Market Overview

Citi Trends Announces Second Quarter 2018 Results and Declares Quarterly Cash Dividend

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Year-to-date, earnings per diluted share up 83%, or 52% on an
adjusted basis*

Second quarter comparable store sales increased 3.3%

Citi Trends, Inc. (NASDAQ:CTRN) today reported results for the second
quarter of fiscal 2018.

Financial Highlights – Second quarter ended
August 4, 2018

Total sales in the second quarter ended August 4, 2018 increased 9.5% to
$182.0 million, compared with $166.2 million in the second quarter ended
July 29, 2017. The year-over-year comparison of total quarterly sales
included a benefit of approximately $6.7 million due to a shift in the
weeks that were included in the second fiscal quarter this year in
relation to last year. With a 53-week fiscal year in 2017, each quarter
of fiscal 2018 starts one week later than in the prior year, resulting
in the second quarter of fiscal 2018 adding a strong back-to-school week
at the beginning of August and losing a smaller sales week at the
beginning of the quarter. Comparable store sales increased 3.3%,
comparing the 13 weeks ended August 4, 2018 with the 13 weeks ended
August 5, 2017.

The Company had net income of $3.2 million in the second quarter of
2018, compared with a net loss in last year's second quarter of ($0.2)
million on a GAAP basis, or net income of $0.4 million when adjusted for
proxy contest-related expenses* incurred in the second quarter of 2017.
Earnings per diluted share in this year's second quarter were $0.24,
compared with a loss per diluted share in the second quarter of 2017 of
$(0.01) on a GAAP basis, or earnings per diluted share of $0.03 when
adjusted for proxy contest-related expenses*.

During the second quarter, the Company opened three new stores,
relocated or expanded four stores and closed two stores.

Financial Highlights – First half ended
August 4, 2018

Total sales in the first half of fiscal 2018 increased 7.3% to $393.0
million, compared with $366.2 million in the first half of fiscal 2017.
Comparable store sales increased 2.7% in the first half of this year,
comparing the 26 weeks ended August 4, 2018 with the 26 weeks ended
August 5, 2017.

Net income was $14.5 million in the first half of 2018, compared with
net income in last year's first half of $8.7 million on a GAAP basis, or
$10.4 million when adjusted for proxy contest-related expenses*.
Earnings per diluted share in the first half of 2018 were $1.08,
compared with earnings per diluted share in the first half of 2017 of
$0.59 on a GAAP basis, or $0.71 when adjusted for proxy contest-related
expenses*.

Bruce Smith, President and Chief Executive Officer, commented, "Our
second quarter reflected a significant improvement in earnings,
highlighted by a 3.3% increase in comparable store sales and a benefit
to total sales from a shift in the fiscal calendar in relation to 2017,
together with healthy gross margin expansion and expense leverage."

Smith further noted, "Importantly, the comparable store sales increase
included positive contributions from all five of our major merchandise
categories, as well as higher transaction counts and increases in the
average unit sale and units per transaction. In addition, the earnings
improvement reflected a much lower income tax rate due to the enactment
of the Tax Cuts and Jobs Act. The second quarter results, combined with
a similarly strong first quarter, led to an 83% increase in earnings per
diluted share, or a 52% increase in earnings per diluted share on an
adjusted basis*, during the first half of 2018."

Guidance

The Company provided the following guidance for the remainder of fiscal
2018:

  • The Company is raising its full year fiscal 2018 earnings per diluted
    share expectations to a range of $1.65 to $1.75, up from previous
    guidance of $1.55 to $1.70.
  • Comparable store sales are expected to increase in a range of 2% to 3%
    in both the third and fourth quarters. Thus far, in the fiscal month
    of August, comparable store sales have increased 9%; however, the
    Company believes a range of 2% to 3% is an appropriate expectation for
    the second half of the year, similar to the actual results in the
    first half of the year.
  • Total sales are expected to increase in a range of 2% to 3% in the
    third quarter. While the second quarter included a benefit to total
    sales from the shift in the fiscal calendar, the third quarter
    year-over-year comparison of total sales is expected to be adversely
    impacted by approximately $5 million, due to a strong back-to-school
    week at the beginning of August shifting from the third quarter last
    year to the second quarter this year. The week at the beginning of
    November that will shift into the third quarter this year is typically
    a lower sales week than the week at the beginning of August.
  • Total sales are expected to decrease in a range of 2% to 3% in the
    fourth quarter due to having one fewer week this year than in last
    year's 14-week fourth quarter of a 53-week year.
  • Earnings (loss) per diluted share are expected to be in a range of
    ($0.03) to $0.02 in the third quarter, compared to $0.05 in last
    year's third quarter, and a range of $0.60 to $0.65 in the fourth
    quarter, compared to $0.38 in the fourth quarter of 2017.

Capital Return Program

The Company announced that its Board of Directors has declared a
quarterly cash dividend of $0.08 per common share, payable on September
18, 2018, to shareholders of record as of the close of business on
September 4, 2018.

During the first half of 2018, the Company repurchased 731,000 shares of
its common stock at an aggregate cost of $21.0 million. On August 4,
2018, $4.0 million remained available under the existing stock
repurchase authorization.

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) 223-4366. A replay of the conference call will be available until
August 30, 2018, by dialing (402) 977-9140 and entering the passcode,
21893704.

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 554 stores
located in 31 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" 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 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 3, 2018.
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 OPERATIONS (unaudited)
(in thousands, except per share data)
 
 
Thirteen Weeks Ended Thirteen Weeks Ended
August 4, 2018 July 29, 2017
(unaudited) (unaudited)
Net sales $ 181,999 $ 166,200
 
Cost of sales (exclusive of depreciation shown separately below) (110,398) (102,175)
Selling, general and administrative expenses (62,285) (59,834)
Depreciation (4,676) (4,589)
Asset impairment   (942)   (77)
Income (loss) from operations 3,698 (475)
Interest income 363 215
Interest expense   (38)   (37)
Income (loss) before income taxes 4,023 (297)
Income tax (expense) benefit   (788)   87
Net income (loss) $ 3,235 $ (210)
 
Basic net income (loss) per common share $ 0.24 $ (0.01)
Diluted net income (loss) per common share $ 0.24 $ (0.01)
 
Weighted average number of shares outstanding
Basic   13,314   14,382
Diluted   13,351   14,382
 
 
 
 
 
Twenty-Six Weeks Ended Twenty-Six Weeks Ended
August 4, 2018 July 29, 2017
(unaudited) (unaudited)
Net sales $ 393,031 $ 366,155
 
Cost of sales (exclusive of depreciation shown separately below) (239,811) (224,565)
Selling, general and administrative expenses (125,290) (120,321)
Depreciation (9,650) (8,887)
Asset impairment   (942)   (77)
Income from operations 17,338 12,305
Interest income 658 401
Interest expense   (75)   (74)
Income before income taxes 17,921 12,632
Income tax expense   (3,389)   (3,952)
Net income $ 14,532 $ 8,680
 
Basic net income per common share $ 1.08 $ 0.60
Diluted net income per common share $ 1.08 $ 0.59
 
Weighted average number of shares outstanding
Basic   13,446   14,550
Diluted   13,491   14,598
 
       
CITI TRENDS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)
(in thousands)
 
August 4, 2018 July 29, 2017
(unaudited) (unaudited)
Assets:
Cash and cash equivalents $ 40,992 $ 30,195
Short-term investment securities 36,009 32,669
Inventory 138,801 131,989
Prepaid and other current assets 17,701 16,783
Property and equipment, net 57,154 63,795
Long-term investment securities 13,020 26,748
Other noncurrent assets 7,105 7,485
Total assets $ 310,782 $ 309,664
 
Liabilities and Stockholders' Equity:
Accounts payable $ 72,096 $ 67,256
Accrued liabilities 27,358 26,788
Other current liabilities 2,005 1,803
Noncurrent liabilities 8,338 8,705
Total liabilities 109,797 104,552
 
Total stockholders' equity 200,985 205,112
Total liabilities and stockholders' equity $ 310,782 $ 309,664
 
       
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 expenses and earnings per diluted share adjusted
for
proxy contest expenses for the thirteen and twenty-six week
periods ended July 29, 2017. 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 July 29, 2017
As Reported   Adjustment (1)   As Adjusted
(unaudited) (unaudited) (unaudited)
 
Net sales $ 166,200 $ - $ 166,200
 
Cost of sales (exclusive of depreciation shown separately below) (102,175) - (102,175)
Selling, general and administrative expenses (59,834) 926 (58,908)
Depreciation (4,589) - (4,589)
Asset impairment   (77)     -     (77)
(Loss) income from operations (475) 926 451
Interest income 215 - 215
Interest expense   (37)     -     (37)
(Loss) income before income taxes (297) 926 629
Income tax benefit (expense)   87     (271)     (184)
Net (loss) income $ (210)   $ 655   $ 445
 
Basic net (loss) income per common share $ (0.01) $ 0.03
Diluted net (loss) income per common share $ (0.01) $ 0.03
 
Weighted average number of shares outstanding
Basic   14,382   14,382
Diluted   14,382   14,417
 
 
Twenty-Six Weeks Ended July 29, 2017
As Reported   Adjustment (1)   As Adjusted
(unaudited) (unaudited) (unaudited)
 
Net sales $ 366,155 $ - $ 366,155
 
Cost of sales (exclusive of depreciation shown separately below) (224,565) - (224,565)
Selling, general and administrative expenses (120,321) 2,516 (117,805)
Depreciation (8,887) - (8,887)
Asset impairment   (77)     -     (77)
Income from operations 12,305 2,516 14,821
Interest income 401 - 401
Interest expense   (74)     -     (74)
Income before income taxes 12,632 2,516 15,148
Income tax expense   (3,952)     (787)     (4,739)
Net income $ 8,680   $ 1,729   $ 10,409
 
Basic net income per common share $ 0.60 $ 0.72
Diluted net income per common share $ 0.59 $ 0.71
 
Weighted average number of shares outstanding
Basic   14,550   14,550
Diluted   14,598   14,598
 
(1) Proxy contest expenses and related tax effects

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