Citi Trends Inc. (CTRN), in its streak to optimize its financial performance, recently announced string of measures to boost its growth prospects by dipping investment in sections of the company that no longer contributes significantly to its growth.
As the quarterly loss per share in second-quarter 2011 widens 17 folds to 69 cents compared with the prior-period loss of 4 cents, the company has decided to slash 40 jobs at its stores, distribution centers and corporate office.
Citi Trends anticipates that staff reductions will result in an annualized savings of $3.5 million, while incurring an expenditure of approximately $800,000 against severance charges in third-quarter 2011. Including 4,900 employees in its stores and 600 in distribution and corporate office, currently the company has a total workforce of approximately 5,500.
Moreover, Citi Trends has also decided to open fewer stores than it planned before. The company will now add a total of approximately 55 new stores in fiscal 2011 and approximately 5 stores in fiscal 2012.
At the end of second-quarter 2011, the company was planning to open new stores in the range of 55 to 60 during fiscal 2011. As of July 30, 2011, Citi Trends had 482 stores.
Prior Story
Citi Trends recently reported a disappointing second-quarter 2011 results. Net loss per share came in at 69 cents versus 4 cents in the year-ago quarter, primarily due to negative comparable store sales. Moreover, net loss was higher than the Zacks Consensus Estimate of 64 cents per share.
During the quarter, Citi Trends recorded a 0.9% year-over-year growth in net sales to $130.2 million, missing the Zacks Consensus Estimate of $131.0 million. Comparable store sales dropped 11.9% in the second quarter of fiscal 2011.
Due to uncertainty hovering around sales, the company rolled back its earlier earnings guidance range of $1.25 to $1.35 per share for fiscal 2011. The company decided not to provide any guidelines unless it receives any near-term catalysts to drive sales.
Citi Trends operates in a highly fragmented specialty retail sector and faces intense competition from larger off-price rivals, such as TJX Companies Inc. (TJX) and Ross Stores Inc. (ROST), mass merchants including Wal-Mart Stores Inc. (WMT) as well as smaller specialty retailers, such as Rainbow and Dots.
Additionally, the company also competes with local off-price specialty stores, regional chains as well as traditional department stores. Consequently, this may dent the company's future growth prospects.
Citi Trends currently has a Zacks #5 Rank, implying a short-term Strong Sell rating on the stock. Moreover, our long-term recommendation on the stock is Underperform.
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