Citi Trends Misses, Sales Rise - Analyst Blog

Citi Trends Inc. (CTRN) recently reported sluggish fiscal 2010 third-quarter results. The company reported a net loss of $0.4 million compared with a net income of $0.6 million in the year-ago quarter. Loss per share came in at 3 cents versus earnings per share of 4 cents in the year-ago quarter and behind the Zacks Consensus Estimate of a loss of 1 cent per share.  

During the quarter, Citi Trends recorded a 10.0% year-over-year growth in net sales to $140.0 million, but missed the Zacks Consensus Estimate of $144 million. Comparable store sales dropped 4.2% in the third quarter of fiscal 2010.

Citi Trends' gross profit logged a growth of 8.5% year over year to $51.7 million, mainly due to higher sales. Selling, general and administrative expenses increased 12.5% year over year, primarily due to higher costs related to new stores. Accordingly, the company posted a wider operating loss of $0.9 million, compared with a profit of $0.8 million in the year-ago period.

Citi Trends ended the quarter with a debt-free balance sheet, and cash and cash equivalents of $69.6 million, compared with $32.5 million in the year-ago quarter. Shareholders' equity at the end of the quarter was $195.9 million, compared with $168.9 million in the year-ago period.

The company expects earnings of $1.50 to $1.60 per share for fiscal 2010 on same-store sales decline of 1% to 4% in the fourth quarter of fiscal 2010. The high end of the guidance is in sync with the Zacks Consensus Estimate of $1.60 per share, which decreased by 2 cents over the past 1 month.

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 460 stores across 27 states in the Southeast, Mid-Atlantic and Midwest regions as well as in the states of Texas and California.

Citi Trends has a sound, zero debt balance sheet with a robust cash horde. This offers the company the financial flexibility to drive future top-line expansion.

However, the company operates in a highly fragmented specialty retail sector and faces intense competition from larger off-price rivals, such as The TJX Companies Inc. (TJX) and Ross Stores Inc. (ROST), and mass merchants including Wal-Mart Stores Inc. (WMT) and Kmart.

We currently have a short-term Zacks #4 Rank (Sell) rating and a long-term Neutral recommendation on the company.

 
CITI TRENDS INC (CTRN): Free Stock Analysis Report
 
ROSS STORES (ROST): Free Stock Analysis Report
 
TJX COS INC NEW (TJX): Free Stock Analysis Report
 
WAL-MART STORES (WMT): Free Stock Analysis Report
 
Zacks Investment Research