Citi Trends Inc.
(
CTRN
), the U.S. based retailer of fashion apparel and accessories,
posted its fourth-quarter 2011 results last week on Friday. Thus,
the street analysts roughly had a week to ponder over and analyze
the result. In the subsequent paragraphs, we will cover the recent
earnings announcement, analysts' estimate revisions as well as the
Zacks Rank and long-term recommendation on the stock.
Quarterly Review
On March 9, 2012, Citi Trends reported its fourth-quarter 2011
results. Citi Trends reported a dismal quarter performance for a
second time on the trot, which also weighed on fiscal 2011 results.
The company's fourth-quarter earnings dipped, dragged by falling
comparable store sales, coupled with rising operating expenses.
Citi Trends reported fourth-quarter adjusted loss per share of
18 cents, falling drastically from the year-ago quarter earnings
per share of 64 cents. The results, however, bettered the Zacks
Consensus Estimate of a loss of 20 cents per share.
During the quarter, Citi Trends recorded a 3.7% year-over-year
growth in net sales to $178.4 million, almost in line with the
Zacks Consensus Estimate of $178.0 million. Comparable store sales
dropped 6.2% in the fourth quarter of fiscal 2011.
(Read our full coverage on this earnings report:
Citi Trends Trending Down
)
Agreement of Analysts
Estimate revision trend for the upcoming first and second
quarters of fiscal 2012 portrayed negative sentiment among most of
the analysts covering the stock. Over the last 7 days, 3 out of 7
analysts revised their estimates downward for first-quarter 2012.
As for the second-quarter 2012, 2 out of 7 analysts made a downward
revision to their estimates, while only one analyst upwardly
revised the estimate.
For fiscal 2012, estimate revision trends portrayed a negative
sentiment among most of the analysts covering the stock. Over the
last 7 days, 4 out of 7 analysts revised their estimates downward,
while the rest made no change. Besides, none of the analysts
revisited their estimates for fiscal 2013 in the last 7 days.
Magnitude of Estimate Revisions
As a result of the bearish sentiment evident among most of the
analysts over the past one week, the Zacks Consensus Estimated
earnings for first-quarter 2012 moved down by 6 cents to 50 cents
per share. For second-quarter 2012, loss per share as projected by
the Zacks Consensus inched up by a penny to 44 cents.
Similarly, the Zacks Consensus Estimate chopped fiscal 2012 and
fiscal 2013 earnings per share by 5 cents and 7 cents, to 5 cents
and 43 cents, respectively.
Our Take
With a string of weak quarterly results in 2011 amid shrinking
comparable store sales, Citi Trends have mostly deterred investor
sentiment. Further, Citi Trends' business is seasonal in nature and
typically generates stronger sales during the first and fourth
quarters, which are characterized by the spring and holiday
seasons. As a result, the company is exposed to significant risks
if these seasons fail to deliver expected operating
performance.
Moreover, the company sources a substantial portion of its
merchandise from countries outside the U.S, such as China and the
Far East. Accordingly, Citi Trends is vulnerable to political,
social and economic risks associated with sourcing from these
developing countries.
Above all, the company 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
), mass merchants including
Wal-Mart Stores Inc.
(
WMT
) as well as smaller specialty retailers, such as Rainbow and Dots.
Additionally, the company also competes with local off-price
specialty stores, regional chains as well as traditional department
stores. Consequently, the company may find it difficult to maintain
the profitability.
Currently, Citi Trends has a Zacks #5 Rank, implying a
short-term 'Strong Sell' rating on the stock. Our long-term
recommendation on the stock remains 'Underperform'.
As a PhD from MIT, Len Zacks proved over 30 years ago that
earnings estimate revisions are the most powerful force impacting
stock prices. He turned this ground breaking discovery into two
of the most celebrating stock rating systems in use today. The
Zacks Rank for stock trading in a 1 to 3 month time horizon and
the Zacks Recommendation for long-term investing (6+ months).
These "Earnings Estimate Scorecard" articles help analyze the
important aspects of estimate revisions for each stock after
their quarterly earnings announcements. Learn more about earnings
estimates and our proven stock ratings at
http://www.zacks.com/education/
CITI TRENDS INC (
CTRN
): Free Stock Analysis Report
ROSS STORES (
ROST
): Free Stock Analysis Report
TJX COS INC NEW (
TJX
): Free Stock Analysis Report
WAL-MART STORES (
WMT
): Free Stock Analysis Report
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