Citi Trends (CTRN 20.90, -1.97, -8.61%) is trading lower today after the company
reported Q3 (Oct) results this morning. The company had a bit of a fashion miss
in the quarter.
Citi Trends is an off-price retailer of urban fashion apparel and accessories. CTRN says that its merchandise is designed to appeal to the fashion preferences of value-conscious consumers, particularly African-Americans. Its goal is to provide merchandise at discounts of 20% to 70%. to department and specialty stores' regular prices. It currently operates 559 stores in both urban and rural markets in 32 states.
CTRN says that 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. The company’s proprietary brands include "Citi Steps" and "Red Ape." Its stores feature sportswear, dresses, outerwear, footwear, intimate apparel, accessories, scrubs, beauty products, and home goods.
Turning to the OctQ results, CTRN reported a loss of $(0.04) per share while revenue fell 0.8% year/year to $175.4 mln. This was below prior guidance that called for EPS of $(0.03)-0.02 with revenue up +2-3%, which computes as $180.4-182.2 mln. In better news, CTRN reaffirmed its Q4 (Jan) EPS guidance of $0.60-0.65.
Same store comps came in at +0.6%, which is below prior guidance of +2-3%. Also, CTRN is lowering its Q4 (Jan) comp guidance to +1-2% from prior guidance of +2-3%.
What happened? While sales in the non-apparel lines of business continued to increase, CTRN says that it experienced a “fashion miss” in its Ladies' apparel category, regarding which CTRN has now taken corrective action. CTRN indicates that it remains focused on efforts to maximize sales across its merchandise categories and that its efforts are “anchored on delivering fashion-right, value-priced products.”
Besides earnings, CTRN also announced a new $25 mln share repurchase authorization. It's not unusual to see a company announce a share buyback plan when they report disappointing earnings. Clearly, they want to mitigate the bad news from the results.
The stock has been trending lower since mid-August, when it was briefly trading above $34, and it today sets 52-week lows under $21. A lot of retail stocks have been taken a peg lower recently as a number of companies have reported disappointing OctQ results, and quite a few have expressed concerns about the holiday season being a heavily promotional period.
The good thing here is that CTRN admitted it simply made a mistake in terms of fashion. CTRN does have more of a fashion component than other retailers, and they do misfire sometimes. That EPS was reaffirmed for JanQ, the all-important holiday season, may also provide some comfort to investors, though it was disappointing to see comp guidance decline slightly.
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