Citi Trends Swings to Earnings - Analyst Blog
March 18 2014 - 10:00AM
Zacks
Citi Trends Inc. (CTRN) posted fourth-quarter
fiscal 2013 earnings per share of 10 cents, marking a turnaround
from the loss of 5 cents per share reported in the prior-year
quarter. Moreover, the company’s earnings were in line the Zacks
Consensus Estimate.
We believe that the company’s strategic initiatives such as better
utilization of floor area, improvising merchandise margins and
efficient inventory management have helped it make a significant
turnaround.
Quarter in Detail
Citi Trends reported sales of $157.2 million, marking a decline of
10.5% from $175.7 million in the prior-year quarter, while it
remained almost in line with the Zacks Consensus Estimate of $157
million. The decline was mainly due to the inclusion of an
additional week in fourth-quarter fiscal 2012, which contributed
$12 million to sales.
Comparable-store sales (13 weeks comparable basis) in the quarter
declined 3.5% from the year-ago quarter, mainly driven by a 2% fall
in average unit sale coupled with a marginal decline in the
number of transactions and the average number of items per
transaction.
On the basis of merchandise category, comparable store sales of the
Home Division and Accessories increased 9% and 12%, respectively.
On the other hand, sales of the Children, Men’s divisions were down
6% each, while the Ladies division was down 15%.
Citi Trends' gross profit for the quarter increased by a marginal
0.2% to $57.6 million from $57.5 million in the year-ago quarter,
while gross margin expanded 390 basis points (bps) to 36.6%. The
improvement in gross margin came on the back of lesser markdowns
and strong inventory control that helped lower cost of sales.
Selling, general and administrative (SG&A) expenses in the
quarter increased approximately 4.7% year over year to $50.2
million, while depreciation expense waned 8.6% to $5.3 million. As
a percentage of sales, SG&A expenses increased 190 bps to 31.9%
due to a decline in total sales.
Operating income on a reported basis was $1.9 million, improving
significantly from a loss of $1.5 million reported in the
comparable year-ago quarter.
Full-Year Synopsis
For fiscal 2013, the company’s earnings came in at 3 cents per
share, significantly improving from a loss per share of 15 cents in
fiscal 2012 and the Zacks Consensus Estimate of a loss of 3 cents.
Sales for the year dipped 5.0% to $622.2 million, while it was
almost in sync with the Zacks Consensus Estimate of $622
million.
Financials
Citi Trends had no debt on its balance sheet at the end of fiscal
2013. Cash and cash equivalents were $58.9 million compared with
$37.3 million at the end of fiscal 2012. Shareholders' equity
totaled $198.9 million, as against $196.0 million in the prior-year
period.
Store Count
Following a conservative store growth strategy in fiscal 2013, Citi
Trends opened only 1 store throughout the year, while it relocated
or expanded 6 stores. Moreover, the company shuttered 9 stores in
the year, bringing the company’s total store count to 505 at the
close of fiscal 2013. At present, the company operates across 29
states in the Southeast, Mid-Atlantic and Midwest regions as well
as in the states of Texas and California.
Outlook
Looking at fiscal 2014, the company anticipates some sales
improvement as the company’s strategies begin paying off. However,
from the perspective of growth the company envisions another
conservative year with plans to open only 5-10 new stores, relocate
or expand 5–10 stores and remodel 20–25 stores.
Other Stocks to Consider
Citi Trends currently holds a Zacks Rank #3 (Hold). Better-ranked
stocks in the retail space include Foot Locker
Inc. (FL), American Apparel Inc. (APP)
and Burlington Stores Inc. (BURL). All of these
stocks have a Zacks Rank #2 (Buy).
AMER APPAREL (APP): Free Stock Analysis Report
BURLINGTON STRS (BURL): Free Stock Analysis Report
CITI TRENDS INC (CTRN): Free Stock Analysis Report
FOOT LOCKER INC (FL): Free Stock Analysis Report
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