Citi Trends Inc. (CTRN) recently reported sluggish fiscal 2011 first-quarter results. The company reported a net income of $12.1 million compared with $12.4 million in the year-ago quarter. Net income per share came in at 83 cents versus 86 cents in the year-ago quarter. Earnings failed to beat the Zacks Consensus Estimate of 87 cents per share.
During the quarter, Citi Trends recorded a 4.3% year-over-year growth in net sales to $189.2 million, missing the Zacks Consensus Estimate of $203 million. Comparable store sales dropped 6.9% in the first quarter of fiscal 2011 against a comparable store sales increase of 9.6% in the prior-year period.
Citi Trends’ gross profit logged a growth of 3.7% year over year to $75.1 million, mainly due to slightly higher sales. Gross margin came in at 39.7% compared with 39.9% in prior-year quarter. Selling, general and administrative expenses increased 5.4% year over year to $51.1 million. Accordingly, the company posted a fall of 4.0% in operating income to $18.4 million compared with $19.2 million in the year-ago period.
Citi Trends ended the year with a debt-free balance sheet, and cash and cash equivalents of $76.8 million compared with $83.3 million in the first quarter of fiscal 2010. Shareholders’ equity at the end of the quarter was $217.8 million compared with $195.3 million in the year-ago period.
The company expects earnings in the range of $1.25 to $1.35 per share for fiscal 2011 based on same-store sales decline of 1% to 2%.
Citi Trends is a value-priced retailer of urban fashion apparel and accessories including nationally recognized brands, private-label products and has a limited assortment of home décor items. The company currently operates 473 stores across 27 states in the Southeast, Mid-Atlantic and Midwest regions as well as in the states of Texas and California.
Citi Trends has a sound, zero-debt balance sheet with a robust cash horde. This offers the company the financial flexibility to drive future top-line expansion.
However, the company operates in a highly fragmented specialty retail sector and faces intense competition from larger off-price rivals, such as The TJX Companies Inc. (TJX) and Ross Stores Inc. (ROST), and mass merchants including Wal-Mart Stores Inc. (WMT) and Kmart.
The shares of Citi Trends currently retain a short-term Zacks #5 Rank (Strong Sell rating) while we hold a long-term Neutral recommendation on the company.
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