Citi Trends Inc. CTRN appears to be an attractive choice for investors, given its strong fundamentals, solid financial position and impressive earnings results.
Citi Trends’ practice of offering merchandise at about 20–70% discount compared with other department and specialty stores’ regular prices, appeals more to value-conscious customers looking for cheaper alternatives.
Further, we are impressed with the company’s strategies such as better utilization of floor area, enhancement of merchandise margins and efficient inventory management which have been aiding a turnaround in its operating performance. This was further evident from Citi Trends’ better-than-expected results in the second quarter of fiscal 2015.
Looking ahead, management expects the company to retain its ongoing comps growth trend as all of its businesses remain strong. Thus, the company expects to deliver positive comps for the next two quarters.
Citi Trends also benefits from its inviting store formats that provide an edge over other off-price retailers and mass merchants. Apart from focusing on stores, the company is testing its website, with limited offerings, in order to capture the eCommerce business. Going forward, it plans to add more assortments to the website based on customer response.
Citi Trends, which competes with The Cato Corporation CATO, Ross Stores Inc. ROST and The TJX Companies, Inc. TJX, has a strong financial status that offers a silver lining to the stock. The company’s healthy balance sheet and solid cash flow generation ability provide it with ample liquidity as well as the flexibility to fund its strategic endeavors.
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