Savannah, Ga. – Citi Trends, the 597-store specialist in value-priced apparel and home, is executing an inventory “reset” as it aims to return to profitable growth.
The company made headway during Q2 by clearing through millions of dollars worth of slow-selling and aged inventory. The goal is to offer a fresher assortment of good/better/best products to its core customers, who are primarily African American multicultural families.
The markdowns helped on the top line. Sales lifted 1.7% to $176.6 million. Home and impulse categories delivered double-digit comps and back-to-school children’s categories got off to a strong start, Citi Trends reported today. However, overall comp decreased 1.7%.
“Significantly, we achieved traffic growth in the quarter, a clear indication our core consumer remains highly engaged with the Citi Trends brand and our unique store experience,” said Ken Seipel, interim CEO.
Citi Trends hopes to capitalize on two opportunities: enhancing the ‘treasure hunt’ experience by securing branded goods at strong values and boosting the penetration of opening price point merchandise.
“Additionally, we have identified specific opportunities to improve our product allocation process, shrinkage controls and preseason assortment planning process, all of which will improve our operational efficiency and execution,” said Seipel.
Taking $9.4 million in markdowns during the quarter impacted margin – as did $4.0 million of shrink from physical inventory. Gross margin contracted to 31.1% vs. 38.2% in last year’s second quarter.
Citi Trends opened 1 new store during the quarter, closed 3 stores and remodeled 15 stores. The company now has completed its store opening schedule for the year, though may shutter a handful of units It expects to end the year with approximately 590 stores.
Looking ahead, Citi Trend said its year-end cash balance is expected to be in the range of $60 million to $70 million.
- Second half comparable store sales to be flat to up low-single digits compared to second half of fiscal 2023; total sales expected to be down mid-single digits due to the 53rd week last year and store closures
- Second half gross margin expected to be approximately 39%
- Second half EBITDA*expected to be positive, in a range of $0.5 million to $2.5 million, which would mark a significant improvement to first half results.
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