Citi Trends Beats, Profit Dips - Analyst Blog
16 May 2012 - 9:59PM
Zacks
Citi Trends Inc. (CTRN), a value-priced
retailer of urban fashion apparel and accessories, posted
better-than-expected first-quarter 2012 results. Quarterly earnings
of 69 cents per share comprehensively beat the Zacks Consensus
Estimate of 47 cents per share.
However, quarterly earnings declined 16.9% year over year from
83 cents, primarily due to a significant fall in comparable-store
sales coupled with rising operating expenses.
Turning to Numbers
During the quarter, Citi Trends recorded a 4.5% year-over-year
growth in net sales to $197.7 million compared to $189.2 million in
the comparable prior-year quarter. However, the total revenue
surpassed the Zacks Consensus Estimate of $195 million. Comparable
store sales dropped 5% in the first quarter of fiscal 2012.
In the first quarter 2012, Citi Trends' gross profit inched down
0.54% to $74.7 million from $75.1 million in the year-ago quarter,
mainly due to higher cost of sales. Consequently, gross margin
contracted 190 basis points to 37.8% from 39.7% in the prior-year
quarter.
Selling, general and administrative expenses in the quarter
increased 3.1% year over year to $52.7 million. Accordingly, the
company's operating profit came in at $15.9 million compared with
$18.4 million in the year-ago period. Operating margin during the
quarter contracted 170 basis points to 8.0% compared with 9.7% in
the prior-year period.
Financials
Citi Trends had no debt on its balance sheet at the end of the
quarter. Cash and cash equivalents were $64.0 million compared with
$76.8 million at the end of first quarter of fiscal 2011. At the
end of the quarter, the company shareholders' equity totaled $206.3
million compared with $217.8 million in the prior-year period.
Stores Count
In the first quarter, Citi Trends further expanded its reach by
opening two new stores, and closed down two Citi Trends store.
Additionally, in first-quarter 2012, the company relocated one
store.
Therefore, all this put together brought the company’s total
store count at the end of the quarter to 511 stores. The company
operates across 29 states in the Southeast, Mid-Atlantic and
Midwest regions as well as in the states of Texas and
California.
Our Take
Citi Trends operates in a highly fragmented specialty retail
sector and faces intense competition from larger off-price rivals
such as The TJX Companies Inc. (TJX) and
Ross Stores Inc. (ROST).
Citi Trends currently has a short-term Zacks #3 Rank which
translates into a short-term Hold rating. However, we retain our
long-term Underperform recommendation on the shares.
CITI TRENDS INC (CTRN): Free Stock Analysis Report
ROSS STORES (ROST): Free Stock Analysis Report
TJX COS INC NEW (TJX): Free Stock Analysis Report
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