8-K: Citi Trends Announces Q4 and Fiscal Year 2024 Results: Sales Up, Company Optimistic for 2025

Citi Trends reports a mixed bag for Q4 and fiscal year 2024, with sales growth offset by increased expenses, but anticipates significant EBITDA improvement in fiscal 2025.

Summary

• Citi Trends announced its fourth quarter and fiscal year 2024 results, with the fiscal year ending on February 1, 2025.
• Q4 2024 total sales reached $211.2 million, a decrease of 1.9% compared to Q4 2023, but comparable store sales increased by 6.4%.
• The company's Q4 2024 gross margin was 39.7%, a 60 basis point increase from Q4 2023.
• For fiscal year 2024, total sales were $753.1 million, a 0.7% increase compared to the previous year, with comparable store sales up by 3.4%.
• The gross margin for fiscal year 2024 was 37.5%, compared to 38.1% in 2023.
• Citi Trends ended fiscal 2024 with approximately $136 million in liquidity, including $61 million in cash and no debt.
• The company expects low to mid-single digit comparable store sales increase and significant EBITDA improvement for fiscal 2025.
• In Q4 2024, Citi Trends repurchased 145,238 shares for $3.8 million, and in Q1 2025 to-date, they repurchased 250,555 shares for $6.2 million.
• As of the end of fiscal 2024, $46.2 million remained available under the share repurchase program, which has now been reduced to $40 million.

Sentiment

Score: 6

Explanation: The sentiment is neutral to slightly positive. While the current results show a net loss, the company is optimistic about future growth and EBITDA improvement. The share repurchase program also indicates confidence.

Positives

• Comparable store sales increased by 6.4% in Q4 2024 and 3.4% for the full year 2024.
• Gross margin improved by 60 basis points in Q4 2024.
• The company has a strong liquidity position with $61 million in cash and no debt.
• Citi Trends expects significant EBITDA improvement in fiscal 2025.
• The company is actively repurchasing shares, indicating confidence in its future prospects.
• The company plans to remodel 50 stores and open up to 5 new locations.

Negatives

• Total sales decreased by 1.9% in Q4 2024 compared to Q4 2023.
• The company reported a net loss of $(14.2) million in Q4 2024, compared to a net income of $3.6 million in Q4 2023.
• The company reported a net loss of $(43.2) million for the full year 2024.
• Gross margin for the full year 2024 decreased to 37.5% from 38.1% in 2023.
• Adjusted EBITDA decreased to $7.1 million in Q4 2024 from $10.0 million in Q4 2023.

Risks

• The company acknowledges economic uncertainty and the potential impact on consumer spending.
• The company faces risks related to shifts in market demand and managing inventory shrinkage.
• The company is subject to risks related to cybersecurity, data privacy and intellectual property.
• The company's forward-looking statements are subject to various factors which are discussed in their Annual Reports and Quarterly Reports on Forms 10-K and 10-Q, respectively, and any amendments thereto, filed with the Securities and Exchange Commission.

Future Outlook

Citi Trends expects low to mid-single digit comparable store sales growth and significant EBITDA improvement for fiscal 2025, with EBITDA planned to be in the range of $5 million to $9 million.

Management Comments

• Ken Seipel, Chief Executive Officer, said, 'I am pleased to report that we continue to make progress on our strategic journey.'
• Mr. Seipel continued, 'As we enter fiscal 2025, we are moving from the repair phase of our transformation to the execute phase of our improvement strategy.'
• Mr. Seipel concluded, 'I remain confident in the Company's ability to deliver significantly improved financial results and that the work we are doing is laying the groundwork for future growth.'

Industry Context

Citi Trends operates in the off-price retail sector, catering primarily to African American families. The company's focus on trendy fashions, great brands, and amazing prices positions it to gain market share during times of economic uncertainty.

Comparison to Industry Standards

• Comparable companies like Ross Stores and TJX Companies generally maintain higher gross margins, often in the low 40s percentage range, indicating potential for Citi Trends to improve its margin performance.
• Off-price retailers typically focus on inventory management and quick turnover, and Citi Trends' efforts to reduce average store inventory by 6.7% align with this industry practice.
• The planned store remodels and new store openings are consistent with growth strategies employed by other retailers in the sector, such as Burlington Stores, which has been actively expanding its store footprint.

Stakeholder Impact

• Shareholders may be concerned about the net loss in Q4 and fiscal year 2024, but the share repurchase program and positive outlook for 2025 could provide some reassurance.
• Employees may be affected by store closures and remodels, but the company's growth plans could create new opportunities.
• Customers can expect continued focus on trendy fashions, great brands, and amazing prices.
• Suppliers may see changes in demand based on the company's inventory management and product mix strategies.

Next Steps

• The company plans to open up to 5 new stores, remodel approximately 50 stores and close up to 5 locations in fiscal 2025.
• Citi Trends will host a conference call today at 9:00 a.m. ET to discuss the results.

Key Dates