Group 1 - The core investment strategy of Quipus Capital focuses on long-only investment, evaluating companies from an operational and buy-and-hold perspective rather than market-driven dynamics [1] - Quipus Capital emphasizes understanding the long-term earnings power of companies and the competitive dynamics within their industries [1] - The majority of recommendations from Quipus Capital will be holds, indicating a cautious approach to investment opportunities [1] Group 2 - The articles produced by Quipus Capital aim to provide valuable information for future investors while maintaining a healthy skepticism towards a generally bullish market [1] - The company believes that only a small fraction of companies should be considered a buy at any given time [1]

Financial Data and Key Metrics Changes - The company reported a fourth quarter comparable store sales growth of 6.4%, showing sequential improvement from the third quarter and strong acceleration on a two-year basis [3][4] - Gross margin expanded compared to the previous year, indicating positive momentum in sales and profitability [4] Business Line Data and Key Metrics Changes - The strategic focus on off-price value retailing has been a key driver of the company's performance, particularly in appealing to the African American customer base [3][5] - The company is enhancing its product value proposition and expanding brand assortment, which has contributed to the positive sales momentum [5] Market Data and Key Metrics Changes - The company has seen approximately 2,000 basis points of improvement in two-year stack trends, distinguishing itself from other retailers facing softening results [7][8] Company Strategy and Development Direction - The company is focused on a refined strategy that emphasizes trendy fashions, great brands, and competitive pricing, creating a defensible market position [3][4] - Long-term EBITDA targets are set between $40 million to $50 million, with plans to improve EBITDA margins to the 5% to 7% range [5][11] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's strategic initiatives and healthy balance sheet, positioning it for continued improvement into fiscal year 2025 [4] - The management highlighted the importance of operational excellence and improved allocation practices in driving the company's turnaround [5] Other Important Information - The company is developing relationships with larger brands to enhance its product offerings, particularly in footwear and apparel [10] - The operating budget is set at a low base to ensure foundational operations, with a sales plan aimed at generating approximately 25% flow-through once sales targets are met [15][16] Q&A Session Summary Question: Sales trends and industry differentiation - The analyst inquired about the company's sales trends and what differentiates it from the industry, noting a significant improvement in two-year stack trends [7] Response: Off-price strategy - Management attributed the success to the addition of off-price strategies and a sharpened price-value equation across core products [8] Question: Off-price inventory expectations - The analyst asked about the current and future state of off-price inventory [9] Response: In-season aggressive deals - Management clarified that off-price now includes more in-season aggressive deals, not just end-of-season closeouts [9] Question: Long-term EBITDA targets - The analyst sought clarity on the sales levels needed to achieve the EBITDA target of $40 million [11] Response: EBITDA margin improvement - Management indicated that improving EBITDA margins to above 5% would be essential to reach the target [11] Question: Building blocks of EBITDA increase - An analyst requested details on the components contributing to the projected EBITDA increase [15] Response: Sales growth and margin expansion - Management discussed the importance of sales growth and margin expansion, with a focus on maintaining a low base of expenses [16] Question: Clarification on comp guidance - The analyst asked if the low base of sales and SG&A was the baseline for comp guidance [17] Response: Guidance encompasses low sales base - Management confirmed that the guidance includes a low sales base to ensure expenses remain controlled [17]

Financial Data and Key Metrics Changes - The company reported total sales of approximately $211 million for Q4 2024, with comparable store sales growth of 6.4%, reflecting a sequential improvement from Q3 [6][13] - Gross margin rate expanded by 60 basis points to 39.7% compared to Q4 2023, driven by strong customer traffic and improved product offerings [14][41] - Inventory levels decreased by 6% year-over-year, indicating a fresher inventory position [15][53] Business Line Data and Key Metrics Changes - The footwear business registered high-single-digit growth, driven by strong customer acceptance of extreme off-value price branded buys [18] - Non-apparel categories such as giftables and family basics performed well, while children's apparel continued to grow [17] - The plus-size apparel segment experienced challenges due to execution issues, which are expected to improve by Q2 2025 [17] Market Data and Key Metrics Changes - The company has identified significant opportunities to expand its product assortment to cater to average- and higher-income customers within its African-American customer base [8][20] - The strategic focus on trendy fashions and recognizable brands has resonated well with customers, leading to increased loyalty and transaction sizes [7][21] Company Strategy and Development Direction - The company is transitioning from the repair phase to the execute phase of its strategic journey, focusing on consistent execution capabilities and best practices [11][55] - A three-tiered product strategy is being implemented to enhance product assortment and meet diverse customer needs [19] - The company plans to remodel at least 50 stores in 2025 and is conducting market studies for future expansion [26][27] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to navigate macroeconomic uncertainties, including potential changes in tariffs and taxes [32][34] - The company anticipates positive free cash flow generation in fiscal 2025, marking a critical milestone in its financial transformation [30][51] - Full-year comparable sales growth is expected to be in the low- to mid-single digits, with gross margin expected to expand by at least 220 basis points [56] Other Important Information - The company maintains a healthy balance sheet with $61 million in cash and no debt, providing flexibility for strategic initiatives [29][51] - The Board approved a $50 million share repurchase program, with $10 million already invested [30][52] Q&A Session Summary Question: Sales trends and market share - Management highlighted the addition of off-price to the business model and improved price value equation as key drivers for sustaining momentum into 2025 [65][66] Question: Off-price business growth - Currently, off-price accounts for 1% to 2% of the business, with expectations to grow to around 10% in the long term [70][71] Question: Brand name deals - The company is focusing on securing deals with well-known brands across various categories, emphasizing extreme pricing [76][78] Question: EBITDA increase components - Management outlined that the anticipated EBITDA increase of $19 million to $23 million will come from sales growth, margin expansion, and leveraging SG&A [89][95] Question: Sales guidance and flow-through - The low base of sales and SG&A is expected to support the guidance of low- to mid-single-digit comp sales, with potential for additional sales above that range [96][98]

Sales Performance - Q4 2024 total sales reached $211.2 million, with comparable store sales growth of 6.4% and average store inventory down 6.7%[1] - Fiscal 2024 total sales amounted to $753.1 million, reflecting a 0.7% increase compared to the previous year[5] - Net sales for the fourth quarter of fiscal year 2025 were $211,172, a decrease of 1.5% compared to $215,179 in the same quarter of the previous year[18] - For the fiscal year 2025, net sales were $753,079, an increase of 0.2% from $747,941 in fiscal year 2024[18] Profitability and Loss - The company reported a net loss of $(43.2) million for fiscal 2024, compared to a net loss of $(12.0) million in 2023[5] - The company reported a net loss of $14,177 for the fourth quarter, compared to a net income of $3,551 in the fourth quarter of fiscal year 2024[18] - The company reported a basic net loss per common share of $5.19 for fiscal year 2025, compared to a basic net income per common share of $7.17 in fiscal year 2024[18] Gross Margin - Q4 2024 gross margin was 39.7%, an increase of 60 basis points from Q4 2023[5] - Full year gross margin for fiscal 2025 is expected to expand by a minimum of 220 basis points compared to 2024[11] - The adjusted gross margin for fiscal year 2025 was 37.5%, down from 38.1% in fiscal year 2024[24] EBITDA - Adjusted EBITDA for Q4 2024 was $7.1 million, down from $10.0 million in Q4 2023[5] - Adjusted EBITDA for the fourth quarter of fiscal year 2025 was $7,098, down from $9,989 in the fourth quarter of fiscal year 2024[23] Liquidity and Debt - The company ended fiscal 2024 with liquidity of approximately $136 million, including $61 million in cash and no debt[1] - Cash and cash equivalents decreased to $61,085 as of February 1, 2025, from $79,706 as of February 3, 2024[20] Future Outlook - For fiscal 2025, the company expects low to mid-single digit comparable store sales growth and EBITDA improvement of $19 million to $23 million compared to fiscal 2024[11] - The company plans to remodel approximately 50 stores and open up to 5 new locations in fiscal 2025[11] Assets and Liabilities - Total assets decreased to $462,769 as of February 1, 2025, from $518,721 as of February 3, 2024[20] - Total liabilities decreased to $349,594 as of February 1, 2025, compared to $361,015 as of February 3, 2024[20] Share Repurchase - In Q4 2024, the company repurchased 145,238 shares for a total of $3.8 million, with $46.2 million remaining under the share repurchase program[8] Asset Impairment - The company incurred asset impairment charges of $701 in the fourth quarter of fiscal year 2025, compared to $873 in the same quarter of the previous year[18]

Core Viewpoint - Purcell & Lefkowitz LLP is investigating Citi Trends, Inc. to determine if the company's directors breached their fiduciary duties related to recent corporate actions [1] Group 1 - The investigation is being conducted on behalf of Citi Trends's shareholders [1] - The law firm specializes in representing shareholders who are victims of securities fraud and corporate misconduct [3] - Shareholders interested in their rights and options can obtain additional information free of charge [2]

Financial Performance - Total net sales for the thirteen weeks ended November 2, 2024, were $179,066,000, a slight decrease of 0.3% compared to $179,520,000 for the same period last year[11]. - The company reported a net loss of $7,152,000 for the thirteen weeks ended November 2, 2024, compared to a net loss of $3,863,000 for the same period last year, representing an increase in loss of 85.5%[11]. - Basic net loss per common share was $(0.86) for the current quarter, compared to $(0.47) for the same quarter last year[11]. - The company experienced a loss from operations of $8,826,000 for the thirteen weeks ended November 2, 2024, compared to a loss of $6,003,000 for the same period last year, indicating a worsening operational performance[11]. - Net loss was $7.2 million in Q3 2024 compared to a net loss of $3.9 million in Q3 2023[75]. - Net loss was $29.0 million in the first thirty-nine weeks of 2024 compared to a net loss of $15.5 million in the same period in 2023[81]. Assets and Liabilities - Total current assets decreased to $183,112,000 as of November 2, 2024, down from $225,099,000 as of February 3, 2024, a decline of 18.7%[8]. - Total liabilities decreased to $336,806,000 as of November 2, 2024, from $361,015,000 as of February 3, 2024, a reduction of 6.7%[8]. - Total stockholders' equity decreased to $130,270,000 as of November 2, 2024, down from $157,706,000 as of February 3, 2024, a decline of 17.3%[8]. - Cash and cash equivalents decreased significantly to $38,872,000 as of November 2, 2024, from $79,706,000 as of February 3, 2024, a decline of 51.2%[8]. - The quarter-end cash and cash equivalents balance was $38.9 million, down from $59.7 million at the end of the third quarter last year[82]. Operational Metrics - Inventory levels were reported at $127,514,000 as of November 2, 2024, a decrease from $130,432,000 as of February 3, 2024, reflecting a reduction of 2.2%[8]. - The company operated 593 stores across 33 states as of November 2, 2024[19]. - The company's revenue from contracts with customers is disaggregated by major merchandise categories, with Ladies accounting for 27% and Home & Lifestyle for 10% of net sales in Q3 2024[44]. - For the first thirty-nine weeks of 2024, net sales increased by $9.1 million, or 1.7%, to $541.9 million compared to the same period in 2023[76]. Expenses - Cost of sales (exclusive of depreciation) decreased by $3.1 million, or 2.7%, to $107.8 million in Q3 2024, with cost of sales as a percentage of sales decreasing to 60.2%[70]. - Selling, general and administrative expenses increased by $5.1 million, or 7.3%, to $74.7 million in Q3 2024, resulting in an increase in expenses as a percentage of sales to 41.7%[71]. - Cost of sales (exclusive of depreciation) increased by $11.9 million, or 3.6%, to $343.7 million in the first thirty-nine weeks of 2024, with cost of sales as a percentage of sales increasing to 63.4%[77]. - Selling, general and administrative expenses increased by $12.7 million, or 6.1%, to $222.7 million in the first thirty-nine weeks of 2024, with expenses as a percentage of sales rising to 41.1%[78]. Cash Flow and Financing - The company reported a net cash used in operating activities of $32,348,000 for the thirty-nine weeks ended November 2, 2024, compared to $32,868,000 for the same period last year, indicating a slight improvement[16]. - The company had no borrowings under its $75 million credit facility as of November 2, 2024[28]. - Cash paid for operating leases in the first thirty-nine weeks of 2024 was $46.7 million, compared to $52.7 million in the same period of 2023[50]. - The company continues to meet its cash requirements through cash flow from operations and short-term trade credit[93]. Legal and Regulatory - The company is involved in various legal proceedings but does not expect any to have a material adverse effect on its financial condition[103]. - The company has established appropriate reserves for legal proceedings when costs become probable and can be reasonably estimated[103]. - The evaluation of disclosure controls and procedures concluded that they are effective as of November 2, 2024, providing reasonable assurance for timely reporting[98]. - There were no changes in internal control over financial reporting that materially affected the company during the fiscal quarter ended November 2, 2024[100]. Accounting and Standards - The company’s financial statements are prepared in accordance with U.S. GAAP and are unaudited[20]. - The company is currently evaluating the impact of new accounting standards issued by the FASB regarding segment reporting and income tax disclosures[51][52]. - There have been no material changes to the critical accounting policies since the last annual report[96]. - There have been no material changes to the risk factors described in the annual report for the fiscal year ended February 3, 2024[104].

Group 1 - Citi Trends, Inc. (NASDAQ: CTRN) reported Q3 2024 results with a topline comparable expansion exceeding 5.5%, attributed to increased traffic and basket size [1] - The company's margins did not expand, and it experienced higher losses compared to previous periods [1] Group 2 - The analysis emphasizes a long-only investment approach, focusing on operational aspects and long-term earnings potential rather than market-driven dynamics [1] - The investment strategy suggests that only a small fraction of companies should be considered for buying at any given time, with most recommendations being holds [1]

Financial Data and Key Metrics Changes - Total sales for Q3 2024 were $179.1 million, with comparable sales growth of 5.7% compared to the prior year [11][33] - Gross margin expanded by 160 basis points to 39.8%, with gross profit dollars increasing by 3.9% year-over-year [19][36] - Adjusted SG&A expenses totaled $74.6 million, an increase of $3.7 million versus last year, driven by strategic costs aimed at future growth [38][39] Business Line Data and Key Metrics Changes - Positive trends were observed across both apparel and non-apparel categories, with children's apparel performing particularly well due to improved product assortment and allocation tactics [12][13] - Non-apparel categories, especially home and lifestyle, also showed strength, benefiting from strategic inventory investments [13] Market Data and Key Metrics Changes - Comparable sales improved each month during Q3, culminating in high single-digit growth in October, indicating strong customer traffic and transaction growth [10][12] - The company noted a significant reduction in inventory aged 7 months or older, which made up only 3% of Q3 end-of-period inventory [35] Company Strategy and Development Direction - The company is focused on a core African American customer base, aiming to refine product assortments that resonate with this demographic [24] - A balanced product value proposition is being reinforced, with an increased selection of goods priced under $5 to attract lower-income customers [25] - The company plans to return to new store growth in 2025 and beyond, while also implementing a remodel and refresh program for existing stores [78][80] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the positive customer response to recent strategic changes, particularly in November [58][102] - The company expects second-half comparable store sales to increase low to mid-single digits year-over-year, with total sales expected to be flat to down slightly due to store closures [44][46] Other Important Information - The company has a strong balance sheet with no debt and $39 million in cash, allowing for share repurchases and funding of business initiatives [40][41] - Approximately $1.6 million in one-time strategic expenses were incurred in Q3, aimed at stabilizing operational practices for long-term growth [23] Q&A Session Summary Question: What is the guidance for Q4 sales given the strong start in November? - Management acknowledged the exceptional performance in November but noted caution due to tougher comparisons in December and January [58][60] Question: What portion of Q4 sales comes in December? - Management indicated that December accounts for about 50% of Q4 sales [63] Question: What is the current impact of shrink on margins? - Management estimated shrink is currently a drag of 50 to 70 basis points compared to historical levels, with improvement expected into 2025 [64][66] Question: What is the long-term EBITDA margin target for the business? - Management aims to return EBITDA margins to historical levels of 5% to 6% [88][90] Question: What is the expected long-term SG&A cost? - Management indicated that a quarterly SG&A of around $73 million is a reasonable target moving forward [93] Question: How does the current turnaround compare to past experiences? - Management highlighted the unique operational challenges faced and the quick positive customer response as key differences in this turnaround [100][102]

Financial Results - Citi Trends, Inc. announced preliminary financial results for Q3 fiscal 2024, with specific figures to be detailed in the attached press release[5]. Executive Appointments - Kenneth D. Seipel has been appointed as the permanent Chief Executive Officer, effective November 18, 2024, after serving as Interim CEO[7]. - The Board appointed Peter Sachse as Chairman of the Board, effective November 18, 2024, following Mr. Seipel's appointment[13]. Compensation and Incentives - Mr. Seipel's annual base salary is set at $725,000, with a potential annual cash incentive of up to 200% of a prorated target amount based on earnings performance[9]. - The company plans to grant Mr. Seipel 80,000 restricted shares of common stock, vesting over three years, and an additional performance-based grant of approximately 321,500 restricted shares[9]. - The performance-based shares will vest based on achieving specific stock price hurdles, each representing a 20% increase in stock price over a three-year period[9]. Press Release - The press release regarding the CEO appointment and preliminary financial results is incorporated into the current report[14].

Financial Performance - Net sales for the twenty-six weeks ended August 3, 2024, were $362,841,000, compared to $353,242,000 for the same period in 2023, representing an increase of about 2.3%[8] - The net loss for the thirteen weeks ended August 3, 2024, was $21,839,000, compared to a net loss of $11,667,000 for the same period in 2023, indicating a worsening of approximately 87.1%[9] - Basic net loss per common share for the thirteen weeks ended August 3, 2024, was $(2.63), compared to $(1.42) for the same period in 2023, reflecting a significant increase in losses per share[8] - The company reported a loss from operations of $31,865,000 for the twenty-six weeks ended August 3, 2024, compared to a loss of $17,382,000 for the same period in 2023, indicating a deterioration of approximately 83.5%[8] - The net loss for the second quarter of 2024 was $18.4 million, compared to a net loss of $6.6 million in the same period of 2023[21] - The company reported an asset impairment of $1,261,000 for the twenty-six weeks ended August 3, 2024, compared to no impairment in the same period of 2023[8] Assets and Liabilities - Total assets decreased from $518,721,000 as of February 3, 2024, to $506,731,000 as of August 3, 2024, a decline of approximately 2.3%[5] - Total current liabilities increased from $169,904,000 as of February 3, 2024, to $185,483,000 as of August 3, 2024, an increase of approximately 9.1%[5] - Total current assets decreased from $225,099 thousand as of February 3, 2024, to $215,116 thousand as of August 3, 2024[5] - Total liabilities increased from $361,015 thousand as of February 3, 2024, to $370,141 thousand as of August 3, 2024[5] - Total stockholders' equity decreased from $157,706,000 as of February 3, 2024, to $136,590,000 as of August 3, 2024, a decline of approximately 13.4%[6] Cash Flow and Liquidity - Cash and cash equivalents decreased from $79,706,000 at the beginning of the period to $59,302,000 at the end, a decline of about 25.6%[9] - Total cash and cash equivalents at the end of the period were $59,302,000, down from $65,820,000 at the end of July 29, 2023, indicating a decrease in liquidity[9] - Cash used in operating activities for the twenty-six weeks ended August 3, 2024, was $(13,996,000), a decrease from $(29,961,000) in the same period of 2023, showing improved cash flow management[9] Inventory and Operating Costs - Inventory increased from $130,432,000 as of February 3, 2024, to $134,996,000 as of August 3, 2024, an increase of approximately 3.6%[5] - Operating lease liabilities increased from $45,842,000 to $49,071,000, reflecting a rise of about 4.9%[5] - Operating lease costs for the weeks ended July 29, 2023, totaled $18,921 thousand, while for the weeks ended August 3, 2024, they were $18,322 thousand, indicating a decrease[31] - Total lease costs for the first half of 2024 amounted to $37.047 million, compared to $37.965 million for the first half of 2023[31] Shareholder Information - The weighted average number of common shares outstanding (basic) for the second quarter of 2024 was 8,336,629, compared to 8,224,762 for the same period in 2023[17] - The weighted average number of basic shares outstanding increased to 8,295,000 for the twenty-six weeks ended August 3, 2024, from 8,203,000 in the same period of 2023[8] - The weighted average number of common shares outstanding (diluted) increased to 8,294,593 as of August 3, 2024, from 8,203,497 in the previous year[18] - There were no stock repurchases in the first half of 2024 or 2023, with $50 million remaining available under the stock repurchase authorization[27] Store Operations - As of August 3, 2024, the company operated 597 stores across 33 states[13] - The company’s retail operations represent a single operating segment, with similar products and processes across its stores[28] Tax and Deferred Assets - The company had approximately $13.7 million in net deferred tax assets as of August 3, 2024[23] - As of August 3, 2024, the company had approximately $13.7 million in net deferred tax assets (DTA), with $9.7 million related to net operating loss (NOL) carryforwards[23][24] Accounting and Reporting - The company is currently evaluating the impact of new accounting standards issued by the FASB regarding segment reporting and income tax disclosures[36][37]