Citi Trends 2Q Profits Slump - Analyst Blog

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Value-priced retailer of urban fashion apparel and accessories, Citi Trends Inc. ( CTRN ), saw its second quarter 2012 results slump on account of a decline in comparable-store sales coupled with rising costs.

The company's quarterly loss per share was 54 cents per share, compared with a loss per share of 76 cents reported in the year-ago quarter. The company's quarterly loss also compared unfavorably to the Zacks Consensus Estimate of 44 cents per share.

Turning to Numbers

During the quarter, Citi Trends recorded a 1.6% rise in net sales to $132.3 million, compared to $130.2 million in the comparable prior-year quarter. However, the total revenue slightly missed the Zacks Consensus Estimate of $133 million. Comparable store sales dropped 4% in the second quarter of fiscal 2012.

In the second quarter, Citi Trends' gross profit increased only 2.1% to $44.4 million from $43.5 million in the year-ago quarter, mainly due to a rise in cost of sales. Consequently, gross margin expanded 20 basis points to 33.6% from 33.4% in the prior-year quarter.

Selling, general and administrative expenses in the quarter increased 0.4% year over year to $50.9 million, while depreciation and amortization expenses declined 6.3% to $6.0 million. However, the company's loss from operations came in at $12.6 million compared with $15.2 million in the year-ago period.

Financials

Citi Trends had no debt on its balance sheet at the end of the quarter. Cash and cash equivalents were $51.7 million compared with $49.5 million at the end of second quarter of fiscal 2011. At the end of the quarter, the company shareholders' equity totaled $199.0 million compared with $208.7 million in the prior-year period.

Stores Count

During the second quarter, Citi Trends slightly stepped up its stores with the opening of one new store. This brought the company's total store count to 512 stores at the end of the July quarter. The company operates across 29 states in the Southeast, Mid-Atlantic and Midwest regions as well as in the states of Texas and California.

Our Take

Citi Trends operates in a highly fragmented specialty retail sector and faces intense competition from larger off-price rivals such as The TJX Companies Inc. ( TJX ) and Ross Stores Inc. ( ROST ).

Citi Trends currently has a short-term Zacks #1 Rank, which translates into a Strong Buy rating. However, we retain our long-term Outperform recommendation on the shares.


 
CITI TRENDS INC (CTRN): Free Stock Analysis Report
 
ROSS STORES (ROST): Free Stock Analysis Report
 
TJX COS INC NEW (TJX): 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 , Stocks

Referenced Stocks: CTRN , ROST , TJX

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