Savannah’s Citi Trends Continues Growth and Strong Profit Picture

Last Updated on Tuesday, 22 March 2011 09:24 Written by From Staff Reports Wednesday, 02 February 2011 15:37

SBJ Staff Report

March 21, 2011 – In its unassuming headquarters just west of MLK Jr. Blvd in Savannah’s Historic District, locals walk and drive by not realizing that one the South’s most successful clothing companies is located in their neighborhood.

That is, unless they’re trading on the NASDAQ stock exchange, and tracking the acquisitions of major institutional investors, including Warren Buffet.

Citi Trends, Inc. (NASDAQ: CTRN) reported the company’s results for its fourth quarter and its fiscal year ended Jan. 29, 2011, and the numbers are good overall, despite sales volume impacts due to the economy. Individual monthly performance was also impacted by delays in federal unemployment checks which affect the disposal income of a portion of the company’s core customer base.

Total sales in the fourth quarter ended Jan. 29, 2011 increased 1.3 percent to $172.0 million compared with $169.8 million in the quarter ended January 30, 2010.

And, the company opened three stores in the fourth quarter of 2010, reaching a total store count of 461 at the end of the year. In addition, the company converted 15 of its stores to its new Citi Lights prototype format in January 2011, and now has a total of 25 stores operating under the new format. For the year, the Company opened 60 stores, relocated or expanded 13 others, and closed 2 stores in 2010.

Total sales for the fiscal year ended Jan. 29, 2011 increased 12.8 percent to $622.5 million compared with $551.9 million in the fiscal year ended Jan. 30, 2010, though comparable store sales decreased 1.8 percent for the full year.

Net income was $20.9 million in 2010 compared with $19.7 million in the prior year. Earnings per diluted share increased to $1.44 in 2010 compared to $1.36 in 2009, aided, however, by a new accounting procedure of capitalizing freight costs.

Prior to the fourth quarter, the company’s policy was to expense the cost of inbound freight associated with the delivery of inventory to the company’s distribution centers in the period incurred, rather than capitalizing such costs as a component of inventory and expensing them as the related inventory was sold. In the fourth quarter of 2010, the company began to capitalize freight costs as a component of the cost of inventory. The impact of this adjustment in the fourth quarter was a non-recurring reduction in cost of sales of $2.7 million and a resulting increase in net income of $1.8 million, or $0.12 per diluted share.

The fourth quarter was challenging. Comparable store sales decreased 11.4 percent in the fourth quarter, particularly weak in December due largely to a delay in the government’s distribution of extended unemployment benefits until just before Christmas. This resulted in a significant shortfall in sales of long denim against a heavy promotional environment by competitors including a going-out-of-business sale event by a major competitor.

Sales in January were negatively impacted by a later income tax refund season due to a lack of refund anticipation loan availability for the company’s customers.

Net income in the fourth quarter of 2010 was $9.4 million compared with $11.3 million in last year’s fourth quarter. Earnings per diluted share decreased to $0.64 in the fourth quarter of 2010 compared with $0.78 in the fourth quarter of 2009. Financial results for the fourth quarter of 2010 included an immaterial correction of an error related to an accounting policy.

The company estimates fiscal 2011 earnings of approximately $1.40 to $1.50 per diluted share, including an anticipated comparable store sales increase of approximately 2 percent and an increase in selling square footage of at least 15 percent. Through the first five-plus weeks of the new fiscal year, comparable store sales are down 2 percent, versus an 11 percent increase during the same period of time last year.