Citi Trends(CTRN) - 2026 Q1 - Quarterly Report

PART I - FINANCIAL INFORMATION Presents the unaudited condensed consolidated financial statements and management's discussion for the first quarter of fiscal 2025 Item 1. Financial Statements (unaudited) This section presents the unaudited condensed consolidated financial statements for Citi Trends, Inc., including the balance sheets, statements of operations, cash flows, and stockholders' equity, along with detailed notes explaining significant accounting policies, financial instruments, and other relevant disclosures for the period ended May 3, 2025 Condensed Consolidated Balance Sheets Presents the Company's financial position, including assets, liabilities, and equity, as of May 3, 2025, and February 1, 2025 Condensed Consolidated Balance Sheets (in thousands) | Metric | May 3, 2025 | February 1, 2025 | | :-------------------------------- | :---------- | :--------------- | | Cash and cash equivalents | $41,556 | $61,085 | | Inventory | $109,931 | $122,640 | | Total current assets | $168,603 | $197,060 | | Total assets | $437,408 | $462,769 | | Total current liabilities | $150,472 | $174,391 | | Total liabilities | $328,849 | $349,593 | | Total stockholders' equity | $108,559 | $113,176 | - Total assets decreased by $25.36 million from February 1, 2025, to May 3, 2025, primarily driven by decreases in cash and cash equivalents and inventory[8] Condensed Consolidated Statements of Operations Details the Company's revenues, expenses, and net income or loss for the thirteen weeks ended May 3, 2025, and May 4, 2024 Condensed Consolidated Statements of Operations (in thousands, except per share amounts) | Metric | Thirteen Weeks Ended May 3, 2025 | Thirteen Weeks Ended May 4, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | | Net sales | $201,728 | $186,289 | | Cost of sales (exclusive of depreciation) | $(121,918) | $(114,254) | | Selling, general and administrative expenses | $(74,887) | $(74,211) | | Income (loss) from operations | $489 | $(6,969) | | Net income (loss) | $871 | $(3,426) | | Basic net income (loss) per common share | $0.11 | $(0.42) | | Diluted net income (loss) per common share | $0.11 | $(0.42) | - Net sales increased by 8.3% year-over-year, from $186.3 million in Q1 2024 to $201.7 million in Q1 2025[10] - The company reported a net income of $0.9 million ($0.11 EPS) in Q1 2025, a significant improvement from a net loss of $3.4 million ($(0.42) EPS) in Q1 2024[10] Condensed Consolidated Statements of Cash Flows Outlines the cash inflows and outflows from operating, investing, and financing activities for the thirteen weeks ended May 3, 2025, and May 4, 2024 Condensed Consolidated Statements of Cash Flows (in thousands) | Metric | Thirteen Weeks Ended May 3, 2025 | Thirteen Weeks Ended May 4, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | | Net cash used in operating activities | $(10,969) | $(19,614) |\n| Net cash used in investing activities | $(2,104) | $(1,590) |\n| Net cash used in financing activities | $(6,456) | $(333) |\n| Net decrease in cash and cash equivalents | $(19,529) | $(21,537) |\n| Cash and cash equivalents, end of period | $41,556 | $58,169 | - Net cash used in operating activities decreased from $19.6 million in Q1 2024 to $11.0 million in Q1 2025, primarily due to improved net income and inventory management[13][72][73] - Cash used in financing activities significantly increased to $6.5 million in Q1 2025, mainly due to $6.3 million in common stock repurchases, compared to $0.3 million in Q1 2024[13][76] Condensed Consolidated Statements of Stockholders' Equity Shows changes in the Company's equity, including stock repurchases and net income, for the thirteen weeks ended May 3, 2025, and May 4, 2024 Changes in Stockholders' Equity (in thousands, except share amounts) | Metric | Thirteen Weeks Ended May 3, 2025 | Thirteen Weeks Ended May 4, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | | Balances — Beginning of Period | $113,176 | $157,706 |\n| Stock-based compensation expense | $968 | $884 |\n| Repurchase of common stock | $(6,315) | — |\n| Net income (loss) | $871 | $(3,426) |\n| Balances — End of Period | $108,559 | $154,832 | - Total stockholders' equity decreased from $113.2 million at February 1, 2025, to $108.6 million at May 3, 2025, primarily due to $6.3 million in common stock repurchases, partially offset by net income[14] Notes to the Condensed Consolidated Financial Statements Provides detailed explanations of significant accounting policies, financial instruments, and other disclosures supporting the financial statements 1. Significant Accounting Policies Outlines the Company's operational context and key accounting principles applied in preparing the financial statements - Citi Trends, Inc. operates 591 stores across 33 states as an off-price value retailer primarily for African American families[16][51] - The financial statements are prepared in accordance with U.S. GAAP for interim reporting and are unaudited, with results for Q1 2025 not necessarily indicative of the full fiscal year due to seasonality and economic uncertainty[17] - As of May 3, 2025, the Company had $0.2 million of assets classified as held for sale[20] 2. Cash and Cash Equivalents/Concentration of Credit Risk Describes the Company's policies for managing cash, cash equivalents, and associated credit risk - Cash equivalents include highly liquid investments with maturities of three months or less at purchase date[21] - The Company places cash and cash equivalents in high credit quality banks and institutional money market funds, maintaining accounts that may exceed federally insured limits[21] 3. Earnings per Share Details the calculation of basic and diluted earnings per common share for the reporting periods Weighted Average Shares Outstanding (Thirteen Weeks Ended) | Metric | May 3, 2025 | May 4, 2024 | | :---------------------------------------------------------------- | :---------- | :---------- | | Weighted average number of common shares outstanding (basic) | 8,033,623 | 8,252,556 |\n| Incremental shares from assumed vesting of nonvested restricted stock | 136,833 | — |\n| Weighted average number of common shares and common stock equivalents outstanding (diluted) | 8,170,456 | 8,252,556 | - For Q1 2024, 272,000 shares of nonvested restricted stock were excluded from diluted EPS calculation due to antidilution[25] 4. Revolving Credit Facility Explains the terms and status of the Company's revolving credit facility, including its recent amendment - The credit facility was amended on April 10, 2025, extending its maturity date to April 10, 2030[26] - The amended facility provides a $75 million credit commitment and a $25 million uncommitted 'accordion' feature, potentially increasing the facility to $100 million[26] - As of May 3, 2025, the Company had no borrowings under the credit facility and $2.2 million of letters of credit outstanding[29] 5. Income Taxes Discusses the Company's accounting for income taxes, including deferred tax assets and valuation allowances - Income taxes are accounted for using the asset and liability method, recognizing deferred tax assets and liabilities for future tax consequences[30] - Management maintains a valuation allowance against deferred tax assets due to sufficient negative evidence, intending to reverse it only when sufficient positive evidence exists[31] 6. Commitments and Contingencies Addresses the Company's legal proceedings and other potential future obligations - The Company is involved in various legal proceedings incidental to its business but is not aware of any expected to have a material adverse effect on its financial condition, results of operations, or liquidity[32][84] 7. Stock Repurchases Provides details on the Company's common stock repurchase activities during the reporting period Stock Repurchases (Thirteen Weeks Ended) | Metric | May 3, 2025 | May 4, 2024 | | :-------------------------------- | :---------- | :---------- | | Total number of shares purchased | 251,000 | — |\n| Average price paid per share | $25.21 | — |\n| Total investment | $6,315,000 | — | - As of May 3, 2025, $40.0 million remained available under the Company's stock repurchase authorization[33] 8. Recent Accounting Pronouncements Summarizes new accounting standards and their potential impact on the Company's financial statements - ASU 2023-09, 'Improvement to Income Tax Disclosures,' effective for annual periods after December 15, 2024, requires additional disclosures for income tax rate reconciliations and taxes paid[34] - ASU 2024-03, 'Expense Disaggregation Disclosures,' effective for fiscal years after December 15, 2026, requires public entities to disaggregate certain income statement expenses into specified categories[35] - The Company is currently evaluating the impact of both ASU 2023-09 and ASU 2024-03 on its financial statements and disclosures[34][35] 9. Revenue Explains the Company's revenue recognition policies and provides a breakdown of net sales by product division - Revenue is primarily derived from the sale of clothing and accessories, with performance obligations satisfied immediately upon customer payment and merchandise receipt[36] - Revenue from layaway sales is recognized when merchandise is paid for and control is transferred, while gift card revenue is recognized upon redemption[36] Percentage of Net Sales by Division (Thirteen Weeks Ended) | Division | May 3, 2025 | May 4, 2024 | | :---------------- | :---------- | :---------- | | Womens | 28 % | 29 % |\n| Kids | 22 % | 22 % |\n| Accessories & Beauty | 17 % | 17 % |\n| Mens | 15 % | 15 % |\n| Home & Lifestyle | 11 % | 10 % |\n| Footwear | 7 % | 7 % | 10. Leases Details the Company's lease arrangements, including lease costs and future minimum lease payments - The Company leases retail store locations, distribution centers, and office space, typically with five-year terms and extension options[40] Total Lease Cost (in thousands, Thirteen Weeks Ended) | Lease Type | May 3, 2025 | May 4, 2024 | | :---------------- | :---------- | :---------- | | Operating lease cost | $15,167 | $15,391 |\n| Variable lease cost | $2,610 | $2,622 |\n| Short term lease cost | $576 | $712 |\n| Total lease cost | $18,353 | $18,725 | Future Minimum Lease Payments as of May 3, 2025 (in thousands) | Fiscal Year | Lease Costs | | :---------- | :---------- | | 2025 | $50,428 |\n| 2026 | $53,975 |\n| 2027 | $42,461 |\n| 2028 | $33,635 |\n| 2029 | $24,936 |\n| Thereafter | $91,553 |\n| Total future minimum lease payments | $296,988 |\n| Less: imputed interest | $(76,599) |\n| Total present value of lease liabilities | $220,389 | 11. Segment Reporting Confirms the Company operates as a single retail segment and how its performance is managed - The Company operates as a single operating segment, an off-price value retailer of fashion apparel, accessories, and home trends[45] - The Chief Executive Officer, as the chief operating decision maker (CODM), manages and allocates resources on a consolidated basis, assessing performance based on consolidated net income (loss)[45] - All sales and assets are located within the United States[45] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the Company's financial performance, liquidity, and capital resources for the first quarter of fiscal 2025 compared to 2024. It highlights improved net sales and a return to net income, driven by increased comparable store sales and better cost management, while also discussing ongoing economic uncertainties and strategic capital allocation Forward-Looking Statements Highlights the inherent uncertainties and risks associated with forward-looking information in the report - The report contains forward-looking statements regarding future revenues, expenditures, plans, and economic performance, subject to risks and uncertainties[47] - Factors that could cause actual results to differ include general economic conditions, inflation, tariffs, natural disasters, supply chain disruptions, and changes in consumer preferences[48] Executive Overview Provides a high-level description of Citi Trends' business model, target market, and operational scope - Citi Trends is an off-price value retailer offering culturally relevant fashion, accessories, and home trends primarily for African American families[50] - The Company curates a three-tiered product mix: well-known brands, core trend-right products, and opening price goods, often with extreme value deals[50] - As of May 3, 2025, the Company operated 591 stores across 33 states[51] Uncertainties and Challenges Discusses external factors like economic conditions, inflation, and seasonality that may impact the Company's operations - Operations are expected to be influenced by general economic conditions, including ongoing inflationary pressures, new tariff programs, and changes in consumer sentiment[53] - The business is seasonal, with historically higher sales in the first and fourth quarters, and store traffic is influenced by weather patterns[54] Basis of Presentation Defines how key financial statement line items such as net sales, cost of sales, and SG&A are presented - Net sales include store sales and layaway fees, net of returns[55] - Cost of sales comprises product costs and associated freight, excluding depreciation[55] - Selling, general and administrative expenses include store, corporate, distribution center, and advertising costs[55] Results of Operations Analyzes the Company's financial performance for the first quarter, focusing on sales, costs, and profitability Key Operating Statistics Identifies the primary metrics used to evaluate the Company's operational performance and store productivity - Key performance measures include comparable store sales growth, average sales per store, cost of sales as a percentage of sales, and store operating expenses as a percentage of sales[58] - A comparable store is defined as one open for at least 14 full consecutive months without significant closure[58] Thirteen Weeks Ended May 3, 2025 and May 4, 2024 Compares the Company's financial results for the first quarter of fiscal 2025 against the same period in 2024 - Net sales increased by $15.4 million, or 8.3%, to $201.7 million in Q1 2025, driven by a 9.9% increase in comparable store sales[59] - Cost of sales as a percentage of sales decreased to 60.4% in Q1 2025 from 61.3% in Q1 2024, due to lower shrink and freight expenses and increased initial markup, partially offset by higher markdowns[60][62] - Selling, general and administrative expenses decreased as a percentage of sales to 37.1% in Q1 2025 from 39.8% in Q1 2024, despite a $0.7 million increase in absolute terms[63] - The Company reported a net income of $0.9 million in Q1 2025, a significant improvement from a net loss of $3.4 million in Q1 2024[65] Liquidity and Capital Resources Examines the Company's ability to generate and manage cash, including its capital allocation strategy and financing Capital Allocation Outlines the Company's strategy for deploying capital, prioritizing growth investments and shareholder returns - The capital allocation strategy prioritizes investments for profitable business growth and current operations, then returns excess cash to shareholders via share repurchases[66] - Quarter-end cash and cash equivalents were $41.6 million, down from $58.2 million at the end of Q1 2024[66] - Principal liquidity sources include cash on hand, short-term trade credit, cash from operations, and a $75 million revolving credit facility[67] Inventory Discusses the Company's inventory levels and management strategies at the end of the reporting period - Quarter-end inventory was $109.9 million, a decrease from $119.0 million at the end of Q1 2024, primarily due to a strategic reduction in average in-store inventory and lower pack-and-hold inventory[68] Capital Expenditures Details the Company's investments in property and equipment, including planned expenditures for the fiscal year - Capital expenditures in Q1 2025 were $2.1 million, an increase of $0.5 million from Q1 2024, reflecting investments in existing store remodels[69] - Anticipated capital expenditures for fiscal 2025 are approximately $20 million, mainly for opening up to five new stores, remodeling about 50 stores, and technology investments[69] Share Repurchases Reports on the Company's activities in buying back its common stock during the quarter - The Company returned $6.3 million to shareholders through share repurchases in Q1 fiscal 2025[70] Revolving Credit Facility Provides an update on the Company's credit facility, including its terms and current utilization - The revolving credit facility matures in April 2030, offering a $75 million credit commitment and a $25 million 'accordion' feature[71] - As of the end of Q1 2025, there were no borrowings under the facility, with $2.2 million in letters of credit outstanding[71] Cash Flows Analyzes the sources and uses of cash from operating, investing, and financing activities for the quarter - Net cash used in operating activities decreased to $11.0 million in Q1 2025 from $19.6 million in Q1 2024, driven by net income and a $12.7 million decrease in inventory[72][73] - Significant uses of cash in Q1 2025 operating activities included a $21.9 million decrease in accounts payable and a $19.4 million decrease in accrued expenses and other long-term liabilities[74] - Cash used in investing activities increased to $2.1 million in Q1 2025 from $1.6 million in Q1 2024, primarily for purchases of property and equipment[75] - Cash used in financing activities increased significantly to $6.4 million in Q1 2025, mainly due to $6.3 million for share repurchases[76] Cash Requirements and Commitments Identifies the Company's significant future cash obligations, including operating leases and operational needs - Principal cash requirements include inventory purchases, capital expenditures, and operational needs (salaries, occupancy, taxes)[77] - As of May 3, 2025, contractual commitments for operating leases totaled $220.4 million, with $50.4 million due within 12 months[77] Critical Accounting Policies Reiterates the significant accounting policies requiring management's judgment and estimates - The preparation of financial statements requires management to make estimates and assumptions that affect reported amounts[78] - There have been no material changes to the Critical Accounting Policies outlined in the Annual Report on Form 10-K for the fiscal year ended February 1, 2025[79] Item 3. Quantitative and Qualitative Disclosures About Market Risk This section states that there have been no material changes in the Company's market risk during the thirteen weeks ended May 3, 2025, compared to the disclosures in its previous Annual Report on Form 10-K - No material changes in market risk occurred during the thirteen weeks ended May 3, 2025, compared to the disclosures in the Annual Report on Form 10-K for the fiscal year ended February 1, 2025[80] Item 4. Controls and Procedures Management, including the principal executive and financial officers, concluded that the Company's disclosure controls and procedures were effective as of May 3, 2025. There were no material changes to internal control over financial reporting during the quarter - Management concluded that the Company's disclosure controls and procedures were effective as of May 3, 2025, providing reasonable assurance that required information is recorded, processed, summarized, and reported timely[81] - No changes in internal control over financial reporting occurred during the fiscal quarter ended May 3, 2025, that materially affected, or are reasonably likely to materially affect, internal control over financial reporting[83] PART II - OTHER INFORMATION Covers legal proceedings, risk factors, equity sales, and other required disclosures for the reporting period Item 1. Legal Proceedings The Company is involved in various legal proceedings but does not expect any pending or threatened matters to have a material adverse effect on its financial condition, results of operations, or liquidity - The Company is not aware of any legal proceedings pending or threatened against it that are expected to have a material adverse effect on its financial condition, results of operations, or liquidity[84] Item 1A. Risk Factors This section indicates that there have been no material changes to the risk factors previously disclosed in the Company's Annual Report on Form 10-K - There have been no material changes to the Risk Factors described in the Company's Annual Report on Form 10-K for the fiscal year ended February 1, 2025[85] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section details the Company's common stock repurchases during the first quarter of 2025, including the number of shares bought back and the average price paid, under existing board-authorized programs Common Stock Repurchases (First Quarter 2025) | Period | Total number of shares purchased | Average price paid per share | | :---------------- | :------------------------------- | :--------------------------- | | February (2/2/25 - 3/1/25) | 159,980 | $26.12 |\n| March (3/2/25 - 4/5/25) | 90,575 | $22.49 |\n| April (4/6/25 - 5/3/25) | — | $— |\n| Total | 250,555 | | - As of May 3, 2025, $40,026,598 remained available under the Company's publicly announced stock repurchase programs, which do not have expiration dates[86] Item 3. Defaults Upon Senior Securities This item is marked as 'Not applicable,' indicating no defaults upon senior securities during the reporting period - This item is not applicable for the reporting period[87] Item 4. Mine Safety Disclosures This item is marked as 'Not applicable,' as the Company's operations do not involve mine safety disclosures - This item is not applicable for the reporting period[88] Item 5. Other Information This item is marked as 'Not applicable,' indicating no other information requiring disclosure under this section - This item is not applicable for the reporting period[89] Item 6. Exhibits This section lists all exhibits filed as part of the Form 10-Q, including corporate governance documents, credit agreements, certifications, and XBRL documents - Exhibits include the Third Amended and Restated Certificate of Incorporation, Fourth Amended and Restated Bylaws, Amended and Restated Cooperation Agreement, and Fourth Amendment to Credit Agreement[94] - Certifications from the Principal Executive Officer and Principal Financial Officer (pursuant to Rule 13a-14(a) and 18 U.S.C. Section 1350) are included[94] - Inline XBRL Document Set for financial statements and cover page are also part of the exhibits[94] SIGNATURES Certifies the submission of the Form 10-Q by the Company's authorized officer SIGNATURES This section contains the required signatures for the Form 10-Q, certifying its submission on behalf of Citi Trends, Inc. by its Chief Financial Officer - The report was signed on June 11, 2025, by Heather Plutino, Chief Financial Officer of Citi Trends, Inc[98]