Citi Trends(CTRN) - 2022 Q3 - Quarterly Report

PART I FINANCIAL INFORMATION Item 1 Financial Statements (unaudited) The unaudited consolidated financial statements highlight a significant increase in net income and a substantial decrease in cash due to stock repurchases Condensed Consolidated Balance Sheets Total assets decreased to $467.6 million due to reduced cash, while liabilities increased and equity declined from $163.6 million to $109.3 million due to stock repurchases Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | Oct 30, 2021 | Jan 30, 2021 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $12,023 | $123,177 | | Inventory | $126,899 | $103,845 | | Total current assets | $193,776 | $244,442 | | Total assets | $467,569 | $494,593 | | Liabilities & Equity | | | | Total current liabilities | $192,916 | $182,845 | | Total liabilities | $358,309 | $330,959 | | Total stockholders' equity | $109,260 | $163,634 | | Total liabilities and stockholders' equity | $467,569 | $494,593 | Condensed Consolidated Statements of Operations Q3 2021 net sales increased 14.5% to $228.0 million, with year-to-date net sales growing 41.3% to $750.6 million and net income surging to $52.4 million Thirteen Weeks Ended Performance (in thousands, except per share data) | Metric | Oct 30, 2021 | Oct 31, 2020 | | :--- | :--- | :--- | | Net sales | $227,959 | $199,100 | | Income from operations | $11,577 | $9,340 | | Net income | $9,014 | $6,965 | | Diluted net income per common share | $1.03 | $0.67 | Thirty-Nine Weeks Ended Performance (in thousands, except per share data) | Metric | Oct 30, 2021 | Oct 31, 2020 | | :--- | :--- | :--- | | Net sales | $750,621 | $531,375 | | Income from operations | $66,940 | $8,234 | | Net income | $52,401 | $5,940 | | Diluted net income per common share | $5.71 | $0.57 | Condensed Consolidated Statements of Cash Flows Operating cash flow decreased to $54.9 million, while investing activities used $56.1 million and financing activities used $109.9 million, primarily for stock repurchases Cash Flow Summary for Thirty-Nine Weeks Ended (in thousands) | Activity | Oct 30, 2021 | Oct 31, 2020 | | :--- | :--- | :--- | | Net cash provided by operating activities | $54,853 | $63,043 | | Net cash (used in) provided by investing activities | $(56,078) | $31,349 | | Net cash used in financing activities | $(109,929) | $(17,553) | | Net (decrease) increase in cash | $(111,154) | $76,839 | | Cash and cash equivalents, end of period | $12,023 | $96,762 | Notes to the Condensed Consolidated Financial Statements Notes detail accounting policies, COVID-19 impact, revenue disaggregation by category, significant stock repurchases, and an undrawn $75 million revolving credit facility - The company is a specialty value retailer with 600 stores in 33 states as of October 30, 2021, primarily serving African American and Latinx families[20] - The company has actively repurchased its stock, spending $85.3 million under its programs and an additional $21.9 million in a block repurchase during the first thirty-nine weeks of 2021. A new $30 million repurchase program was authorized on November 30, 2021[43][44] Revenue Disaggregation by Merchandise Category (% of Net Sales) | Category | Thirteen Weeks Ended Oct 30, 2021 | Thirty-Nine Weeks Ended Oct 30, 2021 | | :--- | :---: | :---: | | Kids | 26% | 22% | | Women | 25% | 27% | | Men | 17% | 18% | | Beauty & Accessories | 17% | 17% | | Home & Lifestyle | 8% | 8% | | Footwear | 7% | 8% | - The company amended its revolving credit facility in April 2021, increasing the commitment to $75 million with a maturity date of April 15, 2026. There were no borrowings under the facility as of October 30, 2021[36] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses significant sales growth driven by comparable store sales and pandemic recovery, gross margin impacts, and strong liquidity despite substantial stock repurchases Results of Operations Q3 2021 net sales increased 14.5% to $228.0 million driven by comparable store sales, while year-to-date net sales grew 41.3% to $750.6 million due to pandemic recovery - Q3 2021 net sales increased 14.5% to $228.0 million, driven by a 13.1% increase in comparable store sales[67] - The 13.1% increase in Q3 comparable store sales was due to a 12% increase in average basket size and a 1% increase in customer transactions[68] - For the first thirty-nine weeks of 2021, net sales increased 41.3% to $750.6 million, primarily due to the temporary closure of all stores in the first half of 2020[74] - Cost of sales as a percentage of sales for Q3 2021 increased to 59.7% from 58.2% YoY, mainly due to a 110 basis point increase in freight costs[69] Liquidity and Capital Resources Liquidity is supported by $12.0 million cash, $35.5 million investments, and an undrawn $75 million credit facility, despite significant cash usage for stock repurchases - Principal sources of liquidity include $12.0 million in cash, $35.5 million in short-term investments, and an undrawn $75 million revolving credit facility as of October 30, 2021[80] - Cash used in financing activities was $109.9 million in the first thirty-nine weeks of 2021, primarily consisting of $107.2 million for common stock repurchases[85][86] - Cash used in investing activities was $56.1 million, consisting of $35.5 million for purchases of short-term investment securities and $20.8 million for capital expenditures[84] - Management believes that existing sources of liquidity will be sufficient to fund operations for at least the next 12 months[87] Item 3. Quantitative and Qualitative Disclosures About Market Risk No material changes in market risk have occurred during the thirty-nine weeks ended October 30, 2021, compared to prior disclosures - There have been no material changes in market risk during the thirty-nine weeks ended October 30, 2021[91] Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective as of October 30, 2021, with no material changes to internal control over financial reporting - Management concluded that the company's disclosure controls and procedures are effective as of October 30, 2021[92] - No material changes to internal control over financial reporting occurred during the fiscal quarter[94] PART II OTHER INFORMATION Item 1. Legal Proceedings The company is involved in various legal proceedings but expects no material adverse effect on its financial condition or operations - The company is not aware of any pending or threatened legal proceedings that are expected to have a material adverse effect on its financial condition, operations, or liquidity[96] Item 1A. Risk Factors No material changes have been made to the risk factors previously disclosed in the company's Annual Report on Form 10-K - No material changes have been made to the Risk Factors disclosed in the Company's Annual Report on Form 10-K for the fiscal year ended January 30, 2021[97] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company repurchased 521,086 shares in Q3 2021 and authorized a new $30 million stock repurchase program on November 30, 2021 Share Repurchases in Q3 2021 | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | August 2021 | 67,233 | $77.59 | | September 2021 | 361,706 | $84.94 | | October 2021 | 92,147 | $74.77 | | Total | 521,086 | - | - On November 30, 2021, the board of directors approved a new stock repurchase program authorizing up to $30 million in share repurchases[99] Item 6. Exhibits This section lists exhibits filed with the Form 10-Q, including CEO and CFO certifications and Inline XBRL documents - Exhibits filed include CEO and CFO certifications pursuant to Section 302 and Section 906 of the Sarbanes-Oxley Act[110]