Citi Trends(CTRN) - 2024 Q4 - Annual Results

Executive Summary & Company Overview 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 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 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] Operational Footprint | Metric | Value | | :--- | :--- | | Number of Operating Stores | 602 | | Number of States Covered | 33 | Fiscal 2023 Financial Performance 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 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 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] - Year-end cash was $79.7 million, with no debt and an undrawn $75 million credit facility[7] - 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] CEO Commentary on Performance 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] - Comparable store sales improved in targeted product categories through inventory rebuilding efforts[6] - The company entered 2024 with a strong financial position, boasting $155 million in total liquidity, including approximately $80 million in year-end cash[8] - Mid-quarter Q1 comparable store sales showed positive growth and continuous improvement from prior quarters, driven by increased traffic and conversion rates[8] Capital Management & Liquidity 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 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] Share Repurchase Program Status | Metric | Amount (million USD) | | :--- | :--- | | Remaining Available for Share Repurchase Program | 50.0 | Liquidity Position 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 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 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 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] 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 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] - Mid-quarter Q1 comparable store sales showed positive growth and continuous improvement from prior quarters, primarily due to increased traffic and conversion rates[8] Condensed Consolidated Financial Statements 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 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 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 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 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] - 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] Fourth Quarter 2023 Non-GAAP Reconciliation 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 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 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 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] - Forward-looking statements are not guarantees of future performance, and actual results may differ materially due to various factors[16] - 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] Investor Conference Call and Webcast 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] - 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] Contact Information 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] - Contact email: CitiTrendsIR@icrinc.com[17]