19-03-2025
Citi Trends Inc (CTRN) Q4 2024 Earnings Call Highlights: Strong Sales Growth and Strategic ...
Total Sales: Approximately $211 million for the fourth quarter.
Comparable Store Sales Growth: 6.4% increase in the fourth quarter.
Gross Margin: 39.7%, a 60 basis point expansion compared to Q4 2024.
Inventory: Down 6% compared to the prior year.
Cash Position: $61 million in cash with no debt.
Store Count: 591 stores at the end of the quarter.
Adjusted EBITDA: $7.1 million for the fourth quarter.
Full-Year Sales: $753.1 million for fiscal 2024.
Full-Year Comparable Store Sales: 3.4% increase on a 52-week to 52-week basis.
Full-Year Adjusted EBITDA: Loss of $14.2 million.
Share Repurchase: $10 million spent on repurchasing 395,793 shares at an average price of $25.23.
2025 Outlook - Comp Sales Growth: Low to mid-single digits expected.
2025 Outlook - Gross Margin Expansion: Minimum of 220 basis points expected.
2025 Outlook - EBITDA: Expected to be in the range of $5 million to $9 million.
2025 Outlook - Store Openings/Closures: Plan to open up to five new stores and close up to five stores.
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Release Date: March 18, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Citi Trends Inc (NASDAQ:CTRN) reported a 6.4% increase in comparable store sales for the fourth quarter, showing strong customer traffic and transaction growth.
The company achieved a gross margin rate of 39.7%, a 60 basis point expansion compared to the previous year.
Citi Trends Inc (NASDAQ:CTRN) ended the period with inventories down 6% compared to the prior year, indicating improved inventory management.
The company has a strong financial position with $61 million in cash, no debt, and no drawings on its $75 million revolver.
Citi Trends Inc (NASDAQ:CTRN) is implementing an AI-based product allocation system to enhance inventory efficiency and reduce markdowns.
The company experienced a significant miss in plus size apparel due to execution issues, although these have been addressed.
Adjusted EBITDA for the fourth quarter was $7.1 million, down from $10 million in the same quarter of the previous year.
Citi Trends Inc (NASDAQ:CTRN) recorded a noncash valuation allowance of approximately $15.5 million related to deferred tax assets.
The company closed two stores during the quarter as part of its fleet optimization efforts.
Weather disruptions in January had a 250 basis point negative impact on comparable store sales for the month.
Q: What is Citi Trends doing differently from the industry to sustain momentum into 2025 despite other retailers reporting softening results? A: Kenneth Seipel, CEO, highlighted that Citi Trends has sharpened its price value equation and added an off-price model, which has resonated well with customers. The strategic positioning of their 591 stores in neighborhoods has also made them a first alternative for customers, contributing to market share gains.
Q: How has the off-price portion of the business evolved, and what are the future expectations? A: Kenneth Seipel explained that the off-price segment, currently contributing 1-2% of the business, is expected to grow to about 10%. This segment focuses on in-season aggressive deals and extreme value items, which are additive to the business rather than replacements.
Q: Can you provide more details on the brand name deals Citi Trends is pursuing? A: Kenneth Seipel mentioned that while specific brand names cannot be disclosed due to ongoing relationships, the focus is on top-selling, high-awareness brands across categories like footwear and apparel. These deals are often at extreme pricing, providing unique market opportunities.
Q: What are the building blocks for the projected EBITDA increase of $19 million to $23 million? A: Kenneth Seipel and Heather Plutino, CFO, noted that the increase will be driven by sales growth, margin expansion, and leveraging SG&A. The company has set a low base for sales and expenses, with a plan to achieve a 25% flow-through from sales growth.
Q: What sales level is needed to achieve the longer-term adjusted EBITDA target of $40 million to $50 million? A: Kenneth Seipel indicated that the goal is to achieve an EBITDA margin of 5% to 7%, which would align with industry standards. The focus is on restoring EBITDA to the $40 million to $50 million range through improved sales and operational efficiencies.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
