a slightly different approach. We don't want to sell things for PLN 20. We want to sell things for PLN 70 or PLN 80 if they're branded products.

And so things that come -- that can be bought inexpensively, they can be sold the Shockprice. We thought this through. And so the most important thing is the head of off-price wants to do that because it was her idea. We had 10 stores. We had to close them because we didn't tend to them properly. So it's clear that it would be good to have a second concept now. So lower -- less prestigious shopping malls or parks. We're thinking about the surrounding areas. What's the mix of landlords? If you have Sinsay, Pepco, [jest Biedronka], then we, as Halfprice don't fit. Let's agree.

Well, then you have -- there's Media Expert, there's Rossman, CCC, but we don't fit that environment with Halfprice. We're talking about large shopping malls, then we fit. Like if we were to open Halfprice in Blue City and now we have an offering in Skorosze, we won't set up a new Halfprice store. We'll open a Shockprice. This is an extreme example perhaps from Warsaw.

And then we have a combined question about growing selling area. Are there any new markets we want to penetrate? And the second thing, are we thinking about moving into the East?

So we're developing Ukraine. Ukraine is a big success. It's a very good market. It turns out that it's a very good market for us. There's one problem. The brands are EUR 4, but they don't want to pay for fit-out. And we have 20% like-for-like performance. So it's a profitable market and only Ukraine. We're not thinking about Belarus, Russia or Kazakhstan, Georgia. We want to optimize costs in those markets where we're already present. So we just want to add new sales areas.

What are your plans for the brand, [Eva Minge]? You have to ask the owner of that brand. We signed a contract, we have a license for that brand [Eva Minge]. So shoes, bags. So we have a license for everything, shoes and bags. I think the name [Eva Minge] is a good name. You can associate it with luxury, but we need a brand for our channel. We're going to sell that in our e-footwear channels, and we'll sell it on its platform. What's important? We have a licensing agreement where we don't have any minimum quantities. We do it if we want to. We don't have to do it. There's no minimum fees, minimum size or anything like that. So we're collecting a variety of ideas that we'll be able to apply.

I think those are the most frequent questions in the chat function. How does the Management Board think -- what does the management team think about the share price? And do you believe the buyback program will help investors see that the current share price shows that the company is undervalued. Is the priority to buy shares and continue developing the group?

In terms of the share price in the valuation, my private opinion is that the company is highly undervalued. If you think about EBITDA, I don't want to, as a Management Board member, discuss what the share price or the valuation. That's not my role. If we're thinking about buying treasury shares, we have the program that's in place. And so the Management Board has a 2-year period in which you can buy back shares and treasury stock. And so it's not a requirement. It's not something that we have an absolute requirement to do. We're looking at the best possible price to shares. So it's attractive from that perspective.

The second thing, of course, there's a financial plan, a development growth plan, which we're pursuing, and that would include the point in time where we are. So Q1 or H1 of the year, we've completed Q1. This is a point in time when -- we have higher costs linked to stocking our inventory. We haven't had a good time up until now to perform that, but the plan itself is something that we uphold.

Let me add one comment. If we talk about the share price, as people talk on the construction industry, we continue to work and our defense is the work we're doing. The share price will reflect the work we've done. That's all I can say about the share price.

And then there was a question about the dividend. It was somehow in the content of the body of that question about a dividend. It's clear that we are a company who has in a strategy that we want to pay out a dividend. We have a dividend policy that's been embraced, adopted. But just as was said, in terms of the program to buy shares back. Well, there's somehow a requirement for the management to have in mind the current financial position, the growth plans. So basically, we'll incorporate all of that when we propose a dividend, and we'll follow the proper procedures and announce that when that happens. What's critical is that in the medium and near term, we want to be a dividend-paying company.

There's a request for information about Worldbox limitations. Will this lead to higher inventory? How much new inventory has been ordered?

That's a good question. A very good question. We do have an inventory. The inventory is bigger than our sales capacity and ability to sell in Worldbox.But the expansion is only a small percentage figure. But we have concepts like Modivo e-commerce or Halfprice, where these goods can be sold with a more attractive price, minus 40%, minus 50%, then we have higher margins there. So generally speaking, let me tell you one other thing. Perhaps I shouldn't say this at all because this cuts off all of our margins of growth.

We're producing these products for CCC for Worldbox to e-footwear for single brand stores like Beverly Hills. So we have these networks we're going to sell at off-price models. So the products arrive at our warehouse and some of it goes to the full-price channels. And everything else goes to get separate tickets and then it will be sold in Spain, Italy, because Worldbox and [Boardriders] are only in Poland. But in the other 16 countries, we can sell in the off-price approach.

Did everybody understand what I was responding? So a 90% margin, we discounted by like 30%. We have a 60% margin. This is -- we have a lot of flexibility in terms of our logistics because everything is in a single center, logistics center. The problem exists, but it doesn't exist. We purchased too much for an extension because we're going to grow things by 100 stores, but it's something that will be spread across the board immediately. And we had that in mind when we were doing the shopping for the Halfprice stores.

So if we stick to inventory, with respect to what you said previously, what's your idea to reduce inventories by 20%? When do you think you can achieve that 2 quarters from today?

It's not so much that we thought that up today, but the purchasing from Modivo. So everything is cut off by 30% per quarter in terms of partnership brands, but we're also limiting our purchasing because we want to work with warehouses that are less full. If we want to open up 300,000 square meters in a sale in one of these centers, then we have to have reduced -- we have to have long periods to pay for those products in order to be able to sell those merchandise.

And so we have -- in full-price , you have a smaller or shorter -- sorry, a longer turnover period. So with the off-price approach, we're able to do things more quickly.

So inventory will be much smaller in subsequent quarters.

So Up until now, everything we've said, we've done. CCC is cleaned up, Halfprice is moving forward fastly. Modivo Club is elegant solution. The only thing that somehow not doing as well as it should be is Worldbox. So Q3, Q4, we should have positive results there. And then the inventory. So Worldbox and inventory. These are the 2 things that still need to be housekept. We started much earlier. And so in the upcoming quarters, we should see some kickoff -- we should see some knock-on effects.

Modivo has been cleaned up. And so we have licensed brands. We've improved that inventory.

Let me mention here. Our Q4 model. So we had 11% sales in February. We sold double the amount of winter products. Of course, this eliminated the sales of half shoes for the spring. The fact that we have 60%, this is a miracle because we had lower prices. Had we sold more of these flat shoes, we would have a higher margin in CCC. That means we don't have 6 million pairs of shoes. We have only 3 million pairs of shoes in the inventory. That means the latter half of the year we'll have higher margins for 3 million new pairs of shoes. So we've been able to achieve better results. Well, I've never had 3 million pairs of winter shoes, so few.

So basically, the inventory is quite small. And so a lot has been done having in mind inventories.

As we gradually close up today's meeting, I have 3 questions.

Well, winter, we were selling things at 40% margin, not 65%. So that reduced our margin results, but things are good anyway. It's only going to get better.

Please go ahead.

The assumption for the 5-year plan, are those assumptions still current? Do you have this motivational program in place of PLN 300 plus for shares in 2030 at PLN 1,000. And what's -- when do you think you're going to be able to ramp up, reach the final stage?

Well, everything I've said, I'm not going to take back. This is my major objective. And so the bonus that's big at the end, I think everybody should be happy because that's the motivational bonus. It's a big and serious race. We should -- so the thing is that we want to have a good performance in the tour de France and not just in some sort of one stage. We have an idea about how to operate in this business. And we talk about the expansion because we're expanding. Everybody was doubting whether or not we could achieve the expansion because we opened 75% of the stores in the last 2 months of the period.

In November, December, everybody was opening up for Christmas period, but we were able to achieve our targets. We were -- we wanted to open those stores. We want the stores to operate. So 300,000 new square meters. This is -- these are regular openings. We have to work on the cash and the cash flow. So if we don't earn too much money, that won't be very realistic, of course. But we're trying to get some additional financing, leasing furniture. So we have a lot of our stores, or turnkey stores. And so we have to add some amounts.

We're much more aggressive in our negotiations. It seems to us that we can extract more from our partners. We're more desirable to our partners. Our model has proven itself. Nobody in Europe can not notice, for example, the half price. So as I said, everybody was a little bit afraid of us if we're going to be able to do what we wanted to do in the market, everybody today, let me mention everybody, even big companies are preparing SMUs for us. I hadn't anticipated that, that we would reach a point in time where brands that were giving us products a year ago, they were saying that you could only sell them full-price . Now they're doing special collections for half price. So full diplomacy, great negotiations. So we've achieved success here.

That's exactly the case. And the results prove that. Well, these results are not wonderful. For me, like-for-like is the most important and margin, everything else, Lukasz is calculating along with the team. But if our like-for-like is good and the margin is good and expansion is good, then we'll achieve our targets.

It's not something that we need to calculate all the way from top to bottom. That's true.

So Lukasz is trying to bring everything together. So I'm pleased with Modivo for everybody to know. because Modivo is really -- we have some pain points in stores aren't earning as much as we would want. Things are maturing less quickly, but the e-commerce has a very good profitability level. That wasn't so obvious a few weeks ago. So we found a model that will enable us to earn money.

We would uphold the lack of guidance. We gave guidance previously and things didn't work out. We are supplying the max -- we're giving you all the maximum that we can give.

E-commerce is very sensitive. It earns money LPP earns money. IKEA make money because they're selling their own products in. They're not spending money on performance marketing. They have their own customers. It's an additional service with a high margin. e-commerce on third-party brands. So look at global companies, it does -- they don't earn money. We're not interested in a low level of EBITDA. We're the leader in the sales of footwear in this business. We're not going to let that go, but we have to do it more with greater wisdom. We started that several quarters ago. And so we will deliver.

I know we introduced the click and collect. You have to pay for the package. How many stores pickups do we have? 30%. Everybody else is paying. So there's no decline. So we have very good results in May and e-commerce. We haven't seen any falloff in sales, but we're doing it more economically. So a customer who comes to our store and picks up something, then he can buy something else. So we have this added value. The same thing, like returns are also paid for. Anything else, [Wojtek]? Maybe a difficult question.

I think we should wrap up because the train is going to Gdansk. And so a friendly company. Well, we have everybody here, so nobody is going to be able to go. Maybe one shareholder has a question. I hope that you'll have good results because almost all of my assets are invested in your company. Well, now we feel motivated.

Is that a question? I have all of my assets, almost all of my assets in this company. I'm not sure that's the best investment model. But of course, we accept that. Well, we have the motivation program, the incentive program. I believe in it. I've made this decision to that nothing has happened in the company that would detain us or stop us from achieving our targets, our goals. We're showing that we're delivering on. It's like 2 plus 2 is 4. We will deliver. So the time, it might take more time.

Things weren't earning money in Q4. So Black Friday or whatever they call it wasn't so successful, everybody said, that's what they said with prices that nobody earned money in the market. I don't want to have a business like that. I want to build businesses that are resilient to, let's say, some market gossup or tremors. So if the margin is lower in half price or stock price. I want to be very profitable. So if margin well, falls, the whole market is going to have lower margins, but I'll do better just because I have better conditions from the get-go. Those are the kind of businesses that we got. So we'd like to thank you very much for your attendance and your attention. So thank you very much.

Good afternoon, everyone, and welcome to PriceSmart, Inc.'s Earnings Release Conference Call for the Second Quarter of Fiscal Year 2026, which ended on February 28, 2026. After remarks from our company's representatives, David Price, Chief Executive Officer; and Gualberto Hernandez, Chief Financial Officer, you will be given an opportunity to ask questions as time permits.

As a reminder, this conference call is limited to 1 hour and is being recorded today, Thursday, April 9, 2026. A digital replay will be available shortly following the conclusion of the call through April 16, 2026, by dialing 1(800) 770-2030 for domestic callers or 1 (647) 362-9199 for international callers, entering replay access code 589-8084.

For opening remarks, I would like to turn the call over to PriceSmart's Chief Financial Officer, Gualberto Hernandez. Please proceed, sir.

Thank you, operator, and welcome to PriceSmart Inc.'s Earnings Call for the Second Quarter of Fiscal Year 2026, which ended on February 28, 2026. We will be discussing the information that we provided in our earnings press release and our 10-Q, which were both released yesterday, April 8, 2026.

Also in these remarks, we refer to non-GAAP financial measures. You can find a reconciliation of our non-GAAP financial measures to the most directly comparable GAAP measures in our earnings press release and our 10-Q. These documents are available on our Investor Relations website at investors.pricesmart.com, where you can also sign up for e-mail alerts.

As a reminder, all statements made on this conference call other than statements of historical fact, are forward-looking statements concerning the company's anticipated plans, revenues and related matters. Forward-looking statements include, but are not limited to, statements containing the words expect, believe, plan, will, may, should, estimate and some other expressions. All forward-looking statements are based on current expectations and assumptions as of today April 9, 2026. These statements are subject to risks and uncertainties that would cause actual results to differ materially, including the risks detailed in the company's most recent annual report on Form 10-K, the quarterly report of our 10-Q filed yesterday and other filings with the SEC, which are accessible on the SEC's website at www.sec.gov. These risks may be updated from time to time. The company undertakes no obligation to update forward-looking statements made during this call.

Now I will turn the call over to David Price, PriceSmart's Chief Executive Officer.

Thank you, Gualberto, and good morning, everyone. Thank you for joining us today. We delivered a strong second quarter. Growth was broad-based across our regions and our membership renewal rate reached an all-time high. I want to take a moment to express my sincere gratitude to every one of our employees across our 13 countries in Chile. Their dedication, hard work and passion for doing right by our members is the foundation of our success. .

We delivered these results against the backdrop of continued global uncertainty, including currency volatility, evolving trade policy and macroeconomic pressures that are dynamic all multinationals face today. That being the case, our business delivers value to our members in good times and bad, and I am excited about the momentum we are carrying into the second half of this fiscal year. With that, let me walk you through highlights from the quarter.

During the second quarter, net merchandise sales and total revenue reached almost $1.5 billion. Net merchandise sales increased by 9.9% or 7.8% in constant currency. Comparable net merchandise sales increased by 7.6% or 5.5% in constant currency. Two of our recent club openings, Cartago and Ketsilton-ongo are not yet included in our comparable sales numbers.

During the first half of our fiscal year, net merchandise sales reached over $2.8 billion and total revenue was almost $2.9 billion. Net merchandise sales increased by 10.2% or 8.6% in constant currency. Comparable net merchandise sales increased by 7.8% or 6.2% in constant currency.

During the second quarter, our average sales ticket grew by 2.2% and transactions grew 7.5% versus the same prior year period. The average price per item increased 3.3% year-over-year, while average items per basket decreased 1%.

First, in Central America, where we had 32 clubs at quarter end, net merchandise sales increased 8.6% or 7.8% in constant currency. Comparable net merchandise sales increased 4.7% or 4% in constant currency. Our Central America segment contributed approximately 280 basis points of positive impact to the growth in total consolidated comparable net merchandise sales for the second quarter.

Second, in the Caribbean, where we had 14 clubs at quarter end, net merchandise sales increased 4.3% or 5.3% in constant currency. Comparable net merchandise sales increased 4.2% or 5.1% in constant currency. Our Caribbean region contributed approximately 120 basis points of positive impact to the growth in total consolidated comparable net merchandise sales for the second quarter.

Last, in Colombia, where we had 10 clubs opened at the end of our second quarter, net merchandise sales increased 30.5% or 13.8% in constant currency. Comparable net merchandise sales increased 31.3% or 14.7% in constant currency. Colombia contributed approximately 360 basis points of positive impact to the growth in total consolidated comparable net merchandise sales for the quarter. The increase is a result of several factors, including the appreciation of the Colombian peso, increases in member traffic and continued strengthening of our merchandise offering, which I will share more on later in my remarks.

In terms of merchandise categories, when comparing our second quarter sales to the same period in the prior year, our foods category grew approximately 9.2% within foods, fresh proteins were a standout. Seafood, poultry and meat each exceeded 15% growth as we continue to elevate quality and value in those departments. Our nonfood category increased approximately 12.4%. Alongside cost efficiencies from our age of consolidation initiatives, we drove growth with strong performance in casual apparel, especially in our actewear categories and in small appliances.

One of several notable programs included a mix of shorting items that were especially exciting for our members, and contributed to our focus of creating the treasure hunt experience within our clubs and online. Softlines also had a strong quarter, highlighted by our domestic white sale promotion in January, which more than doubled sales compared to the prior year.

Our food service and bakery category increased approximately 12.2% and our health services, including optical, audiology and pharmacy increased approximately 13%. Membership accounts grew 7.9% year-over-year to almost 2.1 million accounts with a strong 12-month renewal rate of 90.2% as of February 28. It is especially exciting to see our membership renewal rate at an all-time high this past quarter, a clear indication that our members see the value we deliver and remain engaged with our offering.

The key focus of our membership strategy is growing the Platinum membership base. Platinum is our premium tier designed for our most engaged members. These members receive an annual cash back reward on eligible purchases which drives loyalty, increases, purchasing frequency and rewards their continued business with us. By focusing on platinum growth, we're investing in our highest value member relationships. As of February 28, platinum accounts represented 19.5% of our total membership base. up from 14.5% in the same period last year.

We are happy with the results of our targeted promotional campaigns and the strong renewal rate we are seeing reflects that our members believe in the value of that upgrade. We believe that a Platinum membership, combined with our strong co-branded credit card, which comes with an additional cash back on points earned ensures that participating members get the very most out of their membership with Priceline.

Membership income as a percentage of revenue increased to 1.6% in the second quarter compared to 1.5% in the prior year period, driven in part by the shift toward Platinum membership. These strong results reflect our team's execution and the strategic initiatives we have underway.

Now let me walk you through the progress we're making across real estate expansion, supply chain transformation and technology investments that are enhancing our ability to serve members and position the company for our next phase of growth. We are opening our sixth warehouse club in the Dominican Republic in the La Romana municipality early next month. We are excited to bring PriceSmart to a new trade area, and we are particularly proud of the sustainable design practices incorporated in its build, including solar panels, a heat reclamation water system that eliminates the need for a water heater, recycled steel in the infrastructure, a modern CO2 refrigeration system, high-efficiency plumbing fixtures and an intelligent energy management system.

These features reflect our commitment to doing right by both our members and the planet. And importantly, they also reduce operating costs, making our club more efficient. We look forward to serving members in this new trade area as we continue to deepen our presence in the Dominican Republic.

In Jamaica, we have 2 clubs under construction, one in Montego Bay and the other on South Camp Road in Kingston, which we expect to open in summer and winter of 2026, respectively. Construction is progressing well for both.

Recovery efforts have been strong in the aftermath of Hurricane Melissa, and market indicators suggest a robust 2025, 2026 tourism season. That, combined with international relief efforts supporting the island's recovery, give us confidence in the consumer demand environment as both clubs prepare to open. Additionally, in the second quarter of fiscal year 2026, we purchased land for our tenth warehouse club in Costa Rica and SudadKasata, that's approximately 47 miles northwest from our nearest Club in San Jose. The club will be built on a 6-acre property and is anticipated to open this summer.

Lastly, in the third quarter of fiscal year 2026, we leased land for our eighth warehouse in Guatemala in the municipality of approximately 13 miles south from the near club in Guatemala City. The club will be built on a 5-acre property and is anticipated to open in the spring of 2027. Although we are still waiting to obtain all permits, we are confident we will receive them and have begun with the initial earthworks for the club. Should we not receive the remaining permits we can cancel the lease.

Once these 5 new clubs are open, we will operate 61 warehouse clubs in total. We believe that there is opportunity to expand our footprint in our existing markets and plan to continue to diligently procure sites, we think will strengthen our existing network of locations and meet our expected returns. Chile remains a top priority, and we are encouraged by the progress we are seeing there. We have signed executory agreements for 2 prospective club sites and are actively pursuing additional locations.

In parallel, we are laying the foundation for a successful market entry. We have hired a country General Manager and local team members, established our central office and are building out the procurement and logistical infrastructure needed to operate effectively. We look forward to sharing more specific milestones as they develop.

Beyond new growth, we also will begin warehouse club and parking lot expansions and remodels in fiscal year 2026 in Portware, Jamaica and Barbados.

Now turning to our supply chain transformation strategy, one of the key drivers in keeping prices low is improving how we move and distribute merchandise to our clubs. Today, we operate major distribution centers in Miami, Costa Rica, Panama and Guatemala. During the second quarter, we began operations at our new distribution center in Trinidad. In addition, we plan to open distribution centers in Colombia and Jamaica during fiscal year 2026 and in the Dominican Republic during fiscal year 2027. Our goals with these distribution centers are to improve product availability, reduced lead times and lower landed costs, among other efficiency gains.

Alongside these new distribution centers, we completed implementing third-party distribution centers in China to consolidate merchandise sourced in the country, which we believe will drive greater efficiency and lower costs. We continue to advance our migration to the relax forecasting and replenishment platform and remain on track to complete the full implementation in fiscal year 2026. We completed onboarding our U.S.-sourced inventory procurement process, and now we are focused on our local goods procurement process.

While the implementation of a new system brings with it an initial learning curve, we are starting to realize its capabilities and expect to see the benefits of improved forecasting, product availability and operational efficiency long term. During the second quarter, we advanced our multiphase implementation of the ETA Open Global trade management platform designed to enhance automation, compliance and controls across global import and export operations. We believe this platform will strengthen trade compliance, improve data visibility to support scalable international growth once fully implemented.

Turning now to other ways we are enhancing membership. On a comparable basis, excluding a reclassification of the produce category, private label penetration increased 50 basis points in the first 6 months of FY 2026, reflecting continued progress towards our long-term goal of growing this part of our business. Using our updated methodology, penetration of private label was 26.6% of total merchandise sales.

Private label serves multiple strategic purposes. It allows us to offer high-quality products at lower prices than the national brands. It improves our margins, and it gives us leverage with national brand suppliers by providing a trusted alternative that keeps them competitive. Recent additions like avocado oil, fresh chicken and purified drinking water demonstrate our focus on delivering exceptional value across key everyday categories, and we have been able to pass meaningful savings to our members as reduction in commodity costs allow including price reductions on extra version, all of all of 31.5%, franchise of 8.9% and Montreal 5.8%.

Our private label water program is a good example of how private label can deliver simultaneously for members for the business and for the planet. By shifting supply for our 10 Colombia clubs to a local bottler, we reduced prices by approximately 23%, roughly $2 per pack while also lowering our carbon footprint through reduced transportation and packaging made with 50% recycled content. We continue to invest in omnichannel capabilities to meet our members where they are. In the second quarter, digital channel sales reached $94.1 million, our highest dollar volume to date, up 23.4% year-over-year and representing 6.4% of total net merchandise sales.

Orders placed directly through our website or app grew 10.9%, with average transaction value up 10.8%. As of February 28, 74.7% of our members have created an online profile and more than one in 4 members had made a purchase through pricesmart.com or our app, an indicator of the digital engagement we are building across our membership base. We see continued opportunity in this space, and we will keep investing to enhance the digital experience we offer our members.

During the second quarter, we began migrating our mobile application to fully native iOS and Android architectures, to enhance speed, reliability and accessibility. This foundation will allow faster deployment of new features and help us deliver an outstanding member experience in our digital channels.

Turning to technology investments that enhance both member and employee experience and operational efficiency. In the first quarter, we completed implementation of our new point-of-sale system, Valera across all English-speaking Caribbean markets. We have since begun testing in Central America and are making good progress on our rollout plans for Spanish-speaking markets. Early indicators show that Valera is delivering faster checkout times, improved productivity and expanded payment options for our members, tangible improvements to the in-club experience as we roll out the platform across our network.

Also in the second quarter, we furthered implementation of Workday's human capital management system to replace legacy HR applications and expect to go live by end of the third quarter. This upgrade is designed to enhance the employee experience with modern user-friendly tools while improving processes and strengthening compliance. We will also provide scalable integrated data layer to support our future growth.

Before I turn it over to Gualberto, I want to address a few additional topics. First, regarding U.S. tariffs. Approximately half of the merchandise we sell is sourced locally, reasonably within Latin America. The other half is sourced from the U.S., Europe, China and globally. In addition, on February 20, 2026, the U.S. Supreme Court invalidated tariffs imposed under the International Emergency Economic Powers Act. While the landscape of tariffs continues to evolve, it is important to note that we consolidate many of these international products through our Miami distribution center. They are shipped in bond and are not nationalized in the United States. We also take advantage of free trade agreements where we can.

Additionally, we've been leveraging our expanding distribution center network and China consolidation capabilities to shift direct to market where feasible. In short, U.S. import tariffs do not apply to most of our merchandise. And as a result, we are not owed a refund from the U.S. government due to the most recent Supreme Court ruling.

We continue to monitor the evolving trade policy environment. But to date, current U.S. tariff policy has not directly impacted our cost structure or business operations. We are also monitoring developments with respect to the ongoing military conflicts with Iran. We anticipate potential impacts to transportation costs or delays in the shipment or delivery of our products. The cost of fuel is a significant component of transportation cost.

If our vendors or any raw material suppliers on which our vendors rely suffer prolonged manufacturing or transportation disruptions, our ability to source product to be adversely impacted, which would adversely affect our business. Also, fuel prices in some of our markets have increased significantly, which may reduce consumer demand impacting frequency and purchasing power. However, we are monitoring and we'll do what we can to ensure we continue to provide the value we are known for in our communities.

Lastly, I want to provide a brief preview of our March sales and some insight into our Semana Santa results. Note that Semana Santa this year started late March, early April versus mid- to late April last year. So the comparability and growth for March will be skewed higher. However, our comparable net merchandise sales for the 4 weeks ended March 29, 2026, grew 12.3% in U.S. dollars and 9.2% in constant currency.

I'm incredibly proud of the exciting assortment we offered in the outstanding preparation and execution by our merchandising, supply chain and operation teams and also all who are involved at the company to make this year's Semana Santa a success.

With that, I'll turn it over to Gualberto, who'll walk you through the financial results.

Thank you, David. Continuing with the income statement. Total gross margin for the quarter as a percentage of net merchandise sales increased 50 basis points to 16.1% versus Q2 last year. The increase is mainly driven by shifts in product mix, primarily within our nonfood segment and cost savings we are starting to realize from our Asia consolidation efforts when compared to the same period in the prior year. Total revenue margins improved 60 basis points to 17.7% of total revenue from 17.1% in the same period last year. This was mainly driven by the increase in our warehouse sales margins and good results in membership renewals and platinum growth, as mentioned before by David.

On overhead costs, Total SG&A expenses increased to 12.7% of total revenues for the second quarter of fiscal year 2026 compared to 12.4% for the second quarter of fiscal year 2025. The 30 basis point increase is primarily related to the appreciation of the peso in Colombia and its effect on our warehouse expenses. Our continued investments in technology and executive officer compensation not incurred in previous years. Operating income for the second quarter of fiscal year '26 increased 15.6% from the same period last year to $75.4 million. Operating income for the first 6 months of fiscal year 2026 increased 12% from the same period last year to $138.3 million.

Below the operating income line, in the second quarter of fiscal year 2026, we recorded an $8.7 million net loss in total other expense, an increase from a $5.1 million net loss in the same period last year. The primary cost of the increase is due to foreign currency-related losses, predominantly from unrealized noncash losses related to the revaluation of the net U.S. dollar monetary asset position we have in Costa Rica as there was a significant appreciation of the Costa Rica colon in the month of February. This loss was partially offset by lower foreign currency exchange transaction costs during the quarter and for the first 6 months of the fiscal year in Trinidad as we executed fewer sourcing transactions. However, in March and subsequent to quarter end, we have executed and will be sourcing more foreign currency and incur additional transaction costs for the remaining part of the fiscal year. When and how many transactions we executed in any given period is dependent on various factors, including available trading currencies and the cost to convert.

Lastly, in light of increased volatility in the exchange rates, we are also actively exploring options to expand our hedging program in select markets.

In terms of income tax, our effective tax rate for the second quarter of fiscal year 2026 came in at 26.4%, a slightly favorable result versus 27.2% a year ago. For the 6 months ended February 28, 2026, our effective tax rate was 27.1%, almost in line with a 26.9% effective tax rate of the comparable prior year period. Finally, net income for the second quarter of fiscal year 2026 was $49.1 million or $1.62 per diluted share, an increase of 11.7%, up from $43.8 million or $1.45 per diluted share in the second quarter of fiscal year 2025.

Adjusted EBITDA for the second quarter of fiscal year 2026 was $99.7 million, compared to $87 million in the same period last year, a growth of 14.6%. Net income for the first 6 months of fiscal year 2026 was $89.3 million or $2.91 per diluted share, an increase of 9.4%, up from $81.2 million or $2.66 per diluted share in the first 6 months of fiscal year 2025. Adjusted EBITDA for the first 6 months of fiscal year 2026 was $186.6 million compared to $166.1 million in the same period last year, a growth of 12.3%.

Moving on to our balance sheet. We ended the quarter with cash, cash equivalents and restricted cash totaling $195.1 million, plus approximately $149.7 million of short-term investments, typically held in certificates of the past.

When reviewing our cash balances, it's important to note that as of February 28, 2026, we had $76.9 million of cash, cash equivalents and short-term investments denominated in local currency in Trinidad, which we could not really convert into U.S. dollars.

Turning to cash flow. Net cash provided by operating activities reached $133.3 million for the first 6 months of fiscal year 2026, an increase of $6.9 million versus the prior year period. The increase is primarily driven by a $10.6 million increase in net income adjusted for noncash items and a $5.3 million overall net positive changes in other various operating assets and liabilities. This is partially offset by shifts in working capital, mainly due to higher overall inventory balances, which used $9 million of cash in operating activities.

Net cash used in investing activities increased by $89.9 million for the first 6 months of fiscal year 2026 compared to the prior year, primarily due to net changes in short-term investments of $59.6 million. a $25.5 million increase in property and equipment expenditures and an $11.9 million increase in purchases of long-term investments.

Net cash used in financing activities increased by EUR 21.7 million for the first 6 months of fiscal year 2026 compared to the prior year, primarily due to a $15.9 million increase in net repayments of short-term bank borrowings, a $3.1 million increase in the purchase of treasury stock upon vesting of restricted stock awards to cover employee tax withholding obligations and a $2.3 million increase in cash dividend payments.

In February, we declared our annual cash dividend, which in total is $1.40 per share, or an 11.1% increase over last year's dividend. That's 5 consecutive years of increases and double what we declared per share in 2021. This is another signal of the strength of our cash-generating abilities.

Our priority remains executing consistently and responsibly for our long-term success. We believe our established processes, diversified footprint and experienced teams provide a solid foundation as we manage the business day to day with that long-term perspective, guiding us forward.

We appreciate the continued support of our members, employees and shareholders, and we thank our teams for their ongoing efforts. Thank you for joining our call today. I will now turn the call over to the operator to take your questions. Operator, you may now start taking our callers' questions.

[Operator Instructions] Your first question comes from the line of Jon Bretz from Kansas City Capital.

A couple of questions. First of all, David, when you think of -- it's been a couple of quarters since you first began talking about Chile and the media or the press in Chile has wrote a number of published number of articles about where your stores might be and some of the people you hire, but -- is it taking a little bit longer to sort of the eyes and cross the Ts and get permits and all this other stuff to begin construction of stores? Is it just a little bit longer than you would have anticipated?

Thanks for the question, Jon. Yes, you're right about the media. It's been really interesting to observe just how active the press media is in the business news media is in Chile versus our other markets. It's been something that surprised us, quite frankly. And it's not necessarily a bad thing, but certainly, the press will write a lot of things, whether or not they're able to validate that they're true. They still will publish, and that's something that's kind of been -- But we haven't seen that things are taking any longer necessarily than any other market. The process actually compared to some of our other markets is better in the sense that it's much more clear, in terms of the quality of the institutions and the steps that you have to go through that good permits. But we're quite conservative in terms of when we announce openings. We typically announce once we have permits in hand and we don't. So we haven't announced. And so that's been our policy and our approach. And so we try to be consistent in how we approach announcing new openings.

Okay. Two other questions. David, a lot of conversations surrounding remits in your markets. Have you seen any impact because of that? And then secondly, I was distracted a little bit when you were talking about the situation in the Mid East. Beyond the higher cost of energy, what was your comments about maybe supply chain impact if there is?

Sure, sure. Thank you for the question. So in terms of remittances, we haven't seen any visible changes in consumption as a result of changes in remittances. And in fact, the data has been fairly clear that the remittances are still flowing to the markets at rates that are not that different from what has occurred in the past, which is interesting actually because one would think that there maybe would be bigger changes. But I think these are patterns that have been around for many years, and they're probably quite difficult to change. So we haven't seen any changes in terms of consumption patterns among our members as a result of changes

On the topic of what's happening in Iran and Strait of Hormuz, from a supply chain standpoint, there's a lot of -- I mean, it's still somewhat early in the For sure, we're seeing there are changes in fuel costs around the globe. And that's something that I think all retailers and all distributors are dealing with. And I think it hits in different ways, and we have the ocean component via the U.S. domestic component. And so as it fuels is a large part of transportation of the cost. And so certainly, that's a piece of something that we're seeing shift. Otherwise, we haven't had major supply chain disruption at this point because a lot of the merchandise that's coming into our markets is not coming by -- well, not coming by way of the Strait. But besides that, there's some POs, a delay here and there, but nothing that's really significant. I mean -- which is good, but that doesn't mean it can't happen. I mean I think there's still yet to be seen all of the impacts of this conflict. And I think even after the conflict resolves, there still may be impacts. And there was an interesting article I read in the New York Times just last night about World Word I and the impact that happened many years after. And I recommend you read it because it got me thinking about that could happen here for sure. And so we're just trying to remain as vigilant as we can but also as flexible as we can to have a resilient supply chain. I think the work that we're doing with consolidation and then beginning to diversify how we procure products, it's all good because as the world becomes more volatile, the more resilient and diverse our supply chain is the better.

And we have run some simulations. This is Gualberto, Jon. We have run some simulations and are actively looking into this. There will be some smaller impacts in terms of financials, but nothing really material or nothing or...

Not at this point.

Yes.

Your next question comes from the line of Héctor Maya from Scotiabank.

Could you please share more details on the drivers of the higher gross margin, particularly if this is more structural or temporary? And if there will be some investments going forward? I mean I saw you had a better mix and solid membership income, but just wanted to understand a bit more about this.

Yes. Thank you for the question, Héctor. This is Gualberto. We -- there are a couple of variables that usually, it's not only one single, but we have benefited from a shift in mix by category. Foods went a little bit down in terms of say, participation versus fresh that has been helped with better margins, debase of that is on nonfood hard lines. First, that's an interesting play in harness versus softline improved the margin itself versus prior versus the same quarter in the last year, but still below the margin of Softline. Softline went up versus also a mix change there that ahead. We have started to benefit also from the Asia consolidation efforts, so there are savings in shipping costs have one routes as we are keeping the Miami saving and handling fees. So that all was in favor of the margin improvement this quarter and year-to-date.

Also, given that Central America and the Caribbean are highly dependent on remittances and all imports, how are you preparing for a potential macro challenge there? I mean at least on the side of remittances, I understand that we haven't seen material changes in the region just yet, but we have seen of central banks in Central America coming out with projections that point to a deceleration for 2026 in remittances due to declining integration trends to the U.S. and the 1% tax remittances that started this year. So basically, how would you say that you could be preparing for potential risks on this?

Well, I think we have some type of natural protection to that also because of the profile of our members that are less reliant on remittances. So that gives us some type of natural protection. But we don't this means, I mean, you made a very good point with we don't dismiss the risk and we're watching carefully. But again, there are only projections so far. We're tracking them. as David explained, we haven't really seen anything. As you know, the actual data about has some material lags in terms of how we retest. But I would just repeat what David said. We have not seen anything yet. We believe we have some type of network protection against the heating remittances, and we will continue following this closing.

And maybe -- Héctor, I'll add one other thing, which is our -- we're one of our kind of -- the way we think about our business, one of our missions is to keep driving down costs supply chain and becoming more competitive, so we can offer better and better value to our members. And I think that's a natural -- also a natural way to protect against changes in remittance. I mean we can only do what we can do, right? I mean if there's macro swings happening, we just have to run our business as well as we can. And so as we build a better supply chain that's more efficient and more efficient than our competitors, particularly in those markets, that's going to help us continue to drive up value for the member drive market share, drive sales. And so that, I think, is the best thing we can do.

I'm the add on a promise we noticed that one plant cloud in Costa Rica and one in Jamaica have earlier opening dates now. So just wondering what was behind that? And also on Chile, if you could give us an update on not so much in progress because I understand that it is something that you see as going forward as you were expecting. But progress on how much you're learning so far from the potential opportunities in that market? And I mean, aside from the media, the media behavior that you haven't noticed, what other learnings that you're getting from this new market?

Sure. Thank you. On the topic of the accelerated club opening, I always challenge our team to find ways to open earlier because every day that we save of time that we open is the day that we started getting our investment paid off and creating a good return for our shareholders. So they get a lot of pressure for me to figure out ways to go faster. But besides that, we actually received permits a little earlier than we expected. And so that's probably the most significant thing. I mean, because we only do -- we're always trying to learn how to be better at constructing these buildings, but certainly getting permits are help. So...

On Chile, we're learning a lot. We're learning a lot. We've had a number of different kind of delegations of buyers that have gone down. I was down there a couple of times last year and I'll be down again a few times this year, I'm sure. And so I mean there's all sorts of things that we could dig into, but it's a very advanced market from the standpoint of both the consumer, but then also on the supply chain side. I mean distribution space is high quality, high quality is in the United States, and processing capabilities for fresh products are very high quality in terms of chicken and produce and otherwise. I think there's a desire for international goods. We see it the other retailers in the market the floor and the other retailers that they're carrying a lot of USBs and U.S. and European products, certainly German products, we see a lot of the market as well, and there's -- the shopping experience occurs in a lot digitally, but not only. I mean it's a very digitalized market, as I mentioned on prior calls, it's the highest penetration of Internet in the region, all of Latin America. So we're learning a whole lot. I mean, infrastructure is a whole lot better than our other markets in terms of mobility, right? There's toll roads that are quite robust to go from Visa Cuda, Sachiubeo or around the city, I mean, there's the coolants partially on the ground. For me, as someone that spends a lot of my professional and personal life in Central America is going to Santiago for the first time was really eye opening. I mean, tremendously eye opening in terms of how sophisticated the market is and the capabilities there. So we're learning a whole lot, and we believe that we have something that would be very desirable and valuable for the consumer in the marketplace. And so we're going to do our best.

And that concludes our question-and-answer session. I will now turn the call back over to David Price for closing remarks.

Thank you for joining the call, everyone, and have a great day. Thank you very much.

This concludes today's conference call. Thank you for your participation. You may now disconnect.

Good afternoon, everyone, and welcome to PriceSmart, Inc.'s Earnings Release Conference Call for the First Quarter of Fiscal Year 2026, which ended on November 30, and 2025. After remarks from our company's representatives, David Price, Chief Executive Officer; and Gualberto Hernandez, Chief Financial Officer; you will be given an opportunity to ask questions as time permits.

As a reminder, this conference call is limited to 1 hour and is being recorded today, Thursday, January 8, and 2026. A digital replay will be available shortly following the conclusion of the call through January 15, 2026, by dialing 1 (800) 770-2030 for domestic callers or 1 (647) 362-9199 for international callers and entering replay access code 5898084#.

For opening remarks, I would like to turn the call over to PriceSmart's Chief Financial Officer, Gualberto Hernandez. Please proceed, sir.

Thank you, operator, and welcome to PriceSmart Inc.'s earnings call for the first quarter of fiscal year 2026, which ended on November 30, 2025. We will be discussing the information that we provided in our earnings press release and our 10-Q, which were both released yesterday on January 7, 2026. Also in these remarks, we refer to non-GAAP financial measures. You can find a reconciliation of our non-GAAP financial measures to the most directly comparable GAAP measures in our earnings press release and our 10-Q.

These documents are available on our Investor Relations website at investors.pricesmart.com, where you can also sign up for e-mail alerts. As a reminder, all statements made on this conference call other than statements of historical fact are forward-looking statements concerning the company's anticipated plans, revenues and related matters. Forward-looking statements include, but are not limited to, statements containing the words expect, believe, plan, will, may, should, estimate and similar expressions. All forward-looking statements are based on current expectations and assumptions as of today, January 8, 2026.

These statements are subject to risks and uncertainties that could cause actual results to differ materially, including the risks detailed in the company's most recent Annual Report on Form 10-K, the quarterly report on Form 10-Q filed yesterday and other filings with the SEC, which are accessible on the SEC's website at www.sec.gov. These risks may be updated from time to time. The company undertakes no obligation to update forward-looking statements made during this call.

Now I will turn the call over to David Price, PriceSmart's Chief Executive Officer.

Thank you, Gualberto, and good morning, everyone. Thank you for joining us today. I want to begin by expressing my gratitude to our employees across all the regions where we operate. This first quarter through December represents our peak season, our most demanding period, and our teams rose to the challenge. From our clubs to our distribution centers to our offices across all of our countries, every part of our organization contributed to our success. Their execution was outstanding, and their dedication and commitment to serving our members continues to be the foundation of our success.

It's a pleasure to be back with you for my second earnings call as CEO. I'm now about 128 days into the role, and I've spent this time visiting clubs, distribution centers and offices across our markets. What strikes me most is the strength of our culture, teams across 13 countries united by a commitment to doing the right thing for our members and their communities. This foundation, combined with the opportunities ahead, gives me great confidence in our future. I'm energized by what we can accomplish together.

I'm pleased to share that we delivered strong results across our key performance areas. Our membership growth, solid sales performance and continued operational discipline reflects both resilient consumer demand and the outstanding execution by our teams.

Now I'd like to highlight some of our sales results for the first quarter. Net merchandise sales and total revenue reached almost $1.4 billion during the first quarter. Net merchandise sales increased by 10.6% or 9.5% in constant currency. Comparable net merchandise sales increased by 8% or 6.9% in constant currency. During the first quarter, our average sales ticket grew by 2.1% and transactions grew 8.4% versus the same prior year period. The average price per item increased 1.8% year-over-year while average items per basket remained relatively flat.

First, in Central America, where we had 32 clubs at quarter end, net merchandise sales increased 9.6% or 9.2% in constant currency. Comparable net merchandise sales increased 5.4% or 5.1% in constant currency. All of our markets in Central America had positive comparable net merchandise sales growth. Our Central America segment contributed approximately 320 basis points of positive impact to the growth in total consolidated comparable net merchandise sales for the first quarter.

Second, in the Caribbean, where we had 14 clubs at quarter end. Net merchandise sales increased 5.7% or 7.8% in constant currency. Comparable net merchandise sales increased 5.6% or 7.7% in constant currency. All of our markets in the Caribbean had positive comparable net merchandise sales growth. Our Caribbean region contributed approximately 160 basis points of positive impact to the growth in total consolidated comparable net merchandise sales for the first quarter.

Last, in Colombia, where we had 10 clubs opened at the end of our first quarter, net merchandise sales increased 27.8% or 15% in constant currency. Comparable net merchandise sales increased 27.9% or 14.7% in constant currency. Colombia contributed approximately 320 basis points of positive impact to the growth in total consolidated comparable net merchandise sales for the quarter.

In terms of merchandise categories, when comparing our first quarter sales to the same period in the prior year, our foods category grew approximately 11.3%. Our non-foods category increased approximately 7.2% and our food service and bakery category increased approximately 10.1% and our health services, including optical, audiology and pharmacy, increased approximately 17.8%.

Membership accounts grew 6.7% year-over-year to over 2 million accounts with a strong 12-month renewal rate of 89.3% as of November 30. A key focus of our membership strategy is growing Platinum memberships. Platinum is our premium tier designed for our most engaged members. These members receive an annual cash back reward on eligible purchases which drive loyalty, increases purchasing frequency and rewards their continued business with us. By focusing on Platinum growth, we are investing in our highest value member relationships. As of November 30, Platinum accounts represented 19.3% of our total membership base, up from 14% in the same period last year. This growth reflects our targeted promotional campaigns and increased focus on the segment.

Membership income as a percentage of revenue increased to 1.7% compared to 1.6% in the prior year period, driven in part by the shift towards Platinum membership. These strong results reflect our team's execution and the strategic initiatives we have underway. Let me walk you through the progress we're making across real estate expansion, supply chain transformation and technology investments that are enhancing our ability to serve our members.

In the third quarter of fiscal year 2025, we purchased land for our sixth warehouse club in the Dominican Republic in La Romana. That's about 73 miles east of our nearest club in Santo Domingo. The club will be built on a 5-acre property and is expected to open in spring 2026.

In Jamaica, we're expanding from 2 clubs to 4, in the first quarter of fiscal year 2026, we purchased land in Montego Bay for our third club, and that's about 100 miles west of Kingston. This will also be a 5-acre site anticipated to open in fall 2026.

Also in the first quarter of fiscal year 2026, we finalized the land lease for our fourth Jamaica Club on South Camp Road. That's about 6 miles from our existing Kingston Club. This will be a 3-acre property also anticipated to open in winter 2026. The opening time line for our Jamaica clubs has been adjusted as we address operational disruptions caused by Hurricane Melissa and support recovery efforts across the island. I'm pleased to report that our existing clubs in Kingston and Portmore weathered the storm well, and we're back serving members almost immediately. We do not anticipate any further delays to our new club openings at this time.

In addition, in the second quarter of fiscal year 2026, we purchased land for our 10th warehouse club in Costa Rica, Ciudad Quesada. That's approximately 47 miles north from our nearest club in Costa Rica. The club will be built on a 6-acre property and is anticipated to open in fall of 2026. Once these 4 new clubs are open, we will operate 60 warehouse clubs in total.

We are advancing on our plans to enter Chile, a market that we believe offers strong potential for multiple PriceSmart warehouse clubs. As part of this initiative, as you know, we've hired a country general manager and signed executory agreements for 2 prospective club sites. While we haven't announced target opening dates, we're moving quickly in managing key factors that influence timing, such as permitting and construction.

In addition to opening new clubs in existing markets and Chile, we're continuing to optimize our current footprint, increasing club size, improving efficiency and expanding parking spaces at high-volume locations remains some of the most effective ways to drive sales and enhance the member experience. To support this strategy, we will begin warehouse club and parking lot expansion and remodels in fiscal year 2026 in Portmore, Jamaica and Barbados.

Now turning to our supply chain transformation strategy. One of the key drivers in keeping prices low is improving how we move and distribute merchandise to our clubs. Today, we operate major distribution centers in Miami, Costa Rica, Panama and Guatemala. During the first quarter, we successfully adapted our Panama facility to handle cold merchandise and began operations at our new distribution center in Guatemala. We now plan to open distribution centers in Trinidad, Colombia and the Dominican Republic during fiscal year 2026.

Our goals with these distribution centers are to improve product availability, reduced lead times and lower landed costs, among other efficiency gains. Alongside these new distribution centers, we've begun implementing third-party distribution centers in China to consolidate merchandise source in the country, driving greater efficiency and lowering costs. In select countries, we've also introduced our own fleet of trucks to deliver merchandise directly to our clubs and capitalize on backhaul opportunities.

We continue to advance our migration to the RELEX forecasting and replenishment platform, and we remain on track to complete the full implementation in fiscal year 2026. This upgrade is a critical part of our supply chain strategy and is expected to boost productivity, improve inventory management and increased in-stock availability, ultimately driving sales growth and operational efficiency. During the first quarter, we advanced our multiphase implementation of the e2open global trade management platform designed to enhance automation, compliance and controls across global import and export operations. We believe this platform will strengthen trade compliance, improve data visibility and support scalable international growth once fully implemented.

Turning now to other ways we're enhancing membership. For the first 3 months of fiscal year 2026, private label sales represented 27% of total merchandise sales, down 70 basis points from the same period last year. This was impacted by a reclassification of the produce category. And on a comparable basis, we would have had a 70 basis point increase in penetration of our private label. Our private label brand, member selection is a cornerstone of our strategy. What makes our private label program unique is that we develop products both centrally through our U.S. buying team and locally through our country-based buyers. This development approach enables us to source private label products globally, regionally and locally providing flexibility to deliver the best quality and value. Together, this allows us to offer member selection products that combine global scale and quality with local relevance.

Private label serves multiple strategic purposes. It allows us to offer high-quality products at lower prices than national brands, driving member loyalty. It improves our margins. and it gives us leverage with national brand suppliers by providing a trusted alternative that keeps them competitive. We're committed to growing this penetration through strategic product development, for example, recent additions like Organic Maple Syrup, Aged Scotch Whiskey and premium deli meats demonstrate our focus on delivering exceptional value across key categories.

In the Dominican Republic, we've enhanced our co-branded consumer credit card with our new partner, Banco Santa Cruz, which launched in November 2025. This new agreement offers 6% cash back at PriceSmart Clubs, adding even more value for our members in that market. We continue to invest in omnichannel capabilities to meet our members where they are.

In the first quarter, digital channel sales reached $89.8 million, up 29.4% year-over-year, representing 6.6% of total net merchandise sales. This marks our highest digital contribution to date. Orders placed directly through our website or app grew 18.1% with average transaction value up 10.1%. As of November 30, 73% of our members had created an online profile and 27.1% of our membership base has made a purchase on pricesmart.com or our app. We see continued opportunity in this space and we'll keep investing to enhance the digital experience we offer our members.

During the first quarter, we began migrating our mobile application to fully native iOS and Android architectures to enhance speed reliability and accessibility. This foundation will allow faster deployment of new features and help us deliver an outstanding member experience in our digital channels.

Turning to technology investments that enhance both member and employee experience and operational efficiency. In the first quarter, we completed implementation of our new point-of-sale system, ELERA a Toshiba product in all English-speaking Caribbean markets. Later in fiscal year 2026, we will begin rolling out this system in our Spanish-speaking markets. ELERA will help us achieve faster checkout times, improve productivity and expand payment options among other benefits.

Also, in the first quarter, we began implementing Workday's human capital management system to replace legacy HR applications. This upgrade is designed to enhance the employee experience with modern, user-friendly tools while improving processes and strengthening compliance. Additionally, the platform will provide scalable, integrated data to support our future growth.

Before I turn it over to Gualberto, I want to address a few additional topics. First, regarding U.S. tariffs. Approximately half of the merchandise we sell is sourced locally and regionally within Latin America. The other half is sourced from the U.S., Europe, China and globally. While we consolidate many of these products through our Miami distribution center, they are shipped in bond and are not nationalized in the United States.

We also take advantage of free trade agreements where we can. Additionally, we've been leveraging our expanding distribution center network and China consolidation capabilities to shift direct to market where feasible, further optimizing our supply chain. As a result, U.S. import tariffs do not apply to most of our merchandise.

We continue to monitor the evolving trade policy environment, but to date, current U.S. tariff policy has not impacted our cost structure or business operations. We are also monitoring remittance flows to Latin America and the Caribbean. Remittances represent a significant portion of GDP in several of our markets. including Jamaica, Honduras, El Salvador, Guatemala and Nicaragua. While there has been reporting on changing remittance patterns from the U.S. to the region, to date, we have not seen changes in consumer demand or purchasing behavior in our clubs. We continue to watch this factory closely given its importance to the economies we serve.

In addition, over the weekend, there was major news out of Venezuela. We are alert and monitoring the situation closely. It's still very early to understand how this will evolve or what the implications might be for our business or for U.S. companies operating in the region.

And lastly, I want to provide a preview of our holiday season performance. Comparable net merchandise sales for the 9-week period ended December 28, 2025, grew 7.1% in U.S. dollars and 5.4% in constant currency. This represents solid performance as we continue to comp against increasingly strong prior year periods, though it does reflect the deceleration from our first quarter's growth rate. December specifically was impacted by several transitory factors.

Government elections in Honduras created consumer uncertainty. Panama's extended rainy season disrupted both traffic and logistics and supply chain timing issues created out of stocks in several high-volume food items, a situation we identified and are addressing.

Looking forward, we are encouraged by what we are seeing. Colombia continues to deliver strong momentum, and we are seeing positive trends across many of our markets as we enter calendar 2026. With that, I'll turn it over to Gualberto to walk you through the financial details.

Thank you, David. Continuing with the income statement. Total gross margin for the quarter as a percentage of net merchandise sales remained strong and unchanged at 15.9% versus Q1 last year. Total revenue margins improved 30 basis points to 17.7% of total revenue from 17.4% in the same period last year. This was mainly driven by the good results in membership renewals and Platinum growth, as mentioned before, by David.

On overhead costs, Total SG&A expenses increased to 13.1% of total revenues for the first quarter of fiscal year 2026 compared to 12.8% for the first quarter of fiscal year 2025. The 30 basis point increase is primarily related to our continued investments in technology and to the compensation of our Chief Executive Officer. During his tenure as our interim Chief Executive Officer from February 2023 to August 2025, Robert Price declined any compensation for his services. Operating income for the first quarter of fiscal year 2026 increased 8% from the same period last year to $62.9 million.

Below the operating income line, in the first quarter of fiscal year 2026 we recorded a $7.2 million net loss in total other expense, almost unchanged from $7.3 million net loss in total other expense in the same period last year. The primary cause of our net loss in total other expense is due to foreign currency-related losses.

In terms of income tax, our effective tax rate for the first quarter of fiscal year 2026 came in at 27.9% versus 26.5% a year ago. Primarily, due to nonrecurring items such as the tax contingency approval and foreign exchange rate fluctuations.

Finally, net income for the first quarter of fiscal year 2026 was $40.2 million or $1.29 per diluted share, up from $37.4 million or $1.21 per diluted share in the first quarter of fiscal year 2025. Adjusted EBITDA for the first quarter of fiscal year 2026 was $86.9 million, compared to $79.1 million in the same period last year, a growth of 9.8%.

Moving on to our balance sheet. We ended the quarter with cash, cash equivalents and restricted cash totaling $249.6 million, plus approximately $114.2 million of short-term investments, typically held in certificates of deposit. When reviewing our cash balances, it is important to note that as of November 30, 2025, we had $80.2 million of cash, cash equivalents and short-term investments denominated in local currency in Trinidad which we could not really convert into U.S. dollars.

Turning to cash flow. Net cash provided by operating activities reached $71.2 million for the first 3 months of fiscal year 2026, an increase of $32.7 million versus the prior year period. The increase is primarily due to $18.7 million of overall net positive changes in our previous operating assets and liabilities mainly due to recoveries in our VAT receivables and increases in accrued Platinum rewards as well as improvements in working capital that contributed $10 million to the overall increase.

Net cash used in investing activities increased by $61 million for the first 3 months of fiscal year 2026 compared to the prior year, primarily due to a net increase in purchases less proceeds of short-term investments of $39.8 million, an $11.9 million increase in purchases of long-term investments and a $10.4 million increase in property and equipment expenditures to support growth of our real estate footprint compared to the same 3-month period a year ago.

Net cash used in financing activities in the first 3 months of fiscal year 2026 remained relatively flat compared to the same period a year ago. In closing, we're pleased with our start to fiscal year 2026 and the momentum we're building. The investments we're making in real estate, supply chain infrastructure and technology are positioning us for sustained growth.

Combined with our team's exceptional execution, we're confident in our ability to continue delivering value to our members and driving long-term performance. I will now turn the call over to the operator to take your questions.

Operator, you may now start taking our callers' questions.

[Operator Instructions] Your first question comes from the line of Jon Braatz with Oppenheimer.

A couple of questions. David, when you spoke a little bit about the December comps. You mentioned some issues in Honduras and Panama in the supply chain. Specifically, when you look at Honduras and Panama, were the comps positive despite these issues in the month of December?

We usually don't share that level of detail, Jon, in terms of country by country, so I want to make sure I'm consistent. But in Honduras with the election, there was some front-loading of purchasing in November leading up to the election, and we've seen a good recovery now that there's been an outcome of the election and a definitive President. And in Panama, we're well into the dry season and seeing okay results there as well. But I can't share that level of granularity with you.

Okay. So those -- basically, those issues that you saw are behind you at this point?

Yes.

Okay. Okay. Good. And can you speak a little bit about Colombia. Colombia has been very strong for the last year, maybe even more than a year, comps have been well into the double-digit area. Anything you can put your finger on as to the strength there?

Sure. Thanks for the question. So a couple of different things. I mean, both kind of internal and external factors, starting with the external, I think that the strength of the peso certainly helps. The merchandise mix there, we have more local items than in other markets. But the -- when things are -- when we're under COP 4,000 to $1 on the peso, that definitely helps not only purchasing power but also consumer sentiment. I think confidence in the market from the consumer standpoint.

In addition, I have to just give credit to the team. We have an excellent team, both in buying and operations there, and it's really -- there's some great items coming out of Colombia, even some that we're starting to export to other markets. So the item development, both locally and then in terms of the imports also is driving nice differentiation.

I know it's -- you spoke a little bit about the issues in Venezuela. And are there -- what kind of problems might Colombia face if there is sort of a migration and from Venezuela -- additional migrations from Venezuela to Colombia, does that put economic pressure? What kind of economic pressure might that place on Colombia? David?

Ladies and gentlemen, this is the operator. I apologize, but there will be a slight delay in today's conference. Please hold, and the call will resume momentarily. Thank you for your patience. [Technical Difficulty]

Mr. Braatz , your line is open.

David, I was just going to ask you all the issues that we're seeing in Venezuela. Could some of -- could there be pressure on the Colombian economy if there's more migration of people from Venezuela to Colombia. Can that put any pressure on the economy?.

It's -- I don't want to speculate, Jon. The diaspora has been going on for a long time. And there's been Venezuelan migration all over the region. And so I want to be careful not to speculate on something I really don't have any data to share on. But from what we're seeing, consumer demand is strong in Colombia, and we have a good brand position.

Okay. And 1 last question. If I saw it correctly, at the end of fiscal 2025 you had about USD 60 million in Colombia -- in Trinidad. And at the end of the first quarter, you have $80 million. why the increase from $60 million to $80 million in the first quarter?

Jon, this is Gualberto. Thank you for the question. Trinidad, as you know, is something we're looking careful and there is a lot of fluctuations in the availability of U.S. dollars. There is no specific reason. It's a little bit of high season now after Christmas. So there is more cash on our side. And it's a bit more difficult to cover everything. But we don't see any material changes in the conditions there. It continues to be difficult, I wouldn't say it's more difficult than before, and it just fluctuates depending on the availability of dollars, as you know, in the market in every month. Nothing in particular to highlight there.

Your next question comes from the line of Hector Maya with Scotiabank.

On Chile, very quick, it is really nice to hear that you are moving quick on certain important steps, usually, permits tend to be -- tend to take a bit of time. So that is nice to hear. But what have you learned so far from the market or potential competition, and are there any surprises or takeaways or things that you are not expecting maybe in Chile? And on Colombia, with a good momentum there, how sustainable do you think is the revenue growth that we are seeing in the country? And how concerned are you about the minimum wage hikes in the country? Or what effect do you expect from that?

Okay. Let me take the first 1 with Chile. I wouldn't say there's anything necessarily that has surprised us. But I will say, Chile, of course, is a very competitive market and highly digitalized with a high expectation from the consumer.

It's also very open from the standpoint of free trade agreements. And so there are a lot of imports as well. There are no club models in Chile. There are Mayorista models, as you know, that are kind of more like the Atacadao kind of Brazil type wholesale model, but nobody doing what we do. So we operate in other competitive markets, and so we feel optimistic.

And in terms of Colombia, in terms of minimum wage. I don't want to comment on -- in terms of -- there's a sovereign country making its own policy decisions, but we don't have any sort of issue there because we aim to pay a living wage in every market and pay above minimum wage, where that doesn't align with the living wage. And so that's kind of our approach, and we want to be -- have our pay and compensation benefits be 1 of the differentiators from the standpoint of who we employ.

I mean that's a really important part of our philosophy as a business being an employer of choice. And so I don't anticipate any issue in Colombia as a result of that. And in terms of future looking, I can't comment on future growth. But as I mentioned to John, we're feeling confident in terms of our results in Colombia and the brand position in the market as well as our product mix and what we're able to offer.

Absolutely. I mean to complement that, our operations in Colombia and growing more and more efficient. So we're confident on our abilities to be successful and to have the right to win in the market. But as you, of course, understand there are a lot of macroeconomic and political elements that we don't control.

Excellent, excellent to hear. Also on warehouse and parking expansions and remodeling just how much opportunity or boost in operations are you expecting from this by country or by region? And where do you see the most potential here?

Well, I can't share by region or by country or club, but I can tell you that when we do warehouse expansions, remodels or parking expansions, it helps on several fronts. I mean, first and foremost, it's helping our members. In the case of the parking, we have the good problem of having busy locations. And so when we offer more parking, it helps our members get in and out quicker, but also enables us if there's better flow to turn spaces a little faster, which can help.

And then in terms of the sales floor, it helps from an efficiency standpoint, and then, of course, also in terms of selling pilot positions, which is helpful as well, both in terms of items, but also in terms of show stock and availability on the floor. So I can't mention beyond that but there are various factors that drive where we select to do this and also how it impacts. And so far, we've been happy with the results where we pursued remodels and the parking lot expansions

Perfect. Congratulations.

That concludes our question-and-answer session. I will now turn the call back over to Gualberto Hernandez for closing remarks.

Thank you, operator, and thank you, everybody, for joining the call today. Happy New Year to everybody, and looking forward to our next call.

Ladies and gentlemen, this concludes today's call. Thank you all for joining. You may now disconnect.

Good afternoon, everyone, and welcome to PriceSmart, Inc.'s Earnings Release Conference Call for the Fourth Quarter of Fiscal Year 2025, which ended on August 31, 2025. After remarks from our company's representatives, David Price, Chief Executive Officer; and Gualberto Hernandez, Chief Financial Officer, you will be given an opportunity to ask questions as time permits. As a reminder, this conference call is limited to 1 hour and is being recorded today, Friday, October 31, 2025.

A digital replay will be available following the conclusion of today's conference call through November 7, 2025, by dialing 1 (800) 770-2030 for domestic callers or 1 (647) 362-9199 for international callers and by entering the replay access code 5898084. For opening remarks, I would like to turn the call over to PriceSmart's Chief Financial Officer, Gualberto Hernandez. Please proceed, sir.

Thank you, operator, and welcome to PriceSmart Inc.'s earnings call for the fourth quarter of fiscal year 2025, which ended on August 31, 2025. We will be discussing the information that we provided in our earnings press release and our 10-K, which were both released yesterday afternoon, October 30, 2025.

Also in these remarks, we refer to non-GAAP financial measures. You can find a reconciliation of our non-GAAP financial measures to the most directly comparable GAAP measures in our earnings press release and our 10-K. These documents are available on our Investor Relations website at investors.pricesmart.com, where you can also sign up for e-mail alerts. As a reminder, all statements made on this conference call other than statements of historical fact are forward-looking statements concerning the company's anticipated plans, revenues and related matters.

Forward-looking statements include, but are not limited to, statements containing the words expect, believe, plan, will, may, should, estimate and some other expressions. All forward-looking statements are based on current expectations and assumptions as of today, October 31, 2025. These statements are subject to risks and uncertainties that could cause actual results to differ materially, including the risks detailed in the company's report on Form 10-K filed yesterday and other filings with the SEC, which are accessible on the SEC's website at www.sec.gov. These risks may be updated from time to time. The company undertakes no obligation to update forward-looking statements made during this call. Now I will turn the call over to David Price, PriceSmart's Chief Executive Officer.

Thank you, Gualberto, and good morning, everyone. I'd like to start by expressing my sincere gratitude to the entire PriceSmart team. This is the first earnings call for both Gualberto and me in our new roles, and we're excited to be here with our shareholders. We're settling in well and energized by the opportunities ahead. I also want to thank Robert Price, our Executive Chairman, for his invaluable leadership during his multiple tenures as CEO, especially his most recent one. In his current role, Robert and I are working closely together, and I'm deeply appreciative of the productive, positive and collaborative relationship we have built.

This year's results reflect the passion and dedication of our teams across clubs, distribution centers and offices in 13 countries working together to serve our members. We saw strong momentum in membership sales and income, driven by the commitment of our teams across digital, supply chain, merchandising and operations. They delivered on our mission and provided the value our members expect.

Since stepping into the CEO role on September 1, I've had the opportunity to visit many of our clubs, distribution centers and offices. What I've seen firsthand makes me incredibly optimistic about the future of PriceSmart. But most importantly, I continue to be inspired by the passion and dedication of our teams throughout the regions we serve. I'm also excited to share a major milestone for the company. We have officially moved into our new corporate headquarters in San Diego. This move represents a meaningful step forward, providing us space designed to foster the kind of culture and ways of working that will support our people and mission for years to come.

Now let's turn to the key factors and strategic priorities we are focused on to continue driving sales and delivering greater value to our members, starting with real estate. In August 2025, we opened our seventh warehouse club in Guatemala located in Quetzaltenango. In the third quarter of fiscal year 2025, we purchased land for our sixth warehouse club in the Dominican Republic in La Romana, about 73 miles east of the nearest club in Santo Domingo. The club will be built on a 5-acre property and is expected to open in spring 2026.

In the first quarter of fiscal year 2026, we purchased land for our third warehouse club in Jamaica located in Montego Bay, about 100 miles west of the nearest club in Kingston. This club will also be built on a 5-acre site and is anticipated to open in summer 2026. Additionally, we executed a land lease for our fourth warehouse club in Jamaica located on South Camp Road, about 6 miles southeast from the nearest club in the capital of Kingston. The club will also be built on a 3-acre property and is anticipated to open in fall 2026. Once these 3 new clubs are open, we will operate 59 warehouse clubs in total.

Before I continue, I want to take a moment to acknowledge the impact of Hurricane Melissa on our team members, their families and our members in Jamaica, the Dominican Republic and across the region. Our thoughts are with everyone affected, and we remain committed to supporting recovery efforts and ensuring the safety and well-being of our people and communities. Our operations in Jamaica were affected by both the preparations for and the impact of the storms landfall, resulting in the closure of our Jamaica clubs for a couple of days earlier this week. I'm deeply grateful for the dedicated efforts of our team. And with those efforts, we were able to reopen our clubs on Wednesday, October 29. Going forward, our focus continues to be the safety of our employees and our members.

We are advancing on our plans to enter Chile, a market we believe offers strong potential for multiple PriceSmart warehouse clubs. As part of this initiative, we've hired a country general manager and signed an executory agreement for a prospective club site. While we haven't announced a target opening date, we're moving quickly and managing key factors that influence our opening dates, such as permitting and construction. In addition to opening new clubs in existing markets and Chile, we're continuing to optimize our current footprint, increasing club size, improving efficiency and expanding parking spaces at high-volume locations remain some of the most effective ways to drive sales and enhance the member experience. To support this strategy, we'll begin expansions and remodels at select clubs and parking lots across our markets in fiscal year 2026.

Now moving to our supply chain transformation strategy. One of the key drivers in keeping prices low is improving how we move and distribute merchandise to our clubs. Today, we operate major distribution centers in Miami, Costa Rica and Panama. In the first quarter of fiscal year 2026, we adapted our Panama facility to handle cold merchandise and began operations at a new dry distribution center in Guatemala. Looking ahead, we plan to open PriceSmart run distribution centers in Trinidad and the Dominican Republic during fiscal year 2026. These local facilities are expected to improve product availability, reduce lead times and lower landed costs, among others [indiscernible] .

Alongside these new distribution centers, we've begun implementing third-party distribution centers in China to consolidate merchandise sourced in the country, driving greater efficiencies and lowering costs. We're also exploring additional ways to enhance logistics in multi-club markets by leveraging a mix of PriceSmart managed and third-party operations.

Finally, in select countries, we've introduced our own fleet of trucks to deliver merchandise directly to the clubs and capitalize on backhaul opportunities. In fiscal year 2025, we made significant progress migrating to our new forecasting and replenishment system, the RELEX platform. While we didn't complete implementation as originally anticipated, we remain on track and expect to finalize the migration in fiscal year 2026. This upgrade is a critical part of our supply chain strategy and is expected to boost productivity, improve inventory management and increase in-stock availability, ultimately driving sales growth and operational efficiency.

Turning now to other ways we're enhancing membership. Our private label brand, member selection is a cornerstone of our strategy and a key differentiator in our product mix. These products are crafted to deliver high quality at competitive prices, offering our members exceptional value without compromise. During fiscal year 2025, private label sales represented 28.1% of total merchandise sales, up 50 basis points from 27.6% in the comparable period of fiscal year 2024. Some of the top-selling private label items this year included shredded mozzarella cheese, hypoallergenic baby wipes and cold extracted extra virgin olive oil.

In Central America, we've renewed and enhanced our co-branded consumer credit card with Banco Credomatic BAC, which launched in July 2025. This new agreement offers higher cash back rewards on purchases at PriceSmart, pricemart.com, on BAC's travel program and other retailers and services, adding even more value for our members in that region. We continue to invest in omnichannel capabilities to meet our members where they are.

Digital channel sales reached $306.7 million in fiscal year 2025, up 21.6% year-over-year and represented 6% of total net merchandise sales. Orders placed directly through our website or app grew 22.4% and average transaction value increased 3.7% compared to last fiscal year. As of August 31, 2025, approximately 60.1% of our members had created an online profile and 32.4% of our membership base has made a purchase on pricesmart.com or our app. We see continued opportunity in this space, and we will keep investing to enhance the digital experience we offer our members. For example, in fiscal year 2026, we will begin migrating our mobile application to fully native iOS and Android architecture to enhance speed, reliability and accessibility for our members. This foundation will allow faster deployment of new features and help us deliver an outstanding member experience in our digital channels.

In the first quarter of fiscal year 2026, we expect to complete implementation of our new point-of-sale system, ELERA, a Toshiba product in all English-speaking Caribbean markets. Later in fiscal year 2026, we'll begin rolling out this system in our Spanish-speaking markets. ELERA will help us achieve faster checkout times, improve productivity and expand payment options among other benefits. Also in the first quarter of this fiscal year 2026, we began implementing Workday's human capital management system to replace legacy HR applications. This upgrade is designed to enhance the employee experience with modern, user-friendly tools while improving processes, strengthening compliance, providing scalable, integrated data to support our future growth.

Now I'd like to highlight some of our sales results, starting with a strong fourth quarter. Net merchandise sales and total revenue were both over $1.3 billion in the fourth quarter. Net merchandise sales increased by 9.2% or 9.1% in constant currency. Comparable net merchandise sales in U.S. dollars and constant currency both increased by 7.5%. For the fiscal year ended August 31, 2025, total net merchandise sales reached almost $5.2 billion and total revenues were almost $5.3 billion. Net merchandise sales increased by 7.7% or 8.5% in constant currency, and comparable net merchandise sales increased by 6.7% or 7.5% in constant currency for the 12-month and 52-week periods, respectively.

During the quarter, our average sales ticket grew by 0.5% and transactions grew 8.7% versus the same prior year period. For the 12-month period, our average ticket grew by 1.7% and transactions grew by 5.9% versus the prior year. The average price per item remained relatively flat year-over-year, while average items per basket increased approximately 1.7% compared to the prior year.

Now looking at our business by segment. First, in Central America, where we had 32 clubs at quarter end, net merchandise sales for the fourth quarter increased 8.9% or 8% in constant currency, with a 6% increase in comparable net merchandise sales or 5.3% in constant currency. Additionally, we opened our ninth warehouse club in Costa Rica in April 2025 and our seventh warehouse club in Guatemala in August 2025, resulting in our high single-digit net merchandise sales growth. Although lower than net merchandise sales, all our markets in Central America had positive comparable net merchandise sales growth, validating the strong demand we're seeing in the region. Our Central America segment contributed approximately 360 basis points of positive impact to the growth in total consolidated comparable net merchandise sales for the quarter.

Second, in the Caribbean, where we had 14 clubs at quarter end, net merchandise sales for the fourth quarter increased 6.3% or 7.5% in constant currency and comparable net merchandise sales increased 6.5% or 7.8% in constant currency. All of our markets in this segment had positive comparable net merchandise sales growth. Our Caribbean region contributed approximately 180 basis points of positive impact to the growth in total consolidated comparable net merchandise sales for the quarter. Last, in Colombia, where we had 10 clubs open at the end of our fourth quarter, net merchandise sales for the fourth quarter increased 18.2% or 18.7% in constant currency and comparable net merchandise sales increased 18.3% or 18.8% in constant currency.

Colombia contributed approximately 210 basis points of positive impact to the growth in total consolidated comparable net merchandise sales for the quarter. In terms of merchandise categories, when comparing our fourth quarter sales to the same period in the prior year, our foods category grew approximately 7.6%. Our nonfoods category increased approximately 7.9% and our food services and bakery category increased approximately 7.5%.

Our health services, including optical, audiology and pharmacy increased approximately 17%. Membership accounts grew 6.2% year-over-year to over 2 million. Platinum membership represented 17.9% of our total base as of August 31, 2025. That's up from 12.3% at the end of the prior year. This growth reflects our increased focus on the segment through targeted Platinum promotional campaigns. Fourth quarter membership income reached $22.6 million, a 14.9% increase over the same period last year, driven by higher Platinum penetration and a $5 annual fee increase for all membership types implemented gradually across fiscal year 2024 in all but one market. We continued with a strong 12-month renewal rate of 88.8% for fiscal year 2025. With that, I'll turn it over to Gualberto to continue the financial review.

Thank you, David. Continuing with the income statement. Total gross margin as a percentage of net merchandise sales for the fourth quarter of fiscal year 2025 remained unchanged at 15.7% when compared to the fourth quarter of fiscal year 2024. In dollars, total gross margin increased by $16.9 million or approximately 9% versus the same quarter of the prior fiscal year. Total revenue margins for the fourth quarter increased 10 basis points to 17.4% of total revenue when compared to the same period last year. The 10 basis point increase is primarily driven by the strong membership results that David mentioned before.

Moving to SG&A. Total SG&A expenses increased to 13.5% of total revenues for the fourth quarter of fiscal year 2025 compared to 13.3% for the fourth quarter of fiscal year 2024. For the full fiscal year 2025, total SG&A expenses increased to 12.9% of total revenues compared to 12.7% of total revenues for fiscal year 2024. The increase in both periods is primarily due to investments in technology. The company incurred costs of approximately $600,000 in the fourth quarter and $3.7 million in the fiscal year related to growth and technology projects, such as the implementation of the RELEX and ELERA systems.

Additionally, we had approximately $700,000 in the fourth quarter and $1.6 million in the fiscal year of onetime expenses associated with CFO transition costs as well as approximately $600,000 in the fourth quarter and $1.1 million in the fiscal year related to the relocation of the San Diego corporate office. For fiscal year 2026, G&A expenses will be impacted by the compensation of our Chief Executive Officer as our interim Chief Executive Officer in fiscal year 2025 declined to receive compensation for his services during his term.

Operating income in the quarter increased 7.2% versus prior year to $52.8 million. Operating income for the fiscal year increased 5.2% versus prior year to $232.5 million. In other expenses in the fourth quarter, we recorded a loss of $6.4 million. This is better than the fourth quarter of fiscal year 2024 by $1 million, primarily driven by a decrease in foreign currency conversion transaction costs. Our effective tax rate for the fourth quarter of fiscal year 2025 came in at 32% versus 30.4% a year ago as we fell into a minimum tax position in some of our markets to close the year. Tax planning is central to us as it's a significant expense.

It's also complicated as we operate in many jurisdictions, making it particularly complex to estimate quarter-by-quarter as the tax provision is projected and calculated on an annual basis. Despite the increase in the rate in the fourth quarter, it's important to note that for the full fiscal year 2025, the effective tax rate was 28.4%, down from 31.1% for the prior year period. This shows the result of our continued efforts in the area.

Net income for the fourth quarter of fiscal year 2025 was $31.5 million or $1.02 per diluted share compared to $29.1 million or $0.94 per diluted share in the fourth quarter of fiscal year 2024. For the full fiscal year 2025, net income was $147.9 million or $4.82 per diluted share compared to $138.9 million or $4.57 per diluted share in the comparable prior year period. Adjusted EBITDA for the fourth quarter of fiscal year 2025 was $75.5 million compared to $70.7 million in the same period last year. Adjusted EBITDA for fiscal year 2025 was $320.7 million compared to $303.6 million in the same period last year.

Moving on to our balance sheet and cash flow. We ended the quarter with cash, cash equivalents and restricted cash totaling $285.3 million in addition to approximately $73.2 million of short-term investments. From a cash flow perspective, net cash provided by operating activities reached $261.3 million in the fiscal year, an increase of $53.7 million versus prior year. Changes in our merchandise inventory and accounts payable positions contributed $17.7 million to the overall increase. The primary cause of this was a lower year-over-year increase in inventory compared to prior year due to 1 less club that opened in fiscal year 2025 versus the 3 clubs that we opened in fiscal year 2024 and due to the timing of holiday seasonal buildup.

Net cash used in investing activities decreased by $46.6 million for fiscal year 2025 compared to the prior year, primarily due to a decrease in additions to property and equipment of $10.4 million and a net decrease in purchases less proceeds of short-term investments of $35.4. Net cash provided by financial activities during fiscal year 2025 increased by $164.2 million, primarily driven by $65.4 million net increase in long-term bank borrowings, a $66.8 million decrease in repurchases of our common stock and a $27.4 million decrease in cash dividend payments.

When reviewing our cash balances, it is important to note that as of August 31, 2025, we had $59.7 million of cash, cash equivalents and short-term investments denominated in local currency in Trinidad, which we could not readily convert into U.S. dollars. In Honduras, we're currently able to source substantially all the U.S. dollars that we need, but we faced similar U.S. dollar liquidity challenges in the country from fiscal year 2023 to the first half of fiscal year 2025. We're monitoring this closely as the Central Bank still has strict controls there on the availability of U.S. dollars. Looking forward a little into our current first quarter, our comparable net merchandise sales for the 8 weeks ended October 26, 2025, were up 7.2% and 6.5% in constant currency.

In closing, we are proud of all our accomplishments in the fourth quarter and fiscal year 2025. As we enter fiscal year 2026, we remain dedicated to our members, our people and our communities. We're excited about the many initiatives we have underway, especially on the technological front to make our point-of-sale, supply chain and other front and back-office processes more efficient and are looking forward to a year of growth in fiscal year 2026.

Thank you for joining our call today. I will now turn the call over to the operator to take your questions. Operator, you may now start taking our callers' questions.

[Operator Instructions] Your first question comes from Jon Braatz with Kansas City Capital.

David, in Jamaica, I take it that you -- with the stores being open that they were undamaged during the hurricane. Is that correct?

[Technical Difficulty] can you hear me?

I don't know if you heard my question or not.

I did, Jon. Okay. Let's restart. Yes. So regarding our clubs in Jamaica, they were not damaged. And we take great care in how we construct those buildings and knowing very well that we're in a hurricane area. And luckily, the storm turned west -- well, luckily for those locations, the storm turned westward kind of at the last minute. So we were kind of spared the full brunt of the storm. So we're open and we're flowing in the Kingston Port, we're starting to get merchandise in and -- but different parts of the islands had different impacts, right? And so it's going to take time for the country to recover.

Okay. So you're getting merchandise in to reset?

Yes.

Okay. Okay. Looking at the 2 stores that you are going to build in Trinidad, Montego Bay and South Camp, South Camp is a smaller acreage. Is it going to be a smaller store than what is typical?

That's not the intention. We're going to have to do some changes in our parking format to support the sort of parking that we require, but the intention is to have a typical size club there.

Your next question comes from the line of Hector Maya with Scotiabank.

Congratulations to you both on your new roles. I know that you are still assessing the potential opportunities for expansion in Chile. And we saw your store opening pipeline for 2026 and 2027 and wanted to know if everything goes well in your analysis in Chile, would it be fair to assume that any first openings there might come in 2026 or 2027? Or should we assume that it might still take longer than 2027 to see something there? And also maybe -- sorry, yes, that one first and I have a follow-up.

Okay. Well, thank you, Hector, for calling in today and for your question. So we haven't provided any information beyond what's in the 10-K about our opening plans. We do have a site that's under executory agreement. And so that's good. We continue to make progress there. And -- but we have not provided opening date information at this point. So that's all I can share with you. But I appreciate the question.

Understand. That's fair. Also on EBITDA margins by segment, could you please share a bit of the dynamics by country and if there were any methodology changes there, just making sure.

Yes, Hector, thank you for the question. There were no changes in the methodology. And as you know, we don't disclose details on this. But I can tell you that we have not seen any material mix changes that would impact EBITDA.

Your next question comes from the line of John Braatz with Kansas City Capital.

I'm back. David, as we look ahead in the next calendar year, there's going to be some changes in remittances from the U.S. back to a number of your countries. I guess my question is, there's a 1% [ increase ] Do you think that could have an impact on the sales performance of some of your stores?

Thank you, John, for the question. That's an informed question. I mean you're right that several of our markets have a significant portion of GDP represented by remittances, particularly in Jamaica, Honduras, El Salvador, the largest, but Guatemala is not insignificant, neither is Nicaragua. Having said that, we have no indication so far a slowdown that's impacted consumption that we can see. Certainly, it's not out of the realm of cost that those will be an impact. But at this point, we don't have an indication that there's an impact from that flow of [indiscernible]

That concludes our question-and-answer session. I will now turn it back over to David for closing comments.

Great. Thank you very much. I just want to thank everyone for calling in today and send another message of gratitude to our team just for everything they do. We wouldn't be here without all of our great employees on the ground and in our central office. So thanks a lot, everyone. Have a good day.

This concludes today's conference call. Thank you for your participation, and you may now disconnect.