Citi Trends Inc. (NASDAQ:CTRN) stock tumbled Tuesday as concerns about weaker-than-expected revenue and a $100 million shelf registration eclipsed the retailer’s earnings beat and raised outlook.
Earnings Snapshot
Citi Trends reported adjusted earnings of 4 cents per share. That beat the consensus estimate for a loss of 34 cents. Sales rose 10.9% year over year to $211.6 million but missed the $215 million estimate.
Comparable-store sales increased 10.5%, extending the company’s growth streak to eight quarters. Two-year comparable sales rose 19.7%. Higher transaction volumes and a larger average basket drove the gains.
Gross margin expanded 60 basis points to 40.6%. Improved merchandise margins and lower inventory shrink supported the increase.
Adjusted EBITDA improved to $5.5 million from a loss of $1.1 million a year earlier. The adjusted EBITDA margin expanded 320 basis points to 2.6%, helped by stronger sales and cost controls.
Inventory increased 7.5% year over year. That was below the 10.5% comparable-sales increase.
Citi Trends ended the quarter with $55.9 million in cash, no debt and an unused $75 million revolving credit facility.
The board approved a $100 million shelf registration for potential strategic investments or acquisitions. However, the company said it has no immediate financing need.
Any shares sold under the shelf could dilute existing investors. Still, the registration only provides authorization for potential future offerings and does not require Citi Trends to issue the full $100 million.
Citi Trends also has $40 million remaining under its share repurchase authorization.
Broad-Based Sales Growth
Every merchandise division, store climate zone and store-volume decile posted year-over-year growth.
Apparel, non-apparel and home sales increased. Men’s, children’s and family basics remained strong. Family footwear also performed well, helped by seasonal products, current styles and value pricing.
Customers earning between $75,000 and $150,000 annually represent about 25% of Citi Trends’ customer base. However, they generate more than 40% of its revenue. The retailer sees an opportunity to attract those shoppers with more recognizable brands at discounted prices.
Citi Trends opened four stores during the quarter and ended the period with 594 locations. It remodeled 26 stores, bringing the year-to-date total to 51.
Citi Trends Raises Outlook
Citi Trends now expects fiscal 2026 comparable sales to increase 9% to 11%. It forecast total sales growth of 10% to 12%.
The company raised its fiscal 2026 sales forecast to between $902 million and $918.4 million. Its previous outlook called for sales of $893.8 million to $910.2 million. However, the new range remains below the $941.8 million consensus estimate.
It expects gross margin to expand by 50 to 70 basis points from 39.6% in fiscal 2025. Lower markdowns and inventory shrink should support margins, while higher freight costs could partly offset those benefits.
Store Expansion Plans
Citi Trends plans to open about 20 stores in 2026, down from its previous target of 25 because of timing. It expects to open 40 stores in 2027.
The company targets about $1.5 million in mature annual sales and a midteens four-wall contribution margin for each new store. It uses artificial intelligence tools and strict investment-return criteria to assess potential locations.
The retailer raised its 2026 remodeling target to between 60 and 65 stores from 50. It maintained its capital spending forecast of $35 million to $40 million and expects to close about four stores.
CTRN Price Action: Citi Trends shares were down 8.54% at $68.00 at the time of publication on Tuesday, according to Benzinga Pro data.
Photo via Shutterstock
Login to comment