Citi Trends, Inc. (NASDAQ: CTRN) today reported unaudited
results for the second quarter of fiscal 2019.
Financial Highlights – Second quarter
ended August 3, 2019
Total sales in the second quarter ended August 3, 2019 increased
0.5% to $182.8 million, compared with $182.0 million in the second
quarter ended August 4, 2018. Comparable store sales decreased 1.2%
in the quarter.
The Company had net income of $0.4 million, or $0.03 per diluted
share, in the second quarter of fiscal 2019, compared with $3.2
million, or $0.24 per diluted share, in last year’s second
quarter.
During the second quarter, the Company opened four new stores,
relocated or expanded one store and closed three stores.
Financial Highlights – First half ended
August 3, 2019
Total sales in the first half of fiscal 2019 decreased 1.3% to
$387.9 million, compared with $393.0 million in the first half of
fiscal 2018. Comparable store sales decreased 2.9% in the first
half of this year.
In the first half of 2019, the Company had net income of $8.2
million on a GAAP basis, or $9.1 million when adjusted for proxy
contest-related expenses*, compared with net income in last year’s
first half of $14.5 million. Earnings per diluted share in the
first half of 2019 were $0.68 on a GAAP basis, or $0.76 when
adjusted for proxy contest-related expenses*, compared with
earnings per diluted share of $1.08 in the first half of 2018.
Bruce Smith, President and Chief Executive Officer, commented,
“As discussed in our last earnings release, the second quarter
started off slowly, with comparable store sales down 6% during the
first two-plus weeks of the quarter. Subsequent to that release, we
were encouraged to see sales trends improve, leading to comparable
store sales that were nearly flat during the remaining ten-plus
weeks in the quarter and at the more favorable end of guidance for
the full quarter. Sales of accessories and home merchandise
experienced continued momentum with increases during the quarter,
while the apparel categories declined, but with improving trends in
the latter part of the quarter. We continue to strategically shift
our merchandise mix more towards the growing non-apparel lines and
expect to accelerate this mix shift in the second half of the
year.”
Smith further noted, “We are pleased with the quality and age of
our inventory entering the back half of the year, as we ended the
quarter with 5% less inventory than at the end of last year’s
second quarter, including a 14% decline in inventory in comparable
stores.”
Smith continued, “Peter Sachse, our new director and Special
Advisor to the CEO, has been working with management on a number of
initiatives, including the appropriate mix of apparel and
non-apparel for the important holiday season, organizational
structure and resources, system opportunities, customer research,
real estate optimization, and other strategic projects. We are
executing on these initiatives and believe the benefits will better
position Citi Trends to grow and deliver value for its customers,
associates and shareholders.”
Guidance
The Company is maintaining its full year fiscal 2019 earnings
guidance in a range of $1.30 to $1.50 per diluted share when
adjusted for proxy contest-related expenses*. As the Company enters
the third quarter, comparable store sales thus far have been up 4%.
Given the favorable inventory position and the acceleration of our
efforts to shift our merchandise mix, coupled with the sales
results of the past 13 weeks, the Company’s earnings per share
guidance includes an assumption that comparable store sales will
increase in a range of 1% to 3% in the second half of 2019.
Capital Return Program
The Company announced that its Board of Directors has declared a
quarterly cash dividend of $0.08 per common share, payable on
September 17, 2019, to shareholders of record as of the close of
business on September 3, 2019.
During the first half of 2019, the Company repurchased 273,000
shares of its common stock at an aggregate cost of $4.5 million. At
August 3, 2019, $5.1 million remained available under the existing
stock repurchase authorization, and the Company had no debt and
$82.2 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)
223-2689. A replay of the conference call will be available until
August 29, 2019, by dialing (402) 977-9140 and entering the
passcode, 21927362.
The live broadcast of Citi Trends' conference call will be
available online at the Company's website, www.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 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
562 stores located in 32 states. Citi Trends’ website address is
www.cititrends.com. CTRN-G
*Non-GAAP Financial
Measure
The 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 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
OPERATIONS (unaudited) (in thousands, except per share
data) Thirteen Weeks Ended Thirteen
Weeks Ended August 3, 2019 August 4, 2018
(unaudited) (unaudited) Net sales
$
182,830
$
181,999
Cost of sales (exclusive of depreciation shown separately
below)
(114,612
)
(110,398
)
Selling, general and administrative expenses
(62,989
)
(62,285
)
Depreciation
(4,607
)
(4,676
)
Asset impairment
(472
)
(942
)
Income from operations
150
3,698
Interest income
414
363
Interest expense
(40
)
(38
)
Income before income taxes
524
4,023
Income tax expense
(147
)
(788
)
Net income
$
377
$
3,235
Basic net income per common share
$
0.03
$
0.24
Diluted net income per common share
$
0.03
$
0.24
Weighted average number of shares outstanding Basic
11,882
13,314
Diluted
11,882
13,351
Twenty-Six Weeks Ended
Twenty-Six Weeks Ended August 3, 2019 August 4,
2018 (unaudited) (unaudited) Net sales
$
387,862
$
393,031
Cost of sales (exclusive of depreciation shown separately
below)
(242,850
)
(239,811
)
Selling, general and administrative expenses
(126,436
)
(125,290
)
Depreciation
(9,221
)
(9,650
)
Asset impairment
(472
)
(942
)
Income from operations
8,883
17,338
Interest income
793
658
Interest expense
(78
)
(75
)
Income before income taxes
9,598
17,921
Income tax expense
(1,433
)
(3,389
)
Net income
$
8,165
$
14,532
Basic net income per common share
$
0.68
$
1.08
Diluted net income per common share
$
0.68
$
1.08
Weighted average number of shares outstanding Basic
11,929
13,446
Diluted
11,944
13,491
CITI TRENDS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited) (in thousands) August 3, 2019
August 4, 2018 (unaudited) (unaudited) Assets: Cash and cash
equivalents
$
27,425
$
40,992
Short-term investment securities
37,776
36,009
Inventory
132,050
138,801
Prepaid and other current assets
17,719
17,701
Property and equipment, net
54,843
57,154
Operating lease right of use assets (1)
152,932
-
Long-term investment securities
16,976
13,020
Other noncurrent assets
7,927
7,105
Total assets
$
447,648
$
310,782
Liabilities and Stockholders' Equity: Accounts payable
$
71,303
$
72,096
Accrued liabilities
25,327
27,358
Current operating lease liabilities (1)
41,976
-
Other current liabilities
1,671
2,005
Noncurrent operating lease liabilities (1)
118,102
-
Noncurrent liabilities
1,869
8,338
Total liabilities
260,248
109,797
Total stockholders' equity
187,400
200,985
Total liabilities and stockholders' equity
$
447,648
$
310,782
(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 and earnings per
diluted share adjusted for proxy contest-related expenses for the
twenty-six weeks ended August 3, 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 or earnings per diluted share
prepared in accordance with generally accepted accounting
principles (GAAP).
Thirteen Weeks Ended August 3,
2019 As Reported Adjustment (1) As
Adjusted (unaudited) (unaudited) (unaudited) Net sales
$
182,830
$
-
$
182,830
Cost of sales (exclusive of depreciation shown separately
below)
(114,612
)
-
(114,612
)
Selling, general and administrative expenses
(62,989
)
-
(62,989
)
Depreciation
(4,607
)
-
(4,607
)
Asset impairment
(472
)
-
(472
)
Income from operations
150
-
150
Interest income
414
-
414
Interest expense
(40
)
-
(40
)
Income before income taxes
524
-
524
Income tax expense
(147
)
-
(147
)
Net income
$
377
$
-
$
377
Basic net income per common share
$
0.03
$
0.03
Diluted net income per common share
$
0.03
$
0.03
Weighted average number of shares outstanding Basic
11,882
11,882
Diluted
11,882
11,882
Twenty-Six Weeks Ended August 3, 2019 As
Reported Adjustment (1) As Adjusted (unaudited)
(unaudited) (unaudited) 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) Proxy contest expenses and related tax effects
View source
version on businesswire.com: https://www.businesswire.com/news/home/20190822005115/en/
Bruce Smith President and
Chief Executive Officer (912) 443-2075
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