Citi Trends Disappoints, Shares Plunge - Analyst Blog

Citi Trends Inc. (CTRN) reported sluggish fiscal 2010 second-quarter results before the opening bell on Wednesday. The company’s net loss widened to $567,000 from a loss of $69,000 in the year-ago quarter. Loss per share came in at 4 cents, behind the Zacks Consensus Estimate for a profit of 7 cents per share.

Citi Trends further disappointed investors by slashing its guidance for fiscal 2011 by a significant margin. The company now expects earnings of $1.60 to $1.70 per share on same-store sales growth of flat to 2% in the second half of 2010. Citi Trends earlier predicted earnings of $1.75 to $1.80 per share.

The revised guidance is well below the Zacks Consensus Estimate of $1.84 per share, which edged up a penny over the past 2 months. Consequently, shares of Citi Trends plunged more than 11% in morning trade on the Nasdaq.

During the quarter, Citi Trends recorded a 15.6% year-over-year growth in net sales to $129.0 million, still missing the Zacks Consensus Estimate of $137 million. The growth was primarily driven by the launch of 55 new stores in the last one-year period, partially offset by a 0.6% decline in same–store sales.

Citi Trends’ gross profit logged a growth of 13.3% year-over-year to $48.3 million, mainly due to higher sales. Selling, general and administrative expenses increased 13.9% year-over-year primarily due to higher costs related to new stores. Accordingly, the company posted a wider operating loss of $915,000, compared to a loss of $855,000 in the year-ago period.

Citi Trends ended the quarter with a debt-free balance sheet, and cash and cash equivalents of $84.6 million, compared to $36.4 million in the year-ago quarter. Shareholders’ equity at the end of the quarter was $195.6 million, compared to $167.7 million in the year-ago period.

Citi Trends is a value-priced retailer of urban fashion apparel and accessories including nationally recognized brands, private-label products and a limited assortment of home décor items. The company currently operates 429 stores across 25 states in the Southeast, Mid-Atlantic and Midwest regions as well as in the states of Texas and California.

We currently have a long-term Neutral recommendation on Citi Trends.
 
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