What changed in this filing

/stocks — the workspaceLOADING

Item 1. Business

2021-04-14 compared with 2020-05-14 · 197 added, 188 removed, 45 unchanged (90% of the section changed)

Overview and History

We are a value-priced retailer of fashion apparel, accessories and home goods for the entire family.

Our merchandise offerings are designed to appeal to the fashion preferences of value-conscious consumers, particularly African-Americans.

Our goal is to provide merchandise at discounts of 20% to 70% compared to department and specialty stores’

regular prices.

Our stores average approximately 11,000 square feet of selling space and are typically located in neighborhood shopping centers that are convenient to low and moderate income customers.

As of February 1, 2020, we operated 571 stores in both urban and rural markets in 33 states.

We are a growing specialty value retailer of apparel, accessories and home trends primarily for African American and Latinx families.

Our high-quality and trend-right merchandise offerings at everyday low prices are designed to appeal to the fashion and trend preferences of value-conscious customers.

Based on the strength of our brand and experienced leadership team, we believe we have fostered deep customer loyalty and high shopping frequency in the underserved communities in which we operate.

Our stores are located at the crossroads of low to moderate income households and serve as a “one-stop-shop” for the entire family.

Our stores average approximately 11,000 square feet of selling space and are typically located in outdoor community shopping centers across a variety of urban, suburban and rural markets.

As of January 30, 2021, we operated 585 stores in 33 states.

Our team is focused on delivering a memorable store experience anchored in value, and we currently maintain an informational website at www.cititrends.com that assists customers in finding stores and seeing the latest trends available in our stores.

Our predecessor, Allied Department Stores, was founded in 1946 and grew into a chain of family apparel stores operating in the Southeast.

In 1999, the Company, then consisting of 85 stores, was acquired by a private equity firm.

Following this acquisition, management rebranded the stores to “Citi Trends”

and implemented several strategies to focus on the growing urban fashion market and improve our operating and financial performance.

After the successful implementation of these strategies and the successful growth of our chain from 85 stores to 212 stores, we completed an initial public offering of our common stock on May 18, 2005.

Following this acquisition, management rebranded the stores to “Citi Trends” and implemented several strategies to focus on offering curated assortments for our target customers and improve our operating and financial performance.

After the successful implementation of these strategies and the growth of our chain from 85 stores to 212 stores, we completed an initial public offering of our common stock on May 18, 2005.

Since our initial public offering, we have grown our chain 175% to 585 stores as of January 30, 2021.

We opened 18 new stores in fiscal 2020 (and closed 4 stores) and we plan to open at least 30 new stores in fiscal 2021.

We believe we have opportunity to grow our store base to 1,000 stores over time.

We are a Delaware corporation, and our executive offices are located at 104 Coleman Boulevard, Savannah, Georgia 31408 and our telephone number is (912) 236-1561.

Our Internet address is http://www.cititrends.com .

Our Internet address is www.cititrends.com .

The reference to our web site address in this Report does not constitute the incorporation by reference of the information contained at the web site into this Report.

We make available, free of charge through publication on our web site, copies of our Annual Report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports, as soon as reasonably practicable after we have filed such materials with, or furnished such materials to, the SEC.

In addition, you may read and print any materials we file with the SEC on the SEC’s web site at http://www.sec.gov .

Company Strengths and Strategies

Our goal is to be the leading value-priced retailer of fashion apparel, accessories and home goods for the African-American families we currently serve as our primary target market.

In addition, you may read and print any materials we file with the SEC on the SEC’s web site at www.sec.gov .

Competitive Strengths and Strategies

Our goal is to be the leading specialty value retailer of apparel, accessories and home trends for African American and Latinx families with an average annual household income of approximately $40,000.

We strive to provide our customers with a place to shop that is fashionable, fresh, friendly, fair and fun.

We believe the following business strengths differentiate us from our competitors and are important to our success:

Focus on Fashionable Mix.

We focus our merchandise on fashionable apparel that we believe appeals to our core customers.

We do not attempt to dictate trends, but rather devote considerable effort to identifying emerging trends and ensuring that our apparel assortment is considered timely and fashionable for our target customer.

Our merchandising staff tests new emerging merchandise trends before reordering and actively manages the mix of basic, fashion, trend and branded products in the stores to keep our offering fresh and minimize markdowns.

Focus on Fashion and Trend Mix .

We focus our merchandise on being fashionable and trend-right to appeal to our core customers.

We do not attempt to dictate trends, but rather, we devote considerable effort to identifying emerging trends and ensuring that our wide assortment of apparel and non-apparel merchandise is curated to appeal to the preferences of our target customers.

Our buying staff tests new emerging trends before reordering and actively manages the mix of basic, fashion, trend and branded products in our stores to keep the offering fresh and current.

Superior Value Proposition .

As a value-priced retailer, we seek to offer top quality, fashionable merchandise at compelling prices in relation to department and specialty stores.

We offer branded product at tremendous value that appeals to our core customer.

Merchandise Mix that Appeals to the Entire Family.

We merchandise our stores to create a destination environment capable of meeting the fashion needs of the entire value-conscious family.

Each store offers a wide variety of products for men, women and children, as well as accessories and home goods.

Our stores feature sportswear, dresses, outerwear, footwear, intimate apparel, accessories, scrubs, beauty and home.

We believe that the breadth of our merchandise distinguishes our stores from many competitors that offer similar apparel primarily for women, and reduces our exposure to fashion trends and demand cycles in any single category.

We seek to offer top quality, fashionable merchandise for way less spend.

We believe our value proposition provides important access to trends that would otherwise be out of reach for the lower income customers we serve.

We do not employ high-low pricing strategies;

instead, our everyday low price points offer superior value, allowing our customers to purchase multiple items per visit.

Our advertising expenses are low as we do not rely on promotion-driven sales and instead seek to build our reputation through word-of-mouth awareness of our value in the communities we serve.

One-Stop-Shop for the Entire Family .

We merchandise our stores to create a specialty store environment that serves as a destination that meets the apparel and non-apparel needs of the entire family.

Every store offers a wide variety of always-changing products for men and women of all sizes and children from newborn to size 20.

Our stores include a wide assortment of sportswear, dresses, outerwear, footwear, intimate apparel and sleepwear, jewelry, handbags, beauty products, home goods, tech accessories, health and beauty aids, candy, fitness products, team sports products, toys and books.

We believe that our small footprint stores, combined with a specialty store experience, friendly customer service where we often know the customer’s name and breadth of merchandise, distinguishes our stores from many competitors and creates an exciting and welcoming environment that encourages repeat visits from the local community.

Strong and Flexible Sourcing Relationships .

We maintain strong sourcing relationships with a large group of suppliers.

We have purchased merchandise from approximately 1,700 vendors in the past 12 months.

Purchasing is controlled by a buying team located in New York, New York.

We purchase merchandise through planned programs with vendors at reduced prices and opportunistically through close-outs, with the majority of our merchandise purchased for the current season and a lesser quantity held for sale in future seasons.

Our buying team located in New York City plans, develops and creates curated assortments by purchasing goods developed specifically with our customers in mind and opportunistically available excess inventory from reliable and trustworthy vendors, with the majority of our merchandise purchased for the current season and a lesser quantity held for sale in future seasons.

To foster vendor relationships, we pay vendors promptly and do not ask for typical retail concessions, such as promotional and markdown allowances.

Attractive Fashion Presentation in a Friendly and Fun Environment.

We seek to provide a fashion-focused shopping environment that is similar to a specialty apparel retailer, rather than a typical off-price store.

Products are prominently displayed by style, rather than by size, on dedicated, four-way fixtures featuring multiple sizes and styles.

The remaining merchandise is arranged on hanging racks.

The stores are carpeted and well-lit, with most featuring a sound system that plays music appropriate for our target customer throughout the store.

Dynamic Experience in a Friendly and Fun Environment .

We seek to provide a fashion-focused shopping environment that is similar to a specialty apparel retailer, rather than a typical discount or big box retailer.

Products are prominently displayed by style, rather than by size, on four-sided fixtures featuring multiple sizes, styles and suggested outfits.

Non-apparel products are displayed on fixtures that highlight prints, patterns and themes of trend-right categories.

Our stores are easy to navigate, carpeted, well-lit and feature upbeat and trend-right overhead music appropriate for our target customers.

Our stores are neat, orderly and clean, offering a friendly and fun environment.

2 unchanged sentences

Many of our store associates live in the neighborhoods where our stores are located and frequently shop our stores themselves.

As a result, our store associates cultivate a unique culture at our stores that enables a high level of connectivity with our customers.

Approximately 80% of our associates identify as African American or Latinx, and we have always led with a diverse and inclusive workplace.

As a result, our store associates cultivate a unique culture at our stores that creates a high level of connectivity with our customers.

We strive to make our stores a destination where everyone is welcome, and our store associates foster that vision every day through enriched customer engagement.

Cost-Effective Store Locations.

We locate stores in high traffic strip shopping centers that are convenient to low and moderate income neighborhoods.

Cost-Effective Store Locations and New Store Economics .

We locate our stores in high-traffic outdoor community shopping centers that are convenient to low and moderate income neighborhoods.

We generally utilize previously occupied store sites which enables us to obtain attractive rents.

Similarly, advertising expenses are low as we do not rely on promotion-driven sales but rather, we seek to build our reputation for value through everyday low prices.

At the same time, from an investment perspective, we seek to design stores that are inviting and easy to shop, while limiting startup and fixturing costs.

Product Merchandising and Pricing

Our merchandising strategy is to offer fresh and fashionable apparel, accessories and home goods at attractive prices for the entire value-conscious family.

We seek to maintain a diverse assortment of first quality, in-season merchandise that appeals to the distinctive tastes and preferences of our core customers.

Approximately 20% of our net sales in fiscal 2019 were represented by nationally recognized brands.

We also offer a wide variety of products from less recognized brands and a lesser amount representing private label products under our proprietary brands.

Our merchandise includes apparel, accessories and home.

Within apparel, we offer fashion sportswear for men, women and children, including offerings for newborns, infants, toddlers, boys and girls.

Accessories include handbags, jewelry, footwear, belts, intimate apparel, scrubs and sleepwear.

Home includes décor and functional bedroom, bathroom and kitchen products, as well as beauty and toys.

The following table sets forth the merchandise assortment by classification as a percentage of net sales for fiscal 2019, 2018 and 2017.

Percentage of Net Sales

Children’s

Ladies’

We purchase our merchandise at attractive prices and mark prices up less than department or specialty stores.

We seek to provide nationally recognized brands at prices that are 20% to 70% below regular retail prices available in department stores and specialty stores.

Further, we consider the price-to-value relationships of our non-branded products to be exceptionally strong.

Both branded and non-branded offerings validate our fashion positioning and value to our customers.

We review each department in our stores at least monthly for possible markdowns based on sales rates and fashion seasons to promote faster turnover of inventory and to accelerate the flow of current merchandise.

Our store growth is supported by our new store economics, which we believe to be compelling.

Our new store model assumes a store size of approximately 11,000 square feet that achieves sales of approximately $1.4 million in the first full year of operations and an initial cash investment of approximately $0.4 million comprised of store build-out costs (net of tenant allowances), inventory (net of accounts payable) and cash pre-opening expenses.

Our new store model presents an attractive average payback period of two years on our initial investment.

Highly Talented and Motivated Leadership Team .

Our senior management team, led by David Makuen, our Chief Executive Officer, has extensive value retail experience across a broad range of disciplines, including merchandising, real estate, finance, store operations, supply chain management and information technology.

Our management team plans and drives our growth strategy, which is based on our constant focus on providing trend-driven merchandise anchored in value to the lower income, underserved African American and Latinx populations.

We believe our management team is integral to our success and positions us well for long-term growth.

Growth Strategy

We believe that Citi Trends is in a unique position for growth.

We have a loyal customer base, a long runway for store growth and a motivated leadership team, supported by a healthy balance sheet.

We have identified four strategic areas of focus that we believe will accelerate our sales and earnings growth over the next few years.

These areas of focus are:

Growing Our Fleet .

We believe that we have the potential to grow to 1,000 stores as a result of a third-party study conducted in 2020.

This represents a potential 70% increase in the size of our current fleet and will give us the opportunity to build stores in geographies for the following population segments:

African American-centric geographies, Melting Pot geographies (containing a mix of African Americans and Latinx families), and Latinx-centric geographies.

Optimizing the Product Mix .

We believe that our unique ability to curate assortments for our target customers further differentiates our model.

Through a combination of directly sourced products and highly recognized brands grounded in everyday value, we are known for delivering constant newness and freshness, causing a high repeat shopping rate.

We practice rigorous inventory management, prioritizing choice and breadth over depth, improving our speed to market and driving faster turns.

Continued expansion of non-apparel categories and investments in systems and automation will further optimize our product mix.

Investing in Our Infrastructure .

We believe that we have an opportunity to make strategic investments in our business that will improve our capabilities to “buy,” “move” and “sell” our assortments to effectively engage current and new customers.

● “Buy” is everything associated with buying, planning and allocating the assortments that we offer to our customers.

We plan to invest in systems and data to enhance our teams’ roles and how they operate.

● “Move” translates to our supply chain and how we move goods from the time an order is placed through getting it to the selling floor.

Investments in this area include upgrades to our distribution centers and system enhancements in order to increase speed and productivity.

● “Sell” relates to operations at our retail stores.

Our investments in this area include expanding and enhancing the chain and implementing important tools such as a new point-of-sale system and workflow apps to improve store productivity.

Making a Difference .

Our team is committed to making a difference in the African American and Latinx communities that we serve.

We will start the journey towards being more sustainable as a company, towards taking diversity and inclusion to the next level, and ensuring that we operate with the highest of ethics.

See “Community Involvement” under “Human Capital Management” below for more information on our initiatives to make a difference.

We strongly believe that our growth strategy centered around these four areas will accelerate our sales and earnings growth.

Product and Value

Our merchandising strategy is to offer fresh and fashionable apparel, accessories and home trends for way less spend for value-conscious families.

We seek to maintain a diverse assortment of in-season merchandise that appeals to the specific tastes and preferences of our core customers.

Our assortment is comprised of privately-developed and nationally-recognized brands.

Our merchandise is represented by six distinct “Citis” within the store:

a wide selection of apparel for juniors and women (plus size), including fashion sportswear, outerwear, sleepwear, lingerie and scrubs.

a wide selection of apparel for men and big men, including fashion sportswear and outerwear.

fashion clothing for boys and girls up to size 20 and sizes for newborns, infants and toddlers, as well as kids uniforms and kids accessories.

● Accessories and Beauty:

fashionable handbags, luggage, hats, belts, sunglasses, jewelry and watches for men and women, as well as basic undergarments for the entire family and expansive beauty and fragrance offerings for women and men.

● Home and Lifestyle:

home goods for the bedroom, bathroom, kitchen and decorative accessories, plus an eclectic composition of wants and needs such as books, food, tech products, team sports products, toys, health and beauty products and seasonal items.

casual and dress footwear in sizes for mens, ladies and kids.

The following table provides the percentage of net sales for each Citi within the store:

Accessories & Beauty

Home & Lifestyle

Our goal is to deliver outstanding value every day.

We do this by offering access to fashion and trends at affordable prices that are desirable for low to moderate income customers.

As a normal course, we do not engage in promotional activity such as high-low pricing, coupons or sales other than our regularly scheduled markdowns.

The flexibility of our model allows our pricing structure to fluctuate in response to marketplace changes while maintaining our merchandise margins.

Both branded and non-branded offerings validate our fashion and value to our customers.

Sourcing and Allocation

The merchandising department oversees the sourcing, planning and allocation of merchandise to our stores, which allows us to utilize volume purchase discounts and maintain control over our inventory.

We source our merchandise from approximately 1,700 vendors, consisting of domestic manufacturers and importers.

Our merchandising department consists of a buying team and a planning and allocation team.

The buyers on our buying team have, on average, 12 years of experience in the retail business and have developed long-standing relationships with many of our vendors, including those controlling the distribution of branded apparel.

Our buyers, who are based in New York, travel regularly to the major United States markets, visiting major manufacturers and attending national and regional trade shows.

Our buyers purchase merchandise in styles, sizes and quantities to meet inventory levels developed by the planning staff.

The buying staff utilizes several purchasing techniques that enable us to offer to customers branded and non-branded fashion merchandise at everyday low prices.

The majority of the nationally recognized branded products we sell are purchased in-season, and we generally purchase later in the merchandising buying cycle than department and specialty stores.

This allows us to take advantage of imbalances between retailers’

demands for specific merchandise and manufacturers’

supply of that merchandise.

We also purchase merchandise from some vendors in advance of the selling season at reduced prices and purchase merchandise on an opportunistic basis near the end of the selling season, which we then store in our distribution centers for sale three to nine months later.

Where possible, we seek to purchase items based on style or color in limited quantities on a test basis with the right to reorder as needed.

Finally, we purchase private brand merchandise that we source to our specifications.

We allocate merchandise across our store base according to sales and merchandise plans that are created by our planning and allocation teams.

The merchandising staff utilizes a centralized management system to monitor merchandise purchasing, planning and allocation in order to maximize inventory turnover, identify and respond to changing product demands and determine the timing of markdowns to our merchandise.

We believe that our flexible, value-conscious business model and ever-changing assortment that results from our fresh flow of inventory differentiates us from traditional retailers.

We source our merchandise from thousands of domestic manufacturers and importers.

Our merchandising division consists of a buying team and a planning and allocation team.

Our buyers have extensive experience and have developed long-standing relationships with many of our vendors.

The buying office is located in New York City, and the team travels regularly to the major United States markets, visiting major manufacturers and attending national and regional trade shows.

Our buying team sources goods in a couple of ways.

First, we source a curated compilation of the latest trends and fashion from a constantly growing base of vendors that manufacture products for Citi Trends’ core customers.

Our buyers collaborate with these vendors to design products that are of high aesthetic value and appealing to our customers.

Second, we maintain strong relationships with nationally recognized brands that we partner with to buy and customize products that are geared in size, color and style to our core customers.

The majority of our merchandise is first-quality and purchased in season.

High-quality excess inventory is purchased at advantageous pricing with the intent to sell later in the same season or the following season.

This allows us to deliver exciting value on select highly desirable goods.

Beginning in fiscal 2021, we launched an initiative to increase the penetration of Black and Brown-owned brands in our merchandise assortment.

This initiative will further enable us to support many entrepreneurs that we believe will deepen our connection with our target customers.

We allocate merchandise across our stores according to fact-based plans that are created by our planning and allocation teams.

Our staff utilizes a centralized management system to monitor merchandise purchasing, planning and allocation in order to maximize inventory turnover, identify and respond to changing product demands and determine the timing of markdowns to our merchandise.

A store-level planning system assists our team in their efforts to allocate merchandise to individual stores based on sales performance and planned inventory levels.

The buyers also regularly review the age and performance of the merchandise and manage both the reordering and clearance processes.

In addition, the merchandising team communicates with regional, district and store managers to ascertain regional and store-level conditions and to better ensure that our product mix meets our consumers’

demands in terms of quality, fashion, price and overall value.

We accept payment from our customers for merchandise at time of sale.

Payments are made to us by cash, check, Visa™, MasterCard™, American Express™, or Discover™.

We do not extend credit terms to our customers;

however, we do offer a layaway service.

The nature of our business is seasonal.

Historically, sales in the first and fourth quarters have been higher than sales achieved in the second and third quarters of the fiscal year.

Expenses and, to a greater extent, operating income, vary by quarter.

Results of a period shorter than a full year may not be indicative of results expected for the entire year.

Furthermore, the seasonal nature of our business may affect comparisons between periods.

Store Operations

Store Format.

The average selling space of our 571 stores is approximately 11,000 square feet, which allows us the space and flexibility to departmentalize our stores and provide directed traffic patterns.

We arrange most of our stores in a racetrack format with ladies’

sportswear in the center of each store and complementary categories adjacent to those items.

Men’s and boy’s apparel and footwear are displayed on one side of the store, while dresses, ladies’

footwear and accessories are displayed on the other side.

Merchandise for infants, toddlers, boys and girls, as well as home goods, are displayed along the back of the store.

Impulse items, such as jewelry, beauty, sunglasses and consumables are featured near the checkout area.

Products from nationally recognized brands and other current fashion styles are prominently displayed on four-way racks at the front of each department.

The remaining merchandise is displayed on hanging racks and table displays.

Large hanging signs identify each category location.

The unobstructed floor plan allows the customer to see virtually all of the different product areas from the store entrance and provides us the flexibility to easily expand and contract departments in response to customer demand, seasonality and merchandise availability.

Virtually all of our inventory is displayed on the selling floor.

Our mission is to curate the best product at value prices for our core customers.

We provide them a place to shop that is fashionable, fresh, friendly, fair and fun.

Our stores are located in the heart of the vibrant lower income communities we serve.

We hire a diverse staff of women and men from the local area surrounding our stores.

As of January 31, 2021, nearly 80% of our store associates are African American or Latinx, and more than 90% of our store management positions are filled by women.

We cater to entire families and offer a one-stop shopping experience that meets the vital needs of these underserved communities.

We welcome everyone with “Hi, welcome to Citi Trends” and we develop a longstanding rapport with many of our customers, many of whom we know by name.

Every Citi Trends store presents a specialty store environment with a wide array of offerings.

The average selling space of our 585 stores is approximately 11,000 square feet, which allows us the space and flexibility to organize our six “Citis” of business in exciting and appealing ways.

The unobstructed floor plan allows the customer to see almost all of the different product areas from the store entrance and provides us the flexibility to easily expand and contract departments in response to customer demand, seasonality and merchandise availability.

Nearly all of our inventory is displayed on the selling floor.

Our mission is to curate highly appealing products at value prices for our core customers.

We provide them a place to shop that is fashionable, friendly, fresh, fair and fun.

A critical component of our success is to maintain an environment that is neat, clean and organized, where everyone is welcome.

Store Management.

Store operations are managed by our Senior Vice President of Store Operations, four regional vice presidents and 52 district managers, each of whom manages eight to fifteen stores.

The typical store is staffed with a Store Manager, two or three Assistant Managers and seven to eight part-time Sales Associates, all of whom rotate work days on a shift basis.

Store managers and assistant store managers participate in a bonus program based on achieving predetermined levels of sales and inventory shrinkage.

District managers participate in bonus programs based on achieving targeted levels of sales, profits, inventory shrinkage and payroll costs.

Regional Vice Presidents participate in a bonus program based partly on a roll-up of the district managers’

bonuses and partly on the Company’s profit performance in relation to budget.

Sales associates are compensated on an hourly basis with incentives.

Moreover, we recognize individual performance through internal promotions and provide opportunities for career advancement.

We place significant emphasis on loss prevention in order to control inventory shrinkage.

Initiatives include electronic tags on many of our products, training and education of store personnel on loss prevention issues, digital video camera systems, alarm systems and motion detectors in the stores.

We also visually monitor the stores throughout the day using sophisticated camera systems, capture extensive point-of-sale data and maintain systems that monitor returns, voids and employee sales, and produce trend and exception reports to assist in identifying shrinkage issues.

We also maintain an independent, third party administered, toll-free line for reporting shrinkage concerns and any other employee concerns.

Employee Training.

Our employees are critical to achieving our goals, and we strive to hire employees with high energy levels and motivation.

Our employees are critical to achieving our goals, and we strive to hire employees from the local community with high energy levels and motivation.

We have well-established store operating policies and procedures and an extensive 30-day in-store training program for new store managers and assistant managers.

Sales associates also participate in a 14-day customer service and store procedures training program, which is designed to enable them to assist customers in a friendly and helpful manner.

Layaway Program.

We offer a layaway program that allows customers to purchase merchandise by initially paying a 20% deposit and a $2 service charge, although at various times, we reduce the deposit requirement to 10% and waive the service charge in connection with promotional events.

1 unchanged sentence

If the purchase is not completed, the customer receives a Citi Trends gift card for amounts paid less a re-stocking and layaway service fee.

Site Selection.

Our unique focus on underserved African American and Latinx families offers us the opportunity to pinpoint highly targeted and highly visible store locations.

Cost-effective store locations are an important part of our store profitability model.

Accordingly, we look for second and third use store locations that offer attractive rents, but also meet our demographic and economic criteria.

We have a dedicated real estate management team responsible for new store site selection.

In selecting a location, we target both major metropolitan and rural markets.

Demographic criteria used in site selection include concentrations of our core consumers.

In addition, we require convenient site accessibility, as well as strong co-tenants, such as food stores, dollar stores and rent-to-own stores.

We will be the leading value-priced retailer within the neighborhoods we proudly serve.

We will be an integral part of our customers’

community by providing apparel, accessories, home furnishings and career opportunities.

Shortly after we sign a new store lease and complete the necessary leasehold improvements to the building, we prepare the store over a three to four week period by installing fixtures, signs, dressing rooms, checkout counters and cash register systems and merchandising the initial inventory.

Accordingly, we look for locations in outdoor community shopping centers that offer attractive rents and meet our demographic and economic criteria.

We have a dedicated real estate management team responsible for new store site selection and we employ rigorous analysis that is used during real estate committee meetings to approve final store selection decisions.

In selecting a location, we target urban, suburban and rural markets and our strategy includes both further densification of existing markets and entering new markets over time.

In addition, we require convenient site accessibility, as well as strong co-tenants, such as grocery stores, dollar stores, beauty stores and other value stores.

We aim to be an integral part of our customers’ community by providing a compelling shopping destination and career opportunities.

After completing a study in fiscal 2020 with a third-party provider, we believe we can grow our fleet to 1,000 stores over time.

Advertising and Marketing

Our marketing goals are to build the “Citi Trends”

brand, promote customers’

association of the “Citi Trends”

brand with value, quality, fashion and everyday low prices, and drive traffic into our stores.

We generally focus our advertising efforts during the first quarter

(Spring/Easter), back-to-school and Christmas through the use of hip-hop radio stations, social media and influencer marketing.

In addition, we promote fashion trends and exciting deals in our window signage and through in-store announcements.

Our Facebook page has nearly 600,000 followers, and our Instagram account has more than 80,000 followers.

Our marketing goals are to build the Citi Trends brand, promote customers’ association of the Citi Trends brand with value, quality, fashion and everyday low prices, and drive traffic into our stores.

We generally focus our advertising efforts utilizing emails, social media and influencer marketing.

We use our social media channels to highlight our brand and engage our customers with compelling digital content on a regular basis.

We also maintain a website at http://www.cititrends.com and a mobile app, both of which advertise our latest in-store products and provide information about our business, including a store locator.

All merchandise sold in our stores is shipped directly from our distribution centers in Darlington, South Carolina and Roland, Oklahoma, utilizing various express package distributors.

We also maintain an informational website at www.cititrends.com which showcases our latest in-store products and provides information about our business, including a store locator.

All merchandise sold in our stores is shipped directly from our company-owned distribution centers in Darlington, South Carolina and Roland, Oklahoma, utilizing third-party delivery partners.

Our stores receive multiple shipments of merchandise each week from our distribution centers.

In addition, we initiated a drop-shipment program in fiscal 2020 that enables us to expedite the delivery of select merchandise to our stores by shipping directly from our vendors.

The Darlington distribution center has 550,000 square feet of space, while the Roland distribution center has 565,000 square feet of space.

We engaged a consulting firm to help us identify more efficient and less costly distribution alternatives.

We focused on leveraging the consultant’s relationships with transportation service providers, expanding the number of in-bound trucking options, and evaluating the current out-bound to store model.

This project began in the first quarter of 2019 and has continued into 2020.

The distribution center value-added services include, but are not limited to, receiving, price ticketing, packing and shipping specific store-allocated quantities.

We continue to evaluate distribution, transportation and supply chain alternatives to accelerate the movement of merchandise from our vendor origin points to our stores as optimally as possible.

Information Technology and Systems

We have information systems in place to support our core business functions, using a combination of industry-standard third party products and internally developed applications.

These systems support purchase order management, price and markdown management, merchandise planning and allocation, general ledger, accounts payable, sales audit, loss prevention and supply chain functions.

Prior to the COVID-19 crisis, we were embarking on a systems transformation project with a leading consultant to provide a strategic roadmap for the future of our information systems.

However, due to the negative economic effects of COVID-19, we have delayed this project.

Our top priorities for this project were to reinvent and dramatically improve our planning and allocation systems, as well as provide robust analytical capabilities that extend visibility to granular levels of the business.

We understand the competitive advantage data provides and will strive to leverage newer technologies such as artificial intelligence and machine learning as enablers for executing business operations.

We will revisit next steps for this project later in 2020.

Aligned with our systems transformation project, we were also engaged in a point-of-sale replacement project which included new hardware, software and payment systems for our stores.

The project was expected to improve our store operational processes, increase transactional efficiencies and provide enhanced visibility to the business.

As an organization focused on being fashionable, friendly, fresh, fair and fun, we understand that our customer experience is paramount to our success and a new point-of-sale solution will provide the foundation to enhance our customer engagement journey.

This project has also been temporarily suspended due to the uncertainty stemming from COVID-19.

Growth Strategy

Drive Comparable Store Sales Growth.

We have a number of strategies in place that are focused on continuing to increase our comparable store sales, including the following:

Continued push toward lines of business that have proven to be consistent sales drivers over extended periods of time, including, among other things, accessories and home merchandise,

Improvement of our fashion assortments within apparel to meet the demands of our unique customer base,

Recent addition of internal store planning resources and the implementation of a store-level planning system, which we expect will improve our ability to allocate inventory at each level of the merchandise hierarchy,

Continued testing and introduction of new categories of merchandise that meet the needs of our customers,

Continued evolution of our marketing strategies through the use of digital advertising and influencers, and

Future execution of a systems transformation project and point-of-sale replacement project, as described above.

Increase Store Base.

We believe that our store potential for the existing concept is up to 800 stores.

This concept, which has historically done well in predominantly African-American markets, has proven to be portable across much of the country.

In fact, of the 20 Citi Trends stores with the highest level of profit, 14 different metropolitan statistical areas are represented.

Also, only six of our stores were not profitable on a four-wall basis in fiscal 2019.

We opened 16 new stores in fiscal 2019.

We opened three new stores in fiscal 2020 before suspending our new store initiatives due to the negative economic effects of COVID-19.

We have developed and are executing on our strategic roadmap to upgrade our information systems.

In 2020, we delivered a new cloud-based merchandise planning and forecasting solution to streamline processes, increase accuracy and leverage alternative modeling techniques.

In addition, we are in the process of implementing a cloud-based business intelligence platform to provide robust analytical capabilities across our enterprise and extend visibility to granular levels of the business.

We are currently engaged in a point-of-sale replacement project that includes new hardware, software and payment systems for our stores.

The project will be completed in mid-2021 and is expected to improve our store operational processes, increase transactional efficiencies and provide enhanced visibility to the business.

We will continue to execute on our roadmap in 2021 with increased focus on improving our supply chain and merchandising systems while further leveraging data and analytics.

The markets we serve are highly competitive.

The principal methods of competition in the retail business are fashion, assortment, pricing and presentation.

We believe we have a competitive advantage in our offering of fashionable merchandise at everyday low prices.

We compete against a diverse group of retailers, including national off-price retailers, mass merchants, smaller specialty retailers and dollar stores.

The off-price retail companies with which we compete include TJX Companies, Inc.

(“TJX Companies”), Ross Stores, Inc.

(“Ross Stores”), The Cato Corporation (“Cato”), and Burlington Stores, Inc.

(“Burlington”).

In particular, Ross Stores’

“dd’s DISCOUNTS”

stores, and Cato’s “It’s Fashion Metro”

stores target lower and moderate income consumers.

We believe our strategy of appealing to African-American consumers allows us to compete successfully with these retailers.

We also believe we offer a more inviting store format than the traditional off-price retailers, including our use of carpeted floors and more prominently displayed brands.

In addition, we compete with a group of smaller specialty retailers that sell only women’s products, such as Rainbow, as well as value-oriented retailers, such as Forman Mills and Variety Wholesalers.

Our mass merchant competitors include Wal-Mart, Target and Kohl’s.

These chains do not focus on fashion apparel and, within their apparel offering, lack the specialized focus on fashionable mix that appeals to our core customers.

Similarly, while some of the dollar store chains offer apparel, they typically offer a more limited selection focused on basic apparel needs.

As a result, we believe there is significant demand for a value-priced retailer that addresses the market of low and moderate income consumers generally and, particularly, African-American and other consumers who seek extreme value for fashion apparel, accessories and home goods.

We compete with a broad range of retailers including national chains, mass merchants, discount stores and specialty stores with both physical locations and online stores.

The principal measures of competition in the retail business are fashion, assortment, pricing and presentation.

We believe we have a competitive advantage in our offering of fashion and trends at everyday low prices, and our strategy of focusing on African American and Latinx customers puts Citi Trends in a unique competitive position.

We also believe we offer a more inviting store format than the traditional retailers, including our size and layout of merchandise, use of carpeted floors and colorful signage, and fixtures that are easy to shop.

Our competitors do not focus on trend apparel and, within their apparel offering, lack the specialized focus on fashionable mix that appeals to our core customers.

As a result, we believe there is significant demand for a specialty value retailer that addresses the market of low and moderate income customers generally and, particularly, African American, Latinx and other customers who seek extreme value for fashion apparel, accessories and home goods.

Risk Factors in this Report for additional information regarding competition in our markets.

1 unchanged sentence

We regard our trademarks and service marks as having significant value and as being important to our marketing efforts.

We have registered “Citi Trends”

as a trademark with the U.S.

We have registered “Citi Trends” as a trademark with the U.S.

Patent and Trademark Office on the Principal Register for retail department store services.

We have also registered the following trademarks with the U.S.

Patent and Trademark Office on the Principal Register for various apparel:

“Citi Steps,”

“Citi Trends Fashion for Less,”

“Lil Ms Hollywood,”

“Red Ape,”

and “Vintage Harlem.”

Our policy is to pursue registration of our marks and to oppose vigorously infringement of our marks.

As of February 1, 2020, we had approximately 3,000 full-time and approximately 2,700 part-time employees.

Patent and Trademark Office on the Principal Register for various apparel brands:

“Citi Steps,” “Citi Trends Fashion for Less,” “Lil Ms Hollywood,” “Red Ape,” and “Vintage Harlem.” Our policy is to pursue registration of our marks and to oppose vigorously infringement of our marks.

Human Capital Management

The success of Citi Trends is directly attributable to our people and their passion to achieve our performance goals.

We recognize the importance of attracting and retaining top talent in our workforce that reflects the communities we serve.

We strive to make Citi Trends a diverse, inclusive and safe workplace, with opportunities for our employees to grow and develop in their careers, supported by competitive compensation, benefits and health and wellness programs, and by programs that build connections between our employees and their communities.

As of January 30, 2021, we had approximately 3,000 full-time and approximately 2,200 part-time employees.

Of these employees, approximately 4,300 are employed in our stores and the remainder are employed in our distribution centers, buying offices and corporate office.

We are not a party to any collective bargaining agreements, and none of our employees are represented by a labor union.

Diversity and Inclusion .

We believe that a diverse and inclusive team is critical to our success.

We strive to foster an intentionally inclusive, diverse and productive working environment where our employees are valued and respected.

We continue to focus on attracting, developing and retaining team members that reflect the diverse communities we serve.

As of January 31, 2021, nearly 80% of our employees are African American or Latinx and 83% of our employees are female.

Citi Trends embraces diversity and is committed to continued improvements throughout the Company.

The Compensation Committee of the Board provides oversight of the Company’s diversity and inclusion programs and key metrics associated with the programs.

Additionally, the newly formed Corporate Social Responsibility Committee of the Board will assist in developing processes to achieve the Company’s diversity objectives.

Health, Safety and Wellness .

The success of our business is fundamentally connected to the well-being of our people.

Accordingly, we are committed to the health, safety and wellness of our employees.

In response to the COVID-19 pandemic, we implemented significant changes that we determined were in the best interest of our employees as well as the communities in which we operate.

On March 20, 2020, the Company temporarily closed all of its retail store locations and distribution centers.

Beginning April 24, 2020, the Company started to reopen stores in select states in accordance with state and local government guidelines and implemented additional safety measures for employees and customers.

As of July 18, 2020, the Company safely reopened all of its stores and distribution centers.

As of the end of fiscal 2020, many of the employees at the Company’s corporate and buying offices continue to work from home.

Compensation and Benefits .

We provide competitive compensation and comprehensive benefits programs to help meet the needs of our employees.

In addition to salaries, these programs (which vary by position) include annual bonuses, stock awards, a 401(k) match, healthcare and insurance benefits, paid time off and personal/family leave.

Training and Development .

Our employees are critical to achieving our goals, and we strive to hire employees with high energy levels and motivation.

We have well-established store operating policies and procedures and an extensive 30-day in-store training program for new store managers and assistant managers.

Sales associates also participate in a 14-day customer service and store procedures training program, which is designed to enable them to assist customers in a friendly and helpful manner.

Our training and development programs provide employees with the resources they need to help achieve their career goals, build management skills and lead their organizations.

Community Involvement .

We believe that building connections between our employees, their families and our communities creates a more meaningful, fulfilling and enjoyable workplace.

We formed the CITI cares (cares:

Citi Trends Against Racism Employee Solutions) Council in August 2020 to create and oversee initiatives of change that will have a positive impact in the lives of our customers and employees.

The CITI cares Council is a diverse group of associates who are passionate about making a difference.

They represent every division and level of the company, including both genders, multiple ethnicities and different geographies.

The purpose of the CITI cares Council is to collaborate with community leaders, organizations, individuals and established programs in local underserved communities on the core areas of education, healthcare, employment and exposure.

Additionally, Citi Trends has been engaged in multiple community programs.

In February 2021, we launched our Black History Makers program to honor Black entrepreneurs who are making an impact in their communities.

The program is designed to increase awareness of Black-owned businesses and will provide ten $5,000 grants to Black business owners.

The nature of our business is seasonal.

Historically, sales in the first and fourth quarters have been higher than sales achieved in the second and third quarters of the fiscal year.

Expenses and, to a greater extent, operating income, vary by quarter.

Results of a period shorter than a full year may not be indicative of results expected for the entire year due to changes in our business, consumer spending patterns, and the macroeconomic environment, including those resulting from the COVID-19 pandemic.

Furthermore, the seasonal nature of our business may affect comparisons between periods.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business