Will Citi Trends (CTRN) Miss Earnings Estimates in Q3? - Analyst Blog

Citi Trends, Inc. (CTRN), urban fashion apparel and accessories retailer, is slated to report third-quarter fiscal 2014 results on Nov 25. In the last quarter, it had posted a positive surprise of 41.4%. Let's see how things are shaping up for this announcement.

Factors Influencing this Quarter

Citi Trends' strategies such as better utilization of floor area, improvisation of merchandise margins and efficient inventory management have been helping it turn around its operating performance. However, a competitive retail landscape on account of the upcoming holiday season may act as a hurdle to the company's growth. In order to be in the race, the company may resort to aggressive pricing at the cost of margins.

Earnings Whispers?

Our proven model does not conclusively show that Citi Trends is likely to beat earnings estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. This is not the case here, as you will see below:

Zacks ESP: Earnings ESP for Citi Trends is 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at a loss of 7 cents.

Zacks Rank: Citi Trends carries a Zacks Rank #3 (Hold). Though Zacks Rank #1, 2 or 3 increases the predictive power of ESP, the company's ESP of 0.00% makes surprise prediction difficult.

We caution against stocks with a Zacks Rank #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks that Warrant a Look

Here are some companies you may want to consider as our model shows that these have the right combination of elements:

Restoration Hardware Holdings, Inc. (RH) has an Earnings ESP of +2.13% and a Zacks Rank #2 (Buy).

The Kroger Co. (KR) has an Earnings ESP of +3.28% and a Zacks Rank #3.

Zumiez, Inc. (ZUMZ) has an Earnings ESP of +3.85% and a Zacks Rank #3.