Citi Trends (CTRN) is trading higher today after reporting Q2
(Jul) results this morning. In case you're not familiar, Citi Trends is an
off-price retailer of urban fashion apparel and accessories for the entire
CTRN says its merchandise is designed to appeal to the fashion preferences of value-conscious consumers. Its goal is to provide merchandise at discounts to department and specialty stores' regular prices of 20% to 70%. It currently operates 553 stores in both urban and rural markets in 31 states.
CTRN says it does not attempt to dictate trends, but rather it devotes considerable effort to identifying emerging trends and ensuring that its apparel assortment is timely and fashionable in the urban market. It offers products under its proprietary brands such as "Citi Steps" and "Red Ape." Its stores feature sportswear, dresses, outerwear, footwear, intimate apparel, accessories, scrubs, beauty, and home. CTRN purchases merchandise from vendors through planned programs at reduced prices and opportunistically through close-outs, with the majority of its merchandise purchased for the current season and a lesser quantity held for sale in future seasons. Its stores are located in high traffic strip shopping centers that are convenient to low and moderate income neighborhoods.
Turning to the JulQ results, non-GAAP EPS jumped to $0.24 from $0.03 in the prior year period. Revenue rose 9.5% year/year to $182.0 mln. Both EPS and revenue were above market expectations. Same store comps increased +3.3%, up from +2.1% in AprQ. In terms of guidance, CTRN said it expects Q3 (Oct) EPS of $(0.03)-0.02 with revenue up +2-3%, which computes as $180.4-182.2 mln. Looking a little further out, CTRN expects Q4 (Jan) EPS of $0.60-0.65.
Same store comps are expected in the +2-3% range for both Q3 and Q4. Thus far, in August, comps have increased +9%; however, the company believes a range of +2-3% is an appropriate expectation for 2H18, similar to the actual 1H18 results which came in at +2.7%.
In sum, with the stock trading higher today, it seems investors are happy with the overall results. JulQ was quite good although the OctQ guidance is being seen as a bit weak. It's possible that management is just being conservative with the OctQ guidance. August comps are already trending at an impressive +9%, so there is a good argument that CTRN is just being cautious about OctQ. On a final note, the stock has broken above its recent trading range of $28-32, which could be a positive signal for more gains.
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