Bear of the Day: Citi Trends (CTRN)

Despite rising consumer confidence and improving labor markets, consumers remain reluctant to spend. Weak holiday sales have forced many retailers to shrink their operations and focus on more promising operations like e-commerce.

Headquarters in Savannah, GA, Citi Trends (CTRN) is an off-price retailer of fashion apparel, shoes, accessories and home decor. Their buyers source merchandise from over 1600 vendors and offer branded merchandise at about 20% to 70% discount compared with the regular prices at department and specialty stores.

The company IPO'd in May 2005. They now operate 530 stores in 31 states and employ approximately 4500 people.

Weak Earnings

The retailer reported weaker-than-expected results for Q3. They posted a loss of $0.06 per share in the quarter, compared with earnings of $0.04 per share reported in the same quarter a year ago. The results also missed the Zacks Consensus Estimate for earning of $0.03.

Their sales increased 1.1% year-over-year to $160.7 million but were short of the Zacks Consensus Estimate of $168.1 million.

Comparable store sales declined 1% in the quarter.

Falling Estimates

Analysts have slashed their estimates for the company after weak results . Zacks Consensus Estimates for the current and the next fiscal year have fallen to $0.91 per share and $1.21 per share from $1.00 and $1.30 respectively before the results.

The Bottom Line

In addition to disappointing consumer spending and mall traffic, the retail space is going through a shift toward online shopping. With tightening labor markets, "wage pressure' has also started hurting retailers.

Further, the industry is currently ranked 201 out of 265 Zacks industries (bottom 24%), suggesting potential underperformance in the short-to-medium term. Investors could however look at a better ranked retailer Tillys (TLYS) which currently has a Zacks Rank #1 (Buy). The company posted a huge beat and surged after the results.

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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 Nasdaq, Inc.

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

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