Savannah, Georgia – Citi Trends is more assured of its course despite the third quarter’s uneven performance.
The bargain retailer, which has 593 units and focuses on clothing and home goods, saw a 5.7% increase in profits during the third quarter. Increases in traffic, baskets, and conversions drove the success as the business concentrated on improving product and allocation.
The quarter ended November 2nd saw flat sales, down 0.3% to $179.1 million.
Citi Trends’ 160 basis point increase in gross margin and the comp gain were described by Ken Seipel, who was recently appointed CEO after six months as interim CEO, as early signs that customers are reacting to the company’s strategy changes.
“These results show the early impact of our initiatives to improve operational disciplines, including product allocation to ensure the right product is in the right stores, and to strengthen Citi Trends’ good/better/best product offering by adding extreme value branded deals to the treasure hunt,” he said.
The net loss in Q3 exceeded projections, increasing to $7.2 million from $6.5 million in the same time last year. This includes one-time expenditures to promote sustained growth. These include a thorough market and consumer research study to aid enhance the product selection, expenses to investigate and expedite better shrink outcomes, and the creation of best practices to boost organizational operational effectiveness.
With $38.9 million in cash at the conclusion of the quarter, Citi Trends had no debt borrowings under its $75 million credit facility.
According to Seipel, “Citi Trends is a unique and exciting growth opportunity.” Our approximately 600 stores cater to a core African American clientele that is primarily underserved in their communities. We have a tenable advantage over competitors thanks to our neighborhood locations, client loyalty, and brand awareness.
Sales for the nine months increased 1.7% to $542 million. Compared to a fresh loss of $15.53 million during the same period last year, the net loss was $28.99 million.
Citi Trends today improved its outlook for the second half of the fiscal year after the completion of Q3. It now anticipates:
- Second half EBITDA is expected to be in the range of $1.5 million to $4 million, above the prior outlook of $0.5 million to $2.5 million
- Second half comp sales to be up low to mid-single digits vs. its prior outlook of flat to up low single digits
- Total sales to be flat to down low-single digits due to the 53rdweek last year and a handful of store closures
In keeping with its previous prediction, Citi Trends anticipates closing its fiscal year with about 590 outlets. In keeping with its prior projection, it also anticipates reporting a year-end cash balance of between $60 million and $65 million.
