Citi Trends Inc.
) posted better-than-expected bottom-line results for the third
quarter of fiscal 2013. The company's adjusted loss narrowed to
17 cents per share from a loss of 25 cents in the comparable
year-ago quarter. Moreover, it fared better than the Zacks
Consensus Estimate of loss of 18 cents per share.
This year's adjusted earnings figure does not include a
benefit of 6 cents per share related to pre-tax gain on sale of
the company's former distribution center. Including this, Citi
Trends' loss per share for the quarter came in at 11 cents. We
believe that the company's strategic initiatives such as better
utilization of floor area, improvising merchandise margins and
efficient inventory management have helped it to make a
Quarter in Detail
Citi Trends reported sales of $145.4 million, marking a
decline of 2.4% from $149.0 million in the prior-year quarter.
Moreover, the sales were below the Zacks Consensus Estimate of
However, comparable-store sales in the quarter inched up 0.6%
from the year-ago quarter, mainly driven by an increase of 6% in
the number of customer transactions and marginal rise in the
average number of items per transaction. However,
comparable-store sales performance was negatively impacted by
over 5% fall in average unit sale.
Citi Trends reported strong comparable-store sales in August
and October, while the month of September witnessed fall in
comparable-store sales. On the basis of months, the company's
comparable store sales were up 2% in August, down 3% in September
and again up 3% in October.
On the basis of merchandise category, comparable store sales
of Home Division and Accessories increased 15% and 13%,
respectively. On the other hand, sales of the Children, Men and
Ladies divisions were down 1%, 2% and 9%, respectively.
Citi Trends' gross profit for the quarter rose 4.1% to $53.3
million from $51.2 million in the year-ago quarter, while gross
margin expanded 230 basis points (bps) to 36.7%. The improvement
in gross margin came on the back of lesser markdowns and strong
Selling, general and administrative (SG&A) expenses in the
quarter increased approximately 2% year over year to $52.1
million, while depreciation and amortization expenses waned 8.6%
to $5.5 million. As a percentage of sales, SG&A expenses
increased 160 bps to 35.9% due to decline in total sales.
Loss from operation on a reported basis declined to $3.3
million from $6.6 million of loss reported in the year-ago
Citi Trends had no debt on its balance sheet at the end of the
reported quarter. Cash and cash equivalents were $47.6 million
compared with $36.2 million at the end of third quarter fiscal
2012. Shareholders' equity totaled $196.6 million, as against
$196.0 million in the prior-year period.
Following a conservative store growth strategy in fiscal 2013,
Citi Trends closed 1 store during the third quarter. However, it
relocated or expanded 3 stores. This brought the company's total
store count to 505 at the end of third-quarter fiscal 2013. At
present, the company operates across 29 states in the Southeast,
Mid-Atlantic and Midwest regions as well as in the states of
Texas and California.
Looking at fiscal 2013, the company expects to continue
posting positive comparable store sales and improved gross margin
with lower levels of inventory. Citi Trends intends to keep
lesser inventory in the fourth quarter of this fiscal compared
with the year-ago quarter level.
Other Stocks to Consider
Citi Trends currently holds a Zacks Rank #3 (Hold). However,
some better-ranked apparel retail stocks include
). While Hanesbrands has a Zacks Rank #1 (Strong Buy),
Quicksilver and DSW carry a Zacks Rank #2 (Buy).
CITI TRENDS INC (CTRN): Free Stock Analysis
DSW INC CL-A (DSW): Free Stock Analysis
HANESBRANDS INC (HBI): Free Stock Analysis
QUIKSILVER INC (ZQK): Free Stock Analysis
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