Citi Trends Inc

Previous wording

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.

Current wording

We are the leading off-price value retailer of apparel, accessories and home trends primarily for Black 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 January 31, 2026, we operated 590 stores in urban, suburban and rural markets in 33 states.

Previous wording

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:

Current wording

We believe that CITITRENDS is in a unique position to serve our loyal customer base, with a long runway for store growth and a strong 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:

Previous wording

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.

Current wording

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 Black 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.

Previous wording

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.

Current wording

Focus on the Black Customer. We believe that a sharpened focus on our Black 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.

Previous wording

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.

Current wording

Consistent Operational Excellence. We believe that the work we are doing to develop fundamental retail practices and to focus on consistent execution will produce strong, sustainable financial results while positioning us for future, accelerated growth.

Previous wording

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.

Current wording

Growth. We believe that we can maximize the productivity of our existing 590 stores located in the heart of Black communities 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 CITITRENDS has the potential to grow, and we expect to accelerate square footage expansion over time, including through potential assumptions of leases or subleases.

Previous wording

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.

Current wording

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 Black 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.

Previous wording

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.

Current wording

We are monitoring trends in general economic conditions, including on-going inflationary pressures, new and changing 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.

Previous wording

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.

Current wording

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 marketing costs. The years ended January 31, 2026, February 1, 2025 and February 3, 2024 are referred to herein as fiscal 2025, fiscal 2024 and fiscal 2023, respectively. Fiscal years 2025 and 2024 are each comprised of 52 weeks, while fiscal 2023 is comprised of 53 weeks.

Previous wording

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.

Current wording

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, the macroeconomic environment and strategic initiatives. Furthermore, the seasonal nature of our business may affect comparisons between periods.

Previous wording

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.

Current wording

Net Sales. Net sales increased $66.9 million, or 8.9%, to $820.0 million in fiscal 2025 from $753.1 million in fiscal 2024. The increase in sales was due to a 9.7% increase in comparable store sales, as well as a decrease of $5.4 million from net store opening and closing activity. The increase in comparable store sales was the result of increased transactions with increased average basket contributing to the balance.

Previous wording

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.

Current wording

Cost of Sales (exclusive of depreciation). Cost of sales increased $24.3 million, or 5.2%, to $495.3 million in fiscal 2025 from $471.0 million in fiscal 2024. As a percentage of net sales, cost of sales decreased 210 basis points to 60.4% in fiscal 2025 from 62.5% in fiscal 2024 driven by lower markdowns and lower shrink expenses since the strategic inventory reset in fiscal 2024, and lower freight expense compared to fiscal 2024.

Previous wording

Depreciation. Depreciation expense decreased $0.2 million to $18.8 million in fiscal 2024 from $19.0 million in fiscal 2023.

Current wording

Depreciation. Depreciation expense decreased $0.3 million to $18.5 million in fiscal 2025 from $18.8 million in fiscal 2024.

Previous wording

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.

Current wording

Asset Impairment. Impairment charges for fiscal 2025 related to underperforming stores totaled $0.6 million, comprised of $0.3 million for leasehold improvements and fixtures and equipment, and $0.3 million for an operating lease right-of-use asset. 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 right of use asset.

Previous wording

​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.

Current wording

Income Tax (Expense) Benefit. Income tax expense was $0.3 million in fiscal 2025 compared to income tax expense of $5.8 million in fiscal 2024. 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.

Previous wording

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.

Current wording

Net Income (Loss). Net income was $5.2 million in fiscal 2025 compared to net loss of $43.2 million in fiscal 2024, due to the factors discussed above.

Previous wording

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.

Current wording

Our capital allocation strategy is to maintain adequate liquidity to support current operations while investing in opportunities to profitably grow our business, including opportunities to accelerate growth through strategic roll-ups and synergistic acquisitions. At the discretion of our board of directors, we may also choose to return excess cash to shareholders. Our year-end cash and cash equivalents balance was $66.1 million compared to $61.1 million at the end of last year. Until required for other purposes, we maintain cash and cash equivalents in deposit or money market accounts.

Previous wording

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.

Current wording

Capital expenditures in fiscal 2025 were $22.7 million, an increase of $10.6 million from the prior year, primarily due to new stores being opened and more stores being remodeled in fiscal 2025. We anticipate capital expenditures in fiscal 2026 in the range of $35 million to $40 million, primarily for opening approximately 25 new stores and remodeling approximately 50 stores.

Previous wording

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.

Current wording

In fiscal 2025 we returned $6.3 million to shareholders through share repurchases. See Part II, Item 5 of this Report and Note 6 to the Financial Statements for more information.

Previous wording

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.

Current wording

Cash Flows From Operating Activities. Cash provided by operating activities was $21.0 million in fiscal 2025 compared with cash used of $3.8 million in fiscal 2024. For fiscal 2025, significant sources of cash included increase in net income, as well as an $8.8 million reduction in inventory. Significant uses of cash include a $55.2 million decrease in accrued expenses and other-long-term liabilities due primarily to payments of operating lease liabilities.

Previous wording

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.

Current wording

For fiscal 2024, significant sources of cash included a $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.

Previous wording

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.

Current wording

Cash Flows From Investing Activities. Cash used in investing activities was $8.5 million in fiscal 2025 compared to cash used of $10.1 million in fiscal 2024. Sources of cash in fiscal 2025 included $11.2 million from the sale of a building and $0.6 million from insurance proceeds. Cash used in fiscal 2024 consisted entirely of purchases of property and equipment.

Previous wording

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.

Current wording

Cash Flows From Financing Activities. Cash used in financing activities was $7.5 million in fiscal 2025 compared with $4.7 million in fiscal 2024. Cash used in fiscal 2025 included $6.3 million for share repurchases and $1.1 million to settle withholding taxes on the vesting of restricted stock. Cash used in fiscal 2024 included $3.8 million for share repurchases and $0.9 million to settle withholding taxes on the vesting of restricted stock.

Previous wording

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.

Current wording

Our principal cash requirements consist of (1) inventory purchases; (2) capital expenditures to invest in our growth initiatives; and (3) operational needs, including payroll, 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 January 31, 2026, our contractual commitments for operating leases totaled $309.9 million (with $63.5 million due within 12 months) and our purchase obligations for open merchandise orders totaled $161.7 million due within 12 months. See Note 8 to the Financial Statements for more information regarding lease commitments.

Previous wording

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.

Current wording

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. As a measure of sensitivity, a ten percent change in our estimated shrink as of January 31, 2026, would not have materially impacted our cost of goods sold in fiscal 2025. 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 2025.

Previous wording

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.

Current wording

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. In fiscal 2025, the Company adopted ASU 2023-09 in the current period and retrospectively. The adoption of ASU 2023-09 did not have a material impact on the Company’s consolidated financial statements as the requirements only impact annual income tax reporting disclosures in the Notes to the Company’s consolidated financial statements. Refer to “Note 5. Income Taxes” for additional information.