Citi Trends Announces First Quarter 2019 Results and Declares Quarterly Dividend

Citi Trends, Inc. (NASDAQ: CTRN) today reported unaudited results for the first quarter of fiscal 2019.

Information


Citi Trends, Inc. (NASDAQ: CTRN) today reported unaudited results for
the first quarter of fiscal 2019.

Financial Highlights – First quarter ended
May 4, 2019

Total sales in the first quarter ended May 4, 2019 decreased 2.8% to
$205.0 million compared with $211.0 million in the first quarter ended
May 5, 2018. Comparable store sales decreased 4.5% in the quarter.

On a GAAP basis, the Company had net income of $7.8 million, or $8.7
million when adjusted for proxy contest-related expenses*, in the first
quarter of 2019, compared with $11.3 million in last year’s first
quarter. On a GAAP basis, earnings per diluted share in this year’s
first quarter were $0.65, or $0.72 when adjusted for proxy
contest-related expenses*, compared with $0.83 per diluted share in the
first quarter of 2018.

Bruce Smith, President and Chief Executive Officer, commented, “First
quarter comparable store sales were challenging during the four-week
period in which tax refunds typically provide a lift to our sales, as
tax refunds were not only delayed, but were 3% below last year in the
aggregate. Our apparel business was particularly disappointing during
the quarter. On a positive note, accessories and home merchandise again
posted sales growth, consistent with those categories’ performance over
each of the past ten years, a period in which sales of non-apparel grew
from 14% of total sales to nearly 40%. Given this continued mix shift,
we are working aggressively and rapidly to accelerate our offering of
accessories and home assortments, while simultaneously working to
improve the fashion offerings across our apparel categories.”

Smith further noted, “In addition to these efforts to improve the mix
and apparel fashion, we engaged a consulting firm in March 2019 to
initiate a comprehensive analysis of our merchandising, planning and
allocation processes and strategies, including, among other things, our
competitive landscape, best industry practices, speed-to-market, overall
structure and resources. We will also establish a merchandising task
force, which will operate under the oversight of a new Board committee,
consisting of two of our Directors who each have many years of
merchandising experience with high-performance retailers.”

Smith continued, “Importantly, as reflected in our first quarter gross
margin, we took the necessary markdowns to end the period clean from an
inventory perspective. We entered the second quarter with our
inventories in good shape, down 1.1% in comparable stores. Our total
inventory increase of 4.7% is attributable to merchandise in new stores
that opened since last year’s first quarter and higher levels of
distribution center inventory, including increases in next-season-buys.
In addition to our merchandising efforts, we continue to look for ways
to reduce costs, as reflected in first quarter S, G & A expenses that
increased only $400,000, while decreasing $600,000 when adjusted for
proxy contest-related expenses.*”

During the first quarter, the Company opened one new store and closed
two stores.

Guidance

As the Company enters the second quarter, comparable store sales have
been down 6%, against a difficult comparison last year when they were up
10% during the same period. As discussed in last year’s earnings
release, the two plus-week timeframe at the beginning of the second
quarter in 2018 benefited from timely warm weather. The Company believes
that the quarter-to-date comparable store sales decrease of 6% will
narrow during the remainder of the quarter, resulting in a full second
quarter range of negative 1% to negative 3%. In the second half of the
year, the Company expects comparable store sales to be up 1% to 3% as
efforts to further accelerate the non-apparel sales mix and improve the
apparel fashion take hold.

Based on the actual results in the first quarter, together with
expectations for a comparable store sales decrease of 1% to 3% in the
second quarter and comparable store sales that are up 1% to 3% in the
second half of the year, the Company is lowering its earnings guidance
to a range of $1.30 to $1.50 per diluted share for fiscal 2019.

Capital Return Program

The Company announced that its Board of Directors has declared a
quarterly dividend of $0.08 per common share, payable on June 18, 2019,
to shareholders of record as of the close of business on June 4, 2019.

During the first quarter of 2019, the Company repurchased 82,000 shares
of its common stock at an aggregate cost of $1.6 million. At May 4,
2019, $8.0 million remained available under the existing stock
repurchase authorization, and the Company had no debt and $80.4 million
of cash and investment securities.

Investor Conference Call and Webcast

Citi Trends will host a conference call today at 9:00 a.m. ET. The
number to call for the live interactive teleconference is
(303) 223-4379. A replay of the conference call will be available until
May 30, 2019, by dialing (402) 977-9140 and entering the passcode,
21922974.

The live broadcast of Citi Trends' conference call will be available
online at the Company's website, www.cititrends.com,
in the Investor Relations section, beginning today at 9:00 a.m. ET. The
online replay will follow shortly after the call and will be available
for replay for one year.

During the conference call, the Company may discuss and answer questions
concerning business and financial developments and trends that have
occurred after quarter-end. The Company’s responses to questions, as
well as other matters discussed during the conference call, may contain
or constitute information that has not been disclosed previously.

About Citi Trends

Citi Trends, Inc. is a value-priced retailer of urban fashion apparel
and accessories for the entire family. The Company operates 561 stores
located in 32 states. Citi Trends’ website address is www.cititrends.com.
CTRN-G

*Non-GAAP Financial Measures

The non-GAAP financial measures are reconciled to their corresponding
GAAP measures at the end of this press release.

Forward-Looking Statements

All statements other than historical facts contained in this news
release, including statements regarding the Company’s future financial
results and position, business policy and plans, objectives of
management for future operations and our intentions and ability to pay
dividends and complete any share repurchase authorizations, are
forward-looking statements that are subject to material risks and
uncertainties.
The words "believe," "may," "could," "plans,"
"estimate," "continue," "anticipate," "intend," "expect" and similar
expressions, as they relate to the Company, are intended to identify
forward-looking statements, although not all forward-looking statements
contain such language.
Statements with respect to earnings, sales
or new store guidance are forward-looking statements.
Investors
are cautioned that any such forward-looking statements are subject to
the finalization of the Company’s quarter-end financial and accounting
procedures, are not guarantees of future performance or results and are
inherently subject to risks and uncertainties, some of which cannot be
predicted or quantified. Actual results or developments may differ
materially from those included in the forward-looking statements as a
result of various factors which are discussed in the Company’s filings
with the Securities and Exchange Commission, including those set forth
under the heading “Item 1A. Risk Factors” in the Company’s Form 10-K for
the fiscal year ended February 2, 2019.
These risks and
uncertainties include, but are not limited to, uncertainties relating to
economic conditions, growth risks, consumer spending patterns,
competition within the industry, competition in our markets and the
ability to anticipate and respond to fashion trends.
Any
forward-looking statements by the Company, with respect to guidance, the
Company’s intention to declare and pay dividends, the repurchase of
shares pursuant to a share repurchase program, or otherwise, are
intended to speak only as of the date such statements are made.
Except
as required by applicable law, including the securities laws of the
United States and the rules and regulations of the Securities and
Exchange Commission, the Company does not undertake to publicly update
any forward-looking statements in this news release or with respect to
matters described herein, whether as a result of any new information,
future events or otherwise.

 
CITI TRENDS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
(in thousands, except per share data)
         
 
Thirteen Weeks Ended Thirteen Weeks Ended
May 4, 2019 May 5, 2018
(unaudited) (unaudited)
Net sales $ 205,032 $ 211,032
 
Cost of sales (exclusive of depreciation shown separately below) (128,238 ) (129,413 )
Selling, general and administrative expenses (63,447 ) (63,005 )
Depreciation   (4,614 )   (4,974 )
Income from operations 8,733 13,640
Interest income 379 295
Interest expense   (38 )   (37 )
Income before income taxes 9,074 13,898
Income tax expense   (1,286 )   (2,601 )
Net income $ 7,788   $ 11,297  
 
 
Basic net income per common share $ 0.65   $ 0.83  
Diluted net income per common share $ 0.65   $ 0.83  
 
 
Weighted average shares used to compute basic net income per share   11,976     13,578  
Weighted average shares used to compute diluted net income per share   12,006     13,631  
 
 
 
 
 
CITI TRENDS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
(in thousands)
 
May 4, 2019 May 5, 2018
(unaudited) (unaudited)
Assets:
Cash and cash equivalents $ 29,484 $ 53,978
Short-term investment securities 43,135 33,504
Inventory 131,254 125,331
Prepaid and other current assets 14,018 16,372
Property and equipment, net 54,921 59,156
Operating lease right of use assets (1) 149,125 -
Long-term investment securities 7,777 21,707
Other noncurrent assets   7,834     6,203  
Total assets $ 437,548   $ 316,251  
 
Liabilities and Stockholders' Equity:
Accounts payable $ 64,201 $ 63,814
Accrued liabilities 22,004 21,971
Current operating lease liabilities (1) 41,027 -
Other current liabilities 2,808 5,530
Noncurrent operating lease liabilities (1) 115,121 -
Other noncurrent liabilities   1,838     8,325  
Total liabilities 246,999 99,640
 
Total stockholders' equity   190,549     216,611  
Total liabilities and stockholders' equity $ 437,548   $ 316,251  
 

(1) Lease assets and liabilities recorded in connection with the
adoption of ASU No. 2016-02, Leases (Topic 842)

 

CITI TRENDS, INC.
 
RECONCILIATION OF GAAP BASIS OPERATING RESULTS TO
ADJUSTED NON-GAAP OPERATING RESULTS
(unaudited)
(in thousands, except per share data)
 
 
The Company makes reference in this release to net income adjusted
for proxy contest-related expenses, earnings per diluted share
adjusted for proxy contest-related expenses and selling, general and
administrative expenses adjusted for proxy contest-related expenses
for the thirteen weeks ended May 4, 2019. The Company believes that
excluding proxy contest expenses and their related tax effects from
its financial results reflects operating results that are more
indicative of the Company's ongoing operating performance while
improving comparability to prior and future periods, and as such,
may provide investors with an enhanced understanding of the
Company's past financial performance and prospects for the future.
This information is not intended to be considered in isolation or as
a substitute for net income, earnings per diluted share or selling,
general and administrative expenses prepared in accordance with
generally accepted accounting principles (GAAP).
      Thirteen Weeks Ended May 4, 2019
As Reported     Adjustment (1)     As Adjusted
(unaudited)     (unaudited)     (unaudited)
 
Net sales $ 205,032 $ - $ 205,032
 
Cost of sales (exclusive of depreciation shown separately below) (128,238 ) - (128,238 )
Selling, general and administrative expenses (63,447 ) 1,042 (62,405 )
Depreciation   (4,614 )       -         (4,614 )
Income from operations 8,733 1,042 9,775
Interest income 379 - 379
Interest expense   (38 )       -         (38 )
Income before income taxes 9,074 1,042 10,116
Income tax expense   (1,286 )       (148 )       (1,434 )
Net income $ 7,788       $ 894       $ 8,682  
 
 
Basic net income per common share $ 0.65   $ 0.72  
Diluted net income per common share $ 0.65   $ 0.72  
 
 
 
Weighted average shares used to compute basic net income per share   11,976     11,976  
Weighted average shares used to compute diluted net income per share   12,006     12,006  
 
(1) Proxy contest expenses and related tax effects