Total sales of $179.1 million; Comparable
store sales growth of 5.7%
Gross margin of 39.8%, expansion of 160
basis points from Q3 2023
Strong financial position with liquidity of
approximately $114 million and no debt
Strong start to Holiday Season
Company raises Outlook for second half of
Fiscal 2024
Citi Trends, Inc. (NASDAQ: CTRN), a leading specialty value
retailer of apparel, accessories and home trends for way less spend
primarily for African American and multicultural families in the
United States, today reported results for the third quarter ended
November 2, 2024.
Financial Highlights – Third Quarter
2024
- Total sales of $179.1 million decreased 0.3% vs. Q3 2023;
comparable store sales, calculated on a shifted 13-week to 13-week
basis, increased 5.7% compared to Q3 2023 driven by increases in
traffic, basket and conversion, reflecting improved product and
better allocation methods
- Gross margin of 39.8% vs. 38.2% in Q3 2023, an increase of 160
basis points due to markup expansion and a 40 basis point
improvement in shrink results from the impact of mitigation
efforts
- SG&A of $74.7 million, $74.6 million as adjusted* vs. $69.7
million, or $70.8 million as adjusted* in Q3 2023; approximately
$1.6 million of the increase was due to one-time strategic costs in
support of turnaround efforts, including a customer and market
insight study and consulting to accelerate improved shrink and to
support operational process improvements across the
organization
- Net loss of $(7.2) million, or adjusted net loss* of $(6.5)
million, vs. net loss of $(3.9) million, or $(4.6) million as
adjusted* in Q3 2023
- Adjusted EBITDA* loss of ($3.3) million compared to adjusted
EBITDA* loss of ($2.3) million in Q3 2023
- Closed 4 stores to end the quarter with 593 locations; 23% of
the fleet in CTx remodeled format
- Cash of $38.9 million at quarter-end, with no debt and no
borrowings under a $75 million credit facility
- Quarter-end total dollar inventory decreased 1.7% compared to
Q3 2023
Chief Executive Officer
Comments
Ken Seipel, Chief Executive Officer, commented, "Our third
quarter performance of mid-single digit comparable store sales
growth and a 160 basis point improvement in gross margin are early
indicators that our customers are responding to our strategy
adjustments. Comparable store sales increases grew sequentially
each month in the quarter driven by increased transaction counts,
with continuing momentum Q4 to-date. These results reflect the
early impact of our initiatives to strengthen Citi Trends’ good,
better, best product offering, adding extreme value branded deals
to the treasure hunt and to improve operational disciplines,
including product allocation to ensure the right product is in the
right stores.
During the quarter, we incurred strategic costs, which I
consider as one-time in nature, to drive long-term growth including
an extensive customer and market research study which will help us
refine our product assortment and serve as a basis for the
Company’s long range plan, costs to research and accelerate
improved shrink results and the development of best practices to
improve operational efficiency across the organization. These work
streams and their related expenses are expected to be completed in
the fourth quarter and are instrumental in our goal to
significantly increase shareholder value.”
“I am excited to be appointed to the role of permanent CEO.
Since assuming the interim CEO role six months ago, my confidence
in the Company’s potential has only deepened. Citi Trends is a
unique and exciting growth opportunity. We have nearly 600
locations serving a largely underserved core African American
customer in their neighborhoods. Our brand familiarity, customer
loyalty and neighborhood locations are difficult to duplicate,
giving us a defensible moat against competition. The challenges we
face are largely within our control, and we are taking decisive
action to address them. A strong balance sheet with ample liquidity
and no debt will allow us to execute the foundational work
necessary for future growth and profit acceleration. While we are
still early in our transformation journey, I am energized by our
team's swift pivot to execute upon our new initiatives and the
encouraging results of Q3 along with the strong early results of
the holiday period. This momentum reinforces my belief in the
Company’s potential to deliver much improved near-term and
long-term results," Seipel concluded.
Capital Return Program
Update
In the third quarter of fiscal 2024, the Company did not
repurchase any shares of its common stock. At the end of Q3 2024,
$50.0 million remained available under the Company’s share
repurchase program.
The Company expects to resume share repurchase activity in the
fourth quarter of fiscal 2024.
Second Half 2024 Outlook
The Company is updating its outlook for the second half of
fiscal 2024 as follows:
- Expecting second half comparable store sales to be up low to
mid-single digits compared to the second half of fiscal 2023 vs.
prior outlook of flat to up low single digits; total sales expected
to be flat to down low-single digits due to the 53rd week last year
and store closures
- Second half gross margin is expected to be approximately 39%,
consistent with prior outlook
- Second half EBITDA* is expected to be in the range of $1.5
million to $4 million, above our prior outlook of $0.5 million to
$2.5 million
- The Company expects to end fiscal 2024 with approximately 590
stores, consistent with prior outlook
- Year-end cash balance is expected to be in the range of $60
million to $65 million, within prior outlook
- Capital expenditures for the full year are expected to be in
the range of $14 million to $18 million on pull-forward of certain
investments to drive performance improvement
While the Company does not provide quarterly guidance, given the
significant changes in the Company’s business model along with the
dynamic nature of its growth and where it is in its fiscal year, it
is offering the following comments about the fourth quarter of
fiscal 2024:
- Q4 comparable store sales are expected to be up low to
mid-single digits with total sales down mid-single digits due to
the 53rd week last year and store closures
- Q4 gross margin is expected to be in the range of 39% to
40%
- SG&A is expected to be approximately $76 million including
the finalization of strategic expenses plus store payroll to
support holiday sales
- Q4 EBITDA* is expected to be in the range of $5 million to $7
million
Financial Highlights – 39 weeks ended
November 2, 2024
- Total sales of $541.9 million increased 1.7% vs. 2023;
comparable store sales, calculated on a shifted 39-week to 39-week
basis, increased 2.3% compared to 2023
- Gross margin of 36.6% vs. 37.7%, or 37.8% as adjusted* in
2023
- Net loss of $(29.0) million, or adjusted net loss* of $(25.2)
million, vs. net loss of $(15.5) million, or $(15.0) million as
adjusted* in 2023
- Adjusted EBITDA* loss of ($21.3) million vs. adjusted EBITDA*
loss of ($8.5) million in 2023
Investor Conference Call and
Webcast
Citi Trends will host a conference call today at 9:00 a.m. ET.
The live broadcast of Citi Trends' conference call will be
available online at the Company's website, cititrends.com, under
the Investor Relations section, beginning today at 9:00 a.m. ET.
The online replay will follow shortly after the call and will be
available for replay for one year.
The live conference call can also be accessed by dialing (877)
407-0779. A replay of the conference call will be available until
December 10,2024, by dialing (844) 512-2921 and entering the
passcode, 13748381.
During the conference call, the Company may discuss and answer
questions concerning business and financial developments and trends
that have occurred after quarter-end. The Company’s responses to
questions, as well as other matters discussed during the call, may
contain or constitute information that has not been disclosed
previously.
*Non-GAAP Financial
Measures
The historical non-GAAP financial measures discussed herein are
reconciled to their corresponding GAAP measures at the end of this
press release. The Company is unable to provide a full
reconciliation of the forward-looking non-GAAP financial measure
used in 2024 guidance without unreasonable effort because it is not
possible to predict certain of its adjustment items with a
reasonable degree of certainty. This information is dependent upon
future events and may be outside of the Company’ control and its
unavailability could have a significant impact on its financial
results.
About Citi Trends
Citi Trends, Inc. is a leading specialty value retailer of
apparel, accessories and home trends for way less spend primarily
for African American and multicultural families in the United
States. The Company operates 592 stores located in 33 states. For
more information, visit cititrends.com or your local store.
Forward-Looking
Statements
All statements other than historical facts contained in this
news release, including statements regarding the Company’s future
financial results and position, business policy and plans,
objectives and expectations of management for future operations and
capital allocation expectations, are forward-looking statements
that are subject to material risks and uncertainties. The words
"believe," "may," "could," "plans," "estimate," “expects,”
"continue," "anticipate," "intend," "expect," “upcoming,” “trend”
and similar expressions, as they relate to the Company, are
intended to identify forward-looking statements, although not all
forward-looking statements contain such language. Statements with
respect to earnings, sales or new store guidance are
forward-looking statements. Investors are cautioned that any such
forward-looking statements are subject to the finalization of the
Company’s quarter-end financial and accounting procedures, are not
guarantees of future performance or results, and are inherently
subject to risks and uncertainties, some of which cannot be
predicted or quantified. Actual results or developments may differ
materially from those included in the forward-looking statements as
a result of various factors which are discussed in our Annual
Reports and Quarterly Reports on Forms 10-K and 10-Q, respectively,
and any amendments thereto, filed with the Securities and Exchange
Commission. These risks and uncertainties include, but are not
limited to, uncertainties relating to general economic conditions,
including inflation, energy and fuel costs, unemployment levels,
and any deterioration whether caused by acts of war, terrorism,
political or social unrest (including any resulting store closures,
damage or loss of inventory); or other factors; changes in market
interest rates and market levels of wages; impacts of natural
disasters such as hurricanes; uncertainty and economic impact of
pandemics, epidemics or other public health emergencies such as the
ongoing COVID-19 pandemic; transportation and distribution delays
or interruptions; changes in freight rates; the Company’s ability
to attract and retain workers; the Company’s ability to negotiate
effectively the cost and purchase of merchandise inventory risks
due to shifts in market demand; the Company’s ability to gauge
fashion trends and changing consumer preferences; consumer
confidence and changes in consumer spending patterns; competition
within the industry; competition in our markets; the duration and
extent of any economic stimulus programs; changes in product mix;
interruptions in suppliers’ businesses; the impact of the cyber
disruption we identified on January 14, 2023, including legal,
reputational, financial and contractual risks resulting from the
disruption, and other risks related to cybersecurity, data privacy
and intellectual property; temporary changes in demand due to
weather patterns; seasonality of the Company’s business; changes in
market interest rates and market level wages; the results of
pending or threatened litigation; delays associated with building,
remodeling, opening and operating new stores; and delays associated
with building, and opening or expanding new or existing
distribution centers. Any forward-looking statements by the
Company, with respect to guidance, the repurchase of shares
pursuant to a share repurchase program, or otherwise, are intended
to speak only as of the date such statements are made. Except as
required by applicable law, including the securities laws of the
United States and the rules and regulations of the Securities and
Exchange Commission, the Company does not undertake to publicly
update any forward-looking statements in this news release or with
respect to matters described herein, whether as a result of any new
information, future events or otherwise.
CITI TRENDS, INC. CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS (unaudited) (in thousands, except
per share data) Third Quarter
2024
2023
2022
Net sales
$
179,066
$
179,520
$
192,323
Cost of sales (exclusive of depreciation shown separately
below)
(107,833
)
(110,942
)
(115,741
)
Selling, general and administrative expenses
(74,730
)
(69,654
)
(69,092
)
Depreciation
(4,755
)
(4,749
)
(5,076
)
Asset impairment
(574
)
(178
)
—
Gain on sale-leaseback
-
-
29,168
(Loss) Income from operations
(8,826
)
(6,003
)
31,582
Interest income
482
894
202
Interest expense
(79
)
(76
)
(76
)
(Loss) income before income taxes
(8,423
)
(5,185
)
31,708
Income tax benefit (expense)
1,271
1,322
(7,120
)
Net (loss) income
$
(7,152
)
$
(3,863
)
$
24,588
Basic net (loss) income per common share
$
(0.86
)
$
(0.47
)
$
3.02
Diluted net (loss) income per common share
$
(0.86
)
$
(0.47
)
$
3.02
Weighted average number of shares outstanding Basic
8,356
8,238
8,145
Diluted
8,356
8,238
8,145
Thirty-Nine Weeks Ended November 2,
2024 October 28, 2023 October 29, 2022 Net sales
$
541,907
$
532,762
$
585,550
Cost of sales (exclusive of depreciation shown separately
below)
(343,710
)
(331,827
)
(357,341
)
Selling, general and administrative expenses
(222,721
)
(210,004
)
(208,599
)
Depreciation
(14,331
)
(14,138
)
(15,793
)
Asset impairment
(1,835
)
(178
)
—
Gain on sale-leasebacks
—
—
64,088
(Loss) income from operations
(40,690
)
(23,385
)
67,905
Interest income
1,942
2,804
204
Interest expense
(238
)
(228
)
(230
)
(Loss) income before income taxes
(38,986
)
(20,809
)
67,879
Income tax benefit (expense)
9,995
5,279
(15,624
)
Net (loss) income
$
(28,991
)
$
(15,530
)
$
52,255
Basic net (loss) income per common share
$
(3.49
)
$
(1.89
)
$
6.34
Diluted net (loss) income per common share
$
(3.49
)
$
(1.89
)
$
6.34
Weighted average number of shares outstanding Basic
8,315
8,215
8,237
Diluted
8,315
8,215
8,237
CITI TRENDS, INC. CONDENSED CONSOLIDATED BALANCE
SHEETS (unaudited) (in thousands) November 2,
2024 October 28, 2023 (unaudited) (unaudited) Assets:
Cash and cash equivalents
$
38,872
$
59,726
Inventory
127,514
129,727
Prepaid and other current assets
13,145
11,266
Income Tax Receivable
3,581
3,306
Property and equipment, net
48,878
56,658
Operating lease right of use assets
218,899
239,282
Deferred tax assets
15,301
7,197
Other noncurrent assets
886
1,050
Total assets
$
467,076
$
508,212
Liabilities and Stockholders' Equity: Accounts payable
$
82,791
$
83,393
Accrued liabilities
25,837
24,985
Current operating lease liabilities
49,390
46,511
Other current liabilities
1,548
1,269
Noncurrent operating lease liabilities
175,767
196,856
Other noncurrent liabilities
1,473
2,132
Total liabilities
336,806
355,146
Total stockholders' equity
130,270
153,066
Total liabilities and stockholders' equity
$
467,076
$
508,212
CITI TRENDS, INC. RECONCILIATION OF
NON-GAAP FINANCIAL MEASURES (unaudited) (in thousands,
except per share data)
The Company makes reference in this release to adjusted
operating (loss) income, adjusted gross margin, adjusted net (loss)
income, adjusted EBITDA and adjusted SG&A. The Company believes
these supplemental measures reflect operating results that are more
indicative of the Company's ongoing operating performance while
improving comparability to prior and future periods, and as such,
may provide investors with an enhanced understanding of the
Company's past financial performance and prospects for the future.
This information is not intended to be considered in isolation or
as a substitute for the financial information prepared and
presented in accordance with generally accepted accounting
principles (GAAP).
Third Quarter November 2, 2024 October 28,
2023 Reconciliation of Adjusted Operating (Loss) Income
Operating loss
$
(8,826
)
$
(6,003
)
Gain on insurance
—
(1,188
)
Asset impairment
574
178
CEO transition expenses
121
—
Other non-recurring expenses
44
—
Adjusted operating loss
$
(8,087
)
$
(7,013
)
Third Quarter November 2, 2024 October 28,
2023 Reconciliation of Adjusted Net (Loss) Income Net
loss
$
(7,152
)
$
(3,863
)
Gain on insurance
—
(1,188
)
Asset impairment
574
178
CEO transition expenses
121
Other non-recurring expenses
44
—
Tax effect
(111
)
258
Adjusted net loss
$
(6,524
)
$
(4,615
)
Third Quarter November 2, 2024 October 28,
2023 Reconciliation of Adjusted EBITDA Net loss
$
(7,152
)
$
(3,863
)
Interest income
(482
)
(894
)
Interest expense
79
76
Income tax benefit
(1,271
)
(1,322
)
Depreciation
4,755
4,749
Gain on insurance
—
(1,188
)
Asset impairment
574
178
CEO transition expenses
121
—
Other non-recurring expenses
44
—
Adjusted EBITDA
$
(3,332
)
$
(2,264
)
Third Quarter November 2, 2024 October 28,
2023 Reconciliation of Adjusted Gross Margin Net sales
$
179,066
$
179,520
Cost of sales
(107,833
)
(110,942
)
Gross profit
$
71,233
$
68,578
Gross margin
39.8
%
38.2
%
Non-recurring expenses
$
-
$
-
Adjusted gross profit
$
71,233
$
68,578
Adjusted gross margin
39.8
%
38.2
%
Third Quarter November 2, 2024 October 28,
2023 Reconciliation of SG&A to Adjusted SG&A
SG&A
$
(74,730
)
$
(69,654
)
Gain on insurance
—
(1,188
)
CEO transition expenses
121
—
Other non-recurring expenses
44
—
Adjusted SG&A
$
(74,565
)
$
(70,842
)
Thirty-Nine Weeks Ended November 2, 2024
October 28, 2023 Reconciliation of Adjusted Operating
(Loss) Income Operating (loss) income
$
(40,690
)
$
(23,385
)
Gain on insurance
—
(1,188
)
Asset impairment
1,835
178
Cyber incident expenses
36
1,723
CEO transition expenses
1,479
—
Other non-recurring expenses
1,695
—
Adjusted operating (loss) income
$
(35,645
)
$
(22,672
)
Thirty-Nine Weeks Ended November 2, 2024
October 28, 2023 Reconciliation of Adjusted Gross
Margin Net sales
$
541,907
$
532,762
Cost of sales
(343,710
)
(331,827
)
Gross profit
$
198,197
$
200,935
Gross margin
36.6
%
37.7
%
Non-recurring expenses
$
-
$
513
Adjusted gross profit
$
198,197
$
201,448
Adjusted gross margin
36.6
%
37.8
%
Thirty-Nine Weeks Ended November 2, 2024
October 28, 2023 Reconciliation of Adjusted Net (Loss)
Income Net (loss) income
$
(28,991
)
$
(15,530
)
Gain on insurance
—
(1,188
)
Asset impairment
1,835
178
Cyber incident expenses
36
1,723
CEO transition expenses
1,479
—
Other non-recurring expenses
1,695
—
Tax effect
(1,293
)
(181
)
Adjusted net (loss) income
$
(25,239
)
$
(14,998
)
Thirty-Nine Weeks Ended November 2, 2024
October 28, 2023 Reconciliation of Adjusted EBITDA
Net (loss) income
$
(28,991
)
$
(15,530
)
Interest income
(1,942
)
(2,804
)
Interest expense
238
228
Income tax (benefit) expense
(9,995
)
(5,279
)
Depreciation
14,331
14,138
Gain on insurance
—
(1,188
)
Asset impairment
1,835
178
Cyber incident expenses
36
1,723
CEO transition expenses
1,479
—
Other non-recurring expenses
1,695
—
Adjusted EBITDA
$
(21,314
)
$
(8,534
)
View source
version on businesswire.com: https://www.businesswire.com/news/home/20241203225687/en/
Tom Filandro ICR, Inc. CitiTrendsIR@icrinc.com
Citi Trends (NASDAQ:CTRN)
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