Citi Trends(CTRN) - 2026 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Total sales for Q1 2025 increased by $15.4 million or 8.3% compared to Q1 2024, reaching$ 201.7 million [23] - Adjusted EBITDA for the quarter was $5.4 million, an increase of$ 6.2 million compared to Q1 2024, with a sales to EBITDA flow through of 40% [26] - Gross margin expanded by 90 basis points to 39.6%, driven by higher initial markup and lower freight costs [25] - Adjusted SG&A expenses totaled $74.4 million, or 36.9% of revenue, down from 39.1% in the prior period [25] Business Line Data and Key Metrics Changes - Comparable store sales grew by 9.9%, marking the third consecutive quarter of sequential improvement, with a two-year stack of 13% [24] - The plus-size business showed meaningful improvement, and the footwear category also experienced consistent top-line growth [9][10] - The accessory business was slightly below plan, prompting adjustments to better meet customer needs [9] Market Data and Key Metrics Changes - Strong performance was noted across all apparel and home categories, with many experiencing double-digit growth [8] - Increased traffic and mid-single-digit transaction count growth were observed, alongside improved conversion rates [24] Company Strategy and Development Direction - The company is in a three-phase strategic transformation: repair, execute, and optimize, aimed at building a high-performance company for sustainable profit growth [5][7] - Focus on enhancing product offerings, particularly in plus sizes and big men's apparel, while also improving trend relevancy in juniors and young men's categories [10][54] - Plans to open up to five new stores and remodel approximately 50 locations in the year, with a disciplined approach to fleet optimization [31] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the turnaround plan, expecting full-year comparable store sales growth in the mid-single digits and gross margin expansion of approximately 200 basis points [28][29] - The current tariff environment presents both challenges and opportunities, with the company well-positioned to capitalize on market disruptions [20] Other Important Information - The company ended the quarter with no debt,$ 42 million in cash, and liquidity of approximately $117 million [27] - A new AI-based allocation system is being tested, with plans for a full rollout following the back-to-school season [14][15] Q&A Session Summary Question: Can you provide context on the change in closeout strategy? - The company is focusing on in-season closeouts and extreme value products, aiming for a long-term goal of making this segment incremental to top-line growth by about 10% [41][43] Question: Why is the full-year guidance below current comp trends? - The company is facing tougher comparisons in the back half of the year and is being cautious due to uncertainties in the macro environment [46][48] Question: Can you share insights on specific category performance? - All categories performed well in Q1, with particular strength in plus sizes and footwear, while the accessory business was slightly off plan [52][54] Question: What performance uplift has been seen from remodeled units? - Early performance from remodeled stores is promising and consistent with prior remodel classes, although it is still early to quantify [61]