Citi Trends Inc Q4 FY2024 earnings call

• Strategic journey: The company is in the process of three phases - repair, execute, and optimize. In the repair phase, it focused on reestablishing fundamental practices and improving product plans and retail processes. In the execute phase, it aims to develop consistent execution capabilities, improve core product selection and value equation, increase supply chain speed, reduce working capital requirements, and improve inventory turns. In the optimize phase, it prepares for business acceleration.
• Product initiatives: Fourth quarter product strategy was effective. Off - price extreme value product test drove foot traffic and sales. In 2025, key product intensification areas include big men's, women's plus size, family footwear, consumables and extreme value off - price deals. The three - tiered product strategy is gaining traction. There is also expansion in home and lifestyle categories, especially the pantry and snack category. An AI - based product allocation system is being tested and is expected to impact the business in 2025 and beyond.
• Real estate: Making good progress in remodel program, planning to remodel at least 50 stores in 2025, and has already remodeled 18 stores since the start of 2025. Conducting market studies for longer - term growth, including backfilling existing markets and entering new select markets.
• Financial position: Healthy balance sheet with $61 million of cash, no debt and no drawings on $75 million revolver. Resumed share repurchase program, repurchased shares in the fourth quarter and first quarter of 2025.

In the fourth quarter, total sales were approximately $211 million. Comparable store sales growth was 6.4%. Gross margin rate was 39.7%, a 60-basis-point expansion compared to Q4 2024. Inventories were down 6% compared to the prior year. In non - apparel, giftables, stocking stuffers, family basics and sleepwear categories performed well. On apparel, children's continued to grow and the men's division had a strong sales trend improvement. Footwear business had high - single - digit growth. Plus - size apparel had been affected by internally - controlled execution issues but is expected to improve by Q2 of 2024.

• Full year comp sales growth expected to be low - to mid - single digits.
• Full year gross margin expected to expand a minimum of 220 basis points versus 2024.
• SG&A is expected to leverage in the range of 30 basis points to 50 basis points versus 2024.
• Full year EBITDA is expected to be in the range of $5 million to $9 million, a $19 million to $23 million improvement versus fiscal 2024.
• Effective tax rate in 2025 is expected to be approximately 0%.
• Plan to open up to five new stores and close up to five stores.
• Plan to remodel approximately 50 locations in 2025.
• Full year CapEx is expected to be in the range of $18 million to $22 million.

• Macro uncertainties: New administration's potential changes in tariffs, taxes and government programs create uncertainty for the economy.
• Operational disruptions: Temporary store closures due to weather and delayed tax refunds and other macro uncertainties can impact sales.
• Inventory risks: While inventory aging has improved, there are still risks related to inventory management.

Q: Please talk about what Citi Trends is doing differently from the industry to sustain momentum, especially regarding the off - price portion of the business, where it was a year ago, where it is today, and where it's expected to be in the future.

A: Ken Seipel said that the addition of off - price to the business model and the sharpened price value equation across core products is a key unlock. Off - price currently is about 1% - 2% of the business and is growing. Long - term, it is expected to grow to around 10% of the business, with both extreme value in - season deals and end - of - season closeout type deals being additive.

Q: Walk us through the building blocks of the EBITDA increase of $19 million to $23 million, including how the low base of sales and SG&A, comp guidance, and sales flow - through work.

A: Ken Seipel said there is a low base of sales and expenses to achieve the guidance, and then a sales plan with a 25% - ish flow - through once reaching certain numbers. Heather Plutino added that it's about driving sales, expanding margin, and leveraging SG&A, with sales growth, margin expansion, and SG&A leverage contributing to the EBITDA increase