Citi Trends, Inc. (NASDAQ: CTRN) today reported unaudited
results for the first quarter of fiscal 2019.
Financial Highlights – First quarter
ended May 4, 2019
Total sales in the first quarter ended May 4, 2019 decreased
2.8% to $205.0 million compared with $211.0 million in the first
quarter ended May 5, 2018. Comparable store sales decreased 4.5% in
the quarter.
On a GAAP basis, the Company had net income of $7.8 million, or
$8.7 million when adjusted for proxy contest-related expenses*, in
the first quarter of 2019, compared with $11.3 million in last
year’s first quarter. On a GAAP basis, earnings per diluted share
in this year’s first quarter were $0.65, or $0.72 when adjusted for
proxy contest-related expenses*, compared with $0.83 per diluted
share in the first quarter of 2018.
Bruce Smith, President and Chief Executive Officer, commented,
“First quarter comparable store sales were challenging during the
four-week period in which tax refunds typically provide a lift to
our sales, as tax refunds were not only delayed, but were 3% below
last year in the aggregate. Our apparel business was particularly
disappointing during the quarter. On a positive note, accessories
and home merchandise again posted sales growth, consistent with
those categories’ performance over each of the past ten years, a
period in which sales of non-apparel grew from 14% of total sales
to nearly 40%. Given this continued mix shift, we are working
aggressively and rapidly to accelerate our offering of accessories
and home assortments, while simultaneously working to improve the
fashion offerings across our apparel categories.”
Smith further noted, “In addition to these efforts to improve
the mix and apparel fashion, we engaged a consulting firm in March
2019 to initiate a comprehensive analysis of our merchandising,
planning and allocation processes and strategies, including, among
other things, our competitive landscape, best industry practices,
speed-to-market, overall structure and resources. We will also
establish a merchandising task force, which will operate under the
oversight of a new Board committee, consisting of two of our
Directors who each have many years of merchandising experience with
high-performance retailers.”
Smith continued, “Importantly, as reflected in our first quarter
gross margin, we took the necessary markdowns to end the period
clean from an inventory perspective. We entered the second quarter
with our inventories in good shape, down 1.1% in comparable stores.
Our total inventory increase of 4.7% is attributable to merchandise
in new stores that opened since last year’s first quarter and
higher levels of distribution center inventory, including increases
in next-season-buys. In addition to our merchandising efforts, we
continue to look for ways to reduce costs, as reflected in first
quarter S, G & A expenses that increased only $400,000, while
decreasing $600,000 when adjusted for proxy contest-related
expenses.*”
During the first quarter, the Company opened one new store and
closed two stores.
Guidance
As the Company enters the second quarter, comparable store sales
have been down 6%, against a difficult comparison last year when
they were up 10% during the same period. As discussed in last
year’s earnings release, the two plus-week timeframe at the
beginning of the second quarter in 2018 benefited from timely warm
weather. The Company believes that the quarter-to-date comparable
store sales decrease of 6% will narrow during the remainder of the
quarter, resulting in a full second quarter range of negative 1% to
negative 3%. In the second half of the year, the Company expects
comparable store sales to be up 1% to 3% as efforts to further
accelerate the non-apparel sales mix and improve the apparel
fashion take hold.
Based on the actual results in the first quarter, together with
expectations for a comparable store sales decrease of 1% to 3% in
the second quarter and comparable store sales that are up 1% to 3%
in the second half of the year, the Company is lowering its
earnings guidance to a range of $1.30 to $1.50 per diluted share
for fiscal 2019.
Capital Return Program
The Company announced that its Board of Directors has declared a
quarterly dividend of $0.08 per common share, payable on June 18,
2019, to shareholders of record as of the close of business on June
4, 2019.
During the first quarter of 2019, the Company repurchased 82,000
shares of its common stock at an aggregate cost of $1.6 million. At
May 4, 2019, $8.0 million remained available under the existing
stock repurchase authorization, and the Company had no debt and
$80.4 million of cash and investment securities.
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) 223-4379. A replay of the conference call will be
available until May 30, 2019, by dialing (402) 977-9140 and
entering the passcode, 21922974.
The live broadcast of Citi Trends' conference call will be
available online at the Company's website, www.cititrends.com, in
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 conference
call, may contain or constitute information that has not been
disclosed previously.
About Citi Trends
Citi Trends, Inc. is a value-priced retailer of urban fashion
apparel and accessories for the entire family. The Company operates
561 stores located in 32 states. Citi Trends’ website address is
www.cititrends.com. CTRN-G
*Non-GAAP Financial
Measures
The non-GAAP financial measures 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 of management for future operations and our intentions
and ability to pay dividends and complete any share repurchase
authorizations, are forward-looking statements that are subject to
material risks and uncertainties. The words "believe," "may,"
"could," "plans," "estimate," "continue," "anticipate," "intend,"
"expect" 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 the Company’s
filings with the Securities and Exchange Commission, including
those set forth under the heading “Item 1A. Risk Factors” in the
Company’s Form 10-K for the fiscal year ended February 2, 2019.
These risks and uncertainties include, but are not limited to,
uncertainties relating to economic conditions, growth risks,
consumer spending patterns, competition within the industry,
competition in our markets and the ability to anticipate and
respond to fashion trends. Any forward-looking statements by the
Company, with respect to guidance, the Company’s intention to
declare and pay dividends, 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 INCOME (unaudited) (in thousands,
except per share data)
Thirteen Weeks Ended Thirteen Weeks Ended
May 4, 2019 May 5, 2018 (unaudited) (unaudited) Net
sales $ 205,032 $ 211,032 Cost of sales (exclusive of
depreciation shown separately below) (128,238 ) (129,413 ) Selling,
general and administrative expenses (63,447 ) (63,005 )
Depreciation (4,614 ) (4,974 ) Income from operations
8,733 13,640 Interest income 379 295 Interest expense (38 )
(37 ) Income before income taxes 9,074 13,898 Income tax
expense (1,286 ) (2,601 ) Net income $ 7,788 $
11,297 Basic net income per common share $
0.65 $ 0.83 Diluted net income per common share $
0.65 $ 0.83 Weighted average shares
used to compute basic net income per share 11,976
13,578 Weighted average shares used to compute
diluted net income per share 12,006 13,631
CITI TRENDS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)
(in thousands) May 4, 2019 May 5, 2018
(unaudited) (unaudited) Assets: Cash and cash equivalents $ 29,484
$ 53,978 Short-term investment securities 43,135 33,504 Inventory
131,254 125,331 Prepaid and other current assets 14,018 16,372
Property and equipment, net 54,921 59,156 Operating lease right of
use assets (1) 149,125 - Long-term investment securities 7,777
21,707 Other noncurrent assets 7,834 6,203
Total assets $ 437,548 $ 316,251
Liabilities and Stockholders' Equity: Accounts payable $ 64,201 $
63,814 Accrued liabilities 22,004 21,971 Current operating lease
liabilities (1) 41,027 - Other current liabilities 2,808 5,530
Noncurrent operating lease liabilities (1) 115,121 - Other
noncurrent liabilities 1,838 8,325
Total liabilities 246,999 99,640 Total stockholders' equity
190,549 216,611 Total liabilities and
stockholders' equity $ 437,548 $ 316,251
(1) Lease assets and liabilities recorded
in connection with the adoption of ASU No. 2016-02, Leases (Topic
842)
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 net
income adjusted for proxy contest-related expenses, earnings per
diluted share adjusted for proxy contest-related expenses and
selling, general and administrative expenses adjusted for proxy
contest-related expenses for the thirteen weeks ended May 4, 2019.
The Company believes that excluding proxy contest expenses and
their related tax effects from its financial results reflects
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, earnings
per diluted share or selling, general and administrative expenses
prepared in accordance with generally accepted accounting
principles (GAAP).
Thirteen Weeks Ended May
4, 2019 As Reported Adjustment (1)
As Adjusted (unaudited)
(unaudited) (unaudited) 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 income
379 - 379 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 shares used to
compute basic net income per share 11,976
11,976 Weighted average shares used to compute diluted net
income per share 12,006 12,006
(1) Proxy contest expenses and related tax effects
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version on businesswire.com: https://www.businesswire.com/news/home/20190523005151/en/
Bruce SmithPresident and Chief Executive Officer(912)
443-2075
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