Comparable store sales increase 2.6% in the
quarter; full-year guidance raised
Plans to annually grow store base by 25 to
30 stores and remodel 50 stores
Peter Sachse named Interim CEO
Authorizes $25 million share repurchase
program
Citi Trends, Inc. (NASDAQ: CTRN) today reported unaudited
results for the third quarter of fiscal 2019.
Financial Highlights – Third quarter
ended November 2, 2019
Total sales in the third quarter ended November 2, 2019
increased 4.4% to $183.1 million, compared with $175.4 million in
the third quarter ended November 3, 2018. Comparable store sales
increased 2.6% in the quarter.
The Company had a net loss of $(1.1) million, or $(0.09) per
diluted share, in the third quarter of 2019, compared with a net
loss of $(0.5) million, or $(0.04) per diluted share, in last
year’s third quarter. Selling, general and administrative expenses
in this year’s third quarter included approximately $0.7 million of
costs associated with the planned CEO transition and Board changes
that were reported previously. Such expenses had an adverse impact
on loss per diluted share of $0.05 during the quarter.
During the third quarter, the Company opened six new stores,
relocated or expanded two stores and closed two stores, ending the
period with 566 stores in operation.
Financial Highlights – First three
quarters ended November 2, 2019
Total sales in the first three quarters of fiscal 2019 increased
0.4% to $570.9 million, compared with $568.4 million in the first
three quarters of fiscal 2018. Comparable store sales decreased
1.2% in the first three quarters of this year.
In the first three quarters of 2019, the Company had net income
of $7.1 million on a GAAP basis, or $8.0 million when adjusted for
proxy contest-related expenses*, compared with net income in last
year’s first three quarters of $14.0 million. Earnings per diluted
share in the first three quarters of 2019 were $0.60 on a GAAP
basis, or $0.67 when adjusted for proxy contest-related expenses*,
compared with earnings per diluted share of $1.06 in the first
three quarters of 2018.
Strategic Initiatives
Update
Bruce Smith, President and Chief Executive Officer, commented,
“In the third quarter, we continued to make meaningful progress
with our strategic initiatives. Our ongoing efforts to shift the
merchandise mix more towards the growing accessory and home
categories contributed to our best comparable store sales result
since last year’s second quarter. In addition to the strength in
non-apparel sales in the third quarter, we were also encouraged to
see positive comparable store sales in our Ladies’ and Men’s
apparel categories with a significantly leaner inventory
investment.”
Smith further noted, “Comparable store sales increased 2.6% in
the quarter, with October registering the largest increase,
benefiting from an accelerated shift towards our non-apparel
merchandise. Importantly, the sales gains were achieved on
inventories in comparable stores that were 7% lower than at the end
of last year’s third quarter. Given the high quality of our
inventory, coupled with the recent sales momentum, including solid
trends thus far in the fourth quarter, we are optimistic about the
upcoming holiday season.”
Smith continued, “Lisa Powell, our new Chief Merchandising
Officer, has now been with the Company for almost two months and is
keenly focused on continuing our positive momentum in the areas of
merchandising, planning and allocation, while Peter Sachse, Special
Advisor to the CEO, has continued to work with management on the
strategic initiatives that were outlined last quarter.
In connection with that work, we have prepared a roadmap to
implement these strategies, which includes a plan for the
organizational structure, resources and systems needed to achieve
our goals related to the profitable growth of comparable store
sales and new stores.
A critical portion of this roadmap involves the accelerated
shift in our merchandise mix towards non-apparel, which includes
moving aggressively to more gift-giving merchandise during the
holiday season and expanded home assortments throughout the year.
Fixtures have been added to our stores to accommodate this shift,
and we are encouraged by the early results.
In addition, the roadmap contemplates the optimization of our
real estate opportunities over the next three years, as we aim to
open 25 to 30 new stores annually and complete major remodels in 50
existing stores each year. We have already approved 14 new store
locations to be opened in 2020 and expect to perform major remodels
in 20 stores in January 2020, followed closely by 30 more stores in
the second quarter of 2020.”
Guidance
The Company is increasing the lower end of its full year fiscal
2019 earnings per diluted share guidance, resulting in a range of
$1.40 to $1.50 when adjusted for proxy-contest related expenses*,
which includes an assumption that comparable store sales will
increase in a range of 2% to 4% in the fourth quarter of 2019.
Leadership Transition
The Board of Directors today announced that Peter Sachse, a
member of the Company’s Board of Directors and the current Special
Advisor to the CEO, has been appointed as the Interim Chief
Executive Officer of the Company effective as of December 9, 2019.
The Board is continuing its search for a permanent CEO. Mr. Smith
intends to remain with the Company as its President until February
1, 2020 and will assist Mr. Sachse in all matters that relate to
the implementation of the Company’s strategic plan.
“We are pleased that Peter has accepted the role of Interim CEO
to continue the momentum that he and Bruce have helped create since
Peter stepped into the role of Special Advisor to the CEO in June
of this year,” said Citi Trends’ Board Chairman, Brian Carney. “It
allows us to continue to execute on the strategic initiatives
within our three-year roadmap while being very thoughtful about
finding the right permanent CEO for Citi Trends. And, we are very
pleased that Bruce will continue to assist Peter in those duties
through the end of our fiscal year, creating a smooth transition as
we capitalize on the positive changes that are occurring in our
business.”
Capital Return Program
During the first three quarters of 2019, the Company repurchased
563,000 shares of its common stock at an aggregate cost of $9.7
million, completing its most recent authorization. The Company’s
Board of Directors today announced the authorization of another $25
million share repurchase program as the next step in its expanded
capital return program. The Company expects to fund the share
repurchase program from cash on hand.
In addition, the Company announced that its Board of Directors
has declared a quarterly cash dividend of $0.08 per common share,
payable on December 24, 2019, to shareholders of record as of the
close of business on December 10, 2019.
Mr. Carney commented, “The Board’s action today, authorizing an
additional $25 million share repurchase program, is another
extension of the capital return program that was initiated in 2015
and expanded in 2017, resulting in returns of capital to
shareholders totaling $107 million to date in the form of dividends
and share repurchases. Such actions demonstrate the Board’s
confidence in our business and its commitment to rewarding
stockholders while maintaining the financial flexibility needed to
invest in and grow our business.”
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)
223-4396. A replay of the conference call will be available until
December 3, 2019, by dialing (402) 977-9140 and entering the
passcode, 21932471.
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
566 stores located in 33 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," “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,
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 November 2, 2019 November 3, 2018
(unaudited) (unaudited) Net sales
$
183,050
$
175,364
Cost of sales (exclusive of depreciation shown separately
below)
(114,579)
(110,420)
Selling, general and administrative expenses
(65,539)
(61,189)
Depreciation
(4,520)
(4,600)
Asset impairment
-
(180)
Loss from operations
(1,588)
(1,025)
Interest income
421
321
Interest expense
(39)
(39)
Loss before income taxes
(1,206)
(743)
Income tax benefit
122
237
Net loss
$
(1,084)
$
(506)
Basic net loss per common share
$
(0.09)
$
(0.04)
Diluted net loss per common share
$
(0.09)
$
(0.04)
Weighted average number of shares outstanding Basic
11,636
12,780
Diluted
11,636
12,780
Thirty-Nine Weeks Ended
Thirty-Nine Weeks Ended November 2, 2019 November
3, 2018 (unaudited) (unaudited) Net sales
$
570,912
$
568,395
Cost of sales (exclusive of depreciation shown separately
below)
(357,429)
(350,231)
Selling, general and administrative expenses
(191,975)
(186,478)
Depreciation
(13,741)
(14,250)
Asset impairment
(472)
(1,122)
Income from operations
7,295
16,314
Interest income
1,214
979
Interest expense
(117)
(114)
Income before income taxes
8,392
17,179
Income tax expense
(1,311)
(3,152)
Net income
$
7,081
$
14,027
Basic net income per common share
$
0.60
$
1.06
Diluted net income per common share
$
0.60
$
1.06
Weighted average number of shares outstanding Basic
11,831
13,224
Diluted
11,842
13,269
CITI TRENDS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited) (in thousands) November 2,
2019 November 3, 2018 (unaudited) (unaudited) Assets:
Cash and cash equivalents
$
23,731
$
28,378
Short-term investment securities
32,305
42,939
Inventory
135,395
139,699
Prepaid and other current assets
16,774
15,282
Property and equipment, net
55,704
55,643
Operating lease right of use assets (1)
154,267
-
Long-term investment securities
16,272
10,320
Other noncurrent assets
7,802
7,947
Total assets
$
442,250
$
300,208
Liabilities and Stockholders' Equity: Accounts payable
$
71,699
$
68,342
Accrued liabilities
23,631
25,836
Current operating lease liabilities (1)
41,659
-
Other current liabilities
2,208
2,106
Noncurrent operating lease liabilities (1)
120,485
-
Noncurrent liabilities
1,921
8,001
Total liabilities
261,603
104,285
Total stockholders' equity
180,647
195,923
Total liabilities and stockholders' equity
$
442,250
$
300,208
(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
thirty-nine weeks ended November 2, 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 November 2,
2019 As Reported Adjustment (1) As
Adjusted (unaudited) (unaudited) (unaudited) Net sales
$
183,050
$
-
$
183,050
Cost of sales (exclusive of depreciation shown separately
below)
(114,579)
-
(114,579)
Selling, general and administrative expenses
(65,539)
-
(65,539)
Depreciation
(4,520)
-
(4,520)
Asset impairment
-
-
-
Loss from operations
(1,588)
-
(1,588)
Interest income
421
-
421
Interest expense
(39)
-
(39)
Loss before income taxes
(1,206)
-
(1,206)
Income tax benefit
122
-
122
Net loss
$
(1,084)
$
-
$
(1,084)
Basic net loss per common share
$
(0.09)
$
(0.09)
Diluted net loss per common share
$
(0.09)
$
(0.09)
Weighted average number of shares outstanding Basic
11,636
11,636
Diluted
11,636
11,636
Thirty-Nine Weeks Ended November 2, 2019 As
Reported Adjustment (1) As Adjusted (unaudited)
(unaudited) (unaudited) Net sales
$
570,912
$
-
$
570,912
Cost of sales (exclusive of depreciation shown separately
below)
(357,429)
-
(357,429)
Selling, general and administrative expenses
(191,975)
1,042
(190,933)
Depreciation
(13,741)
-
(13,741)
Asset impairment
(472)
-
(472)
Income from operations
7,295
1,042
8,337
Interest income
1,214
-
1,214
Interest expense
(117)
-
(117)
Income before income taxes
8,392
1,042
9,434
Income tax expense
(1,311)
(163)
(1,474)
Net income
$
7,081
$
879
$
7,960
Basic net income per common share
$
0.60
$
0.67
Diluted net income per common share
$
0.60
$
0.67
Weighted average number of shares outstanding Basic
11,831
11,831
Diluted
11,842
11,842
(1) Proxy contest expenses and related tax effects
View source
version on businesswire.com: https://www.businesswire.com/news/home/20191126005225/en/
Bruce Smith President and
Chief Executive Officer (912) 443-2075
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