Citi Trends Announces Second Quarter Fiscal 2024 Results
Total sales growth of 1.7% to
Significant actions taken to prepare for profitable growth
Strong financial position with liquidity of approximately
Single digit comparable store sales increase Q3 to-date
Company provides Outlook for second half of Fiscal 2024
Financial Highlights – Second Quarter 2024
-
Total sales of
$176.6 million increased 1.7% vs. Q2 2023; comparable store sales, calculated on a shifted 13-week to 13-week basis, decreased 1.7% compared to Q2 2023 -
Gross margin of 31.1% including
$9.4 million of markdowns from strategic inventory reset and$4.0 million of shrink from physical inventory results and accrual rate adjustment, vs. 38.2% in Q2 2023 -
Net loss of
($18.4) million , or($16.2) million as adjusted*, compared to net loss of($5.0) million , or($4.9) million as adjusted* in Q2 2023 -
Adjusted EBITDA* loss of
($17.2) million , including$13.4 million of transition expenses, compared to adjusted EBITDA* loss of($3.1) million in Q2 2023 - Opened 1 new store, closed 3 stores and remodeled 15 stores to end the quarter with 597 locations; 23% of the fleet in CTx format
-
Cash of
$59.3 million at quarter-end, with no debt and no borrowings under a$75 million credit facility - Exited Q2 2024 with total inventory flat vs. Q2 2023
Second Quarter Actions
During the second quarter, the Company took strategic and definitive action to reset its inventory composition, marking down slow-selling and aged inventory. This inventory reset sets the stage for the Company’s refined merchandise strategy to consistently offer fresher, more balanced assortments of good, better, and best products with a higher penetration of opening price point products and branded ‘treasure hunt’ goods at incredible value for our customers.
Throughout the quarter, the Company continued taking action to control and mitigate shrink, including upgrading store talent, updating in-store theft prevention equipment as well as leveraging exception reporting to identify problem areas early and establishing a third-party restitution program. Important policies, such as the return policy and the associate discount policy, have been updated to tighten controls as well. Additionally, a well-regarded consulting firm was engaged to help identify and fix other root causes of shrink.
The Company believes the
Financial Highlights – 26 weeks ended
-
Total sales of
$362.8 million increased 2.7% vs. 2023; comparable store sales, calculated on a shifted 26-week to 26-week basis, increased 0.7% compared to 2023 - Gross margin of 35.0% vs. 37.5%, or 37.6% as adjusted* in 2023
-
Net loss of
($21.8) million , or($18.8) million as adjusted*, compared to net loss of($11.7) million , or($10.4) million as adjusted* in 2023 -
Adjusted EBITDA* loss of
($18.0) million vs adjusted EBITDA* loss of($6.3) million in 2023
Interim Chief Executive Officer Comments
“Significantly, we achieved traffic growth in the quarter, a clear indication our core consumer remains highly engaged with the Citi Trends brand and our unique store experience. In Q2, our home and impulse categories delivered double digit comps and our back-to-school Children’s categories got off to a strong start. I am pleased to report that Q3 is off to a solid start with positive low-single-digit comparable store sales growth through the first three weeks of the quarter. We remain in a healthy financial position with strong liquidity and no debt, allowing us to executethe foundational work necessary for future profit acceleration. While there is still much work ahead, I am energized and optimistic about our company’s future. I would like to thank our entire
Capital Return Program Update
In the second quarter of fiscal 2024, the Company did not repurchase any shares of its common stock. At the end of Q2 2024,
Second Half 2024 Outlook
The Company’s outlook for the second half of fiscal 2024 is as follows:
- Expecting second half comparable store sales to be flat to up low-single digits compared to second half of fiscal 2023; total sales expected to be down mid-single digits due to the 53rd week last year and store closures
- Second half gross margin expected to be approximately 39%
-
Second half EBITDA* expected to be positive, in a range of
$0.5 million to$2.5 million , a significant improvement to first half results - The Company has completed its plans for store openings and remodels for the year with 1 new store and 35 remodels; planning to close 10 to 15 underperforming stores in the year, including the 6 closures completed year-to-date, as part of its ongoing fleet optimization; expecting to end fiscal 2024 with approximately 590 stores
-
Year-end cash balance is expected to be in the range of
$60 million to$70 million -
Full year capital expenditures reduced by 35% from prior outlook to approximately
$13 million
Investor Conference Call and Webcast
The live conference call can also be accessed by dialing (877) 407-0779. A replay of the conference call will be available until
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
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
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|
||||||||||||
| CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited) | ||||||||||||
| (in thousands, except per share data) | ||||||||||||
| Second Quarter | ||||||||||||
|
|
2024 |
|
|
|
2023 |
|
|
|
2022 |
|
||
| Net sales |
$ |
176,552 |
|
$ |
173,554 |
|
$ |
185,012 |
|
|||
| Cost of sales (exclusive of depreciation shown separately below) |
|
(121,624 |
) |
|
(107,226 |
) |
|
(114,589 |
) |
|||
| Selling, general and administrative expenses |
|
(73,780 |
) |
|
(69,543 |
) |
|
(68,481 |
) |
|||
| Depreciation |
|
(4,782 |
) |
|
(4,708 |
) |
|
(5,272 |
) |
|||
| Asset impairment |
|
(1,261 |
) |
|
— |
|
|
— |
|
|||
| (Loss) Income from operations |
|
(24,895 |
) |
|
(7,923 |
) |
|
(3,330 |
) |
|||
| Interest income |
|
611 |
|
|
887 |
|
|
2 |
|
|||
| Interest expense |
|
(80 |
) |
|
(77 |
) |
|
(78 |
) |
|||
| (Loss) income before income taxes |
|
(24,364 |
) |
|
(7,113 |
) |
|
(3,406 |
) |
|||
| Income tax benefit (expense) |
|
5,951 |
|
|
2,081 |
|
|
870 |
|
|||
| Net (loss) income |
$ |
(18,413 |
) |
$ |
(5,032 |
) |
$ |
(2,536 |
) |
|||
| Basic net (loss) income per common share |
$ |
(2.21 |
) |
$ |
(0.61 |
) |
$ |
(0.31 |
) |
|||
| Diluted net (loss) income per common share |
$ |
(2.21 |
) |
$ |
(0.61 |
) |
$ |
(0.31 |
) |
|||
| Weighted average number of shares outstanding | ||||||||||||
| Basic |
|
8,337 |
|
|
8,225 |
|
|
8,165 |
|
|||
| Diluted |
|
8,337 |
|
|
8,225 |
|
|
8,165 |
|
|||
| Twenty Six-Weeks Ended | ||||||||||||
|
|
|
|
||||||||||
| Net sales |
$ |
362,841 |
|
$ |
353,242 |
|
$ |
393,227 |
|
|||
| Cost of sales (exclusive of depreciation shown separately below) |
|
(235,878 |
) |
|
(220,885 |
) |
|
(241,600 |
) |
|||
| Selling, general and administrative expenses |
|
(147,991 |
) |
|
(140,350 |
) |
|
(139,507 |
) |
|||
| Depreciation |
|
(9,576 |
) |
|
(9,389 |
) |
|
(10,717 |
) |
|||
| Asset impairment |
|
(1,261 |
) |
|
— |
|
|
— |
|
|||
| Gain on sale-leasebacks |
|
— |
|
|
— |
|
|
34,920 |
|
|||
| (Loss) income from operations |
|
(31,865 |
) |
|
(17,382 |
) |
|
36,323 |
|
|||
| Interest income |
|
1,460 |
|
|
1,910 |
|
|
2 |
|
|||
| Interest expense |
|
(158 |
) |
|
(152 |
) |
|
(154 |
) |
|||
| (Loss) income before income taxes |
|
(30,563 |
) |
|
(15,624 |
) |
|
36,171 |
|
|||
| Income tax benefit (expense) |
|
8,724 |
|
|
3,957 |
|
|
(8,504 |
) |
|||
| Net (loss) income |
$ |
(21,840 |
) |
$ |
(11,667 |
) |
$ |
27,667 |
|
|||
| Basic net (loss) income per common share |
$ |
(2.63 |
) |
$ |
(1.42 |
) |
$ |
3.34 |
|
|||
| Diluted net (loss) income per common share |
$ |
(2.63 |
) |
$ |
(1.42 |
) |
$ |
3.34 |
|
|||
| Weighted average number of shares outstanding | ||||||||||||
| Basic |
|
8,295 |
|
|
8,203 |
|
|
8,284 |
|
|||
| Diluted |
|
8,295 |
|
|
8,203 |
|
|
8,284 |
|
|||
|
|
||||||
| CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited) | ||||||
| (in thousands) | ||||||
|
|
|
|||||
| (unaudited) | (unaudited) | |||||
| Assets: | ||||||
| Cash and cash equivalents |
$ |
59,302 |
$ |
65,820 |
||
| Inventory |
|
134,996 |
|
134,473 |
||
| Prepaid and other current assets |
|
16,922 |
|
16,741 |
||
| Income Tax Receivable |
|
3,896 |
|
3,054 |
||
| Property and equipment, net |
|
51,702 |
|
59,084 |
||
| Operating lease right of use assets |
|
225,278 |
|
240,151 |
||
| Deferred tax assets |
|
13,715 |
|
6,101 |
||
| Other noncurrent assets |
|
921 |
|
1,083 |
||
| Total assets |
$ |
506,731 |
$ |
526,507 |
||
| Liabilities and Stockholders' Equity: | ||||||
| Accounts payable |
$ |
110,540 |
$ |
93,680 |
||
| Accrued liabilities |
|
24,780 |
|
28,383 |
||
| Current operating lease liabilities |
|
49,071 |
|
46,540 |
||
| Other current liabilities |
|
1,092 |
|
1,259 |
||
| Noncurrent operating lease liabilities |
|
182,869 |
|
198,525 |
||
| Other noncurrent liabilities |
|
1,789 |
|
2,167 |
||
| Total liabilities |
|
370,141 |
|
370,554 |
||
| Total stockholders' equity |
|
136,590 |
|
155,953 |
||
| Total liabilities and stockholders' equity |
$ |
506,731 |
$ |
526,507 |
||
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 (loss) income, adjusted net (loss) income, adjusted earnings per diluted 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 (loss) income or earnings per diluted share prepared in accordance with generally accepted accounting principles (GAAP).
| Second Quarter | ||||||||
|
|
|
|||||||
| Reconciliation of Adjusted Net (Loss) Income | ||||||||
| Net loss |
$ |
(18,413 |
) |
$ |
(5,032 |
) |
||
| Asset impairment |
|
1,261 |
|
|
— |
|
||
| Cyber incident expenses |
|
36 |
|
|
163 |
|
||
| Other non-recurring expenses |
|
1,629 |
|
|
— |
|
||
| Tax effect |
|
(715 |
) |
|
(48 |
) |
||
| Adjusted net loss |
$ |
(16,202 |
) |
$ |
(4,916 |
) |
||
| Second Quarter | ||||||||
|
|
|
|||||||
| Reconciliation of Adjusted EBITDA | ||||||||
| Net loss |
$ |
(18,413 |
) |
$ |
(5,032 |
) |
||
| Interest income |
|
(611 |
) |
|
(887 |
) |
||
| Interest expense |
|
80 |
|
|
77 |
|
||
| Income tax benefit |
|
(5,951 |
) |
|
(2,081 |
) |
||
| Depreciation |
|
4,782 |
|
|
4,708 |
|
||
| Asset impairment |
|
1,261 |
|
|
— |
|
||
| Cyber incident expenses |
|
36 |
|
|
163 |
|
||
| Other non-recurring expenses |
|
1,629 |
|
|
— |
|
||
| Adjusted EBITDA |
$ |
(17,187 |
) |
$ |
(3,051 |
) |
||
| Twenty-Six Weeks Ended | ||||||||
|
|
|
|||||||
| Reconciliation of Adjusted Gross Margin | ||||||||
| Net sales |
$ |
362,841 |
|
$ |
353,242 |
|
||
| Cost of sales |
|
(235,878 |
) |
|
(220,885 |
) |
||
| Gross profit |
$ |
126,963 |
|
$ |
132,357 |
|
||
| Gross margin |
|
35.0 |
% |
|
37.5 |
% |
||
| Non-recurring expenses |
$ |
- |
|
$ |
513 |
|
||
| Adjusted gross profit |
$ |
126,963 |
|
$ |
132,870 |
|
||
| Adjusted gross margin |
|
35.0 |
% |
|
37.6 |
% |
||
| Twenty-Six Weeks Ended | ||||||||
|
|
|
|||||||
| Reconciliation of Adjusted Net (Loss) Income | ||||||||
| Net (loss) income |
$ |
(21,840 |
) |
$ |
(11,667 |
) |
||
| Asset impairment |
|
1,261 |
|
|
— |
|
||
| Cyber incident expenses |
|
36 |
|
|
1,723 |
|
||
| Other non-recurring expenses |
|
3,009 |
|
|
— |
|
||
| Tax effect |
|
(1,229 |
) |
|
(436 |
) |
||
| Adjusted net (loss) income |
$ |
(18,763 |
) |
$ |
(10,380 |
) |
||
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