Citi Trends, Inc. (NASDAQ: CTRN), a growing specialty value retailer of apparel, accessories and home trends for way less spend primarily for African American and Latinx families in the United States, today reported results for the second quarter ended July 31, 2021.

Financial Highlights – 13 week second quarter ended July 31, 2021

The Company is reporting operating results for Q2 2021 relative to Q2 2019 to provide a more normalized comparison of performance since Q2 2020 included significant favorable one-time expense reductions related to COVID-19 such as furloughs, reduced store hours and closures, abated rents and other COVID-19 cost credits.

• Total sales increased 29.8% to $237.3 million compared to $182.8 million in Q2 2019

• Comparable store sales increased 25.6% over Q2 2019

• Gross margin increased 350 bps to 40.8% compared to Q2 2019 gross margin of 37.3%

• As a percent of sales, selling, general and administrative expenses improved 270 bps compared to Q2 2019

• Operating income was $16.4 million compared to $0.2 million in Q2 2019

• Operating margin was 6.9% compared to 0.1% in Q2 2019

• Net income was $12.5 million compared to $0.4 million in Q2 2019

• Earnings per diluted share was $1.36 compared to $0.03 in Q2 2019

• Quarter-end inventory decreased 14.3% compared to the end of Q2 2019

• The Company opened 5 new stores during Q2 2021

Financial Highlights – 26 week first half ended July 31, 2021

In the first half of 2021, total sales were $522.7 million, an increase of 34.8% compared to the first half of 2019. Gross margin was 41.8%, an increase of 440 bps over the same period of 2019. Operating income was $55.4 million for an operating margin of 10.6% compared to operating income of $8.9 million and operating margin of 2.3% in the first half of 2019. Year-to-date, earnings per diluted share was $4.63 compared to $0.68 in the first half of 2019.

Chief Executive Officer Comments

David Makuen, Chief Executive Officer, commented, “We are very pleased with our strong second quarter results that once again showcased the continuation of the end-to-end transformation of our business model, as well as the flexibility and agility of our teams. We are more confident than ever in the power of our physical stores in underserved communities that really need us. We saw a significant increase of new customers in our stores and our customers are in a better financial position which we expect will continue as employment levels rise and the economy continues to improve.”

Makuen continued, “Our top line and bottom line results were once again broad-based with particular strength in our ‘CITIs’ for Men’s, Ladies’ and Beauty/Accessories. Most importantly, we lapped our second quarter 2020 comparable store sales of +15.6% with strong comparable store sales of +8.7%. We were extremely pleased to deliver a +25.6% comp as compared to the second quarter of 2019 on 14.3% less inventory. We entered the third quarter with stores full of fresh, new trends for the entire family, and we feel great about the momentum in our business, including a strong start to our back-to-school and back-to-dorm season.”

“Based on our strong first half performance and confidence in our ability to capitalize on the opportunities that lie ahead, including an amazing holiday assortment to drive fourth quarter sales and our plan to open 20+ stores over the remainder of the year, we have increased our full year total sales and EPS outlook. Our revised outlook now calls for midpoint total sales of $1 billion, reaching our previously shared long-range target more than a year earlier than planned, and delivering midpoint EPS of $6.40, or 354% higher than fiscal 2019. Importantly, the base foundation of our business has improved, fueled by improved and expanded trend-right assortments resulting in higher spend per customer which we believe is sustainable over time. We remain committed to expanding the reach of the Citi Trends brand, and we see a long runway of growth ahead as we continue to fuel market share gains and build shareholder value over time,” Makuen concluded.

Capital Return Program Update

In the second quarter, the Company repurchased approximately 215,000 shares of its common stock at an aggregate cost of $18.9 million. In the first half of fiscal 2021, the Company repurchased approximately 752,000 shares of its common stock at an aggregate cost of $64.4 million.

At the end of the second quarter, $20.9 million remained available under the Company’s existing share repurchase authorization. In addition, the Company’s board of directors today announced the authorization of another $30.0 million share repurchase program.

Guidance

Following the Company’s strong performance during the first half of the fiscal year, the Company is raising its full year 2021 guidance and expects to generate total sales of $990 million to $1.01 billion, an increase of approximately 27% to 29% as compared to fiscal year 2019. This would result in expected earnings per diluted share in a range of $6.30 to $6.50, an increase of 354% at the midpoint compared to fiscal 2019.

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) 223-0120. A replay of the conference call will be available until August 31, 2021, by dialing (402) 977-9140 and entering the passcode, 21996408.

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 conference call, may contain or constitute information that has not been disclosed previously.