Market Overview

Citi Trends Announces Third Quarter 2018 Results and Authorizes New $25 Million Share Repurchase Program

Share:

Year-to-date, earnings per diluted share up 63%, or 38% on an
adjusted basis*

Third quarter comparable store sales increased 0.6%

Maintaining fourth quarter guidance

Declares quarterly dividend

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

Financial Highlights – Third quarter ended
November 3, 2018

Total sales in the third quarter ended November 3, 2018 decreased 0.9%
to $175.4 million, compared with $176.9 million in the third quarter
ended October 28, 2017. As discussed previously, the year-over-year
comparison of total quarterly sales was adversely impacted by
approximately $5.0 million due to a shift in the weeks that were
included in the third quarter this year, as a result of fiscal 2017
being a 53-week year. Comparable store sales increased 0.6%, comparing
the 13 weeks ended November 3, 2018 with the 13 weeks ended November 4,
2017.

The Company had a net loss of $(0.5) million, or $(0.04) per diluted
share, in the third quarter of 2018, compared with net income in last
year's third quarter of $0.6 million, or $0.05 per diluted share. The
decline in third quarter earnings from last year was heavily impacted by
the loss of sales resulting from the calendar shift.

During the third quarter, the Company opened four new stores, expanded
one store and closed one store.

Financial Highlights – First three quarters
ended November 3, 2018

Total sales in the first three quarters of fiscal 2018 increased 4.7% to
$568.4 million, compared with $543.1 million in the first three quarters
of fiscal 2017. Comparable store sales increased 2.0% in the first three
quarters of this year, comparing the 39 weeks ended November 3, 2018
with the 39 weeks ended November 4, 2017.

Net income was $14.0 million in the first three quarters of 2018,
compared with net income in the same period of last year of $9.3 million
on a GAAP basis, or $11.1 million when adjusted for proxy
contest-related expenses*. Earnings per diluted share in the first three
quarters of 2018 were $1.06, compared with earnings per diluted share in
the first three quarters of 2017 of $0.65 on a GAAP basis, or $0.77 when
adjusted for proxy contest-related expenses*.

Bruce Smith, President and Chief Executive Officer, commented,
"Comparable store sales increased 0.6% in this year's third quarter on
top of a strong 7.4% increase in the third quarter of 2017. While sales
in the non-apparel lines of business continued to increase, we
experienced a fashion miss in our Ladies' apparel category. We have
taken corrective action in the Ladies' area and remain focused on our
continuing efforts to maximize sales across all of our merchandise
categories anchored on delivering fashion-right, value-priced products
that resonate with our customers."

Smith further noted, "With the impact on earnings from the calendar
shift now largely behind us, we are pleased with our year-to-date
results for the first nine months of 2018, which reflect a 63% increase
in earnings per diluted share, or 38% when adjusted for proxy
contest-related expenses*."

Guidance

The Company provided the following guidance for the fourth quarter of
fiscal 2018:

  • The Company is maintaining its fourth quarter earnings per diluted
    share guidance in a range of $0.60 to $0.65, which would result in
    full year fiscal 2018 guidance in a range of $1.66 to $1.71. This
    compares with last year's earnings per diluted share of $1.03 for the
    full year.
  • Comparable store sales are expected to increase in a range of 1% to 2%
    in the fourth quarter, consistent with the November month-to-date
    trend.
  • Total sales are expected to decrease in a range of 3% to 4% 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.

The Company is also reiterating its longer term goals, under which 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, with the expectation that earnings
would increase approximately 12% to 15% annually.

Capital Return Program

During the third quarter, the Company completed the $25 million stock
repurchase program that had been authorized by the Company's Board of
Directors on March 16, 2018. 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, the Company announced that its Board of Directors has declared a
quarterly cash dividend of $0.08 per common share, payable on December
26, 2018, to stockholders of record as of the close of business on
December 11, 2018.

Mr. Smith commented, "Once again, our Board has demonstrated its
confidence in the business and its commitment to returning excess
capital to stockholders while maintaining the financial flexibility
required to invest in and grow our business. These actions taken by our
Board are a continuation of the capital return program started in 2015.
Since that time, we have returned approximately $78 million to our
stockholders through a combination of dividends and share repurchases."

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) 223-4398. A replay of the conference call will be available until
December 7, 2018, by dialing (402) 977-9140 and entering the passcode,
21899138.

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 559 stores
located in 32 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 or
sales 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 or
sales 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 3, 2018 October 28, 2017
(unaudited) (unaudited)
Net sales $ 175,364 $ 176,943
 
Cost of sales (exclusive of depreciation shown separately below) (110,420 ) (110,094 )
Selling, general and administrative expenses (61,189 ) (61,118 )
Depreciation (4,600 ) (4,976 )
Asset impairment   (180 )   -  
(Loss) income from operations (1,025 ) 755
Interest income 321 216
Interest expense   (39 )   (38 )
(Loss) income before income taxes (743 ) 933
Income tax benefit (expense)   237     (286 )
Net (loss) income $ (506 ) $ 647  
 
Basic net (loss) income per common share $ (0.04 ) $ 0.05  
Diluted net (loss) income per common share $ (0.04 ) $ 0.05  
 
Weighted average number of shares outstanding
Basic   12,780     13,563  
Diluted   12,780     13,614  
 
Thirty-Nine Weeks Ended Thirty-Nine Weeks Ended
November 3, 2018 October 28, 2017
(unaudited) (unaudited)
Net sales $ 568,395 $ 543,098
 
Cost of sales (exclusive of depreciation shown separately below) (350,231 ) (334,659 )
Selling, general and administrative expenses (186,478 ) (181,439 )
Depreciation (14,250 ) (13,863 )
Asset impairment   (1,122 )   (77 )
Income from operations 16,314 13,060
Interest income 979 617
Interest expense   (114 )   (112 )
Income before income taxes 17,179 13,565
Income tax expense   (3,152 )   (4,238 )
Net income $ 14,027   $ 9,327  
 
Basic net income per common share $ 1.06   $ 0.66  
Diluted net income per common share $ 1.06   $ 0.65  
 
Weighted average number of shares outstanding
Basic   13,224     14,221  
Diluted   13,269     14,270  
CITI TRENDS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)
(in thousands)
 
November 3, 2018 October 28, 2017
(unaudited) (unaudited)
Assets:
Cash and cash equivalents $ 28,378 $ 34,866
Short-term investment securities 42,939 30,298
Inventory 139,699 133,245
Prepaid and other current assets 15,282 16,405
Property and equipment, net 55,643 63,571
Long-term investment securities 10,320 26,117
Other noncurrent assets   7,947   8,171
Total assets $ 300,208 $ 312,673
 
Liabilities and Stockholders' Equity:
Accounts payable $ 68,342 $ 68,047
Accrued liabilities 25,836 28,921
Other current liabilities 2,106 1,913
Noncurrent liabilities   8,001   8,786
Total liabilities 104,285 107,667
 
Total stockholders' equity   195,923   205,006
Total liabilities and stockholders' equity $ 300,208 $ 312,673
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. 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 October 28, 2017
As Reported Adjustment (1) As Adjusted
(unaudited) (unaudited) (unaudited)
 
Net sales $ 176,943 $ - $ 176,943
 
Cost of sales (exclusive of depreciation shown separately below) (110,094 ) - (110,094 )
Selling, general and administrative expenses (61,118 ) - (61,118 )
Depreciation (4,976 ) - (4,976 )
Asset impairment   -     -     -  
Income from operations 755 - 755
Interest income 216 - 216
Interest expense   (38 )   -     (38 )
Income before income taxes 933 - 933
Income tax expense   (286 )   -     (286 )
Net income $ 647   $ -   $ 647  
 
Basic net income per common share $ 0.05   $ 0.05  
Diluted net income per common share $ 0.05   $ 0.05  
 
Weighted average number of shares outstanding
Basic   13,563     13,563  
Diluted   13,614     13,614  
 
 
Thirty-Nine Weeks Ended October 28, 2017
As Reported Adjustment (1) As Adjusted
(unaudited) (unaudited) (unaudited)
 
Net sales $ 543,098 $ - $ 543,098
 
Cost of sales (exclusive of depreciation shown separately below) (334,659 ) - (334,659 )
Selling, general and administrative expenses (181,439 ) 2,516 (178,923 )
Depreciation (13,863 ) - (13,863 )
Asset impairment   (77 )   -     (77 )
Income from operations 13,060 2,516 15,576
Interest income 617 - 617
Interest expense   (112 )   -     (112 )
Income before income taxes 13,565 2,516 16,081
Income tax expense   (4,238 )   (786 )   (5,024 )
Net income $ 9,327   $ 1,730   $ 11,057  
 
Basic net income per common share $ 0.66   $ 0.78  
Diluted net income per common share $ 0.65   $ 0.77  
 
Weighted average number of shares outstanding
Basic   14,221     14,221  
Diluted   14,270     14,270  
 
(1) Proxy contest expenses and related tax effects

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