Citi Trends (CTRN) Reports Q4 EPS of $0.84, Revenues Beat; Provides FY20 EPS Outlook

Citi Trends (NASDAQ: CTRN) reported Q4 EPS of $0.84, versus $0.59 reported last year. Revenue for the quarter came in at $211 million versus the consensus estimate of $205.03 million.

Financial Highlights – 13-week fourth quarter ended February 1, 2020

• Total sales increased 4.9% to $211.0 million compared with $201.2 million in the fourth quarter of fiscal 2018
• Comparable store sales increased 3.1%
• Gross profit expands 235 basis points to 39.7% reflecting strong full price selling and lower markdown rates
• Selling, general and administrative expenses de-leveraged 151 basis points to 32.1% primarily due to higher distribution center labor costs and the reversal of an accrual for incentive compensation in the prior year
• Operating profit increased 27.7% to $11.3 million, or an operating profit margin of 5.3%, up 116 basis points as compared to the fourth quarter of fiscal 2018
• Net income was $9.4 million compared with $7.3 million in the fourth quarter of fiscal 2018 on a GAAP basis, or $9.9 million* in the fourth quarter of fiscal 2019 when adjusted for interim CEO related expenses
• Earnings per diluted share were $0.84 compared with $0.59 in the fourth quarter of fiscal 2018 on a GAAP basis, or $0.88* in the fourth quarter of fiscal 2019 when adjusted for interim CEO related expenses
• Quarter-end inventory was down 1.1% comparing favorably to the 4.9% total sales increase for the fourth quarter, which led to a high quality inventory position entering the spring season

Executive Chairman Comments:

Peter Sachse, Executive Chairman, commented, “We ended 2019 on a high note with strong top and bottom line results that reflect continued progress on a number of our strategic initiatives. We successfully continued to shift our offering towards more non-apparel merchandise, while fueling our growth with lower inventory levels and faster turns, resulting in significantly higher gross profit. We are entering the spring season with current merchandise at lower inventory levels than in recent years, which will enable us to deliver a higher level of fresh fashion and drive our sales in the first half of the year. I am confident we are well positioned to achieve our three year objectives, including a net sales CAGR of approximately 8.5% reaching $1.0 billion in sales and delivering an EPS CAGR of 20-25%.”

Mr. Sachse continued, “Like many others, we are paying close attention to developments relating to the outbreak of the coronavirus (COVID-19). First and foremost, we are focused on the health and safety of our employees and customers, as well as planning for business continuity. We are closely monitoring local, state and federal government agencies to ensure we follow best practices surrounding the coronavirus. The extent and duration of the impacts that the coronavirus may have on our business are not known at this time, but we are monitoring developments in order to be in a position to take appropriate action.”

GUIDANCE:

Citi Trends sees FY2020 EPS of $1.75-$1.85.

• For the first five plus weeks of fiscal 2020, the Company is +3.6% in comparable stores sales, despite a delay in income tax refunds that materially affected the third week of February.
• The Company’s guidance for first quarter earnings per diluted share is in a range of $0.87 to $0.91* on an adjusted basis, which excludes an expected $0.04 per share impact of management transition costs and compares with last year’s first quarter of $0.72* on an adjusted basis.
• The Company’s guidance for the first quarter is based on a comparable store sales increase of approximately 2.5% to 3.0%.
• For fiscal 2020, the Company expects diluted earnings per share to be in a range of $1.75 to $1.85* on an adjusted basis, assuming a comparable store sales increase in a range of 2.5% to 3.5%, compared with adjusted diluted earnings per share of $1.56* in fiscal 2019.

The Company’s 2020 guidance does not include any potential impact related to the coronavirus.

For earnings history and earnings-related data on Citi Trends (CTRN) click here.

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