SAVANNAH, Ga.--(BUSINESS WIRE)--Mar 13, 2020--

Citi Trends, Inc. (NASDAQ: CTRN) today reported results for the fourth quarter and fiscal year ended February 1, 2020.

Financial Highlights – 13-week fourth quarter ended February 1, 2020

  • Total sales increased 4.9% to $211.0 million compared with $201.2 million in the fourth quarter of fiscal 2018
  • Comparable store sales increased 3.1%
  • Gross profit expands 235 basis points to 39.7% reflecting strong full price selling and lower markdown rates
  • Selling, general and administrative expenses de-leveraged 151 basis points to 32.1% primarily due to higher distribution center labor costs and the reversal of an accrual for incentive compensation in the prior year
  • Operating profit increased 27.7% to $11.3 million, or an operating profit margin of 5.3%, up 116 basis points as compared to the fourth quarter of fiscal 2018
  • Net income was $9.4 million compared with $7.3 million in the fourth quarter of fiscal 2018 on a GAAP basis, or $9.9 million* in the fourth quarter of fiscal 2019 when adjusted for interim CEO related expenses
  • Earnings per diluted share were $0.84 compared with $0.59 in the fourth quarter of fiscal 2018 on a GAAP basis, or $0.88* in the fourth quarter of fiscal 2019 when adjusted for interim CEO related expenses
  • Quarter-end inventory was down 1.1% comparing favorably to the 4.9% total sales increase for the fourth quarter, which led to a high quality inventory position entering the spring season

Financial Highlights – 52-week fiscal year ended February 1, 2020

  • Total sales increased 1.6% to $781.9 million compared with $769.6 in fiscal 2018
  • Comparable store sales decreased 0.1%
  • Net income was $16.5 million compared with $21.4 million in fiscal 2018 on a GAAP basis, or $18.2 million* in fiscal 2019 when adjusted for interim CEO related expenses, proxy contest-related expenses and asset impairment expenses
  • Earnings per diluted share were $1.41 compared with $1.64 in fiscal 2018 on a GAAP basis, or $1.56* in fiscal 2019 when adjusted for interim CEO related expenses, proxy contest-related expenses and asset impairment expenses, compared to $1.71* in fiscal 2018 on an adjusted basis
  • In fiscal 2019, Citi Trends opened 16 new stores; remodeled, relocated or expanded 25 stores; and closed 7 stores to end the year at a total of 571 open stores.

Executive Chairman Comments:

Peter Sachse, Executive Chairman, commented, “We ended 2019 on a high note with strong top and bottom line results that reflect continued progress on a number of our strategic initiatives. We successfully continued to shift our offering towards more non-apparel merchandise, while fueling our growth with lower inventory levels and faster turns, resulting in significantly higher gross profit. We are entering the spring season with current merchandise at lower inventory levels than in recent years, which will enable us to deliver a higher level of fresh fashion and drive our sales in the first half of the year. I am confident we are well positioned to achieve our three year objectives, including a net sales CAGR of approximately 8.5% reaching $1.0 billion in sales and delivering an EPS CAGR of 20-25%.”

Mr. Sachse continued, “Like many others, we are paying close attention to developments relating to the outbreak of the coronavirus (COVID-19). First and foremost, we are focused on the health and safety of our employees and customers, as well as planning for business continuity. We are closely monitoring local, state and federal government agencies to ensure we follow best practices surrounding the coronavirus. The extent and duration of the impacts that the coronavirus may have on our business are not known at this time, but we are monitoring developments in order to be in a position to take appropriate action.”

Guidance

  • For the first five plus weeks of fiscal 2020, the Company is +3.6% in comparable stores sales, despite a delay in income tax refunds that materially affected the third week of February.
  • The Company’s guidance for first quarter earnings per diluted share is in a range of $0.87 to $0.91* on an adjusted basis, which excludes an expected $0.04 per share impact of management transition costs and compares with last year’s first quarter of $0.72* on an adjusted basis.
  • The Company’s guidance for the first quarter is based on a comparable store sales increase of approximately 2.5% to 3.0%.
  • For fiscal 2020, the Company expects diluted earnings per share to be in a range of $1.75 to $1.85* on an adjusted basis, assuming a comparable store sales increase in a range of 2.5% to 3.5%, compared with adjusted diluted earnings per share of $1.56* in fiscal 2019.

The Company’s 2020 guidance does not include any potential impact related to the coronavirus.

Long-Term Strategic Plan Update

The Company is continuing to make meaningful progress on its long-term strategic plan, including:

  • Approving 22 of the planned 30 store openings for fiscal 2020
  • Completing 20 of the 50 planned remodels for fiscal 2020 with the remaining 30 targeted for completion by the end of May 2020
  • Hiring Deloitte to identify and execute our strategic systems road map
  • Making significant improvements to the Company’s supply chain, including reducing freight costs and efficiencies within the distribution centers

Capital Return Program

As previously announced on November 26, 2019, the Company’s Board of Directors authorized a $25 million share repurchase program. Since that announcement, the Company has completed that repurchase program. Since the beginning of 2019, the Company has returned approximately $32 million to its shareholders in the form of share repurchases and dividends.

The Company’s Board of Directors today announced the authorization of another $30 million share repurchase program. The Company expects to fund the share repurchase program from cash on hand.

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 (212) 231-2931. A replay of the conference call will be available until March 20, 2020, by dialing (402) 977-9140 and entering the passcode, 21951761.

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, accessories and home goods for the entire family. The Company operates 574 stores located in 33 states. Citi Trends’ website address is www.cititrends.com.CTRN-G

*Non-GAAP Financial Measures

The historical non-GAAP financial measures discussed herein are reconciled to their corresponding GAAP measures at the end of this press release. The Company is unable to provide a full reconciliation of the GAAP and non-GAAP measures used in 2020 guidance without unreasonable effort because it is not possible to predict certain of its adjustment items with a reasonable degree of certainty. This information is dependent upon future events and may be outside of the Company’s control and its unavailability could have a significant impact on its financial results.

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, the impact of potential global health emergencies such as COVID-19 (coronavirus), including potential negative impacts on the global economy and foreign sourcing, 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 EndedThirteen Weeks Ended
February 1, 2020February 2, 2019
(unaudited)(unaudited)
Net sales

$

211,013

 

$

201,158

 

 
Cost of sales (exclusive of depreciation shown separately below)

 

(127,311

)

 

(126,095

)

Selling, general and administrative expenses

 

(67,654

)

 

(61,460

)

Depreciation

 

(4,794

)

 

(4,636

)

Asset impairment

 

-

 

 

(152

)

Income from operations

 

11,254

 

 

8,815

 

Interest income

 

363

 

 

374

 

Interest expense

 

(41

)

 

(40

)

Income before income taxes

 

11,576

 

 

9,149

 

Income tax expense

 

(2,154

)

 

(1,802

)

Net income

$

9,422

 

$

7,347

 

 
Basic net income per common share

$

0.84

 

$

0.59

 

Diluted net income per common share

$

0.84

 

$

0.59

 

 
Weighted average number of shares outstanding
Basic

 

11,202

 

 

12,447

 

Diluted

 

11,271

 

 

12,471

 

 
 
 
 
Fifty-Two Weeks EndedFifty-Two Weeks Ended
February 1, 2020February 2, 2019
(unaudited)(unaudited)
Net sales

$

781,925

 

$

769,553

 

 
Cost of sales (exclusive of depreciation shown separately below)

 

(484,740

)

 

(476,326

)

Selling, general and administrative expenses

 

(259,629

)

 

(247,938

)

Depreciation

 

(18,535

)

 

(18,886

)

Asset impairment

 

(472

)

 

(1,274

)

Income from operations

 

18,549

 

 

25,129

 

Interest income

 

1,577

 

 

1,353

 

Interest expense

 

(158

)

 

(154

)

Income before income taxes

 

19,968

 

 

26,328

 

Income tax expense

 

(3,465

)

 

(4,954

)

Net income

$

16,503

 

$

21,374

 

 
Basic net income per common share

$

1.41

 

$

1.64

 

Diluted net income per common share

$

1.41

 

$

1.64

 

 
Weighted average number of shares outstanding
Basic

 

11,674

 

 

13,030

 

Diluted

 

11,699

 

 

13,070

 

 
CITI TRENDS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)
(in thousands)
 
February 1, 2020February 2, 2019
(unaudited)(unaudited)
Assets:
Cash and cash equivalents

$

19,923

$

17,863

Short-term investment securities

 

27,562

 

50,350

Inventory

 

138,258

 

139,841

Prepaid and other current assets

 

15,464

 

17,544

Property and equipment, net

 

64,985

 

56,224

Operating lease right of use assets (1)

 

169,854

 

-

Long-term investment securities

 

15,675

 

8,883

Other noncurrent assets

 

7,424

 

7,284

Total assets

$

459,145

$

297,989

 
Liabilities and Stockholders' Equity:
Accounts payable

$

79,596

$

73,391

Accrued liabilities

 

27,768

 

28,057

Current operating lease liabilities (1)

 

42,944

 

-

Other current liabilities

 

554

 

921

Noncurrent operating lease liabilities (1)

 

135,316

 

-

Noncurrent liabilities

 

1,923

 

8,195

Total liabilities

 

288,101

 

110,564

 
Total stockholders' equity

 

171,044

 

187,425

Total liabilities and stockholders' equity

$

459,145

$

297,989

 
 
 
(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 and interim CEO related expenses and earnings per diluted share adjusted for proxy contest expenses, interim CEO related expenses and asset impairment expenses for the thirteen and fifty-two weeks ended February 1, 2020, as well as the fifty-two weeks ended February 2, 2019 and the thirteen weeks ended May 4, 2019. The Company believes that excluding proxy contest expenses, interim CEO related expenses and asset impairment expenses together with 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).
Fifty-Two Weeks Ended February 1, 2020
As ReportedAdjustment (1)Adjustment (2)Adjustment (3)As Adjusted
(unaudited)(unaudited)(unaudited)
 
Net sales

$

781,925

 

$

-

 

$

-

 

$

-

 

$

781,925

 

 
Cost of sales (exclusive of depreciation shown separately below)

 

(484,740

)

 

-

 

 

-

 

 

-

 

 

(484,740

)

Selling, general and administrative expenses

 

(259,629

)

 

571

 

 

1,042

 

 

-

 

 

(258,016

)

Depreciation

 

(18,535

)

 

-

 

 

-

 

 

-

 

 

(18,535

)

Asset impairment

 

(472

)

 

-

 

 

-

 

 

472

 

 

-

 

Income from operations

 

18,549

 

 

571

 

 

1,042

 

 

472

 

 

20,634

 

Interest income

 

1,577

 

 

-

 

 

-

 

 

-

 

 

1,577

 

Interest expense

 

(158

)

 

-

 

 

-

 

 

-

 

 

(158

)

Income before income taxes

 

19,968

 

 

571

 

 

1,042

 

 

472

 

 

22,053

 

Income tax expense

 

(3,465

)

 

(99

)

 

(181

)

 

(82

)

 

(3,827

)

Net income

$

16,503

 

$

472

 

$

861

 

$

390

 

$

18,226

 

 
Basic net income per common share

$

1.41

 

$

1.56

 

Diluted net income per common share

$

1.41

 

$

1.56

 

 
Weighted average number of shares outstanding
Basic

 

11,674

 

 

11,674

 

Diluted

 

11,699

 

 

11,699

 

 
(1) Interim CEO related expenses and related tax effects
(2) Proxy contest expenses and related tax effects
(3) Asset impairment expenses and related tax effects
Thirteen Weeks Ended February 1, 2020
As ReportedAdjustment (1)As Adjusted
(unaudited)(unaudited)(unaudited)
 
Net sales

$

211,013

 

$

-

 

$

211,013

 

 
Cost of sales (exclusive of depreciation shown separately below)

 

(127,311

)

 

-

 

 

(127,311

)

Selling, general and administrative expenses

 

(67,654

)

 

571

 

 

(67,083

)

Depreciation

 

(4,794

)

 

-

 

 

(4,794

)

Asset impairment

 

-

 

 

-

 

 

-

 

Income from operations

 

11,254

 

 

571

 

 

11,825

 

Interest income

 

363

 

 

-

 

 

363

 

Interest expense

 

(41

)

 

-

 

 

(41

)

Income before income taxes

 

11,576

 

 

571

 

 

12,147

 

Income tax expense

 

(2,154

)

 

(106

)

 

(2,260

)

Net income

$

9,422

 

$

465

 

$

9,887

 

 
Basic net income per common share

$

0.84

 

$

0.88

 

Diluted net income per common share

$

0.84

 

$

0.88

 

 
Weighted average number of shares outstanding
Basic

 

11,202

 

 

11,202

 

Diluted

 

11,271

 

 

11,271

 

 
 
Thirteen Weeks Ended May 4, 2019
As ReportedAdjustment (2)As Adjusted
(unaudited)(unaudited)(unaudited)
 
Net sales

$

205,032

 

$

-

 

$

205,032

 

 
Cost of sales (exclusive of depreciation shown separately below)

 

(128,238

)

 

-

 

 

(128,238

)

Selling, general and administrative expenses

 

(63,447

)

 

1,042

 

 

(62,405

)

Depreciation

 

(4,614

)

 

-

 

 

(4,614

)

Income from operations

 

8,733

 

 

1,042

 

 

9,775

 

Interest income

 

379

 

 

-

 

 

379

 

Interest expense

 

(38

)

 

-

 

 

(38

)

Income before income taxes

 

9,074

 

 

1,042

 

 

10,116

 

Income tax expense

 

(1,286

)

 

(148

)

 

(1,434

)

Net income

$

7,788

 

$

894

 

$

8,682

 

 
Basic net income per common share

$

0.65

 

$

0.72

 

Diluted net income per common share

$

0.65

 

$

0.72

 

 
Weighted average number of shares outstanding
Basic

 

11,976

 

 

11,976

 

Diluted

 

12,006

 

 

12,006

 

 
 
(1) Interim CEO related expenses and related tax effects
(2) Proxy contest expenses and related tax effects
Fifty-Two Weeks Ended February 2, 2019
As ReportedAdjustment (1)As Adjusted
(unaudited)(unaudited)(unaudited)
 
Net sales

$

769,553

 

$

-

 

$

769,553

 

 
Cost of sales (exclusive of depreciation shown separately below)

 

(476,326

)

 

-

 

 

(476,326

)

Selling, general and administrative expenses

 

(247,938

)

 

-

 

 

(247,938

)

Depreciation

 

(18,886

)

 

-

 

 

(18,886

)

Asset impairment

 

(1,274

)

 

1,274

 

 

-

 

Income from operations

 

25,129

 

 

1,274

 

 

26,403

 

Interest income

 

1,353

 

 

-

 

 

1,353

 

Interest expense

 

(154

)

 

-

 

 

(154

)

Income before income taxes

 

26,328

 

 

1,274

 

 

27,602

 

Income tax expense

 

(4,954

)

 

(240

)

 

(5,194

)

Net income

$

21,374

 

$

1,034

 

$

22,408

 

 
Basic net income per common share

$

1.64

 

$

1.72

 

Diluted net income per common share

$

1.64

 

$

1.71

 

 
Weighted average number of shares outstanding
Basic

 

13,030

 

 

13,030

 

Diluted

 

13,070

 

 

13,070

 

 
 
(1) Asset impairment expenses and related tax effects

 

View source version on businesswire.com:https://www.businesswire.com/news/home/20200313005058/en/

CONTACT: Investor Contact:

ICR, Inc.

Tom Filandro, 646-277-1235

Tom.Filandro@icrinc.com

KEYWORD: UNITED STATES NORTH AMERICA GEORGIA

INDUSTRY KEYWORD: FASHION FAMILY RETAIL CONSUMER DISCOUNT/VARIETY HOME GOODS SPECIALTY

SOURCE: Citi Trends, Inc.

Copyright Business Wire 2020.

PUB: 03/13/2020 06:45 AM/DISC: 03/13/2020 06:45 AM

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