CTRN Citi Trends Inc

Citi Trends (CTRN) declared its guidance for the second quarter of fiscal 2011. The company expects to incur net loss in the range of 60 cents to 70 cents a share for the quarter.

After reporting declining comparable stores sales of 12% in the months of May and June, the company now estimates second quarter comps to decline 11%. Increase in clearance markdowns attributable to weak sales led to the loss in the quarter.

Citi Trends clarifies that despite its many difficulties, it has a solid cash position with $80 million of cash and investments and no outstanding debt. The company is focused on reducing operating cost and capital expenditure allocation. Accordingly, it has slashed its store opening numbers from a band of 65 to 70 to a range of 55 to 60 for fiscal 2011.

Citi Trends Inc. is a leading value-priced retailer of urban fashion apparel and accessories including nationally recognized brands, private-label products and a limited assortment of home décor items. The company primarily targets fashion conscious African-American customers, offering branded merchandise at about 30% to 70% discount compared to the regular prices of department and specialty stores.

Citi Trends’ business is seasonal in nature and typically generates stronger sales during fiscal first and fourth quarters, which are characterized by the spring and holiday seasons. As a result, the company is exposed to significant risks should the seasons fail to deliver on promised operating performance.

The company operates in a highly fragmented specialty retail sector and faces intense competition from larger off-price rivals, such as The TJX Companies Inc. (TJX) and Ross Stores Inc. (ROST), and mass merchants including Wal-Mart Stores Inc. (WMT) and Kmart.

The shares currently retain a short-term Zacks #5 Rank (Strong Sell rating) while we have a long-term Neutral recommendation on the company.

 
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