Citi Trends Inc

Previous wording

Except for specific historical information, many of the matters discussed in this Form 10-Q may express or imply projections of revenues or expenditures, statements of plans and objectives for future operations, growth or initiatives, statements of future economic performance, capital allocation expectations or statements regarding the outcome or impact of pending or threatened litigation. These, and similar statements, are forward-looking statements concerning matters that involve risks, uncertainties and other factors that may cause the actual performance of the Company to differ materially from those expressed or implied by these statements. All forward-looking information should be evaluated in the context of these risks, uncertainties and other factors. The words“believe,” “anticipate,” “project,” “plan,” “expect,” “estimate,” “objective,” “forecast,” “goal,” “intend,” “could,” “will likely result,” or“will continue” and similar words and expressions generally identify forward-looking statements, although not all forward-looking statements contain such language. The Company believes the assumptions underlying these forward-looking statements are reasonable; however, any of the assumptions could be inaccurate, and therefore, actual results may differ materially from those projected in the forward-looking statements.

Current wording

Except for specific historical information, many of the matters discussed in this Form 10-Q may express or imply projections of revenues or expenditures, statements of plans and objectives for future operations, growth or initiatives, statements of future economic performance, capital allocation expectations or statements regarding the outcome or impact of pending or threatened litigation. These, and similar statements, are forward-looking statements, as defined in the Private Securities Litigation Reform Act of 1995, concerning matters that involve risks, uncertainties and other factors that may cause the actual performance of the Company to differ materially from those expressed or implied by these statements. All forward-looking information should be evaluated in the context of these risks, uncertainties and other factors. The words“believe,” “anticipate,” “project,” “plan,” “expect,” “estimate,” “objective,” “forecast,” “goal,” “intend,” “could,” “will likely result,” or“will continue” and similar words and expressions generally identify forward-looking statements, although not all forward-looking statements contain such language. The Company believes the assumptions underlying these forward-looking statements are reasonable; however, any of the assumptions could be inaccurate, and therefore, actual results may differ materially from those projected in the forward-looking statements.

Previous wording

The factors that may result in actual results differing from such forward-looking information include, but are not limited to: uncertainties relating to general economic conditions, including inflation, energy and fuel costs, unemployment levels, and any deterioration whether caused by acts of war, terrorism, political or social unrest (including any resulting store closures, damage or loss of inventory) or other factors; changes in market interest rates and market levels of wages; impacts of natural disasters such as hurricanes; uncertainty and economic impact of pandemics, epidemics or other public health emergencies; transportation and distribution delays or interruptions; changes in freight rates; the Company’s ability to attract and retain workers; the Company’s ability to negotiate effectively the cost and purchase of merchandise; inventory risks due to shifts in market demand; the Company’s ability to gauge fashion trends and changing consumer preferences; consumer confidence and changes in consumer spending patterns; competition within the industry; competition in our markets; the duration and extent of any economic stimulus programs; changes in product mix; interruptions in suppliers’ businesses; the impact of the cyber disruption we identified on January 14, 2023, including legal, reputational, financial and contractual

Current wording

The factors that may result in actual results differing from such forward-looking information include, but are not limited to: uncertainties relating to general economic conditions, including inflation, energy and fuel costs, unemployment levels, and any deterioration whether caused by acts of war, terrorism, political or social unrest (including any resulting store closures, damage or loss of inventory) or other factors; changes in market interest rates and market levels of wages; the imposition of new taxes on imports, new tariffs and changes in existing tariff rates; the imposition of new trade restrictions and changes in existing trade restrictions; impact of natural disasters such as hurricanes; uncertainty and economic impact of pandemics, epidemics or other public health emergencies; transportation and distribution delays or interruptions; changes in freight rates; the Company’s ability to attract and retain workers; the Company’s ability to negotiate effectively the cost and purchase of merchandise; inventory risks due to shifts in market demand; the Company’s ability to gauge fashion trends and changing consumer preferences; consumer confidence and changes in consumer spending patterns; competition within the industry; competition in our markets; the duration and extent of any economic stimulus programs; changes in product mix; interruptions in suppliers’ businesses; risks related to cybersecurity, data privacy and intellectual property; temporary changes in demand due to weather patterns; seasonality of the Company’s business; the results of pending or threatened litigation; delays associated with building, opening, remodeling and operating new stores; delays associated with building, opening or expanding new or existing distribution centers; and other factors described in the section titled“Item 1A. Risk Factors” and elsewhere in the Company’s Annual Report on Form 10-K for the fiscal year ended February 1, 2025 and in Part II,“Item 1A. Risk Factors” and elsewhere in the Company’s Quarterly Reports on Form 10-Q and any amendments thereto and in the other documents the Company files with the SEC, including reports on Form 8-K.

Previous wording

We are a leading specialty value retailer of apparel, accessories and home trends for way less spend primarily for African American and multicultural 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 November 2, 2024, we operated 593 stores in urban, suburban and rural markets in 33 states.

Current wording

As of May 3, 2025, we operated 591 stores in urban, suburban and rural markets in 33 states.

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, which are particularly impactful to the communities we serve. Given the macro-economic environment, we expect low-income families to remain under pressure and to tightly manage their discretionary spend through the remainder of fiscal 2024. In addition, 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 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.

Previous wording

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 include more non-apparel goods, traffic to our stores is still influenced by weather patterns to some extent.

Current wording

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 product, traffic to our stores is still influenced by weather patterns to some extent.

Previous wording

The following discussion contains references to fiscal years 2024 and 2023, which represent fiscal years ending or ended on February 1, 2025 and February 3, 2024, respectively. Fiscal 2024 has a 52-week accounting period and fiscal 2023 had a 53-week accounting period. This discussion and analysis should be read with the unaudited condensed consolidated financial statements and the notes thereto contained in Part 1, Item 1 of this Report.

Current wording

The following discussion contains references to fiscal years 2025 and 2024, which represent fiscal years ending or ended on January 31, 2026 and February 1, 2025, respectively. Fiscal 2025 and fiscal 2024 have a 52-week accounting period. This discussion and analysis should be read with the unaudited condensed consolidated financial statements and the notes thereto contained in Part I, Item 1 of this Report.

Previous wording

The following discussion of the Company’s financial performance is based on the unaudited condensed consolidated financial statements set forth herein. 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 as a result of the seasonality of our business, among other things.

Current wording

The following discussion of the Company’s financial performance is based on the unaudited condensed consolidated financial statements set forth herein. 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 as a result of the seasonality of our business and the current economic uncertainty.

Previous wording

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.

Current wording

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 the overall performance of each individual store. Finally, we monitor corporate and distribution center expenses against budgeted amounts.

Previous wording

*Cost of Sales (exclusive of depreciation).*Cost of sales (exclusive of depreciation) increased $11.9 million, or 3.6%, to $343.7 million in the first thirty-nine weeks of 2024 from $331.8 million in the same period of 2023. Cost of sales as a percentage of sales increased to 63.4% in the first thirty-nine weeks of 2024 from 62.3% in the same period of 2023. The 110 basis points increase was driven by an increase of 120 basis points of markdowns and a 100 basis points increase in shrink, partially offset by a decrease of 50 basis points of freight and a decrease of 60 basis points in other cost of sales.

Current wording

*Cost of Sales (exclusive of depreciation).*Cost of sales (exclusive of depreciation) increased $7.6 million, or 6.6%, to $121.9 million in the first quarter of 2025 from $114.3 million in the first quarter of 2024. Cost of sales as a percentage of sales

Previous wording

*Selling, General and Administrative Expenses.*Selling, general and administrative expenses increased $12.7 million, or 6.1%, to $222.7 million in the first thirty-nine weeks of 2024 from $210.0 million in the same period of 2023. The increase was primarily driven by one-time CEO transition related expenses of $3.2 million, corporate expenses (primarily payroll, insurance and professional fees) of $6.5 million, stores selling and advertising expense of $4.7 million, and distribution center costs of $0.3 million, partially offset by lower incentive compensation expense of $2.0 million. As a percentage of sales, Selling, general and administrative expenses increased to 41.1% in the first thirty-nine weeks of 2024 from 39.4% in the first thirty-nine weeks of 2023, due to the aforementioned items.

Current wording

*Selling, General and Administrative Expenses.*Selling, general and administrative expenses increased $0.7 million, or 0.9%, to $74.9 million in the first quarter of 2025 from $74.2 million in the first quarter of 2024. The increase was primarily due to an increase in distribution center expenses and incentive compensation accrual, partially offset by lower corporate expenses. As a percentage of sales, selling, general and administrative expenses decreased to 37.1% in the first quarter of 2025 from 39.8% in the first quarter of 2024.

Previous wording

*Depreciation.*Depreciation expense increased $0.1 million, or 0.1%, to $4.8 million in the third quarter of 2024 from $4.7 million in the third quarter of 2023.

Current wording

*Depreciation.*Depreciation expense decreased $0.4 million, or 8.8%, to $4.4 million in the first quarter of 2025 from $4.8 million in the first quarter of 2024.

Previous wording

*Net Loss.*Net loss was $7.2 million in the third quarter of 2024 compared to net loss of $3.9 million in the third quarter of 2023 due to the factors discussed above.

Current wording

*Net Income/Loss.*Net income was $0.9 million in the first quarter of 2025 compared to net loss of $3.4 million in the first quarter of 2024 due to the factors discussed above.

Previous wording

Our capital allocation strategy is to maintain adequate liquidity to prioritize investments in opportunities to profitably grow our business and maintain current operations, then to return excess cash to shareholders through our repurchase programs. Our quarter-end cash and cash equivalents balance was$38.9 million compared to cash and cash equivalents of $59.7 million at the end of the third quarter 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 prioritize investments in opportunities to profitably grow our business and maintain current operations, then to return excess cash to shareholders through our share repurchase programs. Our quarter-end cash and cash equivalents balance was$41.6 million compared to $58.2 million at the end of the first quarter of 2024. Until required for other purposes, we maintain cash and cash equivalents in deposit or money market accounts.

Previous wording

Capital expenditures in the first thirty-nine weeks of 2024 were $7.6 million, a decrease of $4.0 million over the first thirty-nine weeks of 2023, as we pared back our investments in new stores and remodels. We anticipate capital expenditures in fiscal 2024 to be in the range of $14 million to $18 million, primarily for the opening of one new store and remodeling existing stores, combined with ongoing investments in our systems.

Current wording

Capital expenditures in the first quarter of 2025 were $2.1 million, an increase of $0.5 million from the first quarter of 2024, as we invest in more existing store remodels. We anticipate capital expenditures in fiscal 2025 of approximately $20 million, primarily for opening up to five new stores and remodeling approximately 50 stores, combined with ongoing investments in various technology platforms.

Previous wording

We did not repurchase any shares of our common stock in the first thirty-nine weeks of fiscal 2024 or fiscal 2023. See Part II of this Report and Note 8 to the Financial Statements for more information.

Current wording

In the first quarter of fiscal 2025, we returned $6.3 million to shareholders through share repurchases. See Part II, Item 2 of this Report and Note 7 to the Financial Statements for more information.

Previous wording

We have a revolving credit facility that matures in April 2026 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 the third quarter of 2024, we had no borrowings under the credit facility and $1.4 million in letters of credit outstanding.

Current wording

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 the first quarter of 2025, we had no borrowings under the credit facility and $2.2 million in letters of credit outstanding.

Previous wording

Significant uses of cash from operating activities in the first thirty-nine weeks of 2024 included (1) a $35.9 million decrease in accrued expenses and other long-term liabilities (compared to a $45.5 million decrease in the first thirty-nine weeks of 2023) due primarily to payments of operating lease liabilities; (2) a $17.9 million decrease in accounts payable (compared to a $2.3 million decrease in the first thirty-nine weeks of 2023); and (3) a $2.3 million increase in prepaid and other current assets (compared to a $1.7 million dollar decrease in the same period last year).

Current wording

Significant uses of cash during the first quarter of 2025 included (1) a $21.9 million decrease in accounts payable (compared to a decrease of $28.1 million in the first quarter of 2024) due primarily to timing of vendor payments; and (2) a decrease of $19.4 million in accrued expenses and other long-term liabilities (compared to a decrease of $14.5 million in the first quarter of 2024) due primarily to payments of operating lease liabilities.

Previous wording

Cash Flows From Investing Activities. Cash used in investing activities was $7.6 million in the first thirty-nine weeks of 2024 compared to cash used of $10.1 million in the same period last year. Cash used in the first thirty-nine weeks of fiscal 2024 and fiscal 2023 consisted of purchases of property and equipment.

Current wording

Cash Flows From Investing Activities. Cash used in investing activities was $2.1 million in the first quarter of 2025 compared to $1.6 million in the first quarter of 2024. Cash used in the first quarter of 2025 and 2024 consisted of purchases of property and equipment.

Previous wording

Our principal cash requirements consist of (1) inventory purchases; (2) capital expenditures to invest in our infrastructure; and (3) operational needs, including salaries, occupancy costs, taxes and other operating costs. We may also use cash to fund any share repurchases, make any required debt payments and satisfy other contractual obligations. Historically, we have met these cash requirements using cash flow from operations and short-term trade credit. As of November 2, 2024, our contractual commitments for operating leases totaled $225.2 million (with $49.4 million due within 12 months). See Note 10 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 infrastructure; and (3) operational needs, including salaries, occupancy costs, taxes and other operating costs. We may also use cash to fund any share repurchases, make any required debt payments and satisfy other contractual obligations. Historically, we have met these cash requirements using cash flow from operations and short-term trade credit. As of May 3, 2025, our contractual commitments for operating leases totaled $220.4 million (with $50.4 million due within 12 months). See Note 10 to the Financial Statements for more information regarding lease commitments.