Citi Trends(CTRN) - 2024 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported total sales of approximately $211 million for Q4 2024, with comparable store sales growth of 6.4%, reflecting a sequential improvement from Q3 [6][13] - Gross margin rate expanded by 60 basis points to 39.7% compared to Q4 2023, driven by strong customer traffic and improved product offerings [14][41] - Inventory levels decreased by 6% year-over-year, indicating a fresher inventory position [15][53] Business Line Data and Key Metrics Changes - The footwear business registered high-single-digit growth, driven by strong customer acceptance of extreme off-value price branded buys [18] - Non-apparel categories such as giftables and family basics performed well, while children's apparel continued to grow [17] - The plus-size apparel segment experienced challenges due to execution issues, which are expected to improve by Q2 2025 [17] Market Data and Key Metrics Changes - The company has identified significant opportunities to expand its product assortment to cater to average- and higher-income customers within its African-American customer base [8][20] - The strategic focus on trendy fashions and recognizable brands has resonated well with customers, leading to increased loyalty and transaction sizes [7][21] Company Strategy and Development Direction - The company is transitioning from the repair phase to the execute phase of its strategic journey, focusing on consistent execution capabilities and best practices [11][55] - A three-tiered product strategy is being implemented to enhance product assortment and meet diverse customer needs [19] - The company plans to remodel at least 50 stores in 2025 and is conducting market studies for future expansion [26][27] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to navigate macroeconomic uncertainties, including potential changes in tariffs and taxes [32][34] - The company anticipates positive free cash flow generation in fiscal 2025, marking a critical milestone in its financial transformation [30][51] - Full-year comparable sales growth is expected to be in the low- to mid-single digits, with gross margin expected to expand by at least 220 basis points [56] Other Important Information - The company maintains a healthy balance sheet with$ 61 million in cash and no debt, providing flexibility for strategic initiatives [29][51] - The Board approved a $50 million share repurchase program, with$ 10 million already invested [30][52] Q&A Session Summary Question: Sales trends and market share - Management highlighted the addition of off-price to the business model and improved price value equation as key drivers for sustaining momentum into 2025 [65][66] Question: Off-price business growth - Currently, off-price accounts for 1% to 2% of the business, with expectations to grow to around 10% in the long term [70][71] Question: Brand name deals - The company is focusing on securing deals with well-known brands across various categories, emphasizing extreme pricing [76][78] Question: EBITDA increase components - Management outlined that the anticipated EBITDA increase of $19 million to$ 23 million will come from sales growth, margin expansion, and leveraging SG&A [89][95] Question: Sales guidance and flow-through - The low base of sales and SG&A is expected to support the guidance of low- to mid-single-digit comp sales, with potential for additional sales above that range [96][98]