Citi Trends, Inc. reported unaudited results for the third quarter of fiscal 2019.

Financial Highlights – Third quarter ended November 2, 2019

Total sales in the third quarter ended November 2, 2019 increased 4.4% to $183.1 million, compared with $175.4 million in the third quarter ended November 3, 2018. Comparable store sales increased 2.6% in the quarter.

The Company had a net loss of $(1.1) million, or $(0.09) per diluted share, in the third quarter of 2019, compared with a net loss of $(0.5) million, or $(0.04) per diluted share, in last year’s third quarter. Selling, general and administrative expenses in this year’s third quarter included approximately $0.7 million of costs associated with the planned CEO transition and Board changes that were reported previously. Such expenses had an adverse impact on loss per diluted share of $0.05 during the quarter.

During the third quarter, the Company opened six new stores, relocated or expanded two stores and closed two stores, ending the period with 566 stores in operation.

Financial Highlights – First three quarters ended November 2, 2019

Total sales in the first three quarters of fiscal 2019 increased 0.4% to $570.9 million, compared with $568.4 million in the first three quarters of fiscal 2018. Comparable store sales decreased 1.2% in the first three quarters of this year.

In the first three quarters of 2019, the Company had net income of $7.1 million on a GAAP basis, or $8.0 million when adjusted for proxy contest-related expenses*, compared with net income in last year’s first three quarters of $14.0 million. Earnings per diluted share in the first three quarters of 2019 were $0.60 on a GAAP basis, or $0.67 when adjusted for proxy contest-related expenses*, compared with earnings per diluted share of $1.06 in the first three quarters of 2018.

Strategic Initiatives Update

Bruce Smith, President and Chief Executive Officer, commented, “In the third quarter, we continued to make meaningful progress with our strategic initiatives. Our ongoing efforts to shift the merchandise mix more towards the growing accessory and home categories contributed to our best comparable store sales result since last year’s second quarter. In addition to the strength in non-apparel sales in the third quarter, we were also encouraged to see positive comparable store sales in our Ladies’ and Men’s apparel categories with a significantly leaner inventory investment.”

Smith further noted, “Comparable store sales increased 2.6% in the quarter, with October registering the largest increase, benefiting from an accelerated shift towards our non-apparel merchandise. Importantly, the sales gains were achieved on inventories in comparable stores that were 7% lower than at the end of last year’s third quarter. Given the high quality of our inventory, coupled with the recent sales momentum, including solid trends thus far in the fourth quarter, we are optimistic about the upcoming holiday season.”

Smith continued, “Lisa Powell, our new Chief Merchandising Officer, has now been with the Company for almost two months and is keenly focused on continuing our positive momentum in the areas of merchandising, planning and allocation, while Peter Sachse, Special Advisor to the CEO, has continued to work with management on the strategic initiatives that were outlined last quarter.

In connection with that work, we have prepared a roadmap to implement these strategies, which includes a plan for the organizational structure, resources and systems needed to achieve our goals related to the profitable growth of comparable store sales and new stores.

A critical portion of this roadmap involves the accelerated shift in our merchandise mix towards non-apparel, which includes moving aggressively to more gift-giving merchandise during the holiday season and expanded home assortments throughout the year. Fixtures have been added to our stores to accommodate this shift, and we are encouraged by the early results.

In addition, the roadmap contemplates the optimization of our real estate opportunities over the next three years, as we aim to open 25 to 30 new stores annually and complete major remodels in 50 existing stores each year. We have already approved 14 new store locations to be opened in 2020 and expect to perform major remodels in 20 stores in January 2020, followed closely by 30 more stores in the second quarter of 2020.”

Guidance

The Company is increasing the lower end of its full year fiscal 2019 earnings per diluted share guidance, resulting in a range of $1.40 to $1.50 when adjusted for proxy-contest related expenses*, which includes an assumption that comparable store sales will increase in a range of 2% to 4% in the fourth quarter of 2019.

Leadership Transition

The Board of Directors today announced that Peter Sachse, a member of the Company’s Board of Directors and the current Special Advisor to the CEO, has been appointed as the Interim Chief Executive Officer of the Company effective as of December 9, 2019. The Board is continuing its search for a permanent CEO. Mr. Smith intends to remain with the Company as its President until February 1, 2020 and will assist Mr. Sachse in all matters that relate to the implementation of the Company’s strategic plan.

“We are pleased that Peter has accepted the role of Interim CEO to continue the momentum that he and Bruce have helped create since Peter stepped into the role of Special Advisor to the CEO in June of this year,” said Citi Trends’ Board Chairman, Brian Carney. “It allows us to continue to execute on the strategic initiatives within our three-year roadmap while being very thoughtful about finding the right permanent CEO for Citi Trends. And, we are very pleased that Bruce will continue to assist Peter in those duties through the end of our fiscal year, creating a smooth transition as we capitalize on the positive changes that are occurring in our business.”

Capital Return Program

During the first three quarters of 2019, the Company repurchased 563,000 shares of its common stock at an aggregate cost of $9.7 million, completing its most recent authorization. The Company’s Board of Directors today announced the authorization of another $25 million share repurchase program as the next step in its expanded capital return program. The Company expects to fund the share repurchase program from cash on hand.

In addition, the Company announced that its Board of Directors has declared a quarterly cash dividend of $0.08 per common share, payable on December 24, 2019, to shareholders of record as of the close of business on December 10, 2019.

Mr. Carney commented, “The Board’s action today, authorizing an additional $25 million share repurchase program, is another extension of the capital return program that was initiated in 2015 and expanded in 2017, resulting in returns of capital to shareholders totaling $107 million to date in the form of dividends and share repurchases. Such actions demonstrate the Board’s confidence in our business and its commitment to rewarding stockholders while maintaining the financial flexibility needed to invest in and grow our business.”