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Share Name | Share Symbol | Market | Type |
---|---|---|---|
Citi Trends Inc | NASDAQ:CTRN | NASDAQ | Common Stock |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
0.28 | 1.28% | 22.10 | 22.10 | 35.34 | 22.56 | 21.91 | 22.16 | 53,385 | 22:30:00 |
Total second quarter sales of $185.0 million with gross margin of 38.1%
Comparable sales decreased 24.9% vs. 25.6% increase in Q2 2021 vs. Q2 2019; 3 year stack of 0.7%
First half 2022 net income of $27.7 million; adjusted EBITDA* of $12.1 million
Expects to close second sale-leaseback transaction for $36 million in September
Company is aggressively lowering expenses to align with the current demand environment
Expects second half operating income to be approximately in line with second half of 2019
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 Latinx families in the United States, today reported results for the second quarter ended July 30, 2022.
The Company is reporting select operating results for the second quarter and first half of 2022 relative to the same periods of 2019 due to the unique operating environment resulting from the COVID-19 pandemic and related government stimulus in 2020 and 2021.
Financial Highlights – Second Quarter 2022
Financial Highlights – 26 week first half ended July 30, 2022
Chief Executive Officer Comments
David Makuen, Chief Executive Officer, said, “The first half of 2022 was a challenging period as our customers, particularly those in the lowest income bracket, were under extraordinary pressure from widespread inflation, reducing their visits to stores for discretionary apparel and accessory purchases. It’s difficult to predict when this slower demand cycle will abate, therefore, we have revised our outlook for fiscal 2022 and have made it our number one priority to lower our SG&A expenses to align with a lower sales expectation. In fact, we are taking swift action on approximately $10 million in expense savings for the back half of 2022, or about 7% of total second half SG&A expenses, including a 10% staff reduction. We wish the very best to the associates impacted by this difficult decision and truly appreciate their contributions.”
Mr. Makuen continued, “During the quarter, we continued optimizing our Buy, Move, Sell and Support teams as we remain hyper-focused on driving healthy sales, managing inventories and maximizing margin to improve our operating profit. We are also prudently reducing capital expenditures by approximately $10 million to ensure we have additional liquidity to chase opportunities as they arise. We continue to believe there is significant white space opportunity to grow the Citi Trends brand and have confidence that our neighborhood customers, whom we know to be resilient and loyal, will allow us to return to a position of growth in time.”
Capital Return Program Update
In the second quarter, the Company repurchased approximately 160,000 shares of its common stock at an aggregate cost of $4.7 million. In the first half of fiscal 2022, the Company repurchased approximately 331,000 shares of its common stock at an aggregate cost of $10.0 million. At the end of the second quarter of 2022, $50.0 million remained available under the Company’s share repurchase program.
Sale-Leaseback Update
As previously announced, the Company underwent a comprehensive review of its owned real estate. As a result, the Company has elected to proceed with a sale-leaseback agreement with an affiliate of Oak Street Real Estate Capital, LLC, a division of Blue Owl, for its distribution center located in Roland, Oklahoma. The Company anticipates closing the transaction in September for an expected purchase price of $36 million.
Guidance
The Company is providing the following updated guidance for 2022, which includes the impact of the sale-leaseback of the Roland distribution center:
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 (212) 231-2900. A replay of the conference call will be available until August 30, 2022, by dialing (402) 977-9140 and entering the passcode, 22019378.
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 Latinx families in the United States. The Company operates 617 stores located in 33 states. For more information, visit 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.
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; public health emergencies such as the ongoing COVID-19 pandemic and associated containment and remediation efforts, the potential negative impacts of COVID-19 on the global economy and foreign sourcing; the impacts of COVID-19 on the Company's financial condition, business operations and liquidity, including the re-closure of any or all of the Company’s retail stores and distribution centers; 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; 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 July 30, 2022 July 31, 2021 August 3, 2019 Net sales$
185,012
$
237,281
$
182,830
Cost of sales (exclusive of depreciation shown separately below)
(114,589
)
(140,542
)
(114,612
)
Selling, general and administrative expenses
(68,481
)
(75,383
)
(62,989
)
Depreciation
(5,272
)
(4,994
)
(4,607
)
Asset impairment
—
—
(472
)
(Loss) income from operations
(3,330
)
16,362
150
Interest income
2
2
414
Interest expense
(78
)
(77
)
(40
)
(Loss) income before income taxes
(3,406
)
16,287
524
Income tax benefit (expense)
870
(3,797
)
(147
)
Net (loss) income$
(2,536
)
$
12,490
$
377
Basic net (loss) income per common share
$
(0.31
)
$
1.37
$
0.03
Diluted net (loss) income per common share
$
(0.31
)
$
1.36
$
0.03
Weighted average number of shares outstanding Basic
8,165
9,088
11,882
Diluted
8,165
9,178
11,882
Twenty-Six Weeks Ended July 30, 2022 July 31, 2021 August 3, 2019 (unaudited) (unaudited) (unaudited) Net sales
$
393,227
$
522,662
$
387,862
Cost of sales (exclusive of depreciation shown separately below)
(241,600
)
(304,333
)
(242,850
)
Selling, general and administrative expenses
(139,507
)
(153,275
)
(126,436
)
Depreciation
(10,717
)
(9,691
)
(9,221
)
Asset impairment
—
—
(472
)
Gain on sale of building
34,920
—
—
Income from operations
36,323
55,363
8,883
Interest income
2
6
793
Interest expense
(154
)
(124
)
(78
)
Income before income taxes
36,171
55,245
9,598
Income tax expense
(8,504
)
(11,858
)
(1,433
)
Net income$
27,667
$
43,387
$
8,165
Basic net income per common share
$
3.34
$
4.68
$
0.68
Diluted net income per common share
$
3.34
$
4.63
$
0.68
Weighted average number of shares outstanding Basic
8,284
9,269
11,929
Diluted
8,284
9,374
11,944
CITI TRENDS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited) (in thousands) July 30, 2022 July 31, 2021 (unaudited) (unaudited) Assets: Cash and cash equivalents
$
27,914
$
76,751
Short-term investment securities
—
24,603
Inventory
142,101
113,186
Prepaid and other current assets
17,728
19,144
Property and equipment, net
72,450
66,524
Operating lease right of use assets
237,556
190,503
Deferred tax assets
2,538
4,086
Other noncurrent assets
1,252
1,414
Total assets
$
501,539
$
496,211
Liabilities and Stockholders' Equity: Accounts payable
$
82,956
$
99,177
Accrued liabilities
33,797
43,799
Current operating lease liabilities
47,547
47,145
Income tax payable
—
3,642
Other current liabilities
1,205
1,133
Noncurrent operating lease liabilities
200,220
156,592
Other noncurrent liabilities
2,204
2,349
Total liabilities
367,929
353,837
Total stockholders' equity
133,610
142,374
Total liabilities and stockholders' equity
$
501,539
$
496,211
CITI TRENDS, INC. RECONCILIATION OF GAAP BASIS OPERATING RESULTS TO ADJUSTED NON-GAAP OPERATING RESULTS (unaudited) (in thousands, except per share data)
The Company makes reference in this release to adjusted net income, adjusted earnings per diluted share, adjusted operating income, EBITDA 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).
Twenty-Six Weeks Ended July 30, 2022 As Reported Adjustment (1) As Adjusted Net sales$
393,227
$
—
$
393,227
Cost of sales (exclusive of depreciation shown separately below)
(241,600
)
—
(241,600
)
Selling, general and administrative expenses
(139,507
)
—
(139,507
)
Depreciation
(10,717
)
—
(10,717
)
Gain on sale of building
34,920
(34,920
)
—
Income from operations
36,323
(34,920
)
1,403
Interest income
2
—
2
Interest expense
(154
)
—
(154
)
Income before income taxes
36,171
(34,920
)
1,251
Income tax expense
(8,504
)
8,210
(294
)
Net income$
27,667
$
(26,710
)
$
957
Basic net income per common share
$
3.34
$
0.12
Diluted net income per common share
$
3.34
$
0.12
Weighted average number of shares outstanding Basic
8,284
8,284
Diluted
8,284
8,284
Twenty-Six Weeks Ended August 3, 2019 As Reported Adjustment (2) As Adjusted Net sales
$
387,862
$
—
$
387,862
Cost of sales (exclusive of depreciation shown separately below)
(242,850
)
—
(242,850
)
Selling, general and administrative expenses
(126,436
)
1,042
(125,394
)
Depreciation
(9,221
)
—
(9,221
)
Asset impairment
(472
)
—
(472
)
Income from operations
8,883
1,042
9,925
Interest income
793
—
793
Interest expense
(78
)
—
(78
)
Income before income taxes
9,598
1,042
10,640
Income tax expense
(1,433
)
(156
)
(1,589
)
Net income$
8,165
$
886
$
9,051
Basic net income per common share
$
0.68
$
0.76
Diluted net income per common share
$
0.68
$
0.76
Weighted average number of shares outstanding Basic
11,929
11,929
Diluted
11,944
11,944
(1) Gain on sale of distribution center in Darlington, South Carolina and related tax effects (2) Proxy contest expenses and related tax effects
CITI TRENDS, INC. RECONCILIATION OF GAAP BASIS OPERATING RESULTS TO ADJUSTED NON-GAAP OPERATING RESULTS (unaudited) (in thousands, except per share data) Thirteen Weeks Ended July 30, 2022 July 31, 2021 August 3, 2019 Net (loss) income
$
(2,536
)
$
12,490
$
377
Interest income
(2
)
(2
)
(414
)
Interest expense
78
77
40
Income tax benefit (expense)
(870
)
3,797
147
Depreciation
5,272
4,994
4,607
EBITDA
$
1,942
$
21,356
$
4,757
Asset impairment
—
—
472
Adjusted EBITDA
$
1,942
$
21,356
$
5,229
Twenty-Six Weeks Ended July 30, 2022 July 31, 2021 August 3, 2019 Net income
$
27,667
$
43,387
$
8,165
Interest income
(2
)
(6
)
(793
)
Interest expense
154
124
78
Income tax expense
8,504
11,858
1,433
Depreciation
10,717
9,691
9,221
EBITDA
$
47,040
$
65,054
$
18,104
Gain on sale of building
(34,920
)
—
—
Asset impairment
—
—
472
Proxy contest expenses
—
—
1,042
Adjusted EBITDA
$
12,120
$
65,054
$
19,618
View source version on businesswire.com: https://www.businesswire.com/news/home/20220824005241/en/
Tom Filandro/Rachel Schacter ICR, Inc. CitiTrendsIR@icrinc.com
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