Fourth quarter comparable store sales up
3.1%
Fourth quarter earnings per diluted share up
42% to $0.84, or up 49% to $0.88 on an adjusted basis*
Fourth quarter gross profit expands 235
basis points to 39.7%
Continued capital return program, returning
$32 million to shareholders in fiscal 2019 and authorizing a new
$30 million share repurchase program
Fiscal 2019 earnings per diluted share were
$1.41, or $1.56 on an adjusted basis* exceeding prior
guidance
Initial guidance for fiscal 2020 earnings
per diluted share of $1.75 to $1.85 on an adjusted basis*
Citi Trends, Inc. (NASDAQ:
CTRN) today reported results for the fourth quarter and fiscal year
ended February 1, 2020.
Financial Highlights – 13-week fourth
quarter ended February 1, 2020
- Total sales increased 4.9% to $211.0 million compared with
$201.2 million in the fourth quarter of fiscal 2018
- Comparable store sales increased 3.1%
- Gross profit expands 235 basis points to 39.7% reflecting
strong full price selling and lower markdown rates
- Selling, general and administrative expenses de-leveraged 151
basis points to 32.1% primarily due to higher distribution center
labor costs and the reversal of an accrual for incentive
compensation in the prior year
- Operating profit increased 27.7% to $11.3 million, or an
operating profit margin of 5.3%, up 116 basis points as compared to
the fourth quarter of fiscal 2018
- Net income was $9.4 million compared with $7.3 million in the
fourth quarter of fiscal 2018 on a GAAP basis, or $9.9 million* in
the fourth quarter of fiscal 2019 when adjusted for interim CEO
related expenses
- Earnings per diluted share were $0.84 compared with $0.59 in
the fourth quarter of fiscal 2018 on a GAAP basis, or $0.88* in the
fourth quarter of fiscal 2019 when adjusted for interim CEO related
expenses
- Quarter-end inventory was down 1.1% comparing favorably to the
4.9% total sales increase for the fourth quarter, which led to a
high quality inventory position entering the spring season
Financial Highlights – 52-week fiscal
year ended February 1, 2020
- Total sales increased 1.6% to $781.9 million compared with
$769.6 in fiscal 2018
- Comparable store sales decreased 0.1%
- Net income was $16.5 million compared with $21.4 million in
fiscal 2018 on a GAAP basis, or $18.2 million* in fiscal 2019 when
adjusted for interim CEO related expenses, proxy contest-related
expenses and asset impairment expenses
- Earnings per diluted share were $1.41 compared with $1.64 in
fiscal 2018 on a GAAP basis, or $1.56* in fiscal 2019 when adjusted
for interim CEO related expenses, proxy contest-related expenses
and asset impairment expenses, compared to $1.71* in fiscal 2018 on
an adjusted basis
- In fiscal 2019, Citi Trends opened 16 new stores; remodeled,
relocated or expanded 25 stores; and closed 7 stores to end the
year at a total of 571 open stores.
Executive Chairman
Comments:
Peter Sachse, Executive
Chairman, commented, “We ended 2019 on a high note with strong top
and bottom line results that reflect continued progress on a number
of our strategic initiatives. We successfully continued to shift
our offering towards more non-apparel merchandise, while fueling
our growth with lower inventory levels and faster turns, resulting
in significantly higher gross profit. We are entering the spring
season with current merchandise at lower inventory levels than in
recent years, which will enable us to deliver a higher level of
fresh fashion and drive our sales in the first half of the year. I
am confident we are well positioned to achieve our three year
objectives, including a net sales CAGR of approximately 8.5%
reaching $1.0 billion in sales and delivering an EPS CAGR of
20-25%.”
Mr. Sachse continued, “Like
many others, we are paying close attention to developments relating
to the outbreak of the coronavirus (COVID-19). First and foremost,
we are focused on the health and safety of our employees and
customers, as well as planning for business continuity. We are
closely monitoring local, state and federal government agencies to
ensure we follow best practices surrounding the coronavirus. The
extent and duration of the impacts that the coronavirus may have on
our business are not known at this time, but we are monitoring
developments in order to be in a position to take appropriate
action.”
Guidance
- For the first five plus weeks of fiscal 2020, the Company is
+3.6% in comparable stores sales, despite a delay in income tax
refunds that materially affected the third week of February.
- The Company’s guidance for first quarter earnings per diluted
share is in a range of $0.87 to $0.91* on an adjusted basis, which
excludes an expected $0.04 per share impact of management
transition costs and compares with last year’s first quarter of
$0.72* on an adjusted basis.
- The Company’s guidance for the first quarter is based on a
comparable store sales increase of approximately 2.5% to 3.0%.
- For fiscal 2020, the Company expects diluted earnings per share
to be in a range of $1.75 to $1.85* on an adjusted basis, assuming
a comparable store sales increase in a range of 2.5% to 3.5%,
compared with adjusted diluted earnings per share of $1.56* in
fiscal 2019.
The Company’s 2020 guidance
does not include any potential impact related to the
coronavirus.
Long-Term Strategic Plan
Update
The Company is continuing to
make meaningful progress on its long-term strategic plan,
including:
- Approving 22 of the planned 30 store openings for fiscal
2020
- Completing 20 of the 50 planned remodels for fiscal 2020 with
the remaining 30 targeted for completion by the end of May
2020
- Hiring Deloitte to identify and execute our strategic systems
road map
- Making significant improvements to the Company’s supply chain,
including reducing freight costs and efficiencies within the
distribution centers
Capital Return Program
As previously announced on
November 26, 2019, the Company’s Board of Directors authorized a
$25 million share repurchase program. Since that announcement, the
Company has completed that repurchase program. Since the beginning
of 2019, the Company has returned approximately $32 million to its
shareholders in the form of share repurchases and
dividends.
The Company’s Board of
Directors today announced the authorization of another $30 million
share repurchase program. The Company expects to fund the share
repurchase program from cash on hand.
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) 231-2931. A replay of the
conference call will be available until March 20, 2020, by dialing
(402) 977-9140 and entering the passcode, 21951761.
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, accessories and
home goods for the entire family. The Company operates 574 stores
located in 33 states. Citi Trends’ website address is
www.cititrends.com. CTRN-G
*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 GAAP and
non-GAAP measures used in 2020 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’s
control and its unavailability could have a significant impact on
its financial results.
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,"
“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 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, the impact of
potential global health emergencies such as COVID-19 (coronavirus),
including potential negative impacts on the global economy and
foreign sourcing, 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 February 1, 2020 February 2, 2019
(unaudited) (unaudited) Net sales
$
211,013
$
201,158
Cost of sales (exclusive of depreciation shown separately
below)
(127,311
)
(126,095
)
Selling, general and administrative expenses
(67,654
)
(61,460
)
Depreciation
(4,794
)
(4,636
)
Asset impairment
-
(152
)
Income from operations
11,254
8,815
Interest income
363
374
Interest expense
(41
)
(40
)
Income before income taxes
11,576
9,149
Income tax expense
(2,154
)
(1,802
)
Net income
$
9,422
$
7,347
Basic net income per common share
$
0.84
$
0.59
Diluted net income per common share
$
0.84
$
0.59
Weighted average number of shares outstanding Basic
11,202
12,447
Diluted
11,271
12,471
Fifty-Two Weeks Ended
Fifty-Two Weeks Ended February 1, 2020 February 2,
2019 (unaudited) (unaudited) Net sales
$
781,925
$
769,553
Cost of sales (exclusive of depreciation shown separately
below)
(484,740
)
(476,326
)
Selling, general and administrative expenses
(259,629
)
(247,938
)
Depreciation
(18,535
)
(18,886
)
Asset impairment
(472
)
(1,274
)
Income from operations
18,549
25,129
Interest income
1,577
1,353
Interest expense
(158
)
(154
)
Income before income taxes
19,968
26,328
Income tax expense
(3,465
)
(4,954
)
Net income
$
16,503
$
21,374
Basic net income per common share
$
1.41
$
1.64
Diluted net income per common share
$
1.41
$
1.64
Weighted average number of shares outstanding Basic
11,674
13,030
Diluted
11,699
13,070
CITI TRENDS, INC. CONDENSED CONSOLIDATED BALANCE
SHEETS (unaudited) (in thousands) February 1,
2020 February 2, 2019 (unaudited) (unaudited) Assets:
Cash and cash equivalents
$
19,923
$
17,863
Short-term investment securities
27,562
50,350
Inventory
138,258
139,841
Prepaid and other current assets
15,464
17,544
Property and equipment, net
64,985
56,224
Operating lease right of use assets (1)
169,854
-
Long-term investment securities
15,675
8,883
Other noncurrent assets
7,424
7,284
Total assets
$
459,145
$
297,989
Liabilities and Stockholders' Equity: Accounts payable
$
79,596
$
73,391
Accrued liabilities
27,768
28,057
Current operating lease liabilities (1)
42,944
-
Other current liabilities
554
921
Noncurrent operating lease liabilities (1)
135,316
-
Noncurrent liabilities
1,923
8,195
Total liabilities
288,101
110,564
Total stockholders' equity
171,044
187,425
Total liabilities and stockholders' equity
$
459,145
$
297,989
(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 and interim CEO related expenses and
earnings per diluted share adjusted for proxy contest expenses,
interim CEO related expenses and asset impairment expenses for the
thirteen and fifty-two weeks ended February 1, 2020, as well as the
fifty-two weeks ended February 2, 2019 and the thirteen weeks ended
May 4, 2019. The Company believes that excluding proxy contest
expenses, interim CEO related expenses and asset impairment
expenses together with 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).
Fifty-Two Weeks Ended February 1, 2020 As Reported
Adjustment (1) Adjustment (2) Adjustment (3)
As Adjusted (unaudited) (unaudited) (unaudited) Net
sales
$
781,925
$
-
$
-
$
-
$
781,925
Cost of sales (exclusive of depreciation shown separately
below)
(484,740
)
-
-
-
(484,740
)
Selling, general and administrative expenses
(259,629
)
571
1,042
-
(258,016
)
Depreciation
(18,535
)
-
-
-
(18,535
)
Asset impairment
(472
)
-
-
472
-
Income from operations
18,549
571
1,042
472
20,634
Interest income
1,577
-
-
-
1,577
Interest expense
(158
)
-
-
-
(158
)
Income before income taxes
19,968
571
1,042
472
22,053
Income tax expense
(3,465
)
(99
)
(181
)
(82
)
(3,827
)
Net income
$
16,503
$
472
$
861
$
390
$
18,226
Basic net income per common share
$
1.41
$
1.56
Diluted net income per common share
$
1.41
$
1.56
Weighted average number of shares outstanding Basic
11,674
11,674
Diluted
11,699
11,699
(1) Interim CEO related expenses and related tax effects (2)
Proxy contest expenses and related tax effects (3) Asset impairment
expenses and related tax effects
Thirteen Weeks Ended February
1, 2020 As Reported Adjustment (1) As
Adjusted (unaudited) (unaudited) (unaudited) Net sales
$
211,013
$
-
$
211,013
Cost of sales (exclusive of depreciation shown separately
below)
(127,311
)
-
(127,311
)
Selling, general and administrative expenses
(67,654
)
571
(67,083
)
Depreciation
(4,794
)
-
(4,794
)
Asset impairment
-
-
-
Income from operations
11,254
571
11,825
Interest income
363
-
363
Interest expense
(41
)
-
(41
)
Income before income taxes
11,576
571
12,147
Income tax expense
(2,154
)
(106
)
(2,260
)
Net income
$
9,422
$
465
$
9,887
Basic net income per common share
$
0.84
$
0.88
Diluted net income per common share
$
0.84
$
0.88
Weighted average number of shares outstanding Basic
11,202
11,202
Diluted
11,271
11,271
Thirteen Weeks Ended May 4, 2019 As
Reported Adjustment (2) 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 number of shares outstanding Basic
11,976
11,976
Diluted
12,006
12,006
(1) Interim CEO related expenses and related tax
effects (2) Proxy contest expenses and related tax effects
Fifty-Two Weeks Ended February 2, 2019 As Reported
Adjustment (1) As Adjusted (unaudited) (unaudited)
(unaudited) Net sales
$
769,553
$
-
$
769,553
Cost of sales (exclusive of depreciation shown separately
below)
(476,326
)
-
(476,326
)
Selling, general and administrative expenses
(247,938
)
-
(247,938
)
Depreciation
(18,886
)
-
(18,886
)
Asset impairment
(1,274
)
1,274
-
Income from operations
25,129
1,274
26,403
Interest income
1,353
-
1,353
Interest expense
(154
)
-
(154
)
Income before income taxes
26,328
1,274
27,602
Income tax expense
(4,954
)
(240
)
(5,194
)
Net income
$
21,374
$
1,034
$
22,408
Basic net income per common share
$
1.64
$
1.72
Diluted net income per common share
$
1.64
$
1.71
Weighted average number of shares outstanding Basic
13,030
13,030
Diluted
13,070
13,070
(1) Asset impairment expenses and related tax effects
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200313005058/en/
Investor Contact: ICR, Inc. Tom Filandro, 646-277-1235
Tom.Filandro@icrinc.com
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