Citi Trends, Inc. reported fiscal first-quarter sales decreased 13.7 percent to $179.7 million compared to the year-ago quarter, in line with guidance. Comparable store sales decreased 14.1 percent compared to Q1 2022.

Gross margin declined 230 basis points to 36.7 percent of sales, or 37.0 percent as adjusted, versus 39.0 percent in Q1 2022.

Operating loss was $9.5 million for the quarter, or a loss of $7.9 million as adjusted, compared to operating income of $39.7 million, or $4.7 million as adjusted in Q1 2022.

Net loss per share was 81 cents, or adjusted net loss per share of 66 cents, versus diluted earnings per share of $3.59, or adjusted diluted earnings per share of 42 cents in Q1 2022.

Quarter-end total dollar inventory decreased 11.9 percent compared to the year-ago quarter-end. Average in-store inventory increased 8.1 percent compared to Q1 2022 reflecting work to rebuild inventory levels in targeted departments.

Citi Trends had total liquidity of approximately $164 million at the end of the quarter, with $88.7 million of cash, no borrowings under a $75 million credit facility, and no debt.

David Makuen, CEO, commented, “Against what remained a challenging macro backdrop for the low-income families that we serve, our first quarter results were in line with our previously stated guidance. During the quarter, we made progress rebuilding inventory in key areas of the business, which we believe will position us to recoup market share. Although we are seeing a good response to our spring and early summer merchandise, our customers are being selective about what they put in their basket. That said, we continue to see strong shopper conversion, a clear signal that our assortments are resonating and the Citi Trends brand position remains healthy.”

Makuen continued, “With a macro environment that remains uncertain, we are prudently adjusting our outlook for the fiscal year, incorporating the impact of continued headwinds on our customers’ spending through the first half with modest improvement in the second half. Importantly, we remain laser-focused on controlling what we can control, including tight expense and capital management. Looking forward, we’ll leverage our strong financial position to procure a fresh assortment of exciting products at amazing values that will set us up for successful back-to-school and holiday selling seasons.”

Given the uncertain macro-economic environment, the company is updating its outlook for fiscal 2023 as follows:

  • Full-year total sales are expected to be in the range of negative mid-single-digits to negative low-single-digits as compared to fiscal 2022, assuming a challenging first half with modest improvement in the second half of the year
  • Full-year EBITDA is now expected to be in the range of $5 million to $20 million
  • The company now plans to open 5 new stores and remodel 10 to 20 stores in the year
  • Full-year capital expenditures are now expected to be in the range of $15 million to $20 million
  • Year-end cash balance is expected to be in the range of $85 million to $105 million
  • The remaining aspects of the prior guidance are unchanged with the full-year gross margin expected to be in the high thirties and the closure of 10 to 15 underperforming stores

Photo courtesy City Trends