Citi Trends, Inc. reduced its outlook after reporting a loss in the third quarter ended October 28 on a 10 percent same-store sales decline.

Financial Highlights for Third Quarter 2023

  • Total sales of $179.5 million decreased 6.7 percent vs. Q3 2022; Comparable store sales decreased 6.2 percent compared to Q3 2022;
  • Gross margin of 38.2 percent vs. 39.8 percent in Q3 2022, flat to Q2 2023 gross margin;
  • Operating loss of $6.0 million, or a loss of $7.0 million as adjusted, compared to operating income of $31.6 million, or $2.4 million as adjusted in Q3 2022;
  • Net loss per share of $0.47, or adjusted net loss per share of $0.56, vs. net earnings per share of $3.02, or $0.24 as adjusted;
  • Quarter-end total dollar inventory increased 0.9 percent compared to Q3 2022;
  • Total liquidity of approximately $135 million at the end of the quarter, made up of $59.7 million of cash, no borrowings under a $75 million credit facility, no debt; and
  • During Q3 2023, the company closed 5 stores and remodeled 7 stores, which brings total remodels to 15 for the year. The company ended the quarter with 606 stores.

Financial Highlights for the 39 weeks ended October 28, 2023

  • Total sales of $532.8 million decreased 9.0 percent vs. 2022; Comparable store sales decreased 8.7 percent compared to 2022;
  • Gross margin of 37.7 percent, or 37.8 percent as adjusted, vs. 39.0 percent in 2022;
  • Operating loss of $23.4 million, or a loss of $22.7 million as adjusted compared to operating income of $67.9 million in 2022, or $3.8 million as adjusted;
  • Net loss of $15.5 million, or $15.0 million as adjusted, compared to net income of $52.3 million in 2022, or $2.9 million as adjusted;
  • Adjusted EBITDA of ($8.5) million vs. $19.6 million in 2022; and
  • Net loss per share of $1.89, or adjusted net loss per share of $1.83, vs. diluted earnings per share of $6.34 in 2022, or $0.35 as adjusted.

David Makuen, CEO, said, “In the third quarter, our team continued to advance our strategic initiatives while navigating a very challenging selling environment and controlling the controllables like we always do. We successfully managed the middle of the P&L as we registered a strong gross margin of 38.2 percent and kept operating expense dollars essentially flat compared to the prior year. That said, our third quarter topline performance did not meet our expectations, with sales held back more than we expected by the ongoing challenging macroeconomic backdrop. Our primarily low-income customer base is being more selective and purchasing much closer to need as they navigate higher costs of living, a buying pattern further impacted by unseasonably warm weather throughout the quarter.”

Makuen continued, “I am pleased to report that we’ve experienced improved top-line momentum fourth quarter to date. Our customers are loving our Ready. Set. GIFT! Campaign with a timely in-store setup of a wide offering of gifts, from great toys to fragrances to Bluetooth speakers and apparel for the whole family, all at incredible value. I am truly grateful to our teams for their unwavering dedication to serving our African-American and multicultural families in the heart of their local neighborhoods. Importantly, the strength of our balance sheet with total liquidity of $135 million at quarter-end and no debt, provides us the necessary flexibility to navigate the dynamic macroeconomic and consumer environment while maintaining our focus on our strategic initiatives and creating long-term shareholder value.”

Capital Return Program Update
In the third quarter of 2023, the company did not repurchase any shares of its common stock. At the end of the third quarter of 2023, $50.0 million remained available under the company’s share repurchase program.

Guidance
The company updated its outlook for fiscal 2023 as follows:

  • Full-year total sales are expected to be down mid-single digits as compared to fiscal 2022, previously, negative mid-single-digits to negative low-single-digits;
  • Full-year gross margin is still expected to be in the high thirties;
  • Full-year EBITDA is expected to be in the range of $1 million to $7 million, previously in the range of $5 million to $20 million;
  • Full-year capex is expected to be in the range of $17 million to $20 million, previously in the range of $15 million to $20 million;
  • Year-end cash balance is expected to be in the range of $80 million to $90 million, previously in the range of $85 million to $105 million; and
  • Implied fourth quarter total sales are expected to be approximately flat to up low-single digits vs. Q4 2022 with EBITDA in the range of $9 million to $15 million.

Photo courtesy Citi Trends