Citi Trends, Inc. (NASDAQ: CTRN), the leading value retailer of apparel, accessories and home trends for way less spend primarily for African American families in the United States, today reported results for the third quarter ended October 31, 2020.

Financial Highlights – 13-week third quarter ended October 31, 2020

• Total sales increased 8.8% to $199.1 million compared to $183.1 million in the third quarter of 2019

• Comparable store sales increased 6.3%; the fifth consecutive quarter of positive open-only comparable store sales

• Gross margin increased 440 bps to 41.8% compared to 37.4% in the third quarter of 2019, reflecting strong full-price selling and fewer markdowns, continuing on the momentum from the second quarter expansion of 390 bps

• Selling, general and administrative expenses increased 5.6% year-over-year due to higher bonus and equity compensation accruals; as a percent of sales, SG&A decreased 100 bps to 34.8% as compared to last year

• Operating income was $9.3 million compared to operating loss of $1.6 million in the third quarter of 2019, for an operating margin of 4.7% compared to (0.9%)

• Net income was $7.0 million compared to ($1.1) million in the third quarter of 2019

• Earnings per share was $0.67 compared to ($0.09) in the third quarter of 2019

• Cash of $96.8 million and no borrowings on the Company’s line of credit at the end of the third quarter, compared to cash and investments of $72.3 million at the end of the third quarter last year

• Quarter-end inventory decreased 15.5% compared to the end of the third quarter of 2019

• Successfully opened eight new Citi Trends stores and closed two stores, bringing the current fleet total to 585

• Repurchased 375,803 shares of common stock at an aggregate cost of $9.9 million during the quarter with an additional $5.1 million repurchased through November 20^th; the repurchase of the shares was funded from cash on hand

Chief Executive Officer Comments

David Makuen, Chief Executive Officer, said, “I could not be more pleased with our third quarter performance as we exceeded our expectations by delivering total company sales growth of nearly 9% and a comparable store sales increase of 6.3%, which we achieved despite reduced operating hours and a challenging operating environment. We achieved this robust growth on 33% less inventory in our comparable stores, validating that we are successfully transforming and adapting our operating model. In fact, our third quarter in-store inventory turned 55% faster than the prior year, driven by meaningfully higher full price selling and resulting in gross margin expansion of more than 440 basis points building on the second quarter gross margin expansion of 390 basis points. These strong results once again demonstrate the strength of our brand, our on-trend assortment and our loyal and expanding customer base.”

Makuen continued, “Our associates in our stores and distribution centers, as well as our home office teams, continue to do an incredible job to safely serve our customers and provide fresh and relevant trends at amazing values. I would like to thank them for their commitment and hard work. Central to our success has been our data-driven approach to effectively respond to today’s largely at-home lifestyle. We entered the holiday selling season well positioned to fill our stores with ‘Fab Festive Finds’ anchored in a broad range of giftable apparel, toys, tech, beauty, jewelry and more. Our 4,500 store team members cannot wait to create a happy holiday across our entire fleet.”

Guidance

The Company continues to plan the remainder of the year conservatively given marketplace conditions as a result of the pandemic. As such, the Company is estimating its fiscal 2020 fourth quarter comparable store sales to be approximately flat, which is consistent with November’s trend. This estimate is subject to potential consumer and marketplace volatility due to the COVID-19 pandemic and changes to the consumer landscape and therefore may change as the quarter progresses.

Due to the uncertainty surrounding the impact of the COVID-19 pandemic on the business environment, consumer behavior and the Company’s business operations, the Company is not providing any further guidance at this time.

CitiCARES^SM Council Update

The Company formed the CitiCARES Council with the mission to find ways to directly support the communities the Company’s stores call home. The Company is determined to be present, involved, and engaged in issues where it can make a difference. The Company announced today that the CitiCARES Council will be conducting its first fundraising event to benefit the Boys and Girls Clubs in select communities. From November 20 thru December 20, select stores will accept donations that will directly benefit the clubs in those communities. Mr. Makuen noted, “the CitiCARES Council worked directly with the staff at these clubs to discuss their needs, programs and the shortfalls created as a result of the current pandemic. The Company and the CitiCARES Council are proud to partner with the Boys and Girls Club of America organization.”

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 (303) 223-4361. A replay of the conference call will be available until December 8, 2020, by dialing (402) 977-9140 and entering the passcode, 21971725.

The live broadcast of Citi Trends' conference call will be available online at the Company's website, www.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 conference call, may contain or constitute information that has not been disclosed previously.