CTRN - Earnings call transcript Q2 2019

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Operator

Greetings and welcome to the CTRN 2Q 2019 Earnings Conference Call.

During the presentation, all participants will be in a listen-only mode. Afterwards, we will conduct a question-and-answer session [Operator Instructions].

As a reminder, this conference is being recorded today, Thursday, August 22, 2019.

I would now like to turn the conference over to Ms. Senior Associate, Senior McKee, Associate. Nitza Please go ahead.

Nitza McKee

you. Thank

earnings A.M. Eastern was out sent X:XX at morning this time. Our release

If you the have it not received a copy on at company's section is of the website Relations under Investor www.cititrends.com. available the release,

guarantee response should statements Management this may performance. during undue forward-looking may future meaning the make contain remarks Reform do Litigation in the call Private within additional aware Securities statements. should prepared to statements Act you You These not be on of reliance made not your that questions. forward-looking of Therefore, statements XXXX. place these

We most the those cause to differ XX-K Securities forward-looking Form in to the more refer with Commission actual and results the Exchange of you can a for the recent report described statements. that from and filings materially detailed company's other subsequent discussion on factors

over I our to President will and the turn Executive Bruce? Bruce now Smith. call Officer, Chief

Bruce Smith

thank call Officer, today. morning us you everybody joining Nitza. and Clifford; Merchandising, Stuart our Thanks is President Christina our Senior Short. and Good of for Vice the Chief on Also Financial

sales the second comparable sales continued began third more the the decrease our Despite the of X.X% early guidance. our start momentum pleased trends that our progressed, quarter I'm in to improve, has slow a was at quarter. second to report quarter, As to and the of store favorable end

the consisting business the declined, performance merchandise has home of third in and of continued and continued And accessories latter part was trend show the sales also of better while quarter quarter. improved grow. non-apparel apparel our in early The second to part to the

in season as lines, inventory customers. gift dollars resonate when we with which reallocate approach strategically will the towards to holiday more growing continued items our non-apparel the non-apparel importance gain We

the period time that Although, we apparel of when from sales last to the a we we had comparing trends still dollars misses. during inventory ladies to can of some back believe apparel half particularly will are be year, considering results specific recent we improve we apparel that non-apparel, shifting year fashion

that the pleased we We note very maintain a reflected inventory including a to It's quarter in inventory were XX% inventory. high important improve our X% efforts third stores a reduction with as and the quality quarter a very in entered to in in inventory position clean inventory turns in liquidity. and decline second comparable levels,

over Now, to expectations. before additional turn Stuart on provide call details I the the discuss to will future plans I results and

Stuart Clifford

a items of reduction X.X% nearly average sales increase counts Comparable reflected sales in sale offset Total sales X.X% decline transaction quarter per a in in transaction the $XXX million. unit X%, decrease of the quarter. decreased The Bruce. comp to more during Thanks store the increased in of second store the quarter partially in than X%. the second was and by X.X% an in in number

And sales in on looking the led the way merchandise increase comp year's with increase XX% at home individual again X% of store an for top quarter. division categories, second a last the

in were while in the the slightly the of being up ladies last X% in quarter X% were Accessories Sales year's were up second after quarter, XXXX. quarter they this X% year. division down second same up during

half comps second comparable quarter. X% men's total store were decreased and year's increasing the sales last X% of down down X.X%, year, Comp X.X%. after in year, were were same X% quarter in in the while the increasing last division sales X% after children's In the first sales down

take the the sales. need points due margin second to primarily quarter decrease to light XXX Gross down of the in store markdowns was in more basis in comparable

of than in XXX is the first of the XXXX. half first basis For XXXX, lower half margin gross points

a higher be the quarter year's normal inflation. second in controlled, compared expenses X.X% count expenses to very last well SG&A only despite to and continued increasing store

expenses has SG&A primarily quarter the declining second in sales sales, to of the that expense XXXX the to of basis increased due effect from percent points on second deleveraging XX a XX.X% ratio. quarter XX.X% As

in For flat proxy the XXXX. the quarter, first incurred of half were first of XXXX, SG&A of the with expenses, $X first for half when virtually expenses contest adjusted million

of Net income to per XXXX was million million last in compared $X.XX $X.X the diluted $X.XX $X.X quarter. share share in second diluted quarter or or second per year's

$X.X per were $XX.X of net half half XXXX in For the million or million of the $X.XX first compared first for to when XXXX. of in contest contest in $X.XX to first Earnings adjusted expenses when compared $X.X last first XXXX, the expenses proxy diluted was income share million proxy for year's half $X.XX adjusted or half.

is reminder a a our impact on sheet. having Finally, about a significant that balance change

million we As XXXX shown balance on sheet liabilities quarter in sheet. has year-end, completed lease adoption earnings Consequently, last method standard the which first the we of date. our standard using new not the discussed the lease and million as our assets $XXX the following of new applied year's new transition effective right-of-use call, balance in accounting on $XXX

Now, the I'll call over to turn Bruce. back

Bruce Smith

strategic shifts are and looking the our mix Thanks forward, on apparel Directors, including of Advisor Board in working improve strive Sachse, to with Stuart. And CEO, between and Special as apparel Peter overall execute the number over initiatives. to we a fashion non-apparel, of we

work either made of X,XXX were a Trends. with Part purchase respondents this had at Citi familiar who of survey or involves a

retailer a information. be forward would into move insight including needs strategies gain as valuable frequency of preferences, think the number our to survey and do things, to We preferences, results in building merchandise of we visits, meet was customers. of better the goal other Our

we to are our priority areas. that on those our the organizational resources addition, designed ensure a and review In focused strategic initiatives resources of that have adequate include structure

stores, systems needs to opportunities, new opening And expanding are in is ensure stores or perspective, fully including of estate that an support Hispanic other merchandising business. Also, real markets. considering infrastructure of predominantly we performing the including a variety and existing remodeling, from IT we the prepared a to are strategic our analysis our and relocating, of

third sales in up store period a year comparable We are the quarter a X% in off first with against thus same during going despite August weeks to ago. the of far a good two-plus X% the start up increase

trends, sales together the recent our comparable year. half a in in in of to expect non-apparel we shift areas to towards more the merchandise $X.XX mix store for position, X% the growing diluted to sales favorable to the full year our the share X% inventory of and back per Considering increase with earnings leading range $X.XX

up open will for Now, Lila questions. it

Operator

Thank Instructions] you. [Operator

mute of Walthausen with ask Mr. is Our open; that Mike next continue question. question, All the right. We'll your your comes We'll line Please from ahead on go please verify first Mr. question & proceed. with you Morales. with Co. line Morales Morales the please button. your

[Operator of is ahead. with SCC Eric Our Research. from question Instructions] next go the Please line Beder

Eric Beder

Good morning Bruce. Congratulations.

Bruce Smith

you Eric. from Good Thanks. to hear

Eric Beder

talk your for of you a little guys kind plan where being shares share Great. how Do little a repurchase Could of doing? kind bit the stock -- back. of bought and it of that? now is about still you see utilizing you I cash the you're consider worthy right is

Bruce Smith

Yes.

an you of the over dividends, million to the is four years, returned and part know, form we it so in As past our the now have, repurchases shareholders important of our about $XXX and cash cash as worked allocation. well has said us. we're to shareholders, for out million capital that and over long that as will investments we that in historically $XX We've return

we in as much buy we second yes, in about quarter, bought the twice to as first bought And the quarter. continued

and of around $X.X at under we're million year-to-date, $X So, current the have purchases, authorization. left we million

Eric Beder

different I Great. some do market desirable is have you And of Hispanic the When guys working market, the mentioned market? now? on how than -- view you How have little a look at Hispanic core know been we the that markets you you that. right

Bruce Smith

Yes. probably and we of that African of us. are that There actually is are nuances learned serving, traditionally the customers Hispanic serving a through have. have stores customer larger The important our it we serve opportunity combination an we demographic than traditional that that American is demographic for so

I that XX% within have Hispanic. already of three of miles think it’s being stores the population at them XX least

So, opening where in The new to we're extent up XX% XXX% that is to Hispanic. an stores today. we're that serving are already markets it customer

things different -- that in to we have merchandising And we're are so, that there some do.

those it involves of involves fashion some some sizing, it versus of things. and Some core of

are So, those the high points.

Eric Beder

question. last And Great.

apparel? and respects little in kind it's permanent reduction kind going been And inventory we some particular should changing. be it of it? shifts a Have doing with you've if So forward, have shift categories products thinking bit about, seen you some how the you've been out how of figure that any the to the margins to -- a with tough seen of split between been drives in the

Bruce Smith

Sure.

was probably low and over non-apparel and six years execute expect you far seven we the of today, was XXs that is past low or apparel, what forward, what if in six as grown went business So, the years. about we've going XXs seven or ago. It as probably the XX% so XX% non-apparel seen our has -- in to back

a So, consistently area us. it's been for growing

made way of said not that have long-term question. versus looking I along non-apparel or merchandise will should what that getting that We -- to XX% probably say shifts we've the that. is is And facilitate and to to mid-term, continue -- the lines, do non-apparel out the we apparel I think

take would in, way in continue think to important some piece ever an run go but that neighborhoods operate up. be certainly that sure we non-apparel that we the than to store Not still we it higher is to apparel these there's because there

Eric Beder

holiday season. the Great. Good for luck

Bruce Smith

you. Thank

Operator

The from line Investor. the is go ahead. Please question next Private Lawrence, John of

Unidentified Analyst

Yes. Good morning Bruce.

Bruce Smith

John. morning Good

Unidentified Analyst

give digging on bit some of Can Could had you the know on you've -- initiatives other through us are you and numbers the progressing? a comment some just little on those a update initiatives how I sort of underway. some little transportation

Bruce Smith

Yes.

have renegotiating outbound was freight. That on with as new both some have transporters. of it group progress point, well. gone I inbound suppliers last or a guess particularly contracts the our we mentioned, suppliers this and made I has working a been of lot and the consulting on inbound we side, with the To extremely quarter sides So,

the up shown one the hasn't we and contracts early into in inbound capitalize because -- goes were have really quarter in the numbers until effective new freight cost. yet second worth about freight straight inventory quarter of quarter's to in It the not freight second because

in The outbound benefit that piece see also then of on the a lagging transportation freight and the in things to as in but third working out we're the will the cost. rolls new is number So, that strategy freight and a management quarter, system including benefit area, some expense. out reduce we piece, still freight in

Unidentified Analyst

Hispanic Thanks. too any -- And stores have it the yet? early opened been Great. of is

Bruce Smith

year. I two. Yes, store-by-store competitive Both And reasons, information this for what in market second a probably won't opened to later just continue fact, tell we've third we've of to early. from but we quarter, want that's that still from that two have test we the so openings it's opened in seen coming you will store the give them first any and, up

Unidentified Analyst

Right. the from And when quarter it mid-third that that last when standpoint, women's earlier did question -- soft? that, turned with it really easy comparisons my Was that or was than start when store -- business your business? really

Bruce Smith

quarter, then the Yes, over little in it the was the so later August months of it's through of quarter. a really rest and two bit

Unidentified Analyst

Good luck. Thanks. Great.

Bruce Smith

Yes, thanks John.

Operator

there to call back this Smith, further questions Mr. the I'll lines time, on at phone the are you. so no turn

Bruce Smith

Okay. joining Thank Thanks. this you And available if today. for everybody, talk one-on-one always, to as to me want for I'm later calls you, week.

Operator

conference your your line. all that the please We for and thank disconnect does we call you conclude you for That ask today. participation

Citi Trends (CTRN) 22 Aug 192019 Q2 Earnings call transcript