Citi Trends Inc

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; 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.

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

Previous wording

We are a highly differentiated off-price value retailer known for trendy fashions, great brands and amazing prices. We offer culturally relevant fashion– what we call“Cultural Cachet” – in apparel, accessories and home trends primarily for African American families in the United States. We curate a three-tiered mix of product featuring well-known brands, core product and opening price goods, with intermittent extreme value deals. Our core product styles are curated trend-right, high quality, value for the price. We offer an assortment of opening price product for the price conscious customer, all sold at competitive prices. Plus, for the treasure hunters, we often have“extreme value” product deals on well-known branded product at 50% to 75% off the manufacturer’s suggested retail price. Consumer insights research validates that our unique culturally relevant styling, and strong value for the price, fosters deep customer loyalty and high shopping frequency in the neighborhoods in which we operate.

Current wording

We are a highly differentiated off-price value retailer known for trendy fashions, great brands and amazing prices. We offer culturally relevant fashion– what we call“Cultural Cachet” – in apparel, accessories and home trends primarily for African American families in the United States. We curate a three-tiered mix of products featuring well-known brands, core products and opening price goods, with intermittent extreme value deals. Our core product styles are curated trend-right, high quality, value for the price. We offer an assortment of opening price products for the price conscious customer; all sold at competitive prices. Plus, for the treasure hunters, we often have“extreme value” product deals on well-known branded product at 50% to 75% off the manufacturer’s suggested retail price. Consumer insights research validates that our unique culturally relevant styling, and strong value for the price, fosters deep customer loyalty and high shopping frequency in the neighborhoods in which we operate.

Previous wording

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

Current wording

As of August 2, 2025, we operated 590 stores in urban, suburban and rural markets in 33 states.

Previous 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.

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 both have 52-week accounting periods. 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 and the current economic uncertainty.

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

Previous 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.

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

Previous 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.

Current wording

*Depreciation.*Depreciation expense decreased $0.2 million, or 4.9%, to $4.5 million in the second quarter of 2025 from $4.8 million in the second quarter of 2024 due to the sale of our corporate office building.

Previous wording

*Income Tax Benefit/Expense.*There was no income tax expense in the first quarter of 2025 compared to a tax benefit of $2.8 million in the first quarter of 2024. For the first quarter of 2025 and the first quarter of 2024, we used the annual effective tax rate to determine income tax expense based upon interim period results.

Current wording

*Income Tax Benefit.*There was no income tax benefit in the second quarter of 2025 compared to a benefit of $6.0 million in the second quarter of 2024. For the second quarter of 2025 and the second quarter of 2024, we used the annual effective tax rate to determine income tax benefit based upon interim period results.

Previous 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.

Current wording

*Net Income (Loss).*Net income was $3.8 million in the second quarter of 2025 compared to net loss of $18.4 million in the second quarter of 2024 due to the factors discussed above.

Previous 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

Current wording

*Cost of Sales (exclusive of depreciation).*Cost of sales (exclusive of depreciation) increased $0.5 million, or 0.2%, to $236.4 million in the first twenty-six weeks of 2025 from $235.9 million in the same period of 2024. Cost of sales as a percentage of sales decreased to 60.2% in the first twenty-six weeks of 2025 from 65.0% in the same period of 2024. The 480 basis-point decrease was driven by a 250 basis points decrease in markdowns, a 130 basis points decrease in shrink, and a 100 basis points decrease in other cost of sales.

Previous 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.

Current wording

*Selling, General and Administrative Expenses.*Selling, general and administrative expenses increased $5.8 million, or 3.9%, to $153.8 million in the first twenty-six weeks of 2025 from $148.0 million in the same period of 2024. The increase was primarily driven by stores selling and advertising expenses of $2.2 million, distribution center costs of $2.2 million, and corporate expenses (primarily incentive compensation) of $1.4 million. As a percentage of sales, Selling, general and administrative expenses decreased to 39.2% in the first twenty-six weeks of 2025 from 40.8% in the first twenty-six weeks of 2024, due to the aforementioned items.

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 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.

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 stockholders through our repurchase programs. Our quarter-end cash and cash equivalents balance was$50.4 million compared to cash and cash equivalents of $59.3 million at the end of the second quarter last year. Until required for other purposes, we maintain cash and cash equivalents in deposit or money market accounts.

Previous 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.

Current wording

Capital expenditures in the first twenty-six weeks of 2025 were $7.7 million, an increase of $2.1 million over the first twenty-six weeks of 2024, as we increased our investments in new stores and remodels. We anticipate capital expenditures in fiscal 2025 to be in the range of $22 million to $25 million, primarily for the opening of three new stores and remodeling existing stores, combined with ongoing investments in our systems.

Previous 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.

Current wording

In the first half of fiscal 2025, we returned $6.3 million to stockholders through share repurchases. See Part II, Item 2 of this Report and Note 8 to the Financial Statements for more information.

Previous 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.

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 second 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 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.

Current wording

Significant uses of cash from operating activities in the first twenty-six weeks of 2025 included (1) a $29.6 million decrease in accrued expenses and other long-term liabilities (compared to a $21.9 million decrease in the first twenty-six weeks of 2024) due primarily to payments of operating lease liabilities; (2) a $9.4 million increase in prepaid and other current assets (compared to a $6.1 million dollar increase in the first twenty-six weeks of 2024); and (3) a $7.1 million decrease in accounts payable (compared to a $10.0 million increase in the same period last year).

Previous 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.

Current wording

Cash Flows From Investing Activities. Cash provided by investing activities was $3.5 million in the first twenty-six weeks of 2025 compared to cash used of $5.6 million in the same period last year. Sources of cash of $11.2 million in the first 26 weeks of 2025 was from the sale of a building. Cash used of $7.7 million in the first twenty-six weeks of fiscal 2025 and $5.6 million in the first twenty-six weeks of fiscal 2024 consisted of purchases of property and equipment.

Previous wording

Cash Flows From Financing Activities. Cash used in financing activities was $6.4 million in the first quarter of 2025 compared to $0.3 million in the first quarter of 2024. Cash used in the first quarter of 2025 was $0.1 million to settle withholding taxes on the vesting of restricted stock and $6.3 million for share repurchases, compared to $0.3 million used in the first quarter of 2024 to settle withholding taxes on the vesting of restricted stock.

Current wording

Cash Flows From Financing Activities. Cash used in financing activities was $7.1 million in the first twenty-six weeks of 2025 compared to $0.9 million in the same period last year. Cash used in the first twenty-six weeks of fiscal 2025 was $0.8 million to settle withholding taxes on the vesting of restricted stock and $6.3 million for share repurchases, compared to $0.9 million used in the first twenty-six weeks of fiscal 2024 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 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.

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 August 2, 2025, our contractual commitments for operating leases totaled $217.5 million (with $36.2 million due within 12 months). See Note 11 to the Financial Statements for more information regarding lease commitments.