Greetings. Welcome to Citi Trends' Second Quarter 2024 Earnings Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. Please note this conference is being recorded. I will now turn the conference over to Nitza McKee, Senior Associate at ICR. Thank you. You may begin.

Thank you and good morning, everyone. Thank you for joining us on Citi Trends' second quarter 2024 earnings call. On our call today is Interim Chief Executive Officer, Ken Seipel, and Chief Financial Officer, Heather Plutino. Our earnings release was sent out this morning at 6:45 a.m. Eastern Time. If you have not received a copy of the release, it's available on the company's website under the Investor Relations section at www.cititrends.com. You should be aware that prepared remarks today made during this call may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Management may make additional forward-looking statements in response to your questions. These statements do not guarantee future performance. Therefore, you should not place undue reliance on these statements. We refer you to the company's most recent report on Form 10-K and other subsequent filings with the Securities and Exchange Commission for more detailed discussion of the factors that can cause actual results to differ materially from those described in the forward-looking statements. I will now turn the call over to our Interim Chief Executive Officer, Ken Seipel. Ken?

Thank you, Nitza. Well, good morning, everyone, and thank you for joining our Q2 earnings call today. Since our first quarterly call, I've had the opportunity to evaluate our business and chart corrective measures to enhance the long-term sales and profitability of Citi Trends. Today, we'll discuss the strategic actions taken in Q2 to prepare Citi Trends for future growth and outline important work underway to improve our near-term and long-term results. And I must say, while there's a lot of work ahead still, I'm more energized and optimistic than ever about our company's future. So turning to Q2, in Q2 we achieved growth in customer traffic versus last year, which indicates our core customer remains highly engaged with the Citi Trends brand and our unique store experience. Our home and impulse categories delivered double-digit comps, and our back-to-school children's categories got off to a good start. I'm pleased to report that we've experienced continued momentum in the important back-to-school period with positive single-digit comparable store sales growth in Q3 to date. Importantly, Citi Trends remains in a healthy financial position with strong liquidity and no debt, allowing us to execute the foundational work necessary for future growth and profit acceleration. Since stepping into the business on June 1st, I made an evaluation of several key areas of our business, including an extensive review of our product assortment. Relatedly, I made the strategic decision to execute markdowns in the second quarter, to quickly clear through aged inventory and make room for new product. This action will enable us to consistently offer pressure, balanced assortments of good, better, and best products. At the same time, we're swiftly capitalizing on two distinct opportunities, enhancing the treasure hunt experience by securing branded goods at significant discounts, while also increasing the penetration of opening price point goods. And second, we've identified specific opportunities to improve our preseason assortment planning process and product allocation processes. I am confident these actions are foundational for producing consistent comparable store sales growth and improved working capital efficiency. Inventory shrinkage has been an area of concern for Citi Trends over the past several quarters. You've heard us discuss in prior calls the actions we're taking to correct recent elevated shrink trends. In July, I made the decision to engage the services of a firm to identify causal issues and assist us with fixing the problem. Working with our team, they are identifying several specific, correctable administrative and process actions that are expected to have a tangible impact on shrink results going forward. The team has also identified corrective measures to monitor and manage internal and external theft. We're in the process of implementing shrinkage improvement measures and we expect to make a positive impact on shrinkage results going forward. As I mentioned on our prior call, we've identified opportunities to enhance the effectiveness of the Island Pacific ERP upgrade that occurred last year. Transitioning from customized legacy software to a standardized software platform left a void in reports, processes, and monitoring capabilities that I view as fundamental for our leaders to guide the business. Our senior leadership team is highly engaged and has prioritized the business needs and the work is now underway to make the necessary improvements. I want to emphasize that each of these actions I described are foundational improvements that position Citi Trends for profitable growth. After these past couple of months, it's clear to me that the majority of the opportunities we face as a company are well within our control and really not dependent on external factors. As a company, it's really nice to be in control of your own destiny, knowing that if you're focused, hard work, determination will result in significantly improved outcomes for our shareholders. My optimism about Citi Trends is really rooted in my belief in our core business model, which boasts a defensible moat against competition. We're uniquely positioned in the marketplace as a value retailer serving a largely underserved customer base. With our extensive network of retail locations, we're one of the largest national retailers focused on providing family apparel to lower-income customers. Our strength lies in our deep-rooted presence within the African-American community, which continues to be the cornerstone of our financial success. Our long-term neighborhood presence has fostered highly engaged and loyal customers who respond positively when we meet their needs. Now I'd like to say a few words about the groundwork that we're laying for the future. Our plan includes a clear focus on the core customer, a strong product value proposition, trendy fashions with more treasures in the treasure hunt, consistent execution of our business model, and disciplined expense management, a combination of which will contribute significantly to improved profit margins. Beginning with our core customer, we have narrowed our company's focus to our core African-American consumer, who represents the majority of our trade area in nearly 90% of our stores. This targeted focus will allow us to deliver more precise assortments. While we acknowledge the presence of multicultural and Latinx customers in our trade areas, our core African-American customer remains central to our business and is critical to our success. Our merchandise teams have embraced the narrow focus on our core customer, which is enabling them to create a more refined and targeted assortment. In addition, we have initiated a comprehensive consumer insights study to gain both quantitative and ethnographic insights into the drivers of purchase decisions. This study, expected to be completed by the fall, will be a critical factor in our decision-making process for 2025 and beyond. Next are product assortments. In past years, the company reduced the style choice count for opening price point goods under $5, which impacted our value perception and created a void for commodity needs and value prices. Simultaneously, we increased our offering of higher priced products, which was a positive step. However, we did not keep pace with the consumer demands for brands, leading to disappointment among customers seeking branded products at competitive prices. Moving forward, our objective is to always offer a balanced assortment of good, better, and best products across all categories. For our lower-income customers on a tight budget, we're going to offer increased selection of goods priced under $5, with visible in-store signage to emphasize our value proposition. An even more significant growth opportunity for our business lies in expanding our sales of branded products. Our customers are fashion conscious and have demonstrated that they are willing to trade up when the fashion is right, the brand is recognizable, and the price value proposition is strong. We have identified juniors, men's, and family shoes as the categories with the greatest potential for near-term, top-line growth. And I want to recognize our merchant team for recently opening up relationships with well over 20 well-known national brands that were previously inaccessible to Citi Trends. Our merchants have noted our large scale of nearly 600 stores uniquely positioned in African-American neighborhoods is very attractive to brands looking to expand their reach into this important demographic. We expect some of this product to begin filtering into our stores in Q4 with continued expansion in 2025. Speaking of brands, we're currently developing internal capacity to add more unique products by securing branded deals from various sources at significant discounts to regular costs. And although the current economic climate is challenging, it presents an excellent opportunity for off-price deal making with distressed vendors and retailers. We've added a highly regarded off-price buyer to our team to open new relationships, create off-price deal flow, evaluate assortment, fit, and execute. Our buyers are in the market now, reviewing a seemingly endless amount of opportunistic deals to begin delivering in Q4, as we refine our capacity to execute this important growth initiative. And over time, I expect this newly developed price treasure segment of our assortment to contribute an additional 10% or more incremental sales at a higher than average margin rate. I'm confident that the changes in our product strategy will drive traffic to our stores, resulting in consistent top-line and gross margin dollar performance in the future. Now turning to operations. In our supply chain, we are working to increase the speed of product delivery from vendor to store while reducing costs. Our objective is to shorten the number of product days in the supply chain, enabling us to respond more quickly to customer demands and reallocate inventory working capital to fuel sales growth opportunities. Our distribution teams have identified several tangible opportunities to increase speed and reduce operating costs. Our progress in supply chain was stalled this summer when our primary outbound carrier unexpectedly shut down and although we were able to react, the disruption caused a distraction for our teams and some delay in product flow. We are now refocusing on the supply chain efficiency project and will provide updates on our progress in the near future. Now, I'll turn the call to Heather to review the financial points from Q2, as well as our outlook for the second half of the year. Heather?

Thank you, Ken, and good morning, everyone. Let me start by saying that I, too, am excited about the growth opportunities that lie ahead for Citi Trends and strongly believe that the decisive actions we are taking set us up for long-term success. Before I review our second quarter results and update you on our outlook, I'd like to provide some additional color on two unique aspects of our second quarter: our successful inventory reset and our shrink results. I would characterize these two items totaling $13.4 million of expense in the quarter as one-time in nature and not reflective of the underlying strength of the business or the long-term potential of the Citi Trends brand. Note, however, that they are included in our adjusted EBITDA results for the quarter. As Ken mentioned, we made the strategic decision to quickly move through aged inventory to make room for new products. The inventory reset resulted in $9.4 million of second quarter markdowns. In addition, and despite progress on several meaningful initiatives, we incurred higher than anticipated shrink from physical inventory results in the quarter. As a result, we appropriately increased our accrual for shrink, which had an outsized impact on Q2 due to the catch-up nature of that adjustment. In total, we incurred $4 million of unexpected shrink expense in the quarter. As you know, there are three categories of shrink in retail: internal theft; administrative, flash, recording issues in either stores or distribution centers; and external theft. We are working hard to change the recent trend in each of these categories. Internal theft has been our primary area of focus, and we've identified and are implementing several mitigating tactics to improve impressions of control, many of which we discussed last quarter, including updated in-store theft prevention equipment, increased use of exception reporting to identify and resolve problem areas, and a new third-party restitution program. We are also upgrading store talent as needed and are revising important policies to further tighten controls. We're taking action on the administrative front to ensure accurate flow of inventory data, identifying and fixing any leaks in that flow. Finally, the external theft category will benefit from the initiatives I've mentioned, but there may be more to do here. As mentioned earlier, we've engaged a well-regarded consulting firm to help further improve our shrink management across all three categories. We remain focused and are confident that the steps we're taking will move us toward shrink results that are more in line with our historic performance. Shifting back to our inventory reset. With Ken's leadership and vision, we are moving fast to refine our assortment strategy anchored on a more balanced mix of good, better and best products, as well as a higher penetration of opening price points and exciting branded goods at incredible values. We enter the second half of fiscal 2024 comfortable with our inventory levels and composition, pleased with the early progress on the refinement of our assortment strategy, and optimistic about our ability to drive top line improvement. Q3 is off to a solid start with single digit comp store sales increases through the first three weeks of August. Turning now to the details of our second quarter results. Total sales in the quarter increased 1.7% compared to last year, with comp store sales down 1.7%. In the second quarter, we saw sales momentum around the moments in our customers' lives, with a particularly strong Father's Day and July 4th. The start of the back-to-school season was supported by strengths in branded children's apparel and uniforms got off to a good start. Our layaway program, which helps our budget-conscious customers manage their spend while still carrying great gear for the kids, remains an important offering and was up until last year. It is important to note that only about 14% of our store markets returned to school by the end of the second quarter. As of today, approximately 80% of our store markets have returned to school. We continued our marketing efforts in the quarter with summer and early back-to-school radio and paid social in select markets. Our back-to-school marketing will continue into Q3 with a focus on learning and planning to maximize holiday advertising efforts. We look forward to updating you with our back-to-school marketing test results when we meet next quarter. To date, we've touched about 188 stores with our marketing efforts and will increase that number throughout the year to drive traffic in key markets. We remodeled 15 stores in the second quarter, bringing the year-to-date total to 35. We also opened one new store and closed three stores as part of our ongoing fleet optimization effort, bringing our quarter-end store count to 597, with CTx stores representing approximately 23% of our fleet. Turning to the details of gross margin. Our second quarter adjusted gross margin of 31.1% was considerably lower than recent history and well below expectations due to the inventory reset and shrink expense I described earlier. On a positive note, I am pleased to report that despite the unexpected shutdown of one of our largest outbound carriers, we delivered freight expense improvement over last year, a direct result of our supply chain team's ongoing efforts to improve overall supply chain efficiency while reducing costs. Moving to SG&A. Adjusted SG&A expenses increased $2.7 million in the quarter compared to last year, in line with our expectations. The increase, as discussed in previous calls, was driven primarily by merit increases in stores and corporates, as well as a modest increase in advertising spend. Now turning to the balance sheet. We remained in a healthy financial position at the end of the quarter, with a strong balance sheet including no debt, no drawings on our $75 million revolver, and $59 million in cash. With liquidity of approximately $134 million, we can more than sufficiently fund our business initiatives designed to position the company for future profitable growth. We exited the second quarter with total inventory dollars approximately flat to last year. Strategic packaway buys made up approximately 23% of the end-of-quarter inventory, up about 20% from last year, reflecting our buyers' success in securing opportunistic buys of exciting branded goods to drive future sales. Excluding the packaway goods, inventory was down 4% from last year. Now turning to our outlook for the balance of the year. Because of the unique aspects of our second quarter results, we believe it is most helpful to provide outlook for the second half of fiscal 2024, which is as follows. We expect second half comparable store sales to be flat to up low single-digits. Total sales for the second half are expected to be down mid-single-digits due to the 53rd week last year and store closures. Second half gross margin is expected to be approximately 39%. Second half EBITDA is expected to be positive in a range of $0.5 million to $2.5 million, a significant improvement to first half results. We've completed our plans for store openings and remodels for the year with one new store and 35 remodels. As part of our ongoing fleet optimization, we are planning to close 10 to 15 underperforming stores in 2024, including the six closures that will be completed through Q2. We expect to end fiscal 2024 with approximately 590 stores. Finally, we expect to end the year with $60 million to $70 million of cash, reflecting full-year capital expenditures of approximately $13 million, which is down about 35% from our previous outlook. Before I turn the call back to Ken, I want to reiterate that our second quarter results, while disappointing, represent a reset for Citi Trends. The actions we took in the quarter will set us up for improved financial performance in the second half of 2024, with stronger sales fueled by our refined merchandise strategy, a return to high 30s margin rates on cleaned-up inventory and efforts to control shrink, positive EBITDA, and importantly, a strong financial position with a healthy cash balance. With that, I'll turn the call back to Ken.

Thank you, Heather. In summary, our plan is a clear focus on our core customer, strong product value proposition, trendy fashions with more treasures in the treasure hunt, consistent execution of our business model, and disciplined expense management, the combination of which contributes significantly to improved profit margins. Executing this amount of change in a short period of time can be challenging, so I'd like to take this opportunity to thank our entire Citi Trends team for their high level of engagement in driving the success of our business. I spoke earlier of the work of our merchandise and distribution teams, but I also would like to extend my sincere appreciation to all of our store and corporate teams for their extra effort and hard work these past couple of months. I am confident that our entire internal team is excited about our direction and eager to execute a winning strategy for our shareholders. I also want to express my appreciation to our long-term shareholders. In a turnaround situation, the initial road can be a little bumpy as we repair, replace, or implement new processes that enable consistent execution and profit flow through. So shareholders, rest assured, your patience will be rewarded. As CEO, my interests are fully aligned with our individual and institutional investors, and I really look forward to enjoying success with all of you. I will now return the call to our operator, Darryl, to facilitate questions.

Our first questions come from Michael Baker with D.A. Davidson. Please proceed with your questions.

Thanks. I wanted to focus on the top line, specifically what was below plan. Can you provide more details on whether the size of the transaction decreased due to fewer items per basket or lower price points because of markdowns? Additionally, could you clarify which categories underperformed? You mentioned what was performing well in the press release, but what categories did not meet expectations?

Hey, Mike, good morning. Good to hear you. So from a retail metric perspective, transactions were up in the quarter, which Ken mentioned. Basket has been under pressure. And we've seen UPT declines pretty consistently, but AUR remains up. So it's really, it's the number of units that our customer is choosing to put in the basket is really causing the pressure. From a category perspective, we mentioned children's off to a good start, uniforms off to a good start, back-to-school to a good start. I mentioned that Father's Day and July 4th in particular were strong. They really responded to the Americana that we had on the floor and getting ready for summer barbecues. So that was off to a good start. This will sound repetitive from what we talked about in prior quarters because it has been a trend. Footwear continues to be a drag on the business. Home continues to perform well because of the inventory rebuilds that we've done. So still continuation of theme there. Impulse also, which we formally called Q Line, also performing well with our customers. So it's really a continuation of theme from prior quarters on what worked, what didn't work, but with a particular focus in the latter part of the quarter on the success of the children's business.

Okay, understood. Thank you. If I could ask a follow-up on just on the shrink and more just the way the accounting works on that. So, I understand you took a big step-up this quarter to catch up on the accrual, but does this still remain a drag over the coming quarters until you cycle that step-up because now you are accruing at a higher rate than you were presumably a year ago? So is it a drag in the gross margin and presumably though that's incorporated in the 39% back-half outlook? Is that fair to say?

You are correct. The negative impact compared to last year lessens in the fall season, but it still exists. Additionally, the increased accrual is reflected in the 39% guidance.

Okay. Thank you.

Thanks, Mike.

Thank you. Our next questions come from the line of John Lawrence with The Benchmark Company. Please proceed with your questions.

Yeah, good morning, guys.

Good morning, John.

Hey, John.

Yeah. Ken, could you spend a little time and just tell me just that rationalization, when you look at that, when you talk about aged inventory and just digging down another level on the write-down sort of what factors go into that? How old is some of this inventory? Was it something that you had tried to clear and just didn't get through? If you can sort of walk through the nuts and bolts of that if you will, please.

Yeah, happy to. A couple things in it, John. So when I first looked at the inventory for the business, the company, as you probably remember from Q1, had a reasonably aggressive sales plan in place and missed that plan, although we had a comp increase for Q1. So the inventory was actually overpurchased for that quarter. And you begin to see from there, and a little bit of a softness in the Q2, a lot of the inventory geared to sell in that important Q1 timeframe just was backing up and certainly not turning at the rate that it needed to. This blocking room for new receipts which is the lifeblood of our business. When looking at it, it was pretty clear that we needed to take more aggressive action to take the markdowns, get them moving. And I am happy to report, actually, we've sold through a better part of 40% to 50% of that inventory already. And it looks like it's going to be clear and out of our stores here very soon. In terms of the nuts and bolts of it, I think an opportunity that we identified and actually is being implemented literally next week after Labor Day is to improve our overall markdown process. What we're doing now is taking a much more thorough look at aged inventory. Aged is defined by not so much a time, I should say slow selling inventory, and making sure that we've reduced the price of that on a regular basis to take advantage of that in-season selling of a markdown and move that slow seller out quickly. And then behind that, we also have a follow-up process for second markdowns. The teams are also in the process of updating our in-store presentation and making it much more easy for the consumer to shop and access that product. I think the combination of both the cleanup and then actually our new actions that are in place now to prevent this from happening in the future should make this a non-issue as we go forward. Most importantly, it will keep our inventories clean and ready to receive new product, which will in fact help us fuel our top line sales.

Thank you for that. And then, secondly, just to follow up, can you talk about the results of the new system and how is it working on the allocation side as far as new products and categories, etc., from an ordering standpoint?

Yeah, the new system, the Island Pacific ERP system we installed, does have, as you point out, an allocation module in it. As we look into the module a little bit more closely, what we've discovered is there's a lot of complexity with executing this particular system. It actually has about every bell and whistle one could ever imagine when it comes to allocation. But unfortunately, what we need to do is to make it a little bit simpler and easier for our teams to execute and implement. So we are underway right now doing a couple things. One, we are trying to think about ways that we can fine-tune the use of the system. One of the things I've asked our teams to do is to reduce the number of overall store clusters that we are trying to allocate to. That will help them be a little bit more focused on dividing up the inventory appropriately between our low volume, mid volume, and high volume stores. That will help us in the interim to get better with allocation. And in the longer term, we do believe that there's a bolt-on opportunity and we're highly investigating a couple of AI solutions that we believe can help us with future forecasting. If I were to be critical of our current system, it's probably the one big deficit that we have, is it doesn't have a robust future forecasting module with it. And certainly an opportunity for us as we go forward to start to anticipate consumer needs. More importantly, as this business continues to grow, we need to be really crisp and clear about the trends going forward. I think the combination of some interim steps to make our current system better and the idea that we may need a bolt-on AI solution will make allocation one of our competitive strengths actually.

Great, thanks. Good luck.

Thank you, John.

Thank you. Our next questions come from the line of Jeremy Hamblin with Craig-Hallum. Please proceed with your questions.

Thanks for taking the question. So I wanted to come back to what you're seeing on the same-store sales trends. The first question would be in terms of the remainder of Q3 and Q4, can you help us to understand one, if the compares get easier from here or if they get a little bit tougher? And then secondly is just in terms of taking a high-level look, you note that you've got traffic growth, and that sounds like that's sustained here to start Q3. But your same-store sales down on top of a pretty easy compare from last year, when you have a lot of larger players in the extreme value apparel category that are reporting fairly strong same-store sales on top of strong same-store sales from last year. Given that you kind of juxtaposition with traffic, do you sense that the bigger problem here is the merchandise assortment itself or the price value equation that is kind of causing some customers maybe to not buy as much from you and potentially to go over to some competitors?

Yeah, Jeremy, thanks for the question. I'll kind of take the last part of your question first, and then I'll let Heather talk to you a little bit about the go-forward compares. I think, essentially what you said is really the problems that we've identified coming into the business. Ultimately, we believe the assortment itself, and I'm speaking in terms of Q2, had become a little bit stale and a little bit out of sync with our consumer demands. As I mentioned, we were missing some opening price point portions of the business, and then we actually didn't have enough brands in the mix that were appealing to our consumers. So part of the action that we took to take the markdowns was to clear out some of that product that we knew was not working. We're in the process of implementing the new things that I mentioned earlier. But most notably, I've been really pleased with the work our merchants have done so far in the near term to react. For example, if you look at what's happening right now in August, our Children's department is having a very robust period. Right in the middle of the peak, they've really done a nice job of growing the business. That's actually coming as a result of going into market and getting some additional branded product in place that the consumer is reacting to. Our uniform business has been excellent as well, and that's a recovery of the missed opportunity for the past year, as well as our home business has been strong. Those are our reversals of trends that we saw coming out of Q2. Now, home had been okay in Q2, but certainly it was accelerated. If I could step back and say that the challenges, the reason we're lagging in consumer sales, is our assortment plan has just not been dialed in correctly. Part of it is the price value equation, but more often it's the offering, which we're adjusting and certainly see some results with. I expect we'll get significantly better as we go forward. In terms of the compares, I'll let Heather talk a little bit about the road ahead on our compares.

Yeah. Hey, Jeremy, good to hear you. As I look at it, spring last year we had a negative 10% comp. In the spring and in the fall we delivered a negative 3.7% comp. So that tells me that the compares are actually getting a little bit harder in the fall, but we're not worried about the compare. We're worried about what are we doing to drive the top line, right? All the things that we've talked about this morning, inventory reset, a new focused approach on our customer, a new focused approach on our product, a better best assortment, opening price point, real strong value statement. I've got to tell you for me personally, the most exciting piece is the branded good approach that Ken is bringing to the table, right, that will bring the excitement back into our stores. It will cause our customers to pick up the phone and call their friends. That is the strongest marketing arm in the history of Citi Trends is when that word of mouth marketing kicks in. Because of that, I would say, I hear you on the compares. It actually gets a little harder in the fall if you just stare at the numbers, but we're not letting that slow us down. We're going after all the levers that we've described this morning to make sure that we are creating the excitement around the product that our customer expects from Citi Trends to drive foot traffic and drive comps.

Understood. That's helpful information. Regarding shrink, in Q2, the $4 million impact translates to over 50 basis points on an annualized basis and more than 230 basis points compared to the Q2 impact. Overall, it seems to be about double what was previously anticipated. I would like to know if you are identifying more issues with internal shrink or if this is mostly related to customer shrink issues.

Thanks, Jeremy. I appreciate that. I promise you that this is a very frustrating topic for a lot of us at Citi Trends. It gets a lot of focus. We are pulling a lot of levers. It always takes time and frankly I think we can't move fast enough or work hard enough on this shrink line because it feels like it's a left hook, right hook when we talk about shrink. Last quarter when we discussed it, we felt like we had our hands around it. We were pulling all the levers. We had not made an adjustment to the accrual because the data didn't support it. The counts we took up until that time supported the accrual that we had in place. Unfortunately, with Q2, we did another big chunk of stores. We count our stores every month. We counted over 200 stores in the second quarter. At that point, looking at the data, it did support an increase in the accrual. We're working hard at it. I will say though that, and I recently learned that this is consistent with the broader industry, Jeremy, that internal theft is our primary area of focus, right? That is our primary first place that we're looking to increase impressions of control. All the things that you've heard me talk about for two quarters now are absolutely happening, starting to turn the tide. The other piece that is in our control, I talked about the three buckets in my prepared remarks, the other piece that is in our control is the administrative recordation, right? Where, how is the flow of inventory-related data, how is that working throughout the supply chain or the data supply chain, if you will, and making sure that we don't have any leaks and that we are correctly reporting at the store level and at the DC level what on-hand inventory is. That's another place that we're attacking. External theft, always a concern. It's just a part of Citi Trends' history, part of Citi Trends' makeup. Probably more to come there. A lot of the things that we're doing on the internal theft side will also provide some help on the external theft. But this third-party consultant that we've talked about throughout the morning is really looking to help us accelerate across all three categories. So we're excited to continue to learn from them and see what we can do to move it forward.

Got it. Just really quick last one to sneak in here. In terms of the comment around the shifted 13-week to 13-week basis, just wanted to understand for, as it relates to Q2 and then into Q3 or Q4, was there a positive benefit in Q2 and then how does that relate to Q3?

Yeah. We talked about this a few quarters ago that from a calendarization perspective, lots of moving pieces, parts, but the bottom line is that in Q2, we moved an important back-to-school week into the second quarter. So it had a little bit of a positive impact. Q3 is minimal. That week moves out, but then a pay week moves in. So kind of neutral in Q3.

Got it. Helpful color. Thanks and good luck the rest of the year.

Thanks, Jeremy.

Thank you. We have reached the end of our question-and-answer session. I would now like to turn the floor back over to Ken Seipel for any closing remarks.

All right. Thank you, Darryl. Well, again, thank you, everybody, for joining us today. We really look forward to updating you on some exciting results as we continue to go through and execute our strategies. Thank you.

Thank you. This does conclude today's teleconference. We appreciate your participation. You may disconnect your lines at this time. Enjoy the rest of your day.