Citi Trends reported a wider loss in the second quarter year-over-year as same-store sales fell 5.3 percent. The urban fashion discount chain noted that the quarter marked significant sequential same-store sales improvement from the first quarter while reiterating guidance for the year.

Same-store sales had been down 14.1 percent in the first quarter.

Financial Highlights, Second Quarter 2023

  • Total sales of $173.6 million decreased 6.2 percent versus Q2 2022. Comparable store sales decreased 5.3 percent compared to Q2 2022, an 880 bps improvement to Q1 202;
  • Gross margin of 38.2 percent versus 38.1 percent in Q2 2022; 150 bps increase to Q1 2023;
  • Operating loss of $7.9 million, or a loss of $7.8 million as adjusted, compared to operating loss of $3.3 million in Q2 2022;
  • Net loss per share of 61 cents, or adjusted net loss per share of 60 cents versus net loss per share of 31 cents in Q2 2022;
  • Quarter-end total dollar inventory decreased 5.4 percent compared to Q2 2022;
  • Total liquidity of approximately $141 million at the end of the quarter, made up of $65.8 million of cash, no borrowings under a $75 million credit facility and no debt; and
  • During Q2 2023, the company opened five new stores, closed two underperforming locations, remodeled eight stores, and ended the quarter with 611 stores.

Financial Highlights, 26 weeks ended July 29, 2023

  • Total sales of $353.2 million decreased 10.2 percent versus 2022. Comparable store sales decreased 10.0 percent compared to 2022.
  • Gross margin of 37.5 percent, or 37.6 percent as adjusted versus 38.6 percent in 2022;
  • Operating loss of $17.4 million, or a loss of $15.7 million as adjusted, compared to operating income of $36.3 million in 2022, or $1.4 million as adjusted;
  • Net loss of $11.7 million, or $10.4 million as adjusted, compared to net income of $27.7 million in 2022, or $1.0 million as adjusted;
  • Adjusted EBITDA of ($6.3) million versus $12.1 million in 2022; and
  • Net loss per share of $1.42, or adjusted net loss per share of ($1.27), versus diluted earnings per share of $3.34 in 2022, or $0.12 as adjusted.

David Makuen, chief executive officer, commented, “We are pleased with our second quarter results that reflect positive momentum for both the top line and gross margin against a continued challenging macro backdrop. The quarter was highlighted by significant sequential comparable store sales acceleration from the first quarter, a strong gross margin of 38.2 percent and well-managed expenses. Importantly, we experienced improved traffic levels and strong conversion throughout the quarter, signaling that our product assortment, strengthened by our strategic inventory rebuild in key areas of the business, is resonating with our loyal customers.”

Makuen continued, “I am incredibly proud of how our team managed the business while maintaining a laser focus on our strategic priorities and taking decisive actions that reflect our deep connection and understanding of our customers. While the discretionary landscape remains under pressure, we are reiterating our guidance for the fiscal year that incorporates our continued efforts to improve what we can control. We are excited about our back-to-school and early Fall assortments showcased in our unique in-store experience that positions Citi Trends as a one-stop solution for trends for the entire family in their local neighborhoods.”

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

Guidance
The company reiterated 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;
  • Full-year gross margin expected to be in the high-thirties;
  • Full-year EBITDA is expected to be in the range of $5 million to $20 million;
  • The company plans to open five new stores, remodel 10-to-20 stores, and closed 10-to-15 underperforming stores in the year;
  • Full-year capital expenditures are expected to be in the range of $15 million to $20 million; and
  • The year-end cash balance is expected to be in the range of $85 million to $105 million.

Photo courtesy Citi Trends