Citi Trends Remains Underperform - Analyst Blog
April 11 2012 - 12:26PM
Zacks
We maintain our long-term Underperform rating on Citi
Trends Inc. (CTRN), a value-priced retailer of urban
fashion apparel and accessories. The company’s poor performance in
the last two straight quarters on account of falling comparable
store sales and heightened operating costs keeps us negative on the
stock.
Citi Trends’ fourth-quarter adjusted loss per share of 18 cents
fell drastically from the year-ago quarter earnings per share of 64
cents. The results, however, bettered the Zacks Consensus Estimate
of a loss of 20 cents per share. Comparable store sales dropped
6.2% in the fourth quarter of fiscal 2011.
Poor quarterly results also pulled down the company’s fiscal
year results posting an adjusted loss per share of 42 cents, which
lagged behind the earnings per share of $1.44 reported in fiscal
2011. Loss per share for the year spiked higher than the Zacks
Consensus Estimate of a loss of 35 cents per share.
With a string of weak quarterly results in 2011 amid shrinking
comparable store sales, Citi Trends have mostly deterred investor
sentiment. Further, due to uncertainty hovering around sales, given
the global economic unrest, the company decided not to provide any
guidelines unless it finds any near- term catalysts to drive
sales.
Further, Citi Trends’ business is seasonal in nature and
typically generates stronger sales during the first and fourth
quarters, which are characterized by the spring and holiday
seasons. As a result, the company is exposed to significant risks
if these seasons fail to deliver expected operating
performance.
Intense competition from other retailers and risks associated
with sourcing merchandise from developing countries may further
undermine the company’s future growth prospects.
Citi Trends operates in a highly fragmented specialty retail
sector and faces intense competition from larger off-price rivals,
such as The TJX Companies Inc. (TJX) and
Ross Stores Inc. (ROST), mass merchants including
Wal-Mart Stores Inc. (WMT) as well as smaller
specialty retailers, such as Rainbow and Dots.
Currently, Citi Trends has a Zacks #5 Rank, implying a
short-term ‘Strong Sell’ rating on the stock.
CITI TRENDS INC (CTRN): Free Stock Analysis Report
ROSS STORES (ROST): Free Stock Analysis Report
TJX COS INC NEW (TJX): Free Stock Analysis Report
WAL-MART STORES (WMT): Free Stock Analysis Report
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