Total third quarter sales of $179.5 million;
Year-to-date total sales of $532.8 million
Strong gross margin of 38.2%; Year-to-date
gross margin of 37.7%, or 37.8% as adjusted*
Total liquidity of $135 million and no
debt
Improved topline momentum fourth quarter to
date
Company provides updated fiscal 2023
guidance
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
October 28, 2023.
Financial Highlights – Third Quarter
2023
- Total sales of $179.5 million decreased 6.7% vs. Q3 2022;
Comparable store sales decreased 6.2% compared to Q3 2022
- Gross margin of 38.2% vs. 39.8% in Q3 2022, flat to Q2 2023
gross margin
- Operating loss of $6.0 million, or a loss of $7.0 million as
adjusted*, compared to operating income of $31.6 million, or $2.4
million as adjusted* in Q3 2022
- Net loss per share of $0.47, or adjusted net loss per share* of
$0.56, vs. net earnings per share of $3.02, or $0.24 as
adjusted*
- Quarter-end total dollar inventory increased 0.9% compared to
Q3 2022
- Total liquidity of approximately $135 million at the end of the
quarter, made up of $59.7 million of cash, no borrowings under a
$75 million credit facility, and no debt
- During Q3 2023, the Company closed 5 stores and remodeled 7
stores, which brings total remodels to 15 for the year. The Company
ended the quarter with 606 stores
Financial Highlights –
39 weeks ended October
28,
2023
- Total sales of $532.8 million decreased 9.0% vs. 2022;
Comparable store sales decreased 8.7% compared to 2022
- Gross margin of 37.7%, or 37.8% as adjusted*, vs. 39.0% in
2022
- Operating loss of $23.4 million, or a loss of $22.7 million as
adjusted*, compared to operating income of $67.9 million in 2022,
or $3.8 million as adjusted*
- Net loss of $15.5 million, or $15.0 million as adjusted*,
compared to net income of $52.3 million in 2022, or $2.9 million as
adjusted*
- Adjusted EBITDA* of ($8.5) million vs. $19.6 million in
2022
- Net loss per share of $1.89, or adjusted net loss per share* of
$1.83, vs. diluted earnings per share of $6.34 in 2022, or $0.35 as
adjusted*
Chief Executive Officer
Comments
David Makuen, Chief Executive Officer, said, “In the third
quarter, our team continued to advance our strategic initiatives
while navigating a very challenging selling environment and
controlling the controllables like we always do. We successfully
managed the middle of the P&L as we registered a strong gross
margin of 38.2% and kept operating expense dollars essentially flat
compared to the prior year. That said, our third quarter topline
performance did not meet our expectations, with sales held back
more than we expected by the ongoing challenging macroeconomic
backdrop. Our primarily low-income customer base is being more
selective and purchasing much closer to need as they navigate
higher costs of living, a buying pattern further impacted by
unseasonably warm weather throughout the quarter.”
Mr. Makuen continued, “I am pleased to report that we’ve
experienced improved top line momentum fourth quarter to date. Our
customers are loving our Ready. Set. GIFT! Campaign with a timely
in-store setup of a wide offering of gifts, from great toys to
fragrances to Bluetooth speakers and apparel for the whole family,
all at incredible values. I am truly grateful to our teams for
their unwavering dedication in serving our African American and
multicultural families in the heart of their local neighborhoods.
Importantly, the strength of our balance sheet with total liquidity
of $135 million at quarter-end and no debt, provides us the
necessary flexibility to navigate the dynamic macroeconomic and
consumer environment while maintaining our focus on our strategic
initiatives and creating long-term shareholder value.”
Capital Return Program
Update
In the third quarter of 2023, the Company did not repurchase any
shares of its common stock. At the end of the third quarter of
2023, $50.0 million remained available under the Company’s share
repurchase program.
Guidance
The Company is updating its outlook for fiscal 2023 as
follows:
- Full year total sales are expected to be down mid-single digits
as compared to fiscal 2022
- Full year gross margin is still expected to be in the high
thirties
- Full year EBITDA* expected to be in the range of $1 million to
$7 million
- Full year capex is expected to be in the range of $17 million
to $20 million
- Year end cash balance is expected to be in the range of $80
million to $90 million
- Implied fourth quarter total sales are expected to be
approximately flat to up low-single digits vs. Q4 2022 with EBITDA
in the range of $9 million to $15 million
Investor Conference Call and
Webcast
Citi Trends will host a conference call today at 9:00 a.m. ET.
The number to call for the live interactive teleconference is (312)
281-2972. A replay of the conference call will be available until
December 5, 2023, by dialing (800) 633-8284 and entering the
passcode, 22028257.
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.
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.
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 606 stores located in 33 states. For
more information, visit www.cititrends.com or your local store.
*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 2023 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’s control and its
unavailability could have a significant impact on its financial
results.
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; 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; changes in
consumer confidence and 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 ongoing assessment and
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
levels of 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) Thirteen Weeks Ended October 28,
2023 October 29, 2022 October 30, 2021 Net sales
$
179,520
$
192,323
$
227,959
Cost of sales (exclusive of depreciation shown separately
below)
(110,942
)
(115,741
)
(136,071
)
Selling, general and administrative expenses
(69,654
)
(69,092
)
(74,784
)
Depreciation
(4,749
)
(5,076
)
(5,527
)
Asset impairment
(178
)
—
—
Gain on sale-leaseback
—
29,168
—
(Loss) income from operations
(6,003
)
31,582
11,577
Interest income
894
202
18
Interest expense
(76
)
(76
)
(76
)
(Loss) income before income taxes
(5,185
)
31,708
11,519
Income tax benefit (expense)
1,322
(7,120
)
(2,505
)
Net (loss) income
$
(3,863
)
$
24,588
$
9,014
Basic net (loss) income per common share
$
(0.47
)
$
3.02
$
1.04
Diluted net (loss) income per common share
$
(0.47
)
$
3.02
$
1.03
Weighted average number of shares outstanding Basic
8,238
8,145
8,706
Diluted
8,238
8,145
8,787
Thirty-Nine Weeks Ended October 28,
2023 October 29, 2022 October 30, 2021 Net sales
$
532,762
$
585,550
$
750,621
Cost of sales (exclusive of depreciation shown separately
below)
(331,827
)
(357,341
)
(440,404
)
Selling, general and administrative expenses
(210,004
)
(208,599
)
(228,059
)
Depreciation
(14,138
)
(15,793
)
(15,218
)
Asset impairment
(178
)
—
—
Gain on sale-leasebacks
—
64,088
—
(Loss) income from operations
(23,385
)
67,905
66,940
Interest income
2,804
204
24
Interest expense
(228
)
(230
)
(200
)
(Loss) income before income taxes
(20,809
)
67,879
66,764
Income tax benefit (expense)
5,279
(15,624
)
(14,363
)
Net (loss) income
$
(15,530
)
$
52,255
$
52,401
Basic net (loss) income per common share
$
(1.89
)
$
6.34
$
5.77
Diluted net (loss) income per common share
$
(1.89
)
$
6.34
$
5.71
Weighted average number of shares outstanding Basic
8,215
8,237
9,081
Diluted
8,215
8,237
9,179
CITI TRENDS,
INC.
CONDENSED CONSOLIDATED BALANCE
SHEETS (unaudited)
(in thousands)
October 28, 2023 October 29, 2022 Assets: Cash
and cash equivalents
$
59,726
$
77,771
Inventory
129,727
128,511
Prepaid and other current assets
14,572
12,903
Property and equipment, net
56,658
60,912
Operating lease right of use assets
239,282
264,667
Deferred tax assets
7,197
873
Other noncurrent assets
1,050
1,218
Total assets
$
508,212
$
546,855
Liabilities and Stockholders' Equity: Accounts payable
$
83,393
$
83,451
Accrued liabilities
24,985
30,528
Current operating lease liabilities
46,511
48,294
Other current liabilities
1,269
1,486
Noncurrent operating lease liabilities
196,856
222,430
Other noncurrent liabilities
2,132
2,204
Total liabilities
355,146
388,393
Total stockholders' equity
153,066
158,462
Total liabilities and stockholders' equity
$
508,212
$
546,855
RECONCILIATION OF NON-GAAP
FINANCIAL MEASURES (unaudited)
(in thousands, except per
share data)
The Company makes reference in this
release to adjusted gross margin, adjusted operating income,
adjusted net income, adjusted earnings per share and adjusted
EBITDA. 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 net income or
earnings per diluted share prepared in accordance with generally
accepted accounting principles (GAAP).
Thirteen Weeks Ended October 28, 2023
October 29, 2022 Reconciliation of Adjusted Operating
(Loss) Income Operating (loss) income
$
(6,003
)
$
31,582
Gain on insurance
(1,188
)
—
Asset impairment
178
—
Gain on sale-leaseback
—
(29,168
)
Adjusted operating (loss) income
$
(7,013
)
$
2,414
Thirteen Weeks Ended October 28, 2023
October 29, 2022 Reconciliation of Adjusted Diluted
EPS Diluted (loss) earnings per share
$
(0.47
)
$
3.02
Gain on insurance
(0.14
)
—
Asset impairment
0.02
—
Gain on sale-leaseback
—
(3.58
)
Tax effect
0.03
0.80
Adjusted diluted (loss) earnings per share
$
(0.56
)
$
0.24
Thirty-NineWeeks Ended October 28, 2023
Reconciliation of Adjusted Gross Margin Net sales
$
532,762
Cost of sales
(331,827
)
Gross profit
$
200,935
Gross margin
37.7
%
Cyber incident expenses
$
513
Adjusted gross profit
$
201,448
Adjusted gross margin
37.8
%
Thirty-Nine Weeks Ended October 28, 2023
October 29, 2022 Reconciliation of Adjusted Operating
(Loss) Income Operating (loss) income
$
(23,385
)
$
67,905
Gain on insurance
(1,188
)
—
Asset impairment
178
—
Cyber incident expenses
1,723
—
Gain on sale-leaseback
—
(64,088
)
Adjusted operating (loss) income
$
(22,672
)
$
3,817
Thirty-Nine Weeks Ended October 28, 2023
October 29, 2022 Reconciliation of Adjusted Net (Loss)
Income Net (loss) income
$
(15,530
)
$
52,255
Gain on insurance
(1,188
)
—
Asset impairment
178
—
Cyber incident expenses
1,723
—
Gain on sale-leaseback
—
(64,088
)
Tax effect
(181
)
14,751
Adjusted net (loss) income
$
(14,998
)
$
2,918
Thirty-Nine Weeks Ended October 28, 2023
October 29, 2022 Reconciliation of Adjusted Diluted
EPS Diluted (loss) earnings per share
$
(1.89
)
$
6.34
Gain on insurance
(0.14
)
—
Asset impairment
0.02
—
Cyber incident expenses
0.21
—
Gain on sale-leaseback
—
(7.78
)
Tax effect
(0.02
)
1.79
Adjusted diluted (loss) earnings per share
$
(1.83
)
$
0.35
Thirty-Nine Weeks Ended October 28, 2023
October 29, 2022 Reconciliation of Adjusted EBITDA
Net (loss) income
$
(15,530
)
$
52,255
Interest income
(2,804
)
(204
)
Interest expense
228
230
Income tax (benefit) expense
(5,279
)
15,624
Depreciation
14,138
15,793
Gain on insurance
(1,188
)
—
Asset impairment
178
—
Cyber incident expenses
1,723
—
Gain on sale-leaseback
—
(64,088
)
Adjusted EBITDA
$
(8,534
)
$
19,610
View source
version on businesswire.com: https://www.businesswire.com/news/home/20231128803508/en/
Tom Filandro/Rachel Schacter ICR, Inc.
CitiTrendsIR@icrinc.com
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