Item 5. Market for Registrant’s Common Equity
ITEM 5.
MARKET FOR REGISTRANT ’ S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Our common stock is traded on The NASDAQ Stock Market under the symbol “ CTRN. ” On March 31, 2025, there were 9 holders of record and approximately 3,400 beneficial holders of our common stock.
Dividends
In 2020, the Company announced it would suspend quarterly cash dividends. Any determination to declare and pay cash dividends in the future will be made by the Company ’ s board of directors.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers.
The number of shares of common stock repurchased by the Company during the fourth quarter of 2024 and the average price paid per share are as follows:
Total number of
Maximum number (or
shares purchased as
approximate dollar value)
Total number
Average
part of publicly
of shares that may yet be
of shares
price paid
announced plans or
purchased under the
Period
purchased
per share (1)
programs (2)
plans or programs (2)
November (11/3/24 - 12/2/24)
—
$
—
—
$
50,011,482
December (12/3/24 - 1/1/25)
77,965
$
25.48
77,965
$
48,026,585
January (1/2/25 - 2/1/25)
67,273
$
26.62
67,273
$
46,237,233
Total
145,238
145,238
(1) Includes commissions for the shares repurchased under the stock repurchase program.
(2) On November 30, 2021, the Company announced that its board of directors approved a $30 million stock repurchase
program. On March 15, 2022 the company announced that its board of directors approved an additional $30 million
stock repurchase program. The programs do not have expiration dates.
Equity Compensation Plan Information.
See Item 12 of this Report.
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Stock Performance Graph
Set forth below is a line graph comparing the last five years ’ percentage change in the cumulative total stockholder return on shares of our common stock against the cumulative total returns of the Russell 2000 Index and the Dow Jones US Specialty Retailers Index. This graph assumes that $100 was invested on January 31, 2020 in our common stock and in each of the market index and the industry indexes, and that all cash distributions were reinvested. Our common stock price performance shown on the graph is not indicative of future price performance.
Total Return Analysis
1/20
1/21
1/22
1/23
1/24
1/25
Citi Trends, Inc.
100.00
254.38
210.06
135.73
116.11
111.67
Russell 2000
100.00
130.17
128.60
124.26
127.24
151.53
Dow Jones US Specialty Retailers
100.00
140.92
142.18
135.59
159.02
235.34
ITEM 6. RESERVED
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ITEM 7.
MANAGEMENT ’ S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our audited consolidated financial statements and the related notes included elsewhere in this Annual Report on Form 10-K. This discussion may contain forward-looking statements that involve risks and uncertainties. As a result of many factors, such as those set forth under the section entitled “ Risk Factors ” and elsewhere in this Report, our actual results may differ materially from those anticipated in these forward-looking statements.
Discussions of our results of operations for the year ended February 3, 2024 compared to the year ended January 28, 2023 that have been omitted under this item can be found in "Part II, Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the year ended February 3, 2024, which was filed with the United States Securities and Exchange Commission on April 18, 2024.
Executive Overview
We are a leading off-price value retailer of apparel, accessories and home trends primarily for African American 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. As of February 1, 2025, we operated 591 stores in urban, suburban and rural markets in 33 states.
Fiscal 2024 Business Highlights
● After a mid-year fiscal 2024 CEO transition, began transformation efforts with significant improvement in financial results in the second half of the year. Comparable stores sales in the first half of 0.7% compared to second half comparable store sales of 6.1%.
● Leveraged extensive, recent customer insights study to sharpen our focus on and understanding of our African American customer base
● Elevated our in-store experience with our updated, three-tiered product assortment strategy, with balanced good-better-best offerings, trend-right fashion and the addition of extreme value branded treasures, all focused on African American families
● Implemented improved allocation methodology and updated in-season markdown approach to ensure improved inventory management and fresh product for our customers
● Opened 1 new store, remodeled 35 stores and closed 12 stores; ended the year with 23% of the fleet in our updated store format
Fiscal 2024 Financial Highlights
● Total sales of $753.1 million; comparable store sales increase of 3.4% vs fiscal 2023
● Net loss of ($43.2) million, including the impact of $16.5 million of valuation allowance on deferred tax asset and impact of $16.5 million of strategic investments to fuel the transformation
● Cash of $61.1 million at the end of the fiscal year, with no debt
Our Strategy
We believe that Citi Trends is in a unique position to serve our loyal customer base, with a long runway for store growth and a motivated leadership team supported by a healthy balance sheet. As described in more detail in “ Item 1 – Business, ” we have identified five strategic areas of focus that we believe will accelerate our sales and earnings growth over the next few years:
Offer Compelling Value Proposition . We believe that we can drive increases in traffic and basket by focusing on our three-tiered product strategy of opening prices, core value product and familiar brands at incredible values, all focused on the wants and needs of our African American customers. We believe that delivering newness and freshness results in high customer frequency. Our expanded offering of “ treasures ” , or extreme value product offerings, further strengthens this strategy and deepens our relationship with our customers.
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Focus on the African American Customer. We believe that a sharpened focus on our African American customers will drive improved sales through a more focused product assortment designed to address their fashion needs and wants, supporting their ability to express themselves through the creation of their own style. We believe that our refined understanding of our customer will drive increased traffic and conversion in our stores.
Consistent Operational Excellence . We believe that the work we are doing to develop fundamental retail practices and to ensure consistent execution will produce strong, sustainable financial results while positioning us for future, accelerated growth.
Growth . We believe that we can maximize the productivity of our existing 591 stores located in the heart of African American neighborhoods by executing on the three areas of focus stated above and by continued refinement of our store format. While we believe that maximizing the productivity of our existing fleet provides significant opportunity for sales and earnings growth, we continue to believe that Citi Trends has the potential to grow, and we expect to accelerate square footage expansion in the range of 6% to 10% annually over time.
People. We believe that our teams across the organization, led by Ken Seipel, our Chief Executive Officer, and their ability to consistently execute while staying focused on our African American customer, providing great product and a welcoming in-store environment, are a key differentiator for our business and are key to the continued transformation of our company.
We strongly believe that our business strategy centered around these five areas will accelerate our long-term sales and earnings growth.
Uncertainties and Challenges
General Economic Conditions
We expect that our operations in the short-term will continue to be influenced by general economic conditions, including on-going inflationary pressures, new tariff programs and changes in consumer sentiment. We continue to monitor the impacts on our business of unemployment levels, wage inflation, interest rates, inflation rates, housing costs, energy costs, consumer confidence, consumer perception of economic conditions, costs to source our merchandise and supply chain disruptions .
Seasonality and Weather Conditions
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. In addition, sales of clothing are directly impacted by the timing of the seasons to which the clothing relates. While we have expanded our product offerings to balance discretionary with non-discretionary products, traffic to our stores is still influenced by weather patterns to some extent.
Basis of Presentation
Net sales consist of store sales and layaway fees, net of returns by customers. Cost of sales consists of the cost of products we sell and associated freight costs. Depreciation is not considered a component of cost of sales and is included as a separate line item in the consolidated statements of operations. Selling, general and administrative expenses are comprised of store costs, including payroll and occupancy costs, corporate and distribution center costs and advertising costs. The years ended February 1, 2025, February 3, 2024 and January 28, 2023 are referred to herein as fiscal 2024, fiscal 2023 and fiscal 2022, respectively. Fiscal years 2024 and 2022 are each comprised of 52 weeks, while fiscal 2023 is comprised of 53 weeks.
Results of Operations
The following discussion of our financial performance is based on the consolidated financial statements set forth in Item 8 of this Report. The nature of our business is seasonal. Results may fluctuate due to changes in our business, consumer spending patterns, and the macroeconomic environment. Furthermore, the seasonal nature of our business may affect comparisons between periods.
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Net Sales and Additional Operating Data
The following table provides selected consolidated statement of operations data expressed both in dollars and as a percentage of net sales:
Fiscal Year
2024
2023
2022
(dollars in thousands)
Statement of Operations Data
Net sales
$
753,079
100.0
%
$
747,941
100.0
%
$
795,011
100.0
%
Cost of sales (exclusive of depreciation)
(471,036)
(62.5)
%
(462,824)
(61.9)
%
(484,022)
(60.9)
%
Selling, general and administrative expenses
(300,173)
(39.9)
%
(284,530)
(38.0)
%
(279,177)
(35.1)
%
Depreciation
(18,822)
(2.5)
%
(18,990)
(2.5)
%
(20,595)
(2.6)
%
Asset impairment
(2,536)
(0.3)
%
(1,051)
0.1
%
—
0.0
%
Gain on sale-leasebacks
—
0.0
%
—
0.0
%
64,088
8.1
%
(Loss) income from operations
(39,488)
(5.2)
%
(19,454)
(2.6)
%
75,305
9.5
%
Interest income
2,473
0.3
%
3,874
0.5
%
1,034
0.1
%
Interest expense
(319)
(0.0)
%
(306)
(0.0)
%
(306)
(0.0)
%
(Loss) income before income taxes
(37,334)
(5.0)
%
(15,886)
(2.1)
%
76,033
9.6
%
Income tax benefit (expense)
(5,836)
(0.8)
%
3,907
0.5
%
(17,141)
(2.2)
%
Net (loss) income
$
(43,170)
(5.7)
%
$
(11,979)
(1.6)
%
$
58,892
7.4
%
The following table provides information about store activity and the change in comparable store sales for each fiscal year:
Fiscal Year
2024
2023
2022
Total stores open, beginning of year
602
611
609
New stores
1
5
12
Closed stores
(12)
(14)
(10)
Total stores open, end of year
591
602
611
Comparable store sales increase (decrease) (1)
3.4
%
(6.8)
%
(22.1)
%
(1) Stores included in the comparable store sales calculation for any year are those stores that were open for at least 14 full consecutive months without closure for more than seven days within the same fiscal month. Remodeled and relocated stores are included in the comparable store sales results, while stores that are closed permanently or for an extended period are excluded from the comparable store sales results.
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Key Operating Statistics
We measure performance using key operating statistics. One of the main performance measures we use is comparable store sales growth. We define a comparable store as a store that has been open for at least 14 full consecutive months without closure for more than seven days within the same fiscal month. Remodeled and relocated stores are included in the comparable store sales results if the selling square footage is not changed significantly, the store is not closed for more than five days in any fiscal month and the store remains in the same trade area. We also use other operating statistics, most notably average sales per store, to measure our performance. As we typically occupy existing space in established shopping centers rather than sites built specifically for our stores, store square footage (and therefore sales per square foot) varies by store. We focus on overall store sales volume as the critical driver of profitability. In addition to sales, we measure cost of sales as a percentage of sales and store operating expenses, with a particular focus on labor, as a percentage of sales. These results translate into store level contribution, which we use to evaluate overall performance of each individual store. Finally, we monitor corporate and distribution center expenses against budgeted amounts.
Fiscal 2024 Compared to Fiscal 2023
Net Sales. Net sales increased $5.1 million, or 0.7%, to $753.1 million in fiscal 2024 from $747.9 million in fiscal 2023. The increase in sales was due to a 3.4% increase in comparable store sales, as well as a decrease of $9.1 million from net store opening and closing activity. The increase in comparable store sales was the result of increased traffic, basket and conversion, particularly in the second half of the year with the implementation of our refined strategies.
Cost of Sales (exclusive of depreciation). Cost of sales increased $8.2 million, or 1.8%, to $471.0 million in fiscal 2024 from $462.8 million in fiscal 2023. As a percentage of net sales, cost of sales deleveraged 60 basis points to 62.5% in fiscal 2024 from 61.9% in fiscal 2023 driven by higher markdowns from our large, strategic inventory reset in the second quarter and higher shrink expense, partially offset by lower freight costs as a result of reduced rates from a new carrier relationship.
Selling, General and Administrative ( “ SG&A ” ) Expenses. SG&A expenses increased $15.7 million, or 5.5%, to $300.2 million in fiscal 2024 from $284.5 million in fiscal 2023. The increase was primarily due to (1) $4.1 million of merit increases for store, DC and corporate roles; (2) $3.9 million of expenses related to CEO transition and shareholder defense; (3) $3.1 million of one-time investments, such as consulting fees and store and DC labor to process off-price deals to fuel our strategic initiatives and (4) $1.8 million of store repair and maintenance costs. As a percentage of sales, SG&A expenses deleveraged 190 basis points to 39.9% in fiscal 2024 from 38.0% in fiscal 2023, due to the aforementioned expense increases.
Depreciation. Depreciation expense decreased $0.2 million to $18.8 million in fiscal 2024 from $19.0 million in fiscal 2023.
Asset Impairment . Impairment charges for fiscal 2024 related to underperforming stores totaled $2.5 million, comprised of $1.2 million for leasehold improvements and fixtures and equipment, and $1.3 million for an operating lease right-of-use asset. Impairment charges for fiscal 2023 related to underperforming stores totaled $1.0 million, comprised of $0.9 million for leasehold improvements and fixtures and equipment, and $0.1 million for an operating right of use asset.
Income Tax (Expense) Benefit. Income tax expense was $5.8 million in fiscal 2024 compared to income tax benefit of $3.9 million in fiscal 2023. The difference is attributable to the $16.5 million valuation allowance related to deferred tax assets, primarily associated with net operating loss carryforward generated in fiscal years 2023 and 2024. The cumulative losses during recent years represents sufficient negative evidence to require a valuation allowance, which will be maintained until sufficient positive evidence exists to support its reversal.
Net Loss. Net loss was $43.2 million in fiscal 2024 compared to net loss of $12.0 million in fiscal 2023, due to the factors discussed above.
Liquidity and Capital Resources
Capital Allocation
Our capital allocation strategy is to maintain adequate liquidity to support current operations while investing in opportunities to profitably grow our business, then to return excess cash to shareholders through our share repurchase programs. Our year-end cash and cash equivalents balance was $61.1 million compared to $79.7 million at the end of last year. Until required for other purposes, we maintain cash and cash equivalents in deposit or money market accounts.
Our principal sources of liquidity consist of (i) cash and cash equivalents on hand; (ii) short-term trade credit arising from customary payment terms and trade practices with our vendors; (iii) cash generated from operations on an ongoing basis; and (iv) a revolving credit facility with a $75 million credit commitment.
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Inventory
Our year-end inventory balance was $122.6 million, compared with $130.4 million at the end of fiscal 2023. The decrease was the result of our large, strategic inventory reset which led to the markdown of aged product in the second quarter plus the impact of a faster supply chain and a focus on improved inventory productivity.
Capital Expenditures
Capital expenditures in fiscal 2024 were $12.1 million, a decrease of $2.8 million from the prior year, primarily due to opening fewer stores in fiscal 2024. We anticipate capital expenditures in fiscal 2025 in the range of $18 million to $22 million, primarily for opening up to 5 new stores and remodeling approximately 50 stores, combined with continued investments in our systems and distribution centers.
Share Repurchases
In fiscal 2024 we returned $3.8 million to shareholders through share repurchases. See Part II, Item 5 of this Report and Note 6 to the Financial Statements for more information.
Revolving Credit Facility
We have a revolving credit facility that matures in April 2030 and provides a $75 million credit commitment and a $25 million uncommitted “ accordion ” feature. Additional details of the credit facility are in Note 4 to the Financial Statements. At the end of fiscal 2024, we had no borrowings under the credit facility and $2.2 million in letters of credit outstanding.
Cash Flows
Cash Flows From Operating Activities. Cash used in operating activities was $3.8 million in fiscal 2024 compared with cash used of $9.6 million in fiscal 2023. For fiscal 2024, significant sources of cash included $7.8 million reduction in inventory and a $0.1 million increase in accounts payable. Significant uses of cash include a $49.5 million decrease in accrued expenses and other-long-term liabilities due primarily to payments of operating lease liabilities.
For fiscal 2023, significant sources of cash included $3.5 million from insurance proceeds related to operating activities and a $17.9 million increase in accounts payable. Significant uses of cash included (1) a $58.3 million decrease in accrued expenses and other-long-term liabilities due primarily to payments of operating lease liabilities; (2) a $24.6 million increase in inventory due primarily to depleted inventory levels at the end of the prior year; and (3) a $3.5 million increase in income tax receivable.
Cash Flows From Investing Activities. Cash used in investing activities was $10.1 million in fiscal 2024 compared to cash used of $13.4 million in fiscal 2023. Cash used in fiscal 2024 consisted entirely of purchases of property and equipment. Cash used in fiscal 2023 consisted of $14.9 million of purchases of property and equipment, partially offset by $1.5 million from insurance proceeds related to investing activities.
Cash Flows From Financing Activities. Cash used in financing activities was $4.7 million in fiscal 2024 compared with $0.9 million in fiscal 2023. Cash used in fiscal 2024 was $3.8 million for share repurchases and $0.9 million to settle withholding taxes on the vesting of restricted stock. Cash used in fiscal 2023 was to settle withholding taxes on the vesting of restricted stock.
Cash Requirements and Commitments
Our principal cash requirements consist of (1) inventory purchases; (2) capital expenditures to invest in our growth initiatives; and (3) operational needs, including salaries, occupancy costs, taxes and other operating costs. We have also historically used cash to repurchase stock under our stock repurchase programs. Historically, we have met these cash requirements using cash flow from operations and short-term trade credit. As of February 1, 2025, our contractual commitments for operating leases totaled $289.3 million (with $60.7 million due within 12 months) and our purchase obligations for open merchandise orders totaled $138.0 million due within 12 months. See Note 8 to the Financial Statements for more information regarding lease commitments.
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Critical Accounting Estimates
Our consolidated financial statements are prepared in accordance with U.S. GAAP, which requires us to make estimates and apply judgments that affect the reported amounts. Actual results could differ from those estimates. We believe the following critical accounting policies describe the more significant judgments and estimates used in the preparation of our consolidated financial statements.
Inventory
Inventory is stated at the lower of cost (first-in, first-out basis) or net realizable value as determined by the retail inventory method for store inventory and the average cost method for distribution center inventory. Under the retail inventory method, the cost of inventory is determined by calculating a cost-to-retail ratio and applying it to the retail value of inventory. Inherent in the retail inventory calculation are certain management judgments and estimates, including, among others, merchandise markups, markdowns and shrink, which impact the ending inventory valuation at cost as well as resulting cost of sales. Merchandise markdowns are reflected in the inventory valuation when the price of an item is lowered in the stores. We estimate and record an allowance for shrink for the period between the last physical count and the balance sheet date. The estimate of shrink can be affected by changes in actual shrink trends. Inventory shrink as a percentage of sales in fiscal 2024, fiscal 2023 and fiscal 2022 was 1.7%, 1.0% and 0.7%, respectively. The allowance for inventory shrink was $5.2 million as of February 1, 2025 and $3.9 million as of February 3, 2024. As a measure of sensitivity, a ten percent change in our estimated shrink as of February 1, 2025, would not have materially impacted our cost of goods sold in fiscal 2024. Many retailers have arrangements with vendors that provide for rebates and allowances under certain conditions, which ultimately affect the value of the inventory. We do not generally enter into such arrangements with our vendors. There were no material changes in the estimates or assumptions related to the valuation of inventory during fiscal 2024.
Recent Accounting Pronouncements
In December 2023, the FASB issued ASU 2023-09, “ Improvement to Income Tax Disclosures (Topic 740) ” , which requires additional disclosures for income tax rate reconciliations, income taxes paid, and certain other tax disclosures. ASU 2023-09 is intended to enhance the transparency and decision usefulness of income tax disclosures. The amendments in ASU 2023-09 address investor requests for enhanced income tax information primarily through changes to the rate reconciliation and income taxes paid information. Adoption is required for annual periods beginning after December 15, 2024. The Company is currently evaluating the impact of this standard on its consolidated financial statements and related disclosures.
In November 2024, the FASB issued ASU 2024-03, “ Expense Disaggregation Disclosures (Topic 220): Disaggregation of Income Statement Expenses ” ( “ ASU 2024-03 ” ), which requires public entities to disclose additional information that disaggregates certain expense captions into specified categories in the Notes to the consolidated financial statements. The new standard is effective for fiscal years beginning after December 15, 2026, and interim periods after December 15, 2027, with early adoption permitted. The disclosure updates are required to be applied prospectively with the option for retrospective application. The Company is currently evaluating the impact the amended guidance will have on its disclosures.