[First Quarter Fiscal 2024 Overview](index=1&type=section&id=First%20Quarter%20Fiscal%202024%20Overview) Citi Trends reported improved financial performance in Q1 Fiscal 2024, with positive sales growth and gross margin expansion, alongside a strong balance sheet with ample liquidity and no debt [Key Performance Highlights](index=1&type=section&id=1.1%20Key%20Performance%20Highlights) Citi Trends reported improved financial performance in Q1 Fiscal 2024, with positive sales growth and gross margin expansion, alongside a strong balance sheet with ample liquidity and no debt. The company also continued its store optimization efforts Key Performance Highlights (Q1) | Metric | Q1 2024 | Q1 2023 | | :-------------------------------- | :------ | :------ | | Total Sales ($M) | $186.3 | $179.7 | | Comparable Sales Growth | 3.1% | N/A | | Gross Margin | 38.7% | 36.7% (reported) / 37.0% (adjusted) | | Operating Loss ($M) | ($7.0) | ($9.5) | | Adjusted Operating Loss ($M) | ($5.6) | ($7.9) | | Adjusted EBITDA Loss ($M) | ($0.8) | ($3.2) | | Net Loss Per Share | ($0.42) | ($0.81) | | Adjusted Net Loss Per Share | ($0.32) | ($0.66) | | Cash at Quarter-End ($M) | $58.2 | N/A | | Inventory Increase (YoY) | 4% | N/A | - Closed **3 stores** and remodeled **20 stores** in Q1 2024, ending the quarter with **599 locations**. An additional **15 stores** were remodeled in Q2 2024 to date, bringing **21% of the fleet** to the CTx format[6](index=6&type=chunk) - The company maintains ample liquidity with **$58.2 million in cash** at quarter-end, no debt, and no borrowings under its **$75 million credit facility**[1](index=1&type=chunk)[6](index=6&type=chunk) [Interim Chief Executive Officer's Remarks](index=1&type=section&id=1.2%20Interim%20Chief%20Executive%20Officer's%20Remarks) Interim CEO Ken Seipel highlighted Q1 performance improvements, strategic initiatives for profitable growth, and financial discipline, while acknowledging the challenging economic environment and the departure of former CEO David Makuen - The company registered a **3.1% comparable sales increase** and a **160 basis point gross margin expansion**, aided by inventory rebuild in targeted product categories and improved in-store experiences[4](index=4&type=chunk) - Strategic focus areas include driving profitable sales, sharpening product assortment, streamlining costs, optimizing the supply chain, improving inventory returns, and leveraging recent technology investments[4](index=4&type=chunk) - The balance sheet has ample liquidity and no debt, providing flexibility to fund business opportunities, despite a challenging economic environment for lower-income consumers[4](index=4&type=chunk) - David Makuen stepped down as CEO on May 31, 2024, after **four years of leadership**, during which he shaped the company's culture through challenging consumer environments[4](index=4&type=chunk) [About Citi Trends](index=1&type=section&id=1.3%20About%20Citi%20Trends) Citi Trends, Inc. is a prominent specialty value retailer catering primarily to African American and multicultural families in the United States, offering apparel, accessories, and home trends at competitive prices - Citi Trends is a leading specialty value retailer of apparel, accessories, and home trends[2](index=2&type=chunk)[11](index=11&type=chunk) - The primary target demographic is African American and multicultural families in the United States[2](index=2&type=chunk)[11](index=11&type=chunk) - The company operates **599 stores** across **33 states**[6](index=6&type=chunk)[11](index=11&type=chunk) [Financial Results - First Quarter Fiscal 2024](index=1&type=section&id=Financial%20Results%20-%20First%20Quarter%20Fiscal%202024) Citi Trends reported an increase in net sales year-over-year but continued to experience a net loss, albeit a reduced one compared to the prior year, with improved operating loss [Condensed Consolidated Statements of Operations](index=5&type=section&id=2.1%20Condensed%20Consolidated%20Statements%20of%20Operations) For the first quarter of 2024, Citi Trends reported an increase in net sales year-over-year but continued to experience a net loss, albeit a reduced one compared to the prior year. Operating loss also improved Condensed Consolidated Statements of Operations (Q1, in thousands) | Metric | Q1 2024 | Q1 2023 | Q1 2022 | | :--------------------------------------- | :------ | :------ | :------ | | Net sales | $186,289 | $179,688 | $208,215 | | Cost of sales | ($114,254) | ($113,659) | ($127,011) | | Selling, general and administrative expenses | ($74,211) | ($70,807) | ($71,026) | | Depreciation | ($4,793) | ($4,681) | ($5,445) | | (Loss) Income from operations | ($6,969) | ($9,460) | $39,653 | | Net (loss) income | ($3,426) | ($6,635) | $30,203 | | Basic net (loss) income per common share | ($0.42) | ($0.81) | $3.59 | | Diluted net (loss) income per common share | ($0.42) | ($0.81) | $3.59 | [Condensed Consolidated Balance Sheets](index=6&type=section&id=2.2%20Condensed%20Consolidated%20Balance%20Sheets) As of May 4, 2024, Citi Trends maintained a healthy balance sheet with no debt, a decrease in cash and cash equivalents, and a slight increase in inventory compared to the prior year Condensed Consolidated Balance Sheets (as of, in thousands) | Metric | May 4, 2024 | April 29, 2023 | | :-------------------------- | :---------- | :------------- | | Cash and cash equivalents | $58,169 | $88,707 | | Inventory | $119,014 | $114,322 | | Total assets | $484,102 | $534,430 | | Total liabilities | $329,269 | $374,468 | | Total stockholders' equity | $154,832 | $159,962 | - The company reported **no debt** at quarter-end[1](index=1&type=chunk)[6](index=6&type=chunk) [Capital Return Program Update](index=1&type=section&id=2.3%20Capital%20Return%20Program%20Update) Citi Trends did not repurchase any shares of its common stock during the first quarter of fiscal 2024, with a significant amount remaining available under its existing share repurchase program - No shares of common stock were repurchased in the first quarter of fiscal 2024[5](index=5&type=chunk) - **$50.0 million** remained available under the Company's share repurchase program at the end of Q1 2024[5](index=5&type=chunk) [Fiscal 2024 Outlook](index=3&type=section&id=Fiscal%202024%20Outlook) Citi Trends has updated its fiscal 2024 outlook, slightly adjusting comparable store sales growth expectations while maintaining previous guidance for gross margin expansion and EBITDA [Full Year Guidance](index=3&type=section&id=3.1%20Full%20Year%20Guidance) Citi Trends has updated its fiscal 2024 outlook, slightly adjusting comparable store sales growth expectations while maintaining previous guidance for gross margin expansion and EBITDA. The company continues its fleet optimization strategy and capital expenditure plans Fiscal 2024 Outlook | Metric | Outlook | Change from Previous Outlook | | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Comparable Store Sales Growth | Low to mid-single digits | Slightly below previous outlook | | Gross Margin Expansion | Approximately 75 to 100 basis points | Consistent with previous outlook | | SG&A Dollars Increase | Approximately 1.5% to 2.5% | Slightly better than previous outlook | | Full Year EBITDA* ($M) | $4 million to $10 million | Unchanged from previous outlook | | New Stores | Up to 5 | Unchanged | | Remodeled Stores | Approximately 40 | Unchanged | | Underperforming Stores Closed | 10 to 15 | Unchanged | | Expected Stores at Fiscal Year-End | Approximately 595 | Unchanged | | Full Year Capital Expenditures ($M) | Approximately $20 million | Unchanged | [Non-GAAP Financial Measures](index=3&type=section&id=Non-GAAP%20Financial%20Measures) Citi Trends provides reconciliations for several non-GAAP financial measures, including adjusted operating income, adjusted diluted EPS, adjusted EBITDA, and adjusted gross margin [Reconciliation of Non-GAAP Measures](index=7&type=section&id=4.1%20Reconciliation%20of%20Non-GAAP%20Measures) Citi Trends provides reconciliations for several non-GAAP financial measures, including adjusted operating income, adjusted diluted EPS, adjusted EBITDA, and adjusted gross margin. These adjustments aim to offer a clearer view of ongoing operating performance by excluding non-recurring items like cyber incident expenses and other non-recurring expenses - Non-GAAP measures are used to reflect operating results more indicative of ongoing performance and improve comparability, but are not a substitute for GAAP measures[10](index=10&type=chunk)[19](index=19&type=chunk) Reconciliation of Adjusted Operating (Loss) Income (Q1, in thousands) | Metric | May 4, 2024 | April 29, 2023 | | :-------------------------- | :---------- | :------------- | | Operating loss | ($6,969) | ($9,460) | | Cyber incident expenses | — | $1,560 | | Other non-recurring expenses | $1,380 | — | | Adjusted operating loss | ($5,589) | ($7,900) | Reconciliation of Adjusted Diluted EPS (Q1) | Metric | May 4, 2024 | April 29, 2023 | | :-------------------------- | :---------- | :------------- | | Diluted loss per share | ($0.42) | ($0.81) | | Cyber incident expenses | — | $0.19 | | Other non-recurring expenses | $0.17 | — | | Tax effect | ($0.07) | ($0.04) | | Adjusted diluted loss per share | ($0.32) | ($0.66) | Reconciliation of Adjusted EBITDA (Q1, in thousands) | Metric | May 4, 2024 | April 29, 2023 | | :-------------------------- | :---------- | :------------- | | Net loss | ($3,426) | ($6,635) | | Interest income | ($849) | ($1,023) | | Interest expense | $79 | $75 | | Income tax benefit | ($2,773) | ($1,876) | | Depreciation | $4,793 | $4,681 | | Cyber incident expenses | — | $1,560 | | Other non-recurring expenses | $1,380 | — | | Adjusted EBITDA | ($796) | ($3,218) | Reconciliation of Adjusted Gross Margin (Q1, in thousands) | Metric | May 4, 2024 | April 29, 2023 | | :-------------------------- | :---------- | :------------- | | Gross profit | $72,035 | $66,029 | | Gross margin | 38.7% | 36.7% | | Cyber incident expenses | $0 | $513 | | Adjusted gross profit | $72,035 | $66,542 | | Adjusted gross margin | 38.7% | 37.0% | [Additional Information](index=3&type=section&id=Additional%20Information) This section provides details on the investor conference call, forward-looking statements, and contact information for investor relations [Investor Conference Call Details](index=3&type=section&id=5.1%20Investor%20Conference%20Call%20Details) Citi Trends hosted a conference call to discuss its first quarter fiscal 2024 results, providing both live access and replay options for investors - A live conference call was held on **June 4, 2024**, at **9:00 a.m. ET**[7](index=7&type=chunk) - The live broadcast was available online at cititrends.com under the Investor Relations section[7](index=7&type=chunk) - A replay of the conference call was available until **June 11, 2024**, via dial-in, and an online replay will be available for **one year**[7](index=7&type=chunk)[8](index=8&type=chunk) [Forward-Looking Statements](index=4&type=section&id=5.2%20Forward-Looking%20Statements) The report includes a standard disclaimer regarding forward-looking statements, emphasizing that such statements are subject to material risks and uncertainties that could cause actual results to differ significantly from projections - All statements regarding future financial results, business policy, plans, objectives, and expectations are forward-looking and subject to material risks and uncertainties[13](index=13&type=chunk) - Risks and uncertainties include general economic conditions (inflation, energy costs, unemployment), market interest rates, natural disasters, pandemics, transportation delays, changes in freight rates, ability to attract/retain workers, merchandise inventory risks, consumer confidence, competition, cyber disruptions, and seasonality[13](index=13&type=chunk) - The company does not undertake to publicly update any forward-looking statements unless required by applicable law[13](index=13&type=chunk) [Contact Information](index=4&type=section&id=5.3%20Contact%20Information) Contact details are provided for investor relations inquiries - For investor inquiries, contact Tom Filandro at ICR, Inc. via CitiTrendsIR@icrinc.com[14](index=14&type=chunk)

PART I [Business Overview](index=3&type=section&id=Item%201.%20Business) Citi Trends is a specialty value retailer operating 602 stores across 33 states, serving multicultural families with a strategy focused on store productivity, inventory, and community impact - The company operates **602 stores** in **33 states**, primarily serving African American and multicultural families in low-income neighborhoods[99](index=99&type=chunk)[75](index=75&type=chunk) - The business strategy focuses on four pillars: Driving Comparable Store Productivity, Managing Inventory and Maximizing Margin, Investing in Infrastructure, and Making a Difference in the community[135](index=135&type=chunk)[136](index=136&type=chunk)[138](index=138&type=chunk) Net Sales Percentage by 'Citi' (Product Category) | Citis | 2023 | 2022 | 2021 | | :--- | :--- | :--- | :--- | | Ladies | 27% | 26% | 26% | | Kids | 23% | 23% | 22% | | Accessories & Beauty | 17% | 18% | 18% | | Mens | 17% | 17% | 18% | | Home & Lifestyle | 9% | 8% | 9% | | Footwear | 7% | 8% | 7% | - The company believes it has the potential to grow its store fleet to approximately **1,000 locations** over time, a **65% increase** from its current size[106](index=106&type=chunk) - As of February 3, 2024, approximately **15% of the store fleet** has been updated to the new CTx format, which features a redesigned layout and enhanced visual merchandising[132](index=132&type=chunk) [Risk Factors](index=16&type=section&id=Item%201A.%20Risk%20Factors) The company faces significant risks including fashion trend anticipation, intense competition, lack of e-commerce, economic sensitivity of its customer base, and cybersecurity threats - Business success is highly dependent on anticipating and responding to rapidly evolving fashion trends, and failure to do so could lead to lower demand and excess inventory[161](index=161&type=chunk)[192](index=192&type=chunk) - The company faces intense competition from a diverse group of retailers, including national chains and mass merchants, many of which have greater resources and name recognition[193](index=193&type=chunk)[163](index=163&type=chunk) - The company does not sell products online, which could adversely affect sales as the retail industry sees continued growth in e-commerce[164](index=164&type=chunk) - The low-income consumer, which is the company's core customer, is especially sensitive to economic downturns, inflation, and changes in government stimulus, which could adversely affect spending patterns[202](index=202&type=chunk)[227](index=227&type=chunk) - Cybersecurity failures, such as the January 2023 ransomware incident, could expose the company to costly fines, litigation, and reputational damage[219](index=219&type=chunk)[241](index=241&type=chunk) [Cybersecurity](index=32&type=section&id=Item%201C.%20Cybersecurity) The company maintains a cybersecurity program with oversight from the VP of Information Systems and the audit committee, continuously investing in system fortification despite no material incidents in Fiscal 2023 - The company's cybersecurity program is led by the Vice President of Information Systems, with oversight from the audit committee, which receives bi-annual updates[251](index=251&type=chunk)[252](index=252&type=chunk) - The company experienced a cybersecurity disruption in January 2023 but states it did not have a material impact on business, operations, or financial condition. No material incidents occurred in Fiscal 2023[250](index=250&type=chunk) - Cybersecurity risk management includes regular network monitoring, vulnerability scanning, penetration testing, and partnerships with external cybersecurity firms[249](index=249&type=chunk) [Properties](index=33&type=section&id=Item%202.%20Properties) Citi Trends operates 602 leased stores averaging 11,000 sq ft, owns its Savannah headquarters, and leases two distribution centers in South Carolina and Oklahoma - The company operates **602 stores**, all of which are leased, with a typical lease term of five years plus extension options[253](index=253&type=chunk)[276](index=276&type=chunk) - The company owns its **70,000 sq. ft. headquarters** in Savannah, GA, and leases two distribution centers in Darlington, SC (**550,000 sq. ft.**) and Roland, OK (**565,000 sq. ft.**)[277](index=277&type=chunk) Top 5 States by Store Count | State | Number of Stores | | :--- | :--- | | Georgia | 63 | | Texas | 59 | | Florida | 52 | | North Carolina | 47 | | South Carolina | 41 | [Legal Proceedings](index=34&type=section&id=Item%203.%20Legal%20Proceedings) The company is involved in various legal proceedings, but management does not anticipate a material adverse effect on its financial condition or operations - The company is subject to various legal proceedings but does not expect them to have a material adverse effect on its business[279](index=279&type=chunk) - In connection with a January 2023 cyber disruption, four putative class action lawsuits were filed against the company and have been consolidated. The company has accrued **$0.8 million** for estimated losses related to these matters[18](index=18&type=chunk) PART II [Market for Common Equity and Related Matters](index=34&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) Citi Trends' common stock trades on NASDAQ (CTRN), with dividends suspended since 2020 and $50.0 million remaining for share repurchases - The company's common stock trades on The NASDAQ Stock Market under the symbol "**CTRN**"[307](index=307&type=chunk) - The company suspended quarterly cash dividends in **2020** and has not reinstated them[281](index=281&type=chunk) - No shares were repurchased in fiscal 2023. As of February 3, 2024, **$50.0 million** remained available under the company's share repurchase programs[308](index=308&type=chunk) [Management's Discussion and Analysis (MD&A)](index=36&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Fiscal 2023 saw a 5.9% sales decrease to $747.9 million and a $12.0 million net loss, impacted by inflation and the absence of prior year's sale-leaseback gains, yet the company maintained strong liquidity [Results of Operations](index=37&type=section&id=Results%20of%20Operations) Fiscal 2023 net sales decreased to $747.9 million due to lower comparable store sales, increased cost of sales, and higher SG&A, resulting in a $12.0 million net loss Consolidated Statement of Operations Highlights (in thousands) | Metric | 2023 | 2022 | 2021 | | :--- | :--- | :--- | :--- | | Net sales | $747,941 | $795,011 | $991,595 | | (Loss) income from operations | ($19,454) | $75,305 | $79,517 | | Net (loss) income | ($11,979) | $58,892 | $62,240 | | Diluted net (loss) income per share | ($1.46) | $7.17 | $6.91 | Store Activity and Comparable Sales | Metric | 2023 | 2022 | 2021 | | :--- | :--- | :--- | :--- | | Total stores open, end of year | 602 | 611 | 609 | | Comparable store sales (decrease) increase | (6.8)% | (22.1)% | 25.1% | - The decrease in fiscal 2023 net sales was driven by a **6.8% decrease** in comparable store sales, attributed to continued inflationary pressures on the company's core customers[296](index=296&type=chunk) - In fiscal 2022, the company recognized a **$64.1 million gain** from the sale-leaseback of its distribution centers, which significantly impacted year-over-year comparisons of operating and net income[67](index=67&type=chunk) [Liquidity and Capital Resources](index=40&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintains liquidity through cash and a $75 million credit facility, ending fiscal 2023 with $79.7 million cash and projecting $20 million in capital expenditures for fiscal 2024 - The company ended fiscal 2023 with a cash and cash equivalents balance of **$79.7 million**, compared to **$103.5 million** at the end of fiscal 2022[85](index=85&type=chunk) Cash Flow Summary (in millions) | Activity | Fiscal 2023 | Fiscal 2022 | | :--- | :--- | :--- | | Net cash (used in) provided by operating activities | ($9.6) | $5.8 | | Net cash (used in) provided by investing activities | ($13.4) | $60.2 | | Net cash used in financing activities | ($0.9) | ($12.2) | - Year-end inventory increased to **$130.4 million** from **$105.8 million** in fiscal 2022, reflecting targeted rebuilds and an earlier set for the spring season[79](index=79&type=chunk) - Capital expenditures for fiscal 2024 are anticipated to be approximately **$20 million**, primarily for opening up to **5 new stores** and remodeling **40 stores**[348](index=348&type=chunk) [Critical Accounting Estimates](index=43&type=section&id=Critical%20Accounting%20Estimates) Critical accounting estimates involve significant judgments in inventory valuation using the retail inventory method and operating lease accounting requiring incremental borrowing rate determination - Inventory valuation relies on the retail inventory method, which involves management judgments on merchandise markups, markdowns, and shrinkage[328](index=328&type=chunk) - Inventory shrinkage as a percentage of sales was **1.0%** in fiscal 2023, up from **0.7%** in 2022 and **0.4%** in 2021[328](index=328&type=chunk) - For operating leases, the company determines an incremental borrowing rate to calculate the present value of future lease payments, as an implicit rate is not readily available[305](index=305&type=chunk)[4](index=4&type=chunk) [Financial Statements and Supplementary Data](index=45&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents the company's audited consolidated financial statements for fiscal years 2023-2021, including balance sheets, statements of operations, cash flows, and stockholders' equity, with accompanying notes [Notes to Consolidated Financial Statements](index=52&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) Notes detail accounting policies, property and equipment, tax expenses, stock compensation, lease and purchase commitments, and a February 2024 Cooperation Agreement with an investor Property and Equipment, net (in thousands) | Category | Feb 3, 2024 | Jan 28, 2023 | | :--- | :--- | :--- | | Leasehold improvements | $131,143 | $128,522 | | Furniture, fixtures and equipment | $138,980 | $137,464 | | Computer equipment | $56,666 | $50,457 | | **Total** | **$332,677** | **$322,631** | | Accumulated depreciation | ($276,446) | ($262,525) | | **Property and equipment, net** | **$56,231** | **$60,106** | Total Lease Cost (in thousands) | Component | 2023 | 2022 | 2021 | | :--- | :--- | :--- | :--- | | Operating lease cost | $62,163 | $60,167 | $52,737 | | Variable lease cost | $11,070 | $9,911 | $10,938 | | Short term lease cost | $1,598 | $1,395 | $1,091 | | **Total lease cost** | **$74,831** | **$71,473** | **$64,766** | - As of February 3, 2024, the company had total future minimum lease payments of **$307.3 million** and open merchandise purchase obligations of **$132.8 million**[426](index=426&type=chunk)[423](index=423&type=chunk) - In February 2024, the company entered into a Cooperation Agreement with an investor, agreeing to nominate certain individuals to the Board of Directors at the 2024 Annual Meeting[456](index=456&type=chunk) [Controls and Procedures](index=63&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded disclosure controls and internal control over financial reporting were effective as of February 3, 2024, with an unqualified auditor opinion - Management concluded that the company's disclosure controls and procedures were effective as of the end of fiscal 2023[458](index=458&type=chunk) - Based on an assessment using the COSO framework, management concluded that the company's internal control over financial reporting was effective as of February 3, 2024[27](index=27&type=chunk) - No changes occurred in the fourth quarter of fiscal 2023 that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[432](index=432&type=chunk) PART III [Directors, Executive Officers, Compensation, and Corporate Governance](index=65&type=section&id=Items%2010-14) Information for Items 10-14, covering directors, executive officers, compensation, security ownership, and corporate governance, is incorporated by reference from the 2024 proxy statement - Information regarding Directors, Executive Officers, and Corporate Governance (Item 10) is incorporated by reference from the 2024 proxy statement[464](index=464&type=chunk) - Information regarding Executive Compensation (Item 11) is incorporated by reference from the 2024 proxy statement[437](index=437&type=chunk) - Information regarding Security Ownership (Item 12), Certain Relationships and Director Independence (Item 13), and Principal Accountant Fees (Item 14) is incorporated by reference from the 2024 proxy statement[465](index=465&type=chunk)[49](index=49&type=chunk)[33](index=33&type=chunk) PART IV [Exhibits and Financial Statement Schedules](index=65&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section lists financial statements and exhibits, including corporate governance documents, credit agreements, incentive plans, and CEO/CFO certifications for the Form 10-K report - The financial statements from Part II, Item 8 are filed as part of this report[34](index=34&type=chunk) - Exhibits filed include corporate governance documents, credit agreements, incentive plans, and various management contracts and severance agreements[51](index=51&type=chunk)[469](index=469&type=chunk)[37](index=37&type=chunk) - Certifications by the Principal Executive Officer and Principal Financial Officer pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act are included as exhibits[37](index=37&type=chunk)

Citi Trends, Inc. (NASDAQ:CTRN) Q4 2023 Earnings Call Transcript March 19, 2024 9:00 AM ET Company Participants Nitza McKee - Senior Associate David Makuen - CEO Heather Plutino - CFO Conference Call Participants Mike Baker - D.A. Davidson Jeremy Hamblin - Craig-Hallum Capital Group John Lawrence - Benchmark Operator Greetings and welcome to the Citi Trends Fourth Quarter 2023 Earnings Call. During the presentation, all participants will be in a listen-only mode. Afterwards, we will conduct a question-and-a ...

[Executive Summary & Company Overview](index=1&type=section&id=Executive%20Summary%20%26%20Company%20Overview) Citi Trends announced its Q4 and full-year FY2023 results, with Q4 total sales of $215.2 million and diluted EPS of $0.42, ending FY2023 with $155 million in liquidity, including $80 million cash and no debt, and projecting mid-single-digit comparable store sales growth for FY2024 [Introduction and Key Highlights](index=1&type=section&id=Introduction%20and%20Key%20Highlights) Citi Trends reported its Q4 and full-year FY2023 financial results, highlighting total sales, diluted EPS, and a strong liquidity position with a positive outlook for FY2024 comparable store sales Key Financial Highlights | Metric | Amount (million USD) | | :--- | :--- | | **Q4 2023** | | | Total Sales | 215.2 | | Diluted EPS | 0.42 | | Adjusted Diluted EPS | 0.53 | | **FY 2023** | | | Total Sales | 747.9 | | Year-End Liquidity | 155 | | Year-End Cash | 80 | | **FY 2024 Outlook** | | | Comparable Store Sales Growth | Mid-single-digit | | Q1 2024 YTD Comparable Store Sales Trend | Consistent with Outlook | [About Citi Trends](index=3&type=section&id=About%20Citi%20Trends) Citi Trends is a leading specialty value retailer serving African American and multicultural families across 33 states with 602 stores - Citi Trends is a specialty value retailer primarily serving African American and multicultural families in the United States, offering apparel, accessories, and home trend merchandise[15](index=15&type=chunk) Operational Footprint | Metric | Value | | :--- | :--- | | Number of Operating Stores | 602 | | Number of States Covered | 33 | [Fiscal 2023 Financial Performance](index=1&type=section&id=Fiscal%202023%20Financial%20Performance) The company's FY2023 financial performance saw a decline in total sales and comparable store sales, resulting in operating and net losses, despite a strong liquidity position at year-end [Fourth Quarter 2023 Financial Highlights](index=1&type=section&id=Fourth%20Quarter%202023%20Financial%20Highlights) Q4 2023 total sales increased by 2.7% to $215.2 million, including an extra week's contribution, while comparable store sales declined, and both operating and net income decreased year-over-year Q4 2023 Financial Summary | Metric | Q4 2023 (million USD) | Q4 2022 (million USD) | Change (%) | | :--- | :--- | :--- | :--- | | Total Sales | 215.2 | 209.5 | +2.7% | | Extra Week Sales Contribution | 11.2 | - | - | | Comparable Store Sales (13 Weeks) | -1.5% (YoY) | - | - | | Gross Margin | 39.1% | 39.5% | -0.4 pp | | Operating Income | 3.9 | 7.4 | -47.2% | | Adjusted Operating Income | 5.1 | 7.5 | -31.9% | | Net Income | 3.6 | 6.6 | -45.5% | | Adjusted Net Income | 4.4 | 6.8 | -35.2% | | Diluted EPS | 0.42 | 0.81 | -48.1% | | Adjusted Diluted EPS | 0.53 | 0.83 | -36.1% | | Adjusted EBITDA | 10.0 | 12.3 | -18.7% | [Full Year 2023 Financial Highlights](index=1&type=section&id=Full%20Year%202023%20Financial%20Highlights) Full-year FY2023 total sales decreased by 5.9% to $747.9 million, with a 6.8% decline in comparable store sales, leading to an operating loss and net loss, while year-end cash stood at $79.7 million with no debt FY 2023 Financial Summary | Metric | FY 2023 (million USD) | FY 2022 (million USD) | Change (%) | | :--- | :--- | :--- | :--- | | Total Sales | 747.9 | 795.0 | -5.9% | | Comparable Store Sales (52 Weeks) | -6.8% (YoY) | - | - | | Gross Margin | 38.1% | 39.1% | -1.0 pp | | Adjusted Gross Margin | 38.2% | 39.1% | -0.9 pp | | Operating Loss | (19.5) | 75.3 | N/A | | Adjusted Operating Loss | (17.5) | 11.4 | N/A | | Net Loss | (12.0) | 58.9 | N/A | | Adjusted Net Loss | (10.5) | 9.4 | N/A | | Diluted EPS | (1.46) | 7.17 | N/A | | Adjusted Diluted EPS | (1.28) | 1.14 | N/A | | Adjusted EBITDA | 1.5 | 32.0 | -95.3% | - In FY2023, the company opened **5 new stores**, remodeled **15 stores**, and closed **14 stores**, ending the year with **602 stores**[7](index=7&type=chunk) - Year-end cash was **$79.7 million**, with **no debt** and an **undrawn $75 million credit facility**[7](index=7&type=chunk) - Year-end inventory increased by **23%** year-over-year, primarily due to prior year under-inventory, strategic category rebuilding, and early receipts for tax refund season and an earlier Easter, with Q1 2024 end-of-quarter inventory expected to show low single-digit growth compared to Q1 2023[7](index=7&type=chunk) [CEO Commentary on Performance](index=1&type=section&id=CEO%20Commentary%20on%20Performance) CEO David Makuen noted that Q4 and full-year results met guidance, driven by strong holiday performance and strategic inventory rebuilding, positioning the company with robust liquidity for FY2024 and positive Q1 comparable store sales trends - Fourth quarter and full-year results were in line with company guidance, with a positive response to the holiday “Ready. Set. Gift!” campaign[6](index=6&type=chunk) - Comparable store sales improved in targeted product categories through inventory rebuilding efforts[6](index=6&type=chunk) - The company entered 2024 with a strong financial position, boasting **$155 million in total liquidity**, including approximately **$80 million in year-end cash**[8](index=8&type=chunk) - Mid-quarter Q1 comparable store sales showed positive growth and continuous improvement from prior quarters, driven by increased traffic and conversion rates[8](index=8&type=chunk) [Capital Management & Liquidity](index=1&type=section&id=Capital%20Management%20%26%20Liquidity) The company maintained a strong liquidity position at the end of FY2023 with significant cash reserves and no debt, while also having remaining authorization for its share repurchase program [Capital Return Program Update](index=2&type=section&id=Capital%20Return%20Program%20Update) No common stock was repurchased during Q4 FY2023, leaving $50 million available under the company's share repurchase program at year-end - No common stock was repurchased during the fourth quarter of fiscal 2023[9](index=9&type=chunk) Share Repurchase Program Status | Metric | Amount (million USD) | | :--- | :--- | | Remaining Available for Share Repurchase Program | 50.0 | [Liquidity Position](index=1&type=section&id=Liquidity%20Position) At the end of FY2023, the company reported a robust liquidity position of $155 million, comprising approximately $80 million in cash and no outstanding debt or borrowings under its $75 million credit facility Year-End Liquidity Summary | Metric | Amount (million USD) | | :--- | :--- | | FY 2023 Year-End Total Liquidity | 155 | | FY 2023 Year-End Cash | 80 | | Debt Status | No Debt | | Credit Facility Utilization | No Borrowings ($75 million credit facility) | [Fiscal 2024 Outlook & Strategic Initiatives](index=1&type=section&id=Fiscal%202024%20Outlook%20%26%20Strategic%20Initiatives) The company projects mid-single-digit comparable store sales growth for FY2024, with anticipated gross margin expansion and strategic store network optimization initiatives [Fiscal 2024 Outlook](index=2&type=section&id=Fiscal%202024%20Outlook) For FY2024, the company anticipates mid-single-digit comparable store sales growth, gross margin expansion of 75 to 100 basis points, and SG&A expense growth of 2.5% to 3.0%, with EBITDA projected between $4 million and $10 million FY 2024 Financial Projections | Metric | FY 2024 Outlook | | :--- | :--- | | Comparable Store Sales Growth | Mid-single-digit | | Gross Margin Expansion | Approximately 75 to 100 basis points | | SG&A Expense Growth | Approximately 2.5% to 3.0% | | EBITDA* | $4 million to $10 million | [Operational & Strategic Initiatives](index=2&type=section&id=Operational%20%26%20Strategic%20Initiatives) In FY2024, the company plans to open up to 5 new stores, remodel approximately 40, and close 10 to 15 underperforming locations to optimize its store network, with capital expenditures estimated at $20 million - The company plans to open up to **5 new stores**, remodel approximately **40 stores**, and close **10 to 15 underperforming stores** as part of ongoing store optimization[14](index=14&type=chunk) FY 2024 Operational Plans | Metric | FY 2024 Plan | | :--- | :--- | | New Store Openings | Up to 5 stores | | Store Remodels | Approximately 40 stores | | Store Closures | 10 to 15 stores | | Projected Year-End Store Count | Approximately 595 stores | | Full-Year Capital Expenditures | Approximately $20 million | [Q1 2024 YTD Performance](index=1&type=section&id=Q1%202024%20YTD%20Performance) As of mid-Q1, comparable store sales show positive growth and continuous improvement, driven by increased traffic and conversion rates, aligning with the company's FY2024 outlook - Comparable store sales trends for Q1 2024 year-to-date are consistent with the full-year outlook[2](index=2&type=chunk) - Mid-quarter Q1 comparable store sales showed positive growth and continuous improvement from prior quarters, primarily due to increased traffic and conversion rates[8](index=8&type=chunk) [Condensed Consolidated Financial Statements](index=4&type=section&id=Condensed%20Consolidated%20Financial%20Statements) This section presents the unaudited condensed consolidated financial statements, including statements of operations and balance sheets, for the specified periods, detailing key financial performance and position metrics [Condensed Consolidated Statements of Operations](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) This section provides unaudited condensed consolidated statements of operations for Q4 and full-year FY2023, detailing net sales, cost of sales, SG&A, depreciation, asset impairment, operating (loss) income, interest income/expense, and net (loss) income Q4 2023 Condensed Consolidated Statements of Operations (Unaudited) | Metric (thousand USD) | February 3, 2024 | January 28, 2023 | | :--- | :--- | :--- | | Net Sales | 215,179 | 209,461 | | Cost of Sales | (130,997) | (126,681) | | Selling, General and Administrative Expenses | (74,527) | (70,578) | | Depreciation | (4,850) | (4,802) | | Asset Impairment | (873) | — | | Operating Income | 3,931 | 7,400 | | Interest Income | 1,070 | 830 | | Interest Expense | (78) | (76) | | Net Income | 3,551 | 6,637 | | Diluted EPS | 0.42 | 0.81 | FY 2023 Condensed Consolidated Statements of Operations (Unaudited) | Metric (thousand USD) | February 3, 2024 | January 28, 2023 | | :--- | :--- | :--- | | Net Sales | 747,941 | 795,011 | | Cost of Sales | (462,824) | (484,022) | | Selling, General and Administrative Expenses | (284,529) | (279,177) | | Depreciation | (18,990) | (20,595) | | Asset Impairment | (1,051) | — | | Gain on Sale-Leaseback | — | 64,088 | | Operating (Loss) Income | (19,454) | 75,305 | | Interest Income | 3,874 | 1,034 | | Interest Expense | (306) | (306) | | Net (Loss) Income | (11,979) | 58,892 | | Diluted (Loss) EPS | (1.46) | 7.17 | [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This section presents the unaudited condensed consolidated balance sheets as of February 3, 2024, and January 28, 2023, outlining cash, inventory, property and equipment, operating lease right-of-use assets, total assets, total liabilities, and total stockholders' equity Condensed Consolidated Balance Sheets (Unaudited) | Metric (thousand USD) | February 3, 2024 | January 28, 2023 | | :--- | :--- | :--- | | Cash and Cash Equivalents | 79,706 | 103,495 | | Inventory | 130,432 | 105,794 | | Prepaid and Other Current Assets | 10,838 | 12,976 | | Property and Equipment, Net | 56,231 | 60,106 | | Operating Lease Right-of-Use Assets | 231,281 | 257,195 | | Deferred Tax Assets | 5,105 | 2,893 | | Other Non-Current Assets | 5,128 | 1,797 | | **Total Assets** | **518,721** | **544,257** | | Accounts Payable | 100,366 | 80,670 | | Accrued Liabilities | 23,312 | 26,876 | | Current Operating Lease Liabilities | 45,842 | 52,661 | | Other Current Liabilities | 384 | 344 | | Non-Current Operating Lease Liabilities | 188,810 | 214,939 | | Other Non-Current Liabilities | 2,301 | 2,322 | | **Total Liabilities** | **361,015** | **377,812** | | **Total Stockholders' Equity** | **157,706** | **166,445** | | **Total Liabilities and Stockholders' Equity** | **518,721** | **544,257** | [Non-GAAP Financial Measures Reconciliation](index=2&type=section&id=Non-GAAP%20Financial%20Measures%20Reconciliation) This section provides reconciliations of GAAP to non-GAAP financial measures, including adjusted gross margin, operating income, net income, EPS, and EBITDA, which are used to better reflect ongoing operational performance [Explanation of Non-GAAP Measures](index=2&type=section&id=Explanation%20of%20Non-GAAP%20Measures) The company utilizes non-GAAP financial measures like adjusted gross margin, operating income, net income, EPS, and EBITDA to provide a clearer view of ongoing operational performance and enhance comparability, though a full reconciliation for forward-looking non-GAAP guidance is not feasible - The company uses non-GAAP measures such as adjusted gross margin, operating income, net income, EPS, and EBITDA to reflect ongoing operational performance and improve comparability[22](index=22&type=chunk) - A complete reconciliation for forward-looking non-GAAP financial measures used in the 2024 guidance cannot be provided without unreasonable effort due to the difficulty in predicting certain adjustment items[13](index=13&type=chunk) [Fourth Quarter 2023 Non-GAAP Reconciliation](index=6&type=section&id=Fourth%20Quarter%202023%20Non-GAAP%20Reconciliation) This section details the reconciliation of Q4 2023 GAAP financial measures to adjusted non-GAAP measures, including operating income, net income, diluted EPS, and EBITDA, with adjustments primarily for asset impairment, cyber incident expenses, and other non-recurring items Q4 2023 Adjusted Operating (Loss) Income Reconciliation (thousand USD) | Metric | February 3, 2024 | January 28, 2023 | | :--- | :--- | :--- | | Operating (Loss) Income | 3,931 | 7,400 | | Asset Impairment | 873 | — | | Cyber Incident Expenses | — | 142 | | Other Non-Recurring Expenses | 334 | — | | **Adjusted Operating (Loss) Income** | **5,139** | **7,542** | Q4 2023 Adjusted Net (Loss) Income Reconciliation (thousand USD) | Metric | February 3, 2024 | January 28, 2023 | | :--- | :--- | :--- | | Net (Loss) Income | 3,551 | 6,637 | | Asset Impairment | 873 | — | | Cyber Incident Expenses | — | 142 | | Other Non-Recurring Expenses | 334 | — | | Tax Impact | (336) | (26) | | **Adjusted Net (Loss) Income** | **4,422** | **6,753** | Q4 2023 Adjusted Diluted (Loss) EPS Reconciliation | Metric | February 3, 2024 | January 28, 2023 | | :--- | :--- | :--- | | Diluted (Loss) EPS | 0.42 | 0.81 | | Asset Impairment | 0.10 | — | | Cyber Incident Expenses | — | 0.02 | | Other Non-Recurring Expenses | 0.04 | — | | Tax Impact | (0.04) | — | | **Adjusted Diluted (Loss) EPS** | **0.53** | **0.83** | Q4 2023 Adjusted EBITDA Reconciliation (thousand USD) | Metric | February 3, 2024 | January 28, 2023 | | :--- | :--- | :--- | | Net (Loss) Income | 3,551 | 6,637 | | Interest Income | (1,070) | (830) | | Interest Expense | 78 | 76 | | Income Tax (Benefit) Expense | 1,372 | 1,517 | | Depreciation | 4,850 | 4,802 | | Asset Impairment | 873 | — | | Cyber Incident Expenses | — | 142 | | Other Non-Recurring Expenses | 334 | — | | **Adjusted EBITDA** | **9,989** | **12,344** | [Fiscal Year 2023 Non-GAAP Reconciliation](index=7&type=section&id=Fiscal%20Year%202023%20Non-GAAP%20Reconciliation) This section provides a detailed reconciliation of full-year FY2023 GAAP financial measures to adjusted non-GAAP measures, including operating (loss) income, gross margin, net (loss) income, diluted (loss) EPS, and EBITDA, with adjustments for insurance proceeds, asset impairment, cyber incident expenses, other non-recurring items, and sale-leaseback gains FY 2023 Adjusted Operating (Loss) Income Reconciliation (thousand USD) | Metric | February 3, 2024 | January 28, 2023 | | :--- | :--- | :--- | | Operating (Loss) Income | (19,454) | 75,305 | | Insurance Proceeds | (1,188) | — | | Asset Impairment | 1,051 | — | | Cyber Incident Expenses | 1,723 | 142 | | Other Non-Recurring Expenses | 334 | — | | Gain on Sale-Leaseback | — | (64,088) | | **Adjusted Operating (Loss) Income** | **(17,533)** | **11,359** | FY 2023 Adjusted Gross Margin Reconciliation | Metric | February 3, 2024 | January 28, 2023 | | :--- | :--- | :--- | | Net Sales (thousand USD) | 747,941 | 795,011 | | Cost of Sales (thousand USD) | (462,824) | (484,022) | | Gross Profit (thousand USD) | 285,117 | 310,989 | | Gross Margin | 38.1% | 39.1% | | Cyber Incident Expenses (thousand USD) | 513 | — | | **Adjusted Gross Profit (thousand USD)** | **285,630** | **310,989** | | **Adjusted Gross Margin** | **38.2%** | **39.1%** | FY 2023 Adjusted Net (Loss) Income Reconciliation (thousand USD) | Metric | February 3, 2024 | January 28, 2023 | | :--- | :--- | :--- | | Net (Loss) Income | (11,979) | 58,892 | | Insurance Proceeds | (1,188) | — | | Asset Impairment | 1,051 | — | | Cyber Incident Expenses | 1,723 | 142 | | Other Non-Recurring Expenses | 334 | — | | Gain on Sale-Leaseback | — | (64,088) | | Tax Impact | (472) | 14,416 | | **Adjusted Net (Loss) Income** | **(10,530)** | **9,362** | FY 2023 Adjusted Diluted (Loss) EPS Reconciliation | Metric | February 3, 2024 | January 28, 2023 | | :--- | :--- | :--- | | Diluted (Loss) EPS | (1.46) | 7.17 | | Insurance Proceeds | (0.14) | — | | Asset Impairment | 0.13 | — | | Cyber Incident Expenses | 0.21 | 0.02 | | Other Non-Recurring Expenses | 0.04 | — | | Gain on Sale-Leaseback | — | (7.80) | | Tax Impact | (0.06) | 1.75 | | **Adjusted Diluted (Loss) EPS** | **(1.28)** | **1.14** | FY 2023 Adjusted EBITDA Reconciliation (thousand USD) | Metric | February 3, 2024 | January 28, 2023 | | :--- | :--- | :--- | | Net (Loss) Income | (11,979) | 58,892 | | Interest Income | (3,874) | (1,034) | | Interest Expense | 306 | 306 | | Income Tax (Benefit) Expense | (3,907) | 17,141 | | Depreciation | 18,990 | 20,595 | | Insurance Proceeds | (1,188) | — | | Asset Impairment | 1,051 | — | | Cyber Incident Expenses | 1,723 | 142 | | Other Non-Recurring Expenses | 334 | — | | Gain on Sale-Leaseback | — | (64,088) | | **Adjusted EBITDA** | **1,457** | **31,954** | [Additional Information](index=2&type=section&id=Additional%20Information) This section includes important disclosures regarding forward-looking statements, details on the investor conference call and webcast, and contact information for investor relations [Forward-Looking Statements](index=3&type=section&id=Forward-Looking%20Statements) All non-historical statements in this press release are forward-looking and subject to significant risks and uncertainties, as actual results may differ materially due to various factors including economic conditions, market rates, natural disasters, pandemics, supply chain disruptions, and cybersecurity risks - All statements in this press release that are not historical facts are forward-looking statements, subject to significant risks and uncertainties[16](index=16&type=chunk) - Forward-looking statements are not guarantees of future performance, and actual results may differ materially due to various factors[16](index=16&type=chunk) - Risks and uncertainties include, but are not limited to: general economic conditions (inflation, energy costs, unemployment), changes in market interest rates, natural disasters, pandemic impacts, transportation and distribution delays, freight cost changes, ability to attract and retain employees, merchandise inventory risks, fashion trend changes, consumer confidence, industry competition, cyber disruptions, and litigation[16](index=16&type=chunk) [Investor Conference Call and Webcast](index=2&type=section&id=Investor%20Conference%20Call%20and%20Webcast) Citi Trends hosted a conference call on March 19, 2024, at 9:00 AM ET to discuss its results, with a live webcast available on the company's investor relations website and an archived replay for one year - Citi Trends held a conference call on **March 19, 2024, at 9:00 AM ET**[10](index=10&type=chunk) - A live webcast of the conference call is available on the investor relations section of the company's website, cititrends.com, with a replay accessible for one year[11](index=11&type=chunk) [Contact Information](index=3&type=section&id=Contact%20Information) Investor relations contact information is provided by Tom Filandro and Rachel Schacter of ICR, Inc - Investor Relations contacts: Tom Filandro/Rachel Schacter (ICR, Inc.)[17](index=17&type=chunk) - Contact email: CitiTrendsIR@icrinc.com[17](index=17&type=chunk)

Buffett Loads Up on This Stock Again, Plus CEO Insider Buying frender / iStock via Getty Images In the wake of a media giant’s quarterly report, the Oracle of Omaha is again bolstering his stake in the tracking stocks with some huge insider purchases. Plus, chief executive officers and an activist investor also scooped up some shares in the following companies.A well-known adage reminds us that corporate insiders and 10% owners really only buy shares of a company because they believe the stock price will ...

SAVANNAH, Ga.--(BUSINESS WIRE)--Citi Trends, Inc. (NASDAQ: CTRN) today announced plans to release its earnings for the fourth quarter and full year 2023 before the market opens on Tuesday, March 19, 2024. Citi Trends will host a conference call on the same day at 9:00 a.m. ET. The number to call for the live interactive teleconference is (212) 231-2921. A telephonic replay of the conference call will be available until March 28, 2023, by dialing (800) 633-8284 and entering the passcode, 22029021. The live ...

SAVANNAH, Ga.--(BUSINESS WIRE)--Citi Trends, Inc. (NASDAQ: CTRN) (“Citi Trends” or the “Company”), a leading specialty value retailer of apparel, accessories and home trends for way less spend primarily for African American and multicultural families in the United States, today announced that it will nominate three new independent directors—David Heath, Charles Liu and Michael Kvitko—for election to the Company’s Board of Directors (the “Board”) at the 2024 Annual Meeting of Stockholders (the “2024 Annual M ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended October 28, 2023 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number 000-51315 CITI TRENDS, INC. (Exact name of registrant as specified in its charter) Delaware 52-2150697 (State or other jurisdiction of (I.R.S. Employer inco ...

Financial Data and Key Metrics Changes - Total sales for Q3 2023 were $179.5 million, a decrease of 6.7% compared to Q3 2022 [14] - Comp sales decreased by 6.2% year-over-year, while gross margin remained strong at 38.2%, flat compared to the previous quarter but down 160 basis points year-over-year [12][14] - Operating loss was $6 million for the quarter, compared to operating income of $31.6 million in Q3 2022 [14] - Net loss per share was $0.47, compared to diluted earnings per share of $3.02 in the same quarter last year [14] Business Line Data and Key Metrics Changes - The Ladies business benefited from excellent preseason trend forecasting, resulting in one of the best assortments ever [28] - The Home, Men's, Big Men's, and Beauty categories saw positive customer reception due to improved inventory levels and better values [28] - The company closed five stores and remodeled seven, bringing the total store count to 606 [14] Market Data and Key Metrics Changes - The customer base primarily consists of low-income families, with many earning $45,000 or less annually, leading to more selective purchasing behavior [28] - The macroeconomic environment and unseasonably warm weather negatively impacted sales, particularly in the back-to-school and fall categories [28][30] Company Strategy and Development Direction - The company is focused on four strategic initiatives: driving comp store productivity, managing inventory and maximizing margin, controlling SG&A expenses, and executing technology enhancements [32] - A new ERP system was launched to improve analytics, product allocation, and assortment planning, which is expected to enhance inventory management and sales performance [34][61] - The company is optimistic about the holiday season, supported by a timely setup of the Ready. Set. GIFT! campaign and improved inventory quality [19][31] Management's Comments on Operating Environment and Future Outlook - Management acknowledged that customers are under pressure and are shopping closer to need, which is expected to continue through the fiscal year [3] - The company anticipates total sales for fiscal 2023 to be down mid-single digits compared to fiscal 2022, with Q4 sales expected to be flat to up low single digits [23][4] - Management expressed confidence in the strategic initiatives and the ability to navigate the current environment while focusing on long-term profitability and shareholder value [24] Other Important Information - The company ended the quarter with $135 million in liquidity, including approximately $60 million in cash and no debt [15] - The company is testing a more robust marketing strategy, which has shown promising early results and will be expanded to 20% of the fleet for the holiday season [32][49] Q&A Session Summary Question: What is the expectation for Q4 comp sales? - Management expects Q4 comp sales to be down mid-single digits to flat compared to last year, with improvements anticipated throughout the quarter [39][40] Question: How is the new marketing initiative performing? - Early results from the marketing tests indicate healthy lifts in traffic and conversion, leading to plans for broader implementation [49] Question: What impact did weather have on sales? - Management noted that unseasonably warm weather negatively affected sales, particularly in fall merchandise, but saw a bounce back when weather conditions improved [55][75] Question: What is the outlook for inventory management with the new ERP system? - The new ERP system is expected to enhance inventory allocation and management, allowing for more precise product distribution based on regional demand [61]

We expect that our operations in the short-term will continue to be influenced by general economic conditions, including the recent inflationary pressures, which are particularly impactful to the communities we serve. Given the macroeconomic environment, we expect low-income families to remain under pressure through the majority of fiscal 2023. In addition, we continue to monitor the impacts on our business of unemployment levels, wage inflation, interest rates, inflation rates, housing costs, energy costs, ...