Financial Data and Key Metrics Changes - Total sales in Q2 2024 increased by 1.7% compared to the previous year, while comparable store sales decreased by 1.7% [20] - Adjusted gross margin for Q2 was 31.1%, significantly lower than recent history due to inventory markdowns and shrink expenses [22] - The company ended Q2 with a strong balance sheet, including no debt and 134 million [23] Business Line Data and Key Metrics Changes - The home and impulse categories delivered double-digit comparable sales growth, while back-to-school children's categories started strong [4] - Footwear continued to be a drag on the business, while home and impulse categories performed well [28] Market Data and Key Metrics Changes - The company reported strong customer traffic growth, indicating high engagement with the Citi Trends brand [4] - Approximately 80% of store markets returned to school by the end of Q2, compared to only 14% at the end of the previous quarter [20] Company Strategy and Development Direction - The company is focusing on refining its product assortment strategy to include a balanced mix of good, better, and best products, with an emphasis on opening price points and branded goods [19][12] - A targeted approach towards the core African-American consumer is being implemented to enhance product offerings and customer engagement [10] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the company's future, citing control over internal opportunities and a strong financial position as key factors for growth [8] - The company expects second-half comparable store sales to be flat to up low single-digits, with total sales anticipated to decline mid-single-digits due to store closures [24] Other Important Information - The company incurred $13.4 million in one-time expenses related to inventory reset and shrink, which are not reflective of the underlying business strength [15] - Inventory was approximately flat compared to last year, with strategic packaway buys making up about 23% of the end-of-quarter inventory [23] Q&A Session Summary Question: What drove the decline in comparable store sales? - Management noted that while transactions were up, basket sizes were under pressure due to fewer items per transaction, with footwear continuing to be a drag on sales [28] Question: How will the increased shrink accrual impact future quarters? - The increased accrual will continue to be a drag on gross margin but is incorporated into the guidance for the second half of the year [29] Question: Can you elaborate on the aged inventory write-downs? - The company overpurchased inventory in Q1, leading to a backlog that required aggressive markdowns to clear [32] Question: How is the new ERP system performing? - The new ERP system has complexities that require simplification for better execution, with plans to enhance allocation processes [33] Question: What are the expectations for same-store sales trends in Q3 and Q4? - Management indicated that while comparisons may get tougher, they are focused on driving top-line growth through improved product offerings and customer engagement [39]
Citi Trends(CTRN) - 2024 Q2 - Earnings Call Transcript