Total sales of $208 million
Comparable store sales decreased 29% vs. a
35% increase in Q1 2021 vs. Q1 2019
Gross margin of 39.0%
Diluted EPS of $3.59; adjusted diluted EPS*
of $0.42 exceeding high end of guidance
Company completes sale-leaseback transaction
for $46 million
Citi Trends, Inc. (NASDAQ: CTRN), a growing 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 first quarter ended April
30, 2022.
The Company is reporting select operating results for the first
quarter 2022 relative to the same period of 2019 due to the unique
operating environment resulting from the COVID-19 pandemic and
related government stimulus in 2020 and 2021.
Financial Highlights – First Quarter
2022
- Total sales decreased 27.0% vs. Q1 2021; increased 1.6% vs. Q1
2019
- Comparable store sales decreased 29.2% compared to Q1 2021 on
top of a 35% increase in Q1 2021 vs. Q1 2019, representing a
positive stack of 5.8% (computed as the sum of Q1 2022 comp vs. Q1
2021 plus Q1 2021 comp vs. Q1 2019)
- Gross margin of 39.0% vs. 42.6% in Q1 2021; increased 150 bps
vs. Q1 2019 of 37.5%
- Operating income of $39.7 million, or $4.7 million as adjusted*
for the gain on the sale of a distribution center, compared to
$39.0 million in Q1 2021 and $8.7 million in Q1 2019, or $9.8
million as adjusted*
- Diluted earnings per share of $3.59, or adjusted diluted
earnings per share* of $0.42 vs. $3.23 in Q1 2021 and $0.65 in Q1
2019, or $0.72 as adjusted*
- Quarter-end total inventory compared to Q1 2019 decreased 1.2%
(or a decrease of 13.9% excluding packaway inventory); average
in-store inventory decreased 32.5% vs. Q1 2019
- Cash of $61.7 million at the end of the quarter, with no debt
and a $75 million credit facility
Chief Executive Officer
Comments
David Makuen, Chief Executive Officer, commented, “Our first
quarter topline results were in line with expectations and our
bottom line performance exceeded our guidance. Despite a very
difficult inflationary environment, our team hunkered down and
rigorously managed inventory and rationalized expenses to deliver
solid operational metrics. Our core customers and associates are
doing their best to get through these tough times and continue to
remain loyal to Citi Trends, as evidenced by our continued strong
in-store conversion and basket size. Our team is more nimble than
ever and in particular, our BUY team is chasing ample trends
available in the marketplace that we intend to scoop up and offer
at prices that don’t break the bank.”
Makuen continued, “As we look to the remainder of 2022, we
expect the macro factors will continue to impact our customer and
the broader discretionary shopping landscape. Therefore, we believe
it is prudent to revise our guidance for the rest of the year
compared to the pre-pandemic 2019 baseline. Lastly, we’re making
progress on our incremental product initiatives and upgrading our
in-store experience via the rollout of our CTx store format.”
Capital Return Program
Update
In the first quarter of 2022, the Company repurchased
approximately 170,000 shares of its common stock at an aggregate
cost of $5.3 million. At the end of the first quarter of 2022,
$54.7 million remained available under the Company’s share
repurchase program.
Sale-Leaseback Update
As previously announced, the Company underwent a comprehensive
evaluation of its owned real estate. As a result, the Company
completed the sale-leaseback of its distribution center located in
Darlington, South Carolina for $46 million. The Company has
extended the deadline to decide on the potential sale of its
distribution center in Roland, Oklahoma.
Guidance
The Company is providing the following updated guidance:
- Fiscal 2022 total sales of $860 to $880 million, with a
comparable store sales decrease of 14% to 16% on top of a 22%
increase in fiscal 2021 vs. fiscal 2019; this guidance implies a
stack of 6% to 8% for the periods noted
- Fiscal 2022 operating income of $58.8 to $65.3 million, and
adjusted operating income of $23.8 to $30.6 million (adjusted for
the sale of the distribution center); at the midpoint of the
adjusted range, this implies a 32% increase compared to fiscal
2019
- Fiscal 2022 diluted earnings per share of $5.59 to $6.09, and
adjusted diluted earnings per share of $2.25 to $2.75 (adjusted for
the sale of the distribution center); at the midpoint of the adjusted range, this
implies a 60% increase compared to fiscal 2019
- Fiscal 2022 guidance includes $2.3 million of incremental
non-cash SG&A expense related to the conversion of certain cash
settled awards to restricted stock, which negatively impacts
diluted earnings per share by approximately $0.22
- The Company now expects to open approximately 20 new stores
during fiscal 2022
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 (303)
223-0118. A replay of the conference call will be available until
May 31, 2022, by dialing (402) 977-9140 and entering the passcode,
22017999.
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 growing 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 613 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) First Quarter
2022
2021
2019
Net sales
$
208,215
$
285,381
$
205,032
Cost of sales (exclusive of depreciation shown separately
below)
(127,011
)
(163,791
)
(128,238
)
Selling, general and administrative expenses
(71,026
)
(77,892
)
(63,447
)
Depreciation
(5,445
)
(4,697
)
(4,614
)
Gain on sale of building
34,920
—
—
Income from operations
39,653
39,001
8,733
Interest income
—
4
379
Interest expense
(76
)
(47
)
(38
)
Income before income taxes
39,577
38,958
9,074
Income tax expense
(9,374
)
(8,061
)
(1,286
)
Net income
$
30,203
$
30,897
$
7,788
Basic net income per common share
$
3.59
$
3.27
$
0.65
Diluted net income per common share
$
3.59
$
3.23
$
0.65
Weighted average number of shares outstanding Basic
8,407
9,450
11,976
Diluted
8,407
9,571
12,006
CITI TRENDS, INC. CONDENSED CONSOLIDATED
BALANCE SHEETS (unaudited) (in thousands) April 30,
2022 May 1, 2021 (unaudited) (unaudited) Assets: Cash
and cash equivalents
$
61,657
$
131,276
Inventory
129,715
101,803
Prepaid and other current assets
16,354
19,290
Property and equipment, net
68,213
65,532
Operating lease right of use assets
241,686
184,694
Deferred tax assets
4,316
5,141
Other noncurrent assets
1,287
1,441
Total assets
$
523,228
$
509,177
Liabilities and Stockholders' Equity: Accounts payable
$
87,857
$
109,723
Accrued liabilities
33,614
39,314
Current operating lease liabilities
46,910
48,908
Other current liabilities
7,657
12,410
Noncurrent operating lease liabilities
203,856
148,596
Other noncurrent liabilities
2,155
2,233
Total liabilities
382,049
361,184
Total stockholders' equity
141,179
147,993
Total liabilities and stockholders' equity
$
523,228
$
509,177
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 earnings per diluted share and adjusted operating income.
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).
First Quarter
2022 As Reported Adjustment (1) As
Adjusted Net sales
$
208,215
$
—
$
208,215
Cost of sales (exclusive of depreciation shown separately
below)
(127,011
)
—
(127,011
)
Selling, general and administrative expenses
(71,026
)
—
(71,026
)
Depreciation
(5,445
)
—
(5,445
)
Gain on sale of building
34,920
(34,920
)
—
Income from operations
39,653
(34,920
)
4,733
Interest expense
(76
)
—
(76
)
Income before income taxes
39,577
(34,920
)
4,657
Income tax expense
(9,374
)
8,271
(1,103
)
Net income
$
30,203
$
(26,649
)
$
3,554
Basic net income per common share
$
3.59
$
0.42
Diluted net income per common share
$
3.59
$
0.42
Weighted average number of shares outstanding Basic
8,407
8,407
Diluted
8,407
8,407
First Quarter 2019 As Reported
Adjustment (2) As Adjusted Net sales
$
205,032
$
—
$
205,032
Cost of sales (exclusive of depreciation shown separately
below)
(128,238
)
—
(128,238
)
Selling, general and administrative expenses
(63,447
)
1,042
(62,405
)
Depreciation
(4,614
)
—
(4,614
)
Income from operations
8,733
1,042
9,775
Interest expense
(38
)
—
(38
)
Income before income taxes
9,074
1,042
10,116
Income tax expense
(1,286
)
(148
)
(1,434
)
Net income
$
7,788
$
894
$
8,682
Basic net income per common share
$
0.65
$
0.72
Diluted net income per common share
$
0.65
$
0.72
Weighted average number of shares outstanding Basic
11,976
11,976
Diluted
12,006
12,006
(1) Gain on sale of distribution center in
Darlington, South Carolina and related tax effects (2) Proxy
contest expenses and related tax effects
View source
version on businesswire.com: https://www.businesswire.com/news/home/20220524005455/en/
Tom Filandro/Rachel Schacter ICR, Inc.
CitiTrendsIR@icrinc.com
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