Citi Trends, Inc. reported results for the second quarter of fiscal 2018.

Financial Highlights – Second quarter ended August 4, 2018

Total sales in the second quarter ended August 4, 2018 increased 9.5% to $182.0 million, compared with $166.2 million in the second quarter ended July 29, 2017. The year-over-year comparison of total quarterly sales included a benefit of approximately $6.7 million due to a shift in the weeks that were included in the second fiscal quarter this year in relation to last year. With a 53-week fiscal year in 2017, each quarter of fiscal 2018 starts one week later than in the prior year, resulting in the second quarter of fiscal 2018 adding a strong back-to-school week at the beginning of August and losing a smaller sales week at the beginning of the quarter. Comparable store sales increased 3.3%, comparing the 13 weeks ended August 4, 2018 with the 13 weeks ended August 5, 2017.

The Company had net income of $3.2 million in the second quarter of 2018, compared with a net loss in last year’s second quarter of ($0.2) million on a GAAP basis, or net income of $0.4 million when adjusted for proxy contest-related expenses* incurred in the second quarter of 2017. Earnings per diluted share in this year’s second quarter were $0.24, compared with a loss per diluted share in the second quarter of 2017 of $(0.01) on a GAAP basis, or earnings per diluted share of $0.03 when adjusted for proxy contest-related expenses*.

During the second quarter, the Company opened three new stores, relocated or expanded four stores and closed two stores.

Financial Highlights – First half ended August 4, 2018

Total sales in the first half of fiscal 2018 increased 7.3% to $393.0 million, compared with $366.2 million in the first half of fiscal 2017. Comparable store sales increased 2.7% in the first half of this year, comparing the 26 weeks ended August 4, 2018 with the 26 weeks ended August 5, 2017.

Net income was $14.5 million in the first half of 2018, compared with net income in last year’s first half of $8.7 million on a GAAP basis, or $10.4 million when adjusted for proxy contest-related expenses*. Earnings per diluted share in the first half of 2018 were $1.08, compared with earnings per diluted share in the first half of 2017 of $0.59 on a GAAP basis, or $0.71 when adjusted for proxy contest-related expenses*.

Bruce Smith, President and Chief Executive Officer, commented, “Our second quarter reflected a significant improvement in earnings, highlighted by a 3.3% increase in comparable store sales and a benefit to total sales from a shift in the fiscal calendar in relation to 2017, together with healthy gross margin expansion and expense leverage.”

Smith further noted, “Importantly, the comparable store sales increase included positive contributions from all five of our major merchandise categories, as well as higher transaction counts and increases in the average unit sale and units per transaction. In addition, the earnings improvement reflected a much lower income tax rate due to the enactment of the Tax Cuts and Jobs Act. The second quarter results, combined with a similarly strong first quarter, led to an 83% increase in earnings per diluted share, or a 52% increase in earnings per diluted share on an adjusted basis*, during the first half of 2018.”

Guidance

The Company provided the following guidance for the remainder of fiscal 2018:

• The Company is raising its full year fiscal 2018 earnings per diluted share expectations to a range of $1.65 to $1.75, up from previous guidance of $1.55 to $1.70.

• Comparable store sales are expected to increase in a range of 2% to 3% in both the third and fourth quarters. Thus far, in the fiscal month of August, comparable store sales have increased 9%; however, the Company believes a range of 2% to 3% is an appropriate expectation for the second half of the year, similar to the actual results in the first half of the year.

• Total sales are expected to increase in a range of 2% to 3% in the third quarter. While the second quarter included a benefit to total sales from the shift in the fiscal calendar, the third quarter year-over-year comparison of total sales is expected to be adversely impacted by approximately $5 million, due to a strong back-to-school week at the beginning of August shifting from the third quarter last year to the second quarter this year. The week at the beginning of November that will shift into the third quarter this year is typically a lower sales week than the week at the beginning of August.

• Total sales are expected to decrease in a range of 2% to 3% in the fourth quarter due to having one fewer week this year than in last year’s 14-week fourth quarter of a 53-week year.

• Earnings (loss) per diluted share are expected to be in a range of ($0.03) to $0.02 in the third quarter, compared to $0.05 in last year’s third quarter, and a range of $0.60 to $0.65 in the fourth quarter, compared to $0.38 in the fourth quarter of 2017.

Capital Return Program

The Company announced that its Board of Directors has declared a quarterly cash dividend of $0.08 per common share, payable on September 18, 2018, to shareholders of record as of the close of business on September 4, 2018.

During the first half of 2018, the Company repurchased 731,000 shares of its common stock at an aggregate cost of $21.0 million. On August 4, 2018, $4.0 million remained available under the existing stock repurchase authorization.