Citi Trends(CTRN) - 2026 Q2 - Quarterly Report

PART I - FINANCIAL INFORMATION This section provides the unaudited condensed consolidated financial information for Citi Trends, Inc., including financial statements, management's discussion, market risk, and controls and procedures Item 1. Financial Statements (unaudited) This section presents the unaudited condensed consolidated financial statements of Citi Trends, Inc. for the period ended August 2, 2025, including balance sheets, statements of operations, cash flows, and stockholders' equity, along with accompanying notes detailing significant accounting policies, financial instruments, and operational aspects Condensed Consolidated Balance Sheets This table presents the condensed consolidated balance sheets, detailing assets, liabilities, and stockholders' equity as of August 2, 2025, and February 1, 2025 | Metric | August 2, 2025 (in thousands) | February 1, 2025 (in thousands) | Change (in thousands) | | :-------------------------- | :----------------------------- | :------------------------------ | :-------------------- | | Cash and cash equivalents | $50,397 | $61,085 | $(10,688) | | Inventory | $117,566 | $122,640 | $(5,074) | | Total current assets | $189,204 | $197,060 | $(7,856) | | Total assets | $457,408 | $462,769 | $(5,361) | | Total current liabilities | $167,376 | $174,391 | $(7,015) | | Total liabilities | $344,168 | $349,593 | $(5,425) | | Total stockholders' equity | $113,240 | $113,176 | $64 | Condensed Consolidated Statements of Operations This section provides the condensed consolidated statements of operations, outlining net sales, income (loss) from operations, and net income (loss) for the thirteen and twenty-six weeks ended August 2, 2025, and August 3, 2024 Thirteen Weeks Ended August 2, 2025 vs. August 3, 2024 | Metric | August 2, 2025 (in thousands) | August 3, 2024 (in thousands) | Change ($ in thousands) | Change (%) | | :-------------------------- | :----------------------------- | :----------------------------- | :---------------------- | :--------- | | Net sales | $190,750 | $176,552 | $14,198 | 8.0% | | Income (loss) from operations | $3,517 | $(24,895) | $28,412 | N/A | | Net income (loss) | $3,818 | $(18,413) | $22,231 | N/A | | Basic net earnings (loss) per common share | $0.48 | $(2.21) | $2.69 | N/A | | Diluted net earnings (loss) per common share | $0.46 | $(2.21) | $2.67 | N/A | Twenty-Six Weeks Ended August 2, 2025 vs. August 3, 2024 | Metric | August 2, 2025 (in thousands) | August 3, 2024 (in thousands) | Change ($ in thousands) | Change (%) | | :-------------------------- | :----------------------------- | :----------------------------- | :---------------------- | :--------- | | Net sales | $392,478 | $362,841 | $29,637 | 8.2% | | Income (loss) from operations | $4,006 | $(31,865) | $35,871 | N/A | | Net income (loss) | $4,689 | $(21,839) | $26,528 | N/A | | Basic net earnings (loss) per common share | $0.58 | $(2.63) | $3.21 | N/A | | Diluted net earnings (loss) per common share | $0.57 | $(2.63) | $3.20 | N/A | Condensed Consolidated Statements of Cash Flows This table summarizes the condensed consolidated statements of cash flows, detailing cash activities from operations, investing, and financing for the twenty-six weeks ended August 2, 2025, and August 3, 2024 Twenty-Six Weeks Ended Cash Flow Summary | Activity | August 2, 2025 (in thousands) | August 3, 2024 (in thousands) | Change (in thousands) | | :------------------------------------------ | :----------------------------- | :----------------------------- | :-------------------- | | Net cash used in operating activities | $(7,114) | $(13,996) | $6,882 (less used) | | Net cash provided by (used in) investing activities | $3,501 | $(5,552) | $9,053 (swing to provided) | | Net cash used in financing activities | $(7,075) | $(856) | $(6,219) (more used) | | Net decrease in cash and cash equivalents | $(10,688) | $(20,404) | $9,716 (smaller decrease) | | Cash and cash equivalents, End of period | $50,397 | $59,302 | $(8,905) | Condensed Consolidated Statements of Stockholders' Equity This section outlines changes in stockholders' equity, including retained earnings and treasury stock, for the periods presented - Total stockholders' equity increased slightly from $113,176 thousand at February 1, 2025, to $113,240 thousand at August 2, 2025[10][18] - Retained earnings increased from $275,901 thousand to $280,590 thousand during the period[10][18] - Treasury stock increased from $(270,988) thousand to $(277,303) thousand, reflecting share repurchases[10][18] Notes to the Condensed Consolidated Financial Statements This section provides detailed notes accompanying the financial statements, explaining significant accounting policies, financial instruments, and other relevant disclosures 1. Significant Accounting Policies This note describes the company's business, store count, and the basis of preparation for the unaudited interim financial statements - Citi Trends, Inc. is a leading off-price value retailer of apparel, accessories, and home trends, primarily for African American families in the United States[20] - As of August 2, 2025, the Company operated 590 stores across 33 states[20] - The condensed consolidated financial statements are unaudited and prepared in accordance with U.S. GAAP for interim reporting[21] 2. Cash and Cash Equivalents/Concentration of Credit Risk This note defines cash equivalents and discusses the company's policies for managing cash and credit risk concentrations - Cash equivalents are defined as highly liquid investments with maturities of three months or less at the date of purchase[23] - The Company places its cash and cash equivalents in high credit quality banks and institutional money market funds, with some accounts exceeding federally insured limits[23] 3. Earnings per Share This note details the calculation of basic and diluted earnings per common share, including the treatment of potentially dilutive securities - Basic earnings per common share are calculated using the weighted average number of common shares outstanding[24] - Diluted earnings per common share include the dilutive effect of potentially dilutive securities, such as nonvested restricted stock, unless antidilutive during loss periods[24] Weighted Average Shares Outstanding (Diluted) | Period | August 2, 2025 | August 3, 2024 | | :--------------------- | :------------- | :------------- | | Thirteen Weeks Ended | 8,313,841 | 8,336,629 | | Twenty-Six Weeks Ended | 8,242,148 | 8,294,593 | 4. Revolving Credit Facility This note provides information on the company's revolving credit facility, including its amendment, commitment, and current utilization - The revolving credit facility was amended on April 10, 2025, extending its maturity date to April 10, 2030[27] - The facility provides a $75 million credit commitment and a $25 million uncommitted 'accordion' feature[27] - As of August 2, 2025, the Company had no borrowings under the credit facility and $2.2 million of letters of credit outstanding[30] 5. Impairment of Assets This note details non-cash impairment expenses related to underperforming stores, specifying the affected asset categories - Non-cash impairment expense related to underperforming stores totaled $0.3 million in the first half of 2025, a decrease from $1.3 million in the first half of 2024[31] - The 2025 impairment consisted of $0.2 million for leasehold improvements and fixtures and equipment, and $0.1 million for operating lease right-of-use assets[31] 6. Income Taxes This note explains the company's income tax accounting, deferred tax assets, valuation allowance, and the impact of recent tax law changes - Income taxes are accounted for under the asset and liability method, recognizing deferred tax assets and liabilities for future tax consequences[32] - A valuation allowance is maintained due to sufficient negative evidence regarding the realizability of deferred tax assets[35] - The 'One Big Beautiful Bill Act,' signed July 4, 2025, includes changes to federal tax law allowing more favorable deductibility of certain business expenses starting in 2025, which the Company expects to utilize[36] 7. Commitments and Contingencies This note addresses the company's involvement in legal proceedings and management's assessment of their potential financial impact - The Company is from time to time involved in various legal proceedings incidental to the conduct of its business[37] - Management is not aware of any legal proceedings pending or threatened that are expected to have a material adverse effect on the Company's financial condition, results of operations, or liquidity[38] 8. Stock Repurchases This note provides details on stock repurchase activities and the remaining authorization under the company's repurchase program Stock Repurchases (Twenty-Six Weeks Ended) | Metric | August 2, 2025 | August 3, 2024 | | :-------------------------- | :------------- | :------------- | | Total number of shares purchased | 251 | — | | Total investment (in thousands) | $6,315 | — | - As of August 2, 2025, $40.0 million remained available under the Company's stock repurchase authorization[40] 9. Recent Accounting Pronouncements This note discusses recently issued accounting standards and the company's ongoing evaluation of their potential impact on financial reporting - ASU 2023-09, 'Improvement to Income Tax Disclosures,' effective for annual periods beginning after December 15, 2024, requires additional income tax rate reconciliations and taxes paid disclosures[41] - ASU 2024-03, 'Expense Disaggregation Disclosures,' effective for fiscal years beginning after December 15, 2026, requires disaggregation of certain income statement expenses[42] - The Company is currently evaluating the impact of both new standards on its consolidated financial statements and related disclosures[41][42] 10. Revenue This note describes the company's primary revenue sources, recognition policies, and disaggregation of net sales by product division - The Company's primary revenue source is from the sale of clothing and accessories, with performance obligations satisfied immediately upon customer payment and merchandise receipt[44] - Revenue from layaway sales is recognized when merchandise is paid for and control is transferred to the customer[44] Revenue Disaggregation by Division (Thirteen Weeks Ended August 2, 2025) | Division | Percentage of Net Sales | | :---------------- | :---------------------- | | Womens | 27 % | | Kids | 22 % | | Mens | 18 % | | Accessories & Beauty | 17 % | | Home & Lifestyle | 9 % | | Footwear | 7 % | 11. Leases This note details the company's lease arrangements for retail stores, distribution centers, and equipment, including lease costs and liabilities - The Company leases its retail store locations, distribution centers, and certain office space and equipment, typically for five-year terms with extension options[49] Total Lease Cost (Thirteen Weeks Ended) | Lease Cost Type | August 2, 2025 (in thousands) | August 3, 2024 (in thousands) | | :---------------- | :----------------------------- | :----------------------------- | | Operating lease cost | $15,219 | $14,400 | | Variable lease cost | $3,205 | $3,541 | | Short term lease cost | $422 | $381 | | Total lease cost | $18,846 | $18,322 | - Total present value of lease liabilities as of August 2, 2025, was $217,489 thousand, with $36,175 thousand due in the remainder of 2025[52] 12. Segment Reporting This note clarifies that the company operates as a single reportable segment, with the CEO managing resources and assessing performance on a consolidated basis - The Company operates as a single reportable segment, an off-price value retailer of fashion apparel, accessories, and home trends primarily for African American families[54] - The Chief Executive Officer, as the chief operating decision maker (CODM), manages and allocates resources on a consolidated basis and assesses performance based on consolidated net income (loss)[54] 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 condition and results of operations, highlighting key performance drivers, economic uncertainties, and strategic capital allocation. It details the financial performance for the thirteen and twenty-six weeks ended August 2, 2025, compared to the prior year, and discusses liquidity, capital resources, and critical accounting policies Forward-Looking Statements This section contains forward-looking statements regarding future performance, subject to various risks and uncertainties that may cause actual results to differ - This section contains forward-looking statements regarding future revenues, expenditures, plans, and economic performance, which are subject to risks, uncertainties, and other factors[57] - Factors that may cause actual results to differ include general economic conditions, inflation, energy and fuel costs, unemployment, tariffs, natural disasters, and supply chain disruptions[58] Executive Overview This overview describes Citi Trends as an off-price value retailer serving African American families, detailing its product mix and store operations - Citi Trends is an off-price value retailer known for trendy fashions, great brands, and competitive prices, primarily serving African American families in the United States[61] - The Company curates a three-tiered product mix including well-known brands, core products, and opening price goods, often featuring 'extreme value' deals[61] - As of August 2, 2025, the Company operated 590 stores in urban, suburban, and rural markets across 33 states[62] Uncertainties and Challenges This section discusses economic conditions, including inflation and tariffs, and the seasonal nature of the business that may impact operations - Operations are expected to continue being influenced by general economic conditions, including ongoing inflationary pressures, new tariff programs, and changes in consumer sentiment[63] - The business is seasonal, with historically higher sales in the first and fourth quarters, and store traffic is influenced by weather patterns[64] Basis of Presentation This section defines key financial statement components, including net sales, cost of sales, and selling, general, and administrative expenses - Net sales consist of store sales and layaway fees, net of customer returns[65] - Cost of sales includes the cost of products sold and associated freight costs, excluding depreciation[65] - Selling, general and administrative expenses comprise store costs (payroll, occupancy), corporate and distribution center costs, and advertising[65] Results of Operations This section analyzes the company's financial performance, including net sales, cost of sales, and net income (loss), for the reported periods Thirteen Weeks Ended August 2, 2025 and August 3, 2024 This subsection details the financial performance for the thirteen-week period, highlighting changes in net sales, cost of sales, and net income - Net sales increased by $14.2 million, or 8.0%, to $190.8 million, driven by a 9.2% increase in comparable store sales[72] - Cost of sales as a percentage of sales decreased by 890 basis points to 60.0%, primarily due to a 580 basis points decrease in markdowns and a 190 basis points decrease in shrink[73] - The Company reported a net income of $3.8 million, a significant improvement from a net loss of $18.4 million in the prior year, partly due to an $11.0 million gain on the sale of a corporate office building[77][78] Twenty-Six Weeks Ended August 2, 2025 and August 3, 2024 This subsection details the financial performance for the twenty-six-week period, highlighting changes in net sales, cost of sales, and net income - Net sales increased by $29.6 million, or 8.2%, to $392.5 million, with comparable store sales increasing by 9.6%[79] - Cost of sales as a percentage of sales decreased by 480 basis points to 60.2%, primarily driven by a 250 basis points decrease in markdowns and a 130 basis points decrease in shrink[80] - The Company achieved a net income of $4.7 million, a substantial improvement from a net loss of $21.8 million in the prior year, benefiting from an $11.0 million gain on the sale of a corporate office building[84][85] Liquidity and Capital Resources This section discusses the company's capital allocation strategy, cash position, inventory, capital expenditures, and cash flow activities - The capital allocation strategy prioritizes investments in profitable business growth and current operations, followed by returning excess cash to stockholders through repurchase programs[86] - Quarter-end cash and cash equivalents were $50.4 million, down from $59.3 million at the end of the second quarter last year[86] - Inventory balance was $117.6 million, a 12.9% decrease compared to $135.0 million at the end of the second quarter last year[88] - Capital expenditures in the first twenty-six weeks of 2025 were $7.7 million, an increase of $2.1 million year-over-year, with fiscal 2025 projected at $22 million to $25 million for new stores, remodels, and systems[89] - Net cash used in operating activities improved to $7.1 million in the first twenty-six weeks of 2025 from $14.0 million in the same period of 2024[92] - Cash provided by investing activities was $3.5 million in the first twenty-six weeks of 2025, a reversal from cash used of $5.6 million in the prior year, primarily due to the sale of a building[94] - Cash used in financing activities increased to $7.1 million in the first twenty-six weeks of 2025, mainly due to $6.3 million in share repurchases[95] Critical Accounting Policies This section addresses the significant estimates and assumptions made in preparing the financial statements and confirms no material changes to prior policies - The preparation of condensed consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, and expenses[97] - There have been no material changes to the Critical Accounting Policies outlined in the Company's Annual Report on Form 10-K for the fiscal year ended February 1, 2025[98] 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 twenty-six weeks ended August 2, 2025, compared to the disclosures in its previous Annual Report on Form 10-K - No material changes in market risk were reported for the twenty-six weeks ended August 2, 2025, compared to the disclosures in the Annual Report on Form 10-K for the fiscal year ended February 1, 2025[99] Item 4. Controls and Procedures Management, including the principal executive and financial officers, evaluated the effectiveness of disclosure controls and procedures as of August 2, 2025, concluding they are effective. No material changes to internal control over financial reporting occurred during the quarter - Disclosure controls and procedures were evaluated and deemed effective as of August 2, 2025, providing reasonable assurance that required information is recorded, processed, summarized, and reported timely[100] - No changes in internal control over financial reporting occurred during the fiscal quarter ended August 2, 2025, that materially affected, or are reasonably likely to materially affect, internal control over financial reporting[102] PART II - OTHER INFORMATION This section provides additional information not covered in Part I, including legal proceedings, risk factors, equity sales, and exhibits Item 1. Legal Proceedings The Company is periodically involved in legal proceedings incidental to its business but is not aware of any pending or threatened matters expected to have a material adverse effect on its financial condition, results of operations, or liquidity - The Company is from time to time involved in various legal proceedings incidental to the conduct of its business[103] - Management is not aware of any legal proceedings pending or threatened that are expected to have a material adverse effect on the Company's financial condition, results of operations, or liquidity[103] Item 1A. Risk Factors This section states that there have been no material changes to the Risk Factors previously described in the Company's Annual Report on Form 10-K for the fiscal year ended February 1, 2025 - 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[104] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The Company did not repurchase any shares in the second quarter of 2025, but $40.0 million remained available under its stock repurchase authorization as of August 2, 2025 - The Company did not repurchase any shares in the second quarter of 2025[105] - As of August 2, 2025, $40.0 million remained available under the Company's stock repurchase authorization[105] Item 3. Defaults Upon Senior Securities This item is marked as not applicable, indicating no defaults upon senior securities - This item is marked as 'Not applicable'[106] Item 4. Mine Safety Disclosures This item is marked as not applicable, indicating no mine safety disclosures are required - This item is marked as 'Not applicable'[107] Item 5. Other Information This item is marked as not applicable, indicating no other information to report - This item is marked as 'Not applicable'[108] Item 6. Exhibits This section lists all exhibits filed as part of the Form 10-Q, including corporate organizational documents, incentive plans, award agreements, and certifications from executive officers - Exhibits include corporate organizational documents (Certificate of Incorporation, Bylaws), incentive plans (2021 Incentive Plan), and related award agreements[112] - Certifications of the Principal Executive Officer and Principal Financial Officer, pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002, are included[112] - Inline XBRL Document Sets for the condensed consolidated financial statements and the cover page are also filed[112] SIGNATURES This section contains the official signature of the registrant, Citi Trends, Inc., by its Chief Financial Officer, Heather Plutino, certifying the filing of the report - The report was signed on September 10, 2025, by Heather Plutino, Chief Financial Officer of Citi Trends, Inc[116]