US' Citi Trends Q3 FY24 sales dip 0.3%, comparable store sales up 5.7%

The gross margin of the company was 39.8 per cent vs 38.2 per cent in Q3 FY23, an increase of 160 basis points (bps) due to markup expansion and a 40-basis point improvement in shrink results from the impact of mitigation efforts, Citi Trends said in a press release.

Selling, general, and administrative (SG&A) expenses amounted to $74.7 million, or $74.6 million as adjusted, in Q3 FY24, compared to $69.7 million, or $70.8 million as adjusted, in Q3 FY23. The company reported a net loss of $7.2 million, or an adjusted net loss of $6.5 million, for the period, compared to a net loss of $3.9 million, or $4.6 million as adjusted, in Q3 FY23. The adjusted EBITDA loss was $3.3 million, compared to an adjusted EBITDA loss of $2.3 million in Q3 FY23.

The company held $38.9 million in cash at the quarter’s end, with no debt or borrowings under its $75 million credit facility. Total dollar inventory at the quarter’s end decreased by 1.7 per cent compared to Q3 FY23.

"Our third quarter performance of mid-single digit comparable store sales growth and a 160-basis point improvement in gross margin are early indicators that our customers are responding to our strategy adjustments. Comparable store sales increases grew sequentially each month in the quarter driven by increased transaction counts, with continuing momentum Q4 to-date. These results reflect the early impact of our initiatives to strengthen Citi Trends’ good, better, best product offering, adding extreme value branded deals to the treasure hunt and to improve operational disciplines, including product allocation to ensure the right product is in the right stores,” said Ken Seipel, chief executive officer (CEO) of Citi Trends.

Nine months (9M) financials

Citi Trends reported total sales of $541.9 million in the 9M period, an increase of 1.7 per cent YoY. Comparable store sales rose by 2.3 per cent compared to the same period last fiscal. The gross margin stood at 36.6 per cent, down from 37.7 per cent (or 37.8 per cent as adjusted) in FY23. The company recorded a net loss of $29.0 million, with an adjusted net loss of $25.2 million, compared to a net loss of $15.5 million (or $15.0 million as adjusted) in FY23. The adjusted EBITDA loss was $21.3 million, widening from an adjusted EBITDA loss of $8.5 million in FY23.

Outlook

Citi Trends expects total sales to be flat to down low-single digits due to the 53rd week last year and store closures in the second half (H2) of FY24. The gross margin for H2 is expected to be approximately 39 per cent, consistent with prior outlook. The company expects second half EBITDA to be in the range of $1.5-$4 million, above prior outlook of $0.5-$2.5 million. The company expects to end fiscal 2024 with approximately 590 stores, consistent with prior outlook. Year-end cash balance is expected to be in the range of $60 million to $65 million, within prior outlook.

The capital expenditures for the full year are expected to be in the range of $14 million to $18 million on pull-forward of certain investments to drive performance improvement.

Citi Trends, in the fourth quarter (Q4) of FY24, anticipates comparable store sales to increase in the low to mid-single digits. However, total sales are expected to decline in the mid-single digits due to the absence of a 53rd week this year, as compared to the previous year. The company projects a gross margin within the range of 39-40 per cent for the quarter. SG&A expenses are estimated to be $76 million. The company forecasts its Q4 EBITDA to fall between $5 million and $7 million, reflecting its efforts to balance profitability with strategic investments during the critical holiday season.

Fibre2Fashion News Desk (SG)