Citi Trends ((CTRN)) has held its Q2 earnings call. Read on for the main highlights of the call.
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Citi Trends’ recent earnings call conveyed a positive sentiment, highlighting strong sales growth and gross margin improvements. The company is strategically positioned for expansion and inventory optimization, although challenges such as increased SG&A expenses and an adjusted EBITDA loss remain. Overall, Citi Trends’ outlook is optimistic, with strategic initiatives paving the way for a promising future.
Consistent Sales Growth
Citi Trends reported its fourth consecutive quarter of mid to high single-digit comparable sales growth, achieving an impressive 9.2% in Q2 and a 9.6% year-to-date year-over-year comp growth. This consistent performance underscores the company’s robust sales strategies and market presence.
Gross Margin Improvement
The company achieved a 40% gross margin rate in Q2, marking the highest since fiscal 2021. This represents an 890 basis point expansion compared to Q2 of the previous year, highlighting significant improvements in cost management and pricing strategies.
Inventory Optimization
Citi Trends demonstrated improved inventory efficiency with a 5.7% decrease in in-store inventory compared to last year, while still supporting a 9.2% comp growth. This reflects the company’s effective inventory management practices.
Updated 2025 Outlook
Citi Trends has increased its full-year guidance, now expecting mid to high single-digit comp store sales growth and full-year EBITDA in the range of $7 million to $11 million. This updated outlook reflects confidence in their strategic initiatives and market conditions.
Expansion and Remodel Strategy
The company plans to remodel approximately 60 locations in 2025 and expand square footage by mid-single digits annually. This expansion strategy aims to achieve $40 million or more in EBITDA by 2027, driven by consistent sales growth and new store openings.
SG&A Expenses
In the second quarter, adjusted SG&A expenses totaled $78.9 million, up from $72.1 million in the prior period. This increase is attributed to higher incentive compensation accruals, indicating a focus on rewarding performance and driving future growth.
Adjusted EBITDA Loss
Citi Trends reported a loss of $2.6 million in adjusted EBITDA for Q2, despite showing improvement from the previous year. This highlights ongoing challenges in achieving profitability, although the company is making strides towards financial stability.
Forward-Looking Guidance
During the earnings call, Citi Trends provided forward-looking guidance, anticipating mid to high single-digit comp store sales growth for the full year. They expect EBITDA to be between $7 million and $11 million, representing a significant increase over fiscal 2024 results. The company’s transformation plan, including phases of Repair, Execute, and Optimize, aims for sustainable profitable growth. Additionally, they plan to remodel 60 stores in 2025 and target $40 million or more in EBITDA by 2027.
In summary, Citi Trends’ earnings call reflects a positive sentiment with strong sales growth and strategic initiatives for expansion and inventory optimization. Despite challenges like increased SG&A expenses and an adjusted EBITDA loss, the company’s forward-looking guidance and strategic plans indicate a promising trajectory for future growth.