Fourth quarter 2017 pretax income increased
23% to $9.9 million
Fourth quarter comparable store sales up
5.6%
Authorizes $25 million share repurchase
program
Citi Trends, Inc. (NASDAQ: CTRN) today reported results for the
fourth quarter and fiscal year ended February 3, 2018.
The Company’s 2017 fiscal year included 53 weeks compared with
52 weeks in fiscal 2016. Accordingly, year-over-year comparisons of
total sales for the fourth quarter and full year are affected by an
extra week of sales in 2017. However, for comparable store sales,
the Company is reporting on a comparable weeks basis (e.g. the 14
and 53 weeks ended February 3, 2018 compared with the 14 and 53
weeks ended February 4, 2017, respectively).
Financial Highlights – 14-week fourth
quarter ended February 3, 2018
Total sales in the 14-week quarter ended February 3, 2018
increased 14.4% to $212.1 million compared with $185.5 million in
the 13-week quarter ended January 28, 2017. The extra week
contributed $11.8 million to total sales in the fourth quarter of
fiscal 2017. Fourth quarter comparable store sales increased 5.6%,
comparing the 14 weeks ended February 3, 2018 with the 14 weeks
ended February 4, 2017.
Pretax income increased 23.3% to $9.9 million in the fourth
quarter of 2017 compared with $8.1 million in last year’s fourth
quarter. Income tax expense increased to $4.7 million in this
year’s fourth quarter compared with $2.5 million in the fourth
quarter of 2016, including $1.6 million of expense, or $0.12 per
diluted share, resulting from the enactment of the Tax Cuts and
Jobs Act (the “TCJA”) in December 2017. Most of the impact of the
TCJA on income tax expense related to a one-time, non-cash
write-down to remeasure the net deferred tax assets on the
Company’s balance sheet based on the lower enacted federal
corporate income tax rate.
This year’s fourth quarter net income was $5.2 million, or $6.9
million* when adjusted for the effect of the enactment of the TCJA,
compared with $5.6 million in the fourth quarter of fiscal 2016.
Earnings per diluted share in the fourth quarter of fiscal 2017
were $0.38, or $0.50* when adjusted for the effect of the TCJA,
compared with $0.38 in the fourth quarter of fiscal 2016,
representing adjusted year-over-year growth of 31.6%.
Financial Highlights – 53-week fiscal
year ended February 3, 2018
Total sales in the 53-week fiscal year ended February 3, 2018
increased 8.6% to $755.2 million compared with $695.2 million in
the 52-week fiscal year ended January 28, 2017. Comparable store
sales increased 4.5%, comparing the 53 weeks ended February 3, 2018
with the 53 weeks ended February 4, 2017.
Pretax income was $23.5 million in fiscal 2017, or $26.0
million* when adjusted for proxy contest-related expenses, compared
with $19.4 million in 2016. Income tax expense increased to $8.9
million this year compared with $6.0 million last year, with the
increase including the aforementioned $1.6 million of expense
resulting from the TCJA enactment.
The Company had net income of $14.6 million, or $17.7 million*
when adjusted for proxy contest-related expenses and the effect of
the TCJA, in fiscal 2017 compared with $13.3 million in fiscal
2016. Earnings per diluted share in 2017 were $1.03, or $1.26* when
adjusted for proxy contest-related expenses and the effect of the
TCJA, compared with $0.91 in 2016, representing adjusted
year-over-year growth of 38.5%.
Bruce Smith, Chief Executive Officer, commented, “Fourth quarter
sales and earnings continued to build on the broad-based strength
in all five of our major merchandise categories that we saw in the
first three quarters of the year. The highlight of the quarter was
a 5.6% comparable store sales increase, particularly since it was
on top of a 3.4% increase in last year’s fourth quarter. In
addition, expenses were very well-controlled and inventory turns
continued to improve. As we have entered fiscal 2018, comparable
store sales are up 3% through yesterday.”
Citi Trends opened 20 new stores, relocated or expanded 10 other
stores, and closed 4 stores in fiscal 2017.
Capital Return Program
As the next step in the Company’s expanded capital return
program announced in April 2017, the Company’s Board of Directors
today announced the authorization of another $25 million share
repurchase program, which the Company expects to fund from cash on
hand.
Also, as previously announced, the Board of Directors has
declared a quarterly dividend payment of $0.08 per share, which
will be paid on March 20, 2018 to stockholders of record as of
March 6, 2018.
Mr. Smith commented, “These actions taken by our Board are a
continuation of the capital return program started in 2015 when we
authorized and completed a $15 million share repurchase program and
initiated our first quarterly cash dividend. The expansion of the
program in 2017 with the authorization and completion of a $25
million share repurchase program and an increase in the dividend
rate, coupled with these steps announced today, demonstrate our
financial strength, as well as the Board’s commitment to
appropriately returning excess capital to stockholders while
maintaining the financial flexibility required to invest in and
grow our business.”
Guidance
For the 52-week fiscal year ending February 2, 2019, the Company
expects:
- Comparable store sales to increase in
the range of 2% to 3%, on top of the 4.5% increase in fiscal
2017;
- Total sales to increase in the range of
3% to 4%, including the impact of opening approximately 20 new
stores in 2018 and having one fewer week than in the 53-week 2017
fiscal year;
- Earnings per diluted share in the range
of $1.55 to $1.70, compared with adjusted earnings per diluted
share of $1.26* in fiscal 2017, with the 2018 range including a
benefit of $0.23 to $0.25 resulting from the lower income tax rate
prescribed by the TCJA. Without this income tax benefit, the
guidance implies a 5% to 15% improvement in earnings per diluted
share next year. The 2018 guidance is based on a fully diluted
share count of 13.7 million shares, an effective income tax rate of
20% and no impact on earnings from having one fewer week, because
that week is approximately break-even from a net income standpoint.
To the extent the Company repurchases shares under its new program
during 2018, the Company expects that earnings per diluted share
would benefit accordingly.
Looking at longer term goals, the Company expects to increase
comparable store sales at a rate of approximately 3% each year and
increase store square footage 2% to 3% each year through new store
growth, which would be expected to result in earnings increases of
approximately 12% to 15% annually. In addition, the Company expects
that the Board’s commitment to appropriately return excess capital
to stockholders would continue in the future.
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) 231-2926. A replay of the conference call will be
available until March 23, 2018, by dialing (402) 977-9140 and
entering the passcode, 21882248.
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
553 stores located in 31 states. Citi Trends’ website address is
www.cititrends.com. CTRN-G
*Non-GAAP Financial
Measures
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 guidance are forward-looking statements.
Investors are cautioned that any such forward-looking statements
are subject to the finalization of the Company’s year-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
January 28, 2017. 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 earnings 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)
Fourteen Weeks Ended
Thirteen Weeks Ended February 3, 2018
January 28, 2017 (unaudited) (unaudited) Net sales $ 212,143
$ 185,511 Cost of sales (exclusive of depreciation shown
separately below) (131,363 ) (114,822 ) Selling, general and
administrative expenses (65,623 ) (58,593 ) Depreciation (5,020 )
(4,129 ) Asset impairment (430 ) (31 ) Income from
operations 9,707 7,936 Interest income 266 163 Interest expense
(38 ) (39 ) Income before income taxes 9,935 8,060
Income tax expense (4,688 ) (2,510 ) Net income $
5,247 $ 5,550 Basic net income per common
share $ 0.39 $ 0.38 Diluted net income per common
share $ 0.38 $ 0.38 Weighted average
shares used to compute basic net income per share 13,568
14,680 Weighted average shares used to compute
diluted net income per share 13,652 14,693
Fifty-Three Weeks Ended
Fifty-Two Weeks Ended February 3, 2018 January 28,
2017 (unaudited) (unaudited) Net sales $ 755,241 $ 695,175
Cost of sales (exclusive of depreciation shown separately
below) (466,022 ) (428,167 ) Selling, general and administrative
expenses (247,062 ) (230,666 ) Depreciation (18,883 ) (17,090 )
Asset impairment (507 ) (313 ) Income from operations
22,767 18,939 Interest income 883 571 Interest expense (150
) (159 ) Income before income taxes 23,500 19,351 Income tax
expense (8,926 ) (6,020 ) Net income $ 14,574
$ 13,331 Basic net income per common share $ 1.04
$ 0.91 Diluted net income per common share $ 1.03
$ 0.91 Weighted average shares used to
compute basic net income per share 14,058
14,657 Weighted average shares used to compute diluted net
income per share 14,116 14,662
CITI TRENDS, INC. CONDENSED CONSOLIDATED
BALANCE SHEETS (unaudited) (in thousands)
February 3, 2018 January 28, 2017 (unaudited)
(unaudited) Assets: Cash and cash equivalents $ 48,451 $ 49,253
Short-term investment securities 31,500 38,026 Inventory 137,701
134,649 Prepaid and other current assets 15,694 15,384 Property and
equipment, net 61,777 59,280 Long-term investment securities 25,451
26,691 Other noncurrent assets 6,497 9,231
Total assets $ 327,071 $ 332,514
Liabilities and Stockholders' Equity: Accounts payable $ 75,947 $
75,433 Accrued liabilities 30,775 24,505 Other current liabilities
2,448 471 Noncurrent liabilities 8,433 8,514
Total liabilities 117,603 108,923 Total stockholders'
equity 209,468 223,591 Total
liabilities and stockholders' equity $ 327,071 $ 332,514
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 pretax income adjusted for proxy contest expenses and
net income and earnings per diluted share adjustedfor proxy contest
expenses and the effect of the Tax Cuts and Jobs Act. The Company
believes that excluding proxy contest expenses and their related
taxeffects and the effect of the Tax Cuts and Jobs Act from its
financial results reflects operating results that are more
indicative of the Company's ongoingoperating performance while
improving comparability to prior periods, and as such, may provide
investors with an enhanced understanding of theCompany's past
financial performance and prospects for the future. This
information is not intended to be considered in isolation or as a
substitute for netincome, earnings per common share, or expense
information prepared in accordance with generally accepted
accounting principles (GAAP).
Fourteen Weeks Ended February 3,
2018 As Reported Adjustment (1)
Adjustment (2) As
Adjusted (unaudited) (unaudited) (unaudited) (unaudited)
Net sales $ 212,143 $ - $ - $ 212,143 Cost of sales
(exclusive of depreciation shown separately below) (131,363 ) - -
(131,363 ) Selling, general and administrative expenses (65,623 ) -
- (65,623 ) Depreciation and impairment (5,020 ) - - (5,020 ) Asset
impairment (430 ) - - (430 )
Income from operations 9,707 - - 9,707 Interest income 266 - - 266
Interest expense (38 ) - - (38 )
Income before income taxes 9,935 - - 9,935 Income tax expense
(4,688 ) 1,609 (3,079 ) Net income $
5,247 $ - $ 1,609 $ 6,856 Basic net
income per common share $ 0.39 $ 0.51 Diluted net
income per common share $ 0.38 $ 0.50 Weighted
average number of shares outstanding Basic 13,568
13,568 Diluted 13,652 13,652
Fifty-Three Weeks Ended February 3,
2018 As Reported Adjustment (1) Adjustment
(2) As Adjusted (unaudited) (unaudited) (unaudited)
(unaudited) Net sales $ 755,241 $ - $ - $ 755,241
Cost of sales (exclusive of depreciation shown separately below)
(466,022 ) - - (466,022 ) Selling, general and administrative
expenses (247,062 ) 2,516 - (244,546 ) Depreciation and impairment
(18,883 ) - - (18,883 ) Asset impairment (507 ) -
- (507 ) Income from operations 22,767 2,516 -
25,283 Interest income 883 - - 883 Interest expense (150 )
- - (150 ) Income before income taxes
23,500 2,516 - 26,016 Income tax expense (8,926 )
(956 ) 1,609 (8,273 ) Net income $ 14,574 $
1,560 $ 1,609 $ 17,743 Basic net income per
common share $ 1.04 $ 1.26 Diluted net income per
common share $ 1.03 $ 1.26 Weighted average
number of shares outstanding Basic 14,058
14,058 Diluted 14,116 14,116
(1) Proxy contest expenses and related tax effects (2) Tax
Cuts and Jobs Act effect
View source
version on businesswire.com: http://www.businesswire.com/news/home/20180316005073/en/
Citi Trends, Inc.Bruce Smith, 912-443-2075Chief Executive
Officer
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