8-K
Citi Trends Inc (CTRN)
UNITED STATES
SECURITIES ANDEXCHANGE COMMISSION
Washington, D.C.20549
FORM 8-K
CURRENT REPORT
Pursuant to Section13 or 15(d) of The Securities Exchange Act of 1934
Date of Report (Dateof earliest event reported): May 23,2023
Citi Trends, Inc.
(Exact name ofregistrant as specified in its charter)
| Delaware | 000-51315 | 52-2150697 |
|---|---|---|
| (State or other jurisdiction of incorporation) | (Commission File Number) | (IRS Employer Identification No.) |
| 104 Coleman Boulevard, Savannah, Georgia | 31408 | |
| --- | --- | |
| (Address of principal executive offices) | (Zip Code) |
Registrant’s
telephone number, including area code: (912) 236-1561
Former
name or former address, if changed since last report: Not applicable
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (See General Instruction A.2 below):
| ¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
|---|---|
| ¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ¨ | Pre- commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
|---|---|---|
| Common stock, $0.01 par value | CTRN | Nasdaq Stock Market |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ¨
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
| Item 2.02. | Results of Operations and Financial Condition. |
|---|
On May 23, 2023, the Company issued a press release reporting its financial results for the first quarter ended April 29, 2023 (the “Press Release”). A copy of the Press Release is attached to this Current Report on Form 8-K (the “Current Report”) as Exhibit 99.1, the contents of which are incorporated herein solely for purposes of this Item 2.02 disclosure by this reference.
The information contained in this Item 2.02, including the Press Release attached to this Current Report, is being furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of such section. The information in this Item 2.02, including the Press Release, shall not be incorporated by reference into any filings under the Securities Act of 1933, as amended (the “Securities Act”), or the Exchange Act, except as shall be expressly set forth by specific reference in any such filing.
| Item 9.01. | Financial Statements and Exhibits. |
|---|
(d) Exhibits.
| Exhibit No. | Description |
|---|---|
| 99.1 | Press Release dated May 23, 2023. |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document). |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| CITI TRENDS, INC. | ||
|---|---|---|
| Date: May 23, 2023 | By: | /s/ Heather Plutino |
| Name: | Heather Plutino | |
| Title: | Chief Financial Officer |
Exhibit 99.1
CITI TRENDS ANNOUNCES FIRST QUARTER 2023 RESULTS
Total sales of $179.7 million, in line withpreviously stated guidance
Strong financial position with liquidityof approximately $164 million and no debt
Company updates fiscal year 2023 guidance
SAVANNAH, GA (May 23, 2023) — Citi Trends, Inc. (NASDAQ: CTRN), a leading specialty value retailer of apparel, accessories and home trends for way less spend primarily for African American and multicultural families in the United States, today reported results for the first quarter ended April 29, 2023.
Financial Highlights – First Quarter 2023
| · | Total sales decreased 13.7% vs. Q1 2022 in line with guidance; Comparable<br>store sales decreased 14.1% compared to Q1 2022 |
|---|---|
| · | Gross margin of 36.7%, or 37.0% as adjusted* vs. 39.0% in Q1 2022 |
| --- | --- |
| · | Operating loss was $9.5 million, or a loss of $7.9 million as adjusted*,<br>compared to operating income of $39.7 million, or $4.7 million as adjusted* in Q1 2022 |
| --- | --- |
| · | Net loss per share was ($0.81), or adjusted net loss per share* of ($0.66),<br>vs. diluted earnings per share of $3.59, or adjusted diluted earnings per share* of $0.42 in Q1 2022 |
| --- | --- |
| · | Quarter-end total dollar inventory decreased 11.9% compared to Q1 2022; average<br>in-store inventory increased 8.1% compared to Q1 2022 reflecting work to rebuild inventory levels in targeted departments |
| --- | --- |
| · | Total liquidity of approximately $164 million at the end of the quarter,<br>made up of $88.7 million of cash, no borrowings under a $75 million credit facility, and no debt |
| --- | --- |
Chief Executive Officer Comments
David Makuen, Chief Executive Officer, commented, “Against what remained a challenging macro backdrop for the low-income families that we serve, our first quarter results were in line with our previously stated guidance. During the quarter, we made progress rebuilding inventory in key areas of the business, which we believe will position us to recoup market share. Although we are seeing good response to our spring and early summer merchandise, our customers are being selective about what they put in their basket. That said, we continue to see strong shopper conversion, a clear signal that our assortments are resonating and the Citi Trends brand position remains healthy.”
Mr. Makuen continued, “With a macro environment that remains uncertain, we are prudently adjusting our outlook for the fiscal year, incorporating the impact of continued headwinds on our customers’ spending through the first half with modest improvement in the second half. Importantly, we remain laser focused on controlling what we can control, including tight expense and capital management. Looking forward, we’ll leverage our strong financial position to procure a fresh assortment of exciting products at amazing values that will set us up for successful back-to-school and holiday selling seasons.”
Capital Return Program Update
In the first quarter of 2023, the Company did not repurchase any shares of its common stock. At the end of the first quarter of 2023, $50.0 million remained available under the Company’s share repurchase program.
Guidance
Given the uncertain macro-economic environment, the Company is updating its outlook for fiscal 2023 as follows:
| · | Full year total sales are expected to be in the range of negative mid single-digits<br>to negative low single-digits as compared to fiscal 2022, assuming a challenging first half with modest improvement in the second half<br>of the year |
|---|---|
| · | Full year EBITDA now expected to be in the range of $5 million to $20 million |
| --- | --- |
| · | The Company now plans to open 5 new stores and remodel 10 to 20 stores in<br>the year |
| --- | --- |
| · | Full year capital expenditures are now expected to be in the range of $15<br>million to $20 million |
| --- | --- |
| · | Year end cash balance is expected to be in the range of $85 million to $105<br>million |
| --- | --- |
| · | The remaining aspects of the prior guidance are unchanged with full year<br>gross margin expected to be in the high thirties and the closure of 10 to 15 underperforming stores |
| --- | --- |
Investor Conference Call and Webcast
Citi Trends will host a conference call today at 9:00 a.m. ET. The number to call for the live interactive teleconference is (415) 226-5357. A replay of the conference call will be available until May 30, 2023, by dialing (800) 633-8284 and entering the passcode, 22026757.
The live broadcast of Citi Trends' conference call will be available online at the Company's website, cititrends.com, under the Investor Relations section, beginning today at 9:00 a.m. ET. The online replay will follow shortly after the call and will be available for replay for one year.
During the conference call, the Company may discuss and answer questions concerning business and financial developments and trends that have occurred after quarter-end. The Company’s responses to questions, as well as other matters discussed during the call, may contain or constitute information that has not been disclosed previously.
About Citi Trends
Citi Trends, Inc. is a leading specialty value retailer of apparel, accessories and home trends for way less spend primarily for African American and multicultural families in the United States. The Company operates 608 stores located in 33 states. For more information, visit cititrends.com or your local store.
*Non-GAAP Financial Measures
The historical non-GAAP financial measures discussed herein are reconciled to their corresponding GAAP measures at the end of this press release.
Forward-Looking Statements
All statements other than historicalfacts contained in this news release, including statements regarding the Company’s future financial results and position, businesspolicy and plans, objectives and expectations of management for future operations and capital allocation expectations, are forward-lookingstatements that are subject to material risks and uncertainties. The words "believe," "may," "could," "plans," "estimate," “expects,” "continue," "anticipate," "intend," "expect," “upcoming,” “trend” and similar expressions, as they relate to the Company, are intended to identify forward-looking statements, althoughnot all forward-looking statements contain such language. Statements with respect to earnings, sales or new store guidance are forward-lookingstatements. Investors are cautioned that any such forward-looking statements are subject to the finalization of the Company’s quarter-endfinancial and accounting procedures, are not guarantees of future performance or results, and are inherently subject to risks and uncertainties,some of which cannot be predicted or quantified. Actual results or developments may differ materially from those included in the forward-lookingstatements as a result of various factors which are discussed in our Annual Reports and Quarterly Reports on Forms 10-K and 10-Q, respectively,and any amendments thereto, filed with the Securities and Exchange Commission. These risks and uncertainties include, but are not limitedto, uncertainties relating to general economic conditions, including inflation, energy and fuel costs, unemployment levels, and any deteriorationwhether caused by acts of war, terrorism, political or social unrest (including any resulting store closures, damage or loss of inventory)or other factors; changes in market interest rates and market levels of wages; natural disasters such as hurricanes; uncertainty and economicimpact of pandemics, epidemics or other public health emergencies such as the ongoing COVID-19 pandemic; transportation and distributiondelays or interruptions; changes in freight rates; the Company’s ability to attract and retain workers; the Company’s abilityto negotiate effectively the cost and purchase of merchandise inventory risks due to shifts in market demand; the Company’s abilityto gauge fashion trends and changing consumer preferences; consumer confidence and changes in consumer spending patterns; competitionwithin the industry; competition in our markets; the duration and extent of any economic stimulus programs; changes in product mix; interruptionsin suppliers’ businesses; the ongoing assessment and impact of the cyber disruption we identified on January 14, 2023, includinglegal, reputational, financial and contractual risks resulting from the disruption, and other risks related to cybersecurity, data privacyand intellectual property; temporary changes in demand due to weather patterns; seasonality of the Company’s business; the resultsof pending or threatened litigation; delays associated with building, remodeling, opening and operating new stores; anddelays associated with building and opening or expanding new or existing distribution centers. Any forward-looking statements by the Company,with respect to guidance, the repurchase of shares pursuant to a share repurchase program, or otherwise, are intended to speak only asof the date such statements are made. Except as required by applicable law, including the securities laws of the United States andthe rules and regulations of the Securities and Exchange Commission, the Company does not undertake to publicly update any forward-lookingstatements in this news release or with respect to matters described herein, whether as a result of any new information, future eventsor otherwise.
Contact:
Tom Filandro/Rachel Schacter
ICR, Inc.
CitiTrendsIR@icrinc.com
CITI TRENDS, INC.
CONDENSED CONSOLIDATED STATEMENTSOF OPERATIONS (unaudited)
(in thousands, except per share data)
| First Quarter | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| 2023 | 2022 | 2021 | |||||||
| Net sales | $ | 179,688 | $ | 208,215 | $ | 285,381 | |||
| Cost of sales (exclusive of depreciation shown separately below) | (113,659 | ) | (127,011 | ) | (163,791 | ) | |||
| Selling, general and administrative expenses | (70,807 | ) | (71,026 | ) | (77,892 | ) | |||
| Depreciation | (4,681 | ) | (5,445 | ) | (4,697 | ) | |||
| Gain on sale-leaseback | — | 34,920 | — | ||||||
| (Loss) income from operations | (9,459 | ) | 39,653 | 39,001 | |||||
| Interest income | 1,023 | — | 4 | ||||||
| Interest expense | (75 | ) | (76 | ) | (47 | ) | |||
| (Loss) income before income taxes | (8,511 | ) | 39,577 | 38,958 | |||||
| Income tax expense | 1,876 | (9,374 | ) | (8,061 | ) | ||||
| Net (loss) income | $ | (6,635 | ) | $ | 30,203 | $ | 30,897 | ||
| Basic net (loss) income per common share | $ | (0.81 | ) | $ | 3.59 | $ | 3.27 | ||
| Diluted net (loss) income per common share | $ | (0.81 | ) | $ | 3.59 | $ | 3.23 | ||
| Weighted average number of shares outstanding | |||||||||
| Basic | 8,182 | 8,407 | 9,450 | ||||||
| Diluted | 8,182 | 8,407 | 9,571 |
CITI TRENDS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS(unaudited)
(in thousands)
| April 29, 2023 | April 30, 2022 | |||
|---|---|---|---|---|
| Assets: | ||||
| Cash and cash equivalents | $ | 88,707 | $ | 61,657 |
| Inventory | 114,322 | 129,715 | ||
| Prepaid and other current assets | 16,054 | 16,354 | ||
| Property and equipment, net | 57,383 | 68,213 | ||
| Operating lease right of use assets | 252,435 | 241,686 | ||
| Other noncurrent assets | 5,529 | 5,603 | ||
| Total assets | $ | 534,430 | $ | 523,228 |
| Liabilities and Stockholders' Equity: | ||||
| Accounts payable | $ | 90,029 | $ | 87,857 |
| Accrued liabilities | 23,473 | 33,614 | ||
| Current operating lease liabilities | 47,780 | 46,910 | ||
| Other current liabilities | 912 | 7,657 | ||
| Noncurrent operating lease liabilities | 209,594 | 203,856 | ||
| Other noncurrent liabilities | 2,680 | 2,155 | ||
| Total liabilities | 374,468 | 382,049 | ||
| Total stockholders' equity | 159,962 | 141,179 | ||
| Total liabilities and stockholders' equity | $ | 534,430 | $ | 523,228 |
RECONCILIATION OF NON-GAAP FINANCIALMEASURES (unaudited)
(in thousands, except per share data)
The Company makes reference in this release to adjusted gross margin, adjusted operating income and adjusted earnings per diluted share. The Company believes these supplemental measures reflect operating results that are more indicative of the Company's ongoing operating performance while improving comparability to prior and future periods, and as such, may provide investors with an enhanced understanding of the Company's past financial performance and prospects for the future. This information is not intended to be considered in isolation or as a substitute for net income or earnings per diluted share prepared in accordance with generally accepted accounting principles (GAAP).
| First Quarter | ||||||
|---|---|---|---|---|---|---|
| 2023 | ||||||
| Reconciliation of Adjusted Gross Margin | ||||||
| Net sales | $ | 179,688 | ||||
| Cost of sales | (113,659 | ) | ||||
| Gross profit | $ | 66,029 | ||||
| Gross margin | 36.7 | % | ||||
| Cyber incident expenses | $ | 513 | ||||
| Adjusted gross profit | $ | 66,542 | ||||
| Adjusted gross margin | 37.0 | % | ||||
| First Quarter | ||||||
| 2023 | 2022 | |||||
| Reconciliation of Adjusted Operating Income | ||||||
| Operating (loss) income | $ | (9,459 | ) | $ | 39,653 | |
| Cyber incident expenses | 1,560 | — | ||||
| Gain on sale-leasebacks | — | (34,920 | ) | |||
| Adjusted operating (loss) income | $ | (7,899 | ) | $ | 4,733 | |
| First Quarter | ||||||
| 2023 | 2022 | |||||
| Reconciliation of Adjusted Diluted EPS | ||||||
| Diluted (loss) earnings per share | $ | (0.81 | ) | $ | 3.59 | |
| Cyber incident expenses | 0.19 | — | ||||
| Gain on sale-leasebacks | — | (4.15 | ) | |||
| Tax effect | (0.04 | ) | 0.98 | |||
| Adjusted diluted (loss) earnings per share | $ | (0.66 | ) | $ | 0.42 |