Citi Trends, Inc. issued an open letter to its shareholders regarding Macellum SPV III, LP’s (“Macellum”) notice of its nomination of four individuals to stand for election to the Citi Trends Board of Directors at the Company’s 2019 Annual Meeting of Shareholders (“2019 Annual Meeting”).

The Board's recommendation regarding director nominees will be made in the Company's definitive proxy materials, which will be filed with the Securities and Exchange Commission and mailed to all shareholders eligible to vote at the 2019 Annual Meeting. The date of the Company’s 2019 Annual Meeting has not yet been announced. Shareholders are not required to take any action at this time.

Dear Shareholders:

Following Macellum’s recent nomination of Board candidates, we are taking this opportunity to present the facts regarding Citi Trends’ plan to drive value, describe the Board’s attempts to reach a constructive resolution and avoid a prolonged proxy contest with Macellum, and correct the misinformation Macellum has put into the market.

CITI TRENDS IS MAKING PROGRESS ON ITS STRATEGIC PLAN, AND WE ARE DELIVERING RESULTS

Citi Trends is executing on a strategic plan focused on growing our business by being the leader in providing value-priced urban fashions to our customers.

During fiscal 2018, we made significant progress on a number of strategic initiatives, including completing the roll-out of our store-level merchandise planning system, successfully opening 19 new stores, relocating or expanding eight stores and closing six stores. Over the last 10 years, we have completed 100 opportunistic store relocations and expansions, and we will continue to evaluate and optimize our store footprint.

We have many other exciting projects and initiatives underway that are expected to unlock value in 2019 and beyond. This includes our efforts to better allocate merchandise on a store-by-store basis, our initiatives to reduce freight costs and other expenses, our enhanced warehouse packing system that will drive efficiencies, and the implementation of a markdown optimization system.

Importantly, we are delivering results. In 2018, the Company reported comparable store sales increases in every quarter and delivered a full year comparable store sales increase of 1.6%. This increase was on top of a 4.5% increase the previous year. Additionally, the Company tightly managed its expenses, leading to an increase in adjusted earnings per diluted share of 59% in 2018 following a 13.2% increase in 2017.

We also continued to execute our capital return program in 2018 by returning $45 million to our shareholders in the form of share repurchases and dividends. Since the initiation of the program in 2015, we have returned $94 million to our shareholders.

We remain focused on achieving our goal of reaching $4.00 of earnings per share within the next five years through a combination of merchandising, planning and allocation enhancements, cost-reduction initiatives and the return of excess capital to our shareholders.

WE ARE EXECUTING ON OUR MISSION

At Citi Trends, we are focused on our mission of delivering value-priced urban fashion apparel and accessories for the entire family. We provide our customers with a specialty store feel, while maintaining merchandise offerings that appeal to the fashion preferences of value-conscious consumers at prices that are 20% to 70% below regular retail prices available in department stores and specialty stores.

Our stores are typically located in neighborhood shopping centers that are convenient to low and moderate income customers. As of March 15, 2019, we operated 562 stores in both urban and rural markets in 32 states.

We are also proud of the jobs we provide to our diverse group of valued associates who are often from the same communities we serve. We are committed to treating all of our associates with dignity and respect, providing them with valuable training and promoting from within the Company so they have opportunities to develop their careers.

MACELLUM HAS A RELATIVELY SMALL OWNERSHIP STAKE, IS NOT ALIGNED WITH OTHER SHAREHOLDERS AND IS ATTEMPTING TO GAIN BOARD CONTROL WITHOUT PAYING A PREMIUM

Despite the Company’s positive momentum, Macellum has provided its notice of intent to nominate at least three individuals to stand for election at the Company’s 2019 Annual Meeting. This effort is being led by Macellum’s founder, Jonathan Duskin, who ran a proxy fight two years ago leading to him joining the Company’s Board.

We believe Macellum’s actions are a clear attempt to take control of Citi Trends’ Board, despite only holding approximately 3.8% of the outstanding shares of the Company. Consistent with his tactics in his previous proxy fight against Citi Trends in 2017, Mr. Duskin has nominated more individuals than are currently up for election. We believe he has taken this path in an attempt to ensure he has maximum potential to gain control of the Board.

It is worth noting that Macellum has sold approximately 38,000 shares since May 2018, while no other Citi Trends director has sold any shares during that same period. We believe Macellum selling your Company’s shares underscores the fact that Mr. Duskin’s interests are not aligned with those of other shareholders and our efforts to drive long-term sustainable growth at Citi Trends.

MACELLUM HAS REJECTED EVERY OVERTURE FOR A CONSTRUCTIVE OUTCOME

In order to preclude Mr. Duskin from waging yet another costly and distracting proxy contest, the Citi Trends Board has held numerous discussions over the last few weeks with Mr. Duskin regarding board composition and the Board’s commitment to regular refreshment.

The Board has attempted to reach a resolution that benefits all shareholders, but Mr. Duskin has refused our offers. In fact, the Board had agreed to consider nominating one of Macellum’s nominees, Peter R. Sachse, who most recently served as Chief Growth Officer of Macy’s, Inc., to the Board. However, Macellum declined our offer. A key negotiating point of Mr. Duskin has been to be compensated for the fees his firm incurred as a result of his proxy contest of two years ago. Additionally, he has insisted that two current Citi Trends directors resign in time periods of his choosing as part of any resolution, instead of a smooth and thoughtful transition process. Again, we believe this demonstrates that he is focused on gaining control of the Board in the near-term and prioritizing Macellum’s financial interests over generating value for Citi Trends shareholders.

As part of the Board’s annual review process, Mr. Duskin indicated that he believes the Board is meeting or exceeding expectations. It makes it difficult to trust Mr. Duskin when he says one thing but does another. We believe his nomination of his own candidates illustrates that his goal is to gain control of the Board, rather than enhance the quality of the Citi Trends Board to benefit all shareholders.

MR. DUSKIN DOES NOT BRING ANY RETAIL OPERATING EXPERIENCE TO CITI TRENDS AND HAS VOTED FOR ALL INITIATIVES BROUGHT BEFORE THE BOARD

Macellum claims that it is “deeply concerned by the Board's lack of urgency in addressing many of the issues facing the Company … notwithstanding Mr. Duskin's considerable efforts to drive change for the past two years.”²In reality, Mr. Duskin does not bring any retail operating experience to Citi Trends. Instead, Mr. Duskin has been focused on financial tactics to drive value for his firm, such as simply spending more money on share buybacks without regard to the Company’s capital allocation priorities.

Further, since joining the Citi Trends Board, Mr. Duskin has also voted for every initiative brought before the Board. Mr. Duskin has served as a member of every standing committee of the Board, and currently serves as a member of the Audit Committee and Compensation Committee, which has provided him the opportunity to participate in all board decisions.

During his tenure, the Board has found Mr. Duskin’s short-term focus to have inhibited and slowed the Board’s ability to have productive discussions regarding initiatives to drive long-term value for the Company and our shareholders.

MR. DUSKIN’S TRACK RECORD CONTRADICTS HIS CLAIM THAT HE CAN DRIVE MEANINGFUL, POSITIVE CHANGE

Mr. Duskin has a track record of being involved in companies that have declared bankruptcy, liquidated or experienced significant declines in share price.

Mr. Duskin’s board experience includes serving on the boards of Wet Seal, Inc., Whitehall Jewelers, Inc., Furniture.com Inc. and Plvtz (the holding company of Levitz Furniture). Both Wet Seal and Whitehall filed for bankruptcy, and KB Toys and Plvtz were liquidated while Mr. Duskin's fund was an owner and while he served as a director. Mr. Duskin was ousted as a board member by shareholders at Wet Seal in 2012 with 63% of the outstanding shares voting against him.

Mr. Duskin’s poor track record is also evident at Christopher & Banks Corporation, where he was elected as a Board member in 2016 following a proxy contest. The Company continues to report disappointing results, including reporting decreasing comparable sales and declining earnings in each of the two full fiscal years since his appointment to the Board³. Further, Christopher & Banks’ stock price has declined drastically by 83% and more than $50 million in market cap has been eroded since Mr. Duskin joined the Board⁴. In addition, Christopher & Banks stock has been trading below $1.00 since August 6, 2018.

CITI TRENDS HAS A BOARD WITH OPERATIONAL AND STRATEGIC EXPERTISE THAT IS DRIVING VALUE FOR SHAREHOLDERS; WE BELIEVE GIVING CONTROL OF OUR BOARD TO MACELLUM WILL HINDER OUR MOMENTUM

The Citi Trends Board, excluding Mr. Duskin, comprises six highly qualified directors, five of whom are independent, and all of whom are actively engaged in the execution of the Company’s plan. Four new directors, two of whom are women, were added to the Board in the past four years and the Board has reduced the average tenure of its independent board members to approximately six and a half years. These directors, other than Mr. Duskin, have a wide range of relevant and critical experiences, including in the areas of finance, merchandising, retail operations, distribution, marketing and advertising.

The Board and management team are executing our value-creation plan and making necessary adjustments to our merchandise and operations to deliver stronger results and enhanced value for our shareholders in the short- and long-term. The Citi Trends Board believes letting a 3.8% shareholder, who we believe solely has short-term interests, control 57% of the Board would be destructive to the Company’s future.

We appreciate the interest and support of all Citi Trends shareholders. We remain open to constructive suggestions and look forward to continuing to engage with shareholders as we work to drive sustainable, long-term value.

Sincerely,

The Citi Trends Board of Directors