On Sep 7, we upgraded value-priced retailer of urban fashion
apparel and accessories,
Citi Trends, Inc.
) to Outperform, based on its improved results in second-quarter
fiscal 2013. We are impressed with Citi Trends' turnaround
efforts, which boosted the company's top-line growth and narrowed
its loss despite a challenging macroeconomic environment.
Why the Upgrade?
Citi Trends marked an improvement in its second-quarter
results by reporting a loss per share of 34 cents, which fared
better than the prior-year quarter loss of 54 cents. Including
asset impairment charge, loss came in at 37 cents. The quarterly
loss also fared better the Zacks Consensus Estimate of a loss of
During the quarter, Citi Trends' net sales improved 4.2% to
$137.8 million and came marginally ahead of the Zacks Consensus
Estimate of $137.0 million.
Furthermore, Citi Trends has witnessed an improvement in its
store performance as comps decline in the Ladies segment has
softened to single digits from high double digits in the previous
Moreover, for the remainder of 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 third and fourth quarters
of this fiscal compared with the year-ago quarter level.
Following the release of Citi Trends' second-quarter results
and management's impressive outlook for the remaining period of
fiscal 2013, the Zacks Consensus Estimate for fiscal 2013 has
improved to break-even earnings compared with a loss of 4 cents
in the last 60 days.
Apart from better-than-expected second-quarter results, the
company's efficient inventory management and healthy financial
position underline its strength.
In our point of view, Citi Trends' extensive focus on
store-expansion strategy will likely drive top-line growth.
Further, the company has undertaken prudent steps toward
inventory management such as enhanced supervision and
installation of sophisticated surveillance systems in
high-shrinkage stores. We expect these initiatives to help the
company improve its operational performance.
Other Stocks to Consider
Currently, Citi Trends holds a Zacks Rank #1 (Strong Buy).
Apart from Citi Trends, other stocks in the retail-apparel/shoe
sector that are currently performing well include
L Brands, Inc.
). All of these carry a Zacks Rank #2 (Buy).
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CITI TRENDS INC (CTRN): Free Stock Analysis
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L BRANDS INC (LTD): Free Stock Analysis
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