Citi Trends' 1Q Earnings Disappoint - Analyst Blog

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Value-priced retailer of urban fashion apparel and accessories, Citi Trends Inc. ( CTRN ) reported first-quarter fiscal 2013 earnings per share of 42 cents, missing the Zacks Consensus Estimate of 57 cents and down 39.1% from 69 cents earned in the year-ago quarter.

Turning to Numbers

Citi Trends reported first-quarter sales of $181.8 million, marking a decrease of 8.0% from $197.7 million in the prior-year quarter. The company's first-quarter sales also missed the Zacks Consensus Estimate of $198 million.

Comparable store sales in the quarter was down 4.1% compared to the year-ago quarter, driven mainly by weak sales at the company's stores in February and March, followed by a recovery in April as weather turned warmer after Easter.

On the basis of months, the company's comparable store sales dipped 7% in February and 8% in March, while it gained 9% in April. Comps remained weak in March primarily due to shift in timing of Easter this year to March against April last year. This shift caused March comps to decline 2% while April comps gained 3%.

Citi Trends' gross profit for the quarter declined 9.8% to $67.3 million from $74.7 million in the year-ago quarter, whereas gross margin contracted 80 basis points to 37.0%. The decline in gross margin was equally distributed between core merchandise margin, freight expense and shrinkage.

Selling, general and administrative expenses in the quarter decreased 1.5% year over year to $51.9 million, while depreciation and amortization expenses waned 8.2% to $5.6 million. The company's operating income came in at $9.8 million, a significant decline of 38.4% from $15.9 million in the year-ago period.

Financials

Citi Trends had no debt on its balance sheet at the end of the first quarter. Cash and cash equivalents were $64.1 million compared with $64.0 million at the end of first quarter fiscal 2012. Shareholders' equity totaled $202.2 million compared with $206.3 million in the prior-year period.

Store Count

Following a conservative store growth strategy in 2013, Citi Trends opened only 1 new store in the first quarter. In furtherance of streamlining its stores, the company shuttered 6 troubled stores. This brought the company's total store count to 508 at the end of first-quarter fiscal 2013.

Stepping into the second quarter, the company closed 2 more stores, with its current store count reaching 506. The company operates across 29 states in the Southeast, Mid-Atlantic and Midwest regions as well as in the states of Texas and Calif.

Outlook

Looking into fiscal 2013, the company continues to be focused on improving its sales via enhancing the variety of its ladies business. Though the significance of the company's Urban Brands continues to decline and non-branded business is not poised to make loss from the branded business, the company expects to gain from better focus on its ladies business in 2013.

A Look at Zacks Rank

Citi Trends currently holds a Zacks Rank #3 (Hold). Stocks that are performing well among apparel-shoe retailers include Buckle Inc. ( BKE ), Gap Inc . ( GPS ) and Zumiez Inc. ( ZUMZ ) , all of which carry a Zacks Rank #2 (Buy).



BUCKLE INC (BKE): Free Stock Analysis Report

CITI TRENDS INC (CTRN): Free Stock Analysis Report

GAP INC (GPS): Free Stock Analysis Report

ZUMIEZ INC (ZUMZ): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Earnings , Stocks

Referenced Stocks: BKE , CTRN , GPS , ZUMZ

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