CTRN - Earnings call transcript Q2 2024

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Operator

Greetings, and welcome to the Citi Trends 2Q '23 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded Tuesday, August 22, 2023. I would now like to turn the conference over to Nitza McKee, Senior Associate. Please go ahead.

Nitza McKee

Thank you, Chris, and good morning, everyone. us Trend's joining Earnings Quarter for Call. you on Second Citi XXXX Thank today Executive our and our is On call Chief Officer, Plutino. Chief Heather Officer, Financial Makuen; David

a.m. out Our was this Eastern Time. morning earnings sent at release X:XX

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

refer Litigation XXXX. Commission factors that undue the made detailed not may contain call may statements. filings other should differ aware meaning the the forward-looking response you You the of this subsequent statements be to of recent for you discussion not those the that These of actual XX-K to forward-looking cause during reliance prepared materially future Reform statements. Private additional in company's make and Securities your a should from Securities and statements on described performance. Therefore, with We Management more statements Exchange to to remarks results report these can within Act guarantee most today in on place forward-looking do Form the questions.

I over turn the Chief our Officer, Makuen. now David? to David will Executive call

David Makuen

outlook. related your elaborate our will for Heather items our detailed we'll on call quarter for I highlights performance. to Thank morning, Good results everyone, Officer, financial a our the and second then quarter Chief Earnings will our of XXXX us other you, today Plutino, and few open operational on thanks questions. second Financial begin our Nitza. up with fiscal Then Call. joining call and financial the

line challenging highlighted store significant, backdrop. momentum second reflect our The quarter against quarter. from a comparable with continued that pleased macro positive are margin, for sequential, acceleration first top both, the gross results the and sales was by We quarter

improving to committed are comp productivity. store extreme driving with we an operating our heard, you've focus on results improved As

customers gross of via increase with year we our sequential assortments. summer agility compelling comp than was quarter. our Coupled point a which sales above of spring result sales in team's margin is strong to XX.X% a points basis last direct basis amaze and first our XXX momentum, better Our the XXX trend and delivered

quarter, we and product customers. inventory Importantly, business areas our by of our throughout strengthened assortment, rebuild the levels traffic is strategic that resonating our in strong signaling conversion experienced key improved the with

Our primary styles of healthy mix paying the price assortment points of our business inventory dividends. of is key that to rebuild initiative strategic emphasis best and the to rebuild with is entry a customers. better incorporating areas definitely Central offering price appeals a to on an in balanced good, value-based

prior of XX% Our the first total was Compared X% at inventory quarter. at down the versus down the the end year. quarter end of the to

on we keeping across our category reins We are right want where our And we have to rest assured, amount be. primary right newness cities. inventory of tight and the ensuring are we and freshness

During our on our last as the key development call, for we lever sharpening a focus year. trend mentioned

few minutes, theme our seeing half controllables. controlling on a do, we front, of doubling which work moving more and the to speak I'm in that wins to the With down I'll consistent confident some We product are the right definitely are the clear, the on with we first in direction. books, have in sustainable

is business customers us. are designed our benefit In to initiatives in fact, across operational that note have Sell, flight our important Move mean so that many productivity. three What's initiatives we our pillars, optimize much Buy, primary and who further to to

to for every that customers who pressures and tenured each interviewing neighborhoods we cohort the still day. than I and After associates stores know visiting anyone, cater our are better inflationary can real confirm and many that very population

rent family year being work is their making and a on with who customers on utilities about it $XX,XXX customer live $XX,XXX per just extended whose or with customers XX%, As I living really met less up Incomes year. our members stretched. work are it paying of makes on a $XX,XXX of $XX,XXX year, base have higher reminder, the per on our a year. customers bulk half

sit the heart the in also is I are. lower-income what observe families resilient we As of neighborhood, how

all fun thrive well Our right everyday access times I can Getting you and to get as fresh our provide environment better. to mission is in that this to pleasant us, high-energy to and everything a model suited means is and to these families trends friendly, respect. assure is about

little on performance our the a detail for more Now during quarter.

our portion showed on of up line, abated pent-up While best all cooler the after our month quarter months first Buoyed the sales July. in part comp weather northern the fleet. the better was trend by in that were than demand trends

moments had Our and From from family-centric including broad-based. inventory Mother's men's yes footwear, to X. rebuild strong, momentum quarter Memorial Day, merchandise. at Day, trends our ladies were perspective, benefited assortment positive and These customers Q in seasonal Notable categories line efforts amazing beauty included and an July was voting values. outperformers apparel, the

trends, hydration the head our needs into more. we fashion stocked and stores our quarter, As across And the store are teams apparel, basic latest to and backpacks, are deliver. ready third with home, tech,

with managers, experience wonderful customers. seen store so to of title their They show examples service managers, do their regular tailored up great and customers, specialty feel way. good them a delivering customer our that our for whatever experience value reflects our I look comes merchandising great, their for connection many helping store our job deep have

high-quality, remains season, the for season ongoing ripe for the With well team up with in and fall our the successful along goods. setting immersed merchandising BUY marketplace high-value process a holiday

an model, right position buy right goods in strong Our balance the us our combined operating price. at and to with excellent puts the to continue sheet, agile flexible

$XXX borrowings million on Importantly, we quarter no ended the facility liquidity and no $XX of asset-based debt. of $XX approximately second with in cash, our million million, lending inclusive

our earnings that focus priorities. would were I reflect incredibly our take our quarter customers. that laser business managed deep connection the actions clear how of We maintaining decisive on am strategic proud while we environment with our call during this a team the in first

said, execution the of priorities directly performance to the of that down our Our momentum the quarter top during we would the sequential over positive boils improvement year. line the course fuel to tied

vein, profitable a of In take within the during you context the rest moment sales driving priorities, our let the update strategic to me on four this of year.

commitment First Latinx multicultural customers, up, headline of the neighborhoods, populations. our number build store here efforts comp productivity. includes assortment all families, thanks to recent traction our awareness driving rapidly aligning wants to our to The African-American and and one, within with and combined needs the about with changing of the growth our which decades-long outsized is

towards and and pickups and direction. surprise accessories, footwear half essentials QX, first in the and in moving delight are we right While demand the seeing tilted apparel

penetration trend, Timing value, quality customers and price for the appreciative setup $X.XX offering our pointed store, and and our role healthy kiddos. and her, our presentation value are a in of in of This Our of customers responding at that are indicating newness is our the goods shows potent up of of goods in really him fresh conversion customers to lower-income sharp for season. less. a our also high-quality our in strong playing given stores

adoption product hard this year seasonal timing in and assortment. flow really of changes product early to worked new satisfy our the have in of trends the order to We refine

talent of in the we Lastly, sales the top promoting am than I wallet we to believe to people confident are deploying share comp incremental from by adding are drive more drive business ever productivity. significant line. of opportunities and where muscle there areas to the within store our

margin. is, strategic inventory priority second maximizing managing and Our

our tell the can targeted areas you respect on to are think I our can from we that delivering stats controlling levels, of store. rebuild promise appropriate to inventory what while control the where with we in

the categories, show in which strong adoption. is is and stores satisfaction in approach the right consumer that yielding Our right primary and adding breadth results

that earlier the we most our lot way are We is analytics reaction calibrating the healthier I'm to as process and consumer learning a the go. team response inventory. in in applying to along excited

are turns merchandise to the focus and maniacal in sell-throughs forward maintaining on Looking front, on we order a maximize margin. margin

good us already also in that guidance. are recruit outbound a to market positioned And news reduced feel to and domestic on optimization share the will costs we inbound In quarter, deliver and here gross embedded we freight capitalize large in We our is well that during I the include potential demand. total, help initiative freight margin. freight completed future

our expense internal we delivered Our SG&A leveraging expenses quarter. is third good on expense balance and the the The second organization, expectations prudent instilled sheet. headline approach entire priority consistent. remains a disciplined our We've is and management across on the news controlling management for and to

potential operating remain look highly our look incremental structure Although through. to opportunities leverageable fuel we consistent. cost believe will for we we providing relatively cost our top line, significant efficiencies, to to will more important, And continue as flow drive

liquidity for a allows product take us to rich goods. of environment Additionally, advantage high-quality

fourth ERP system, priority The go executing upgraded main technology which highlight is our for will enhancements. live initiative shortly. our Lastly, is this

We enhancements plan productivity. to a ready organization, data the team, for game and win-win a sell-through and replenishment markdowns, goods system boost on driving functionality right new upgraded are that tool based set, to will our needs. the excited long-term are at ultimately teams analytics The ability bottom for throughout get added in the full-price right benefit right and top system to stores BUY will enhance with trend and changers improved over time, our our line. smarter, and dynamically major ERP leveraging particular and line Essentially, the climate, allocate both this reducing to time, the a fueling providing while

attributed Life, efforts PROUD both for to neighborhood more primary families fun and are by and will pleased results are the stated plans to Citi the for quarter and our positive our specialty bank. we the Live momentum living trends the value second our to, that summary, as serving break margin, customers ALL means local our centerpiece proactive our and never that that strategy, than is store which to ever with team of known top is fresh local purpose, enjoy responding line In Live we BOLD, as execute Respect important gross reflect the

over Heather quarter results few She as in our turn well a With detail call that, I'll discuss outlook. the related our Heather? CFO. to to items Plutino, second as our will

Heather Plutino

and good everyone. morning, David, Thanks,

and big performance through walk and work our grateful. many more be I for Each a want our quarter, sell way more and teams Before thank I move, second buy, contributed moment our our results, in hard to in to couldn't associates proud their take I improved dedication. to the second of support or quarter a

our the our While core for uncertain, teams remaining while our control. environment base, execute against cost with particularly to disciplined continued remained priorities, customer selling strategic

challenging an debt. no sheet to with continue million leverage $XX.X the inventory, we of $XX credit million environment, given strong undrawn and cash, of revolving Additionally, our well-controlled balance line

versus X.X% QX quarter the quarter the to our financial were specifics for of $XXX.X XXXX. sales of Turning Total a million, second results. decrease

strong well mentioned remained David as with our customers. earlier, As assortments shopper conversion resonated the throughout quarter

traffic -- to our are We to result from pleased have rebalance as and our inventory the seen rebuild good, initiative improved best sequentially build better, our efforts of first assortment. and a quarter basket

County encouraging supported in locations. radio multicultural across openings acceleration X.X% openings. stores new Spanish quarter results X opened and store digital have Second Inglewood, decreased proper. last for these sales new store our spots in at the a marking X July, We XXX compared year, marketing from including been comp of our Early store QX. L.A. radio grand with We including an California, mix of first basis to points the end a

stores During X sales remodeled the comp to improved quarter, productivity. drive also we

and XX.X%, was improvement significantly expense slightly moderation This Gross higher due than markdowns quarter margin stronger to and year lower than primarily quarter. last sequential in our freight of for QX. was second first the

we David moderate freight expect of to second the half the As further year. in mentioned,

the drove Lower or a SG&A of expense XX% points versus dollars approximately adjusted, last of sales. the down to adjusted year. XXXX for SG&A of as total in XXX to about million QX million quarter quarter deleverage $XX.X X% totaled $XX.X basis rate sales

was in as share of versus $X.XX of quarter or adjusted XXXX. $X.XX operating $X.X as an Net loss per or QX share compared Operating was $X.X $X.X XXXX. per in loss adjusted million $X.XX loss loss the million to million QX in

Now dollars key level of a of to at to of with year the decreased last the inventory in the sheet. Total inventory compared demand. X.X% drive to and balance quarter turning carefully to at our the investing first end XX% remain areas makeup and We quarter. are decrease end comfortable

to turn our I'll Next, outlook.

quarter. guidance for in we for low-income serve, are which of on pressure under the of incorporates our families expect the to building spending we the second controlling key second While our year initiatives remain the impact experienced the expected we controllables half momentum reiterating and discretionary during the the

as Our XXXX for reiterated follows. outlook is fiscal

expected are fiscal XXs. gross in negative compared in million be to to Full is the negative $XX digits to XXXX. year Full is margin the of be Total single range the digits sales for to million. EBITDA the expected year mid-single in expected be range as of year low to $X to high

year, open expenditures underperforming XX are to XX cash is to to of $XX the in the During year-end to of stores. be XX stores stores, expected X plan to balance remodel to million. year million. we be new million close to capital expected and XX finally, million $XX in $XX the range And Full $XXX range

growth the to ability not approach second drive initiatives, our our are while embedded a This continue maintaining drive results aggressive we standing deployment. our quarter with are to Overall, and still gives and in taking pleased growth actions capital The improved are structure, strategic in confidence combined with to to disciplined guidance. approach, top results. our us teams expense our line to

turn back closing comments. call David to that, for With the I'll David?

David Makuen

Heather. I of that can XX-year-old you brand strong. tell our Thanks, foundation the is

As really proud our experience. a company, employing and locals and a brand of a connection our high-quality we're with serving true to neighborhoods,

the miles customers and neighborhoods, XXX heart in often from within X little or of Our area. core of located are the or with in homes no stores our less the these competition immediate

base multiple We offering and is base the Citi partnerships aware curate less trends apparel, Trends customer and on decades. of our spend. with these of for family a lasting whole well can Our that rely partners accessories from vendor for home loyal strong way some product

a enjoy markets the we in. of a we're share result, large As

strong we will flow I remain earnings -- our investments through this the coupled believe potential the fuel important potential. growth-minded excited unlock to brand that about foundation, top the making of with our will and are unlike line

Before to each day day excellent business so entire a job and difficult of I the to dedication, for the them. I in a in their turn They moment to one and hard take and want environment are the thank Trends the to helping have team for every call operator, work we out. of an Citi and done over thankful manage

you, Thank questions. we your take Chris, to now are ready you. and back to

Operator

question Capital Hamblin from Group. And Craig-Hallum of the Instructions] [Operator first our line with Jeremy is

Jeremy Hamblin

asking by So sounds for I you've bit see I thought little might the just color but what seeing as color QX. It thus like on start sequential you a seen you're more of start that we improvement that front, little and quarter-to-date see with far if encouraged what on continuing more that a you're on traffic to wanted could assume bit to share kind you're here. we

Heather Plutino

Heather. that Jeremy, you. Thanks so much, from it's take hear I'll question. good to

it's we're hard say look, but entered QX quality, team perspective. the customers. Both our we working with the early our is I assortment have days, BUY in We're sure early, inventory that quantity in an how right? pleased to we delight will make to So and from

comp improvement. that sequential year-over-year another building have believe of we place So are with starting in to the quarter blocks, back-to-school,

Jeremy Hamblin

And also of that like of the I tilted first in Got a categories of to you think, more and terms then sounds performing now shift half drivers. more the the it. -- And it essentials. types being apparel second half seeing as noted, you're best, footwear in shift in were towards terms a year, of

get first you it maybe gross from and something half impact with apparel as are I shift, more that spending managing and that to can might see essentials that they aid just in types that have where is share on that feeling you maybe wanted two, as give like habits? shifted better footwear? the shift? margins And you sense to sense better a as about what well they've pressures on customer those of core then shift a your their inflationary Anything Does they're

David Makuen

you. because was first as we of the goes we entry Jeremy, as that the not what mentioned, half. tell development. And a Good all clarify she price into you, QX. the what filled was there, I some the been. little as it's saw think and QX, to footwear news, to to of rebuilds, a clear we And have not on it points Good and here invest, The to apparel. could David. back kind point, all thirdly, apparel, I and shift your was resulted about. And of might have QX coming difficult I think we've towards a things out I on as the nicely It was, needed And tilting getting during showed the And trend of hear directly stated, and customer headwinds in from half sharper and question. to up to let so things gotten accessories as that's that talked me little inventory really in first would we our have it gradual it a role. been sharper playing more think seen willing to have definitely speak, QX might bit better so small do happening

control. far, think we reason I bigger things the is can the by that

some our areas apparel. in on of I as we're and those the as footwear I of And strategic mentioned, are paying focused And dividends. rebuilds, targeted mentioned, keenly store,

So you by that continues, might and be rest has their of did the the of that the excite I'd I with course probably the right, weight we improvements into finding that's little over caused thing, agree that little. of towards communities to probably a there great and been hopefully, way we're that year. say, And the what the shift. our more some in some as customers, But that is impress

gross portion, impact margin. Yes, second on

"You we sell meaning margin job think we say, it gross Really, said, and we've managing see by the doing and in are to meaning on and great it know, gross right", a markup to margin we points When XXs. we by to point it our team price evenly all doesn't the directions it. With I it right, or and for our gross our through is put the blender should our timing stores. And then I in the to eye in apparel item. works, right, ship And got item tremendous pretty balanced, keen high got keeping that we're in you from think right margin that say, got I swing As freights example. buy our non-apparel, price line. all a

It's the could when So one it's reason that shows pie just there's high you. up it gets no in XXs. more -- tell I cranking, whole

Jeremy Hamblin

in then I to you for able if of be And freight it. little see wanted noted, here you year. impact that you here you Heather, of would the even be the what of sequentially better QX Got might of a the in the back half quantify Would of year? kind bit characterize half in and points to back of then the magnitude basis us kind terms to get able QX, expect should

Heather Plutino

our that to year. that is year approximately half Jeremy, year say, for freight last in that second the with for the the I'll line full outlook improves the what here's point in So is assumes freight

Jeremy Hamblin

is year? freight in line That with last

Heather Plutino

on in approximately yes, Yes, a basis. full year line

Jeremy Hamblin

one just quick then last And real Okay. here.

which update, like sounds on system on. that's ERP Your to and track here turn about

to see is more you benefit impact? of flowing to of Do of terms in some through financial begin that benefit, terms of a In expect we QX? expect kind that when by potentially see -- might in XXXX

David Makuen

we will the upgrades, what it take of see summed you you and obviously. sort after throughout all kind getting But impact. these forward the organization, It's you new our The functionality, And on-ramp it we're some traction we'll into gain rest great and of do with more system way you 'XX a planned. new it's an that's benefit. around nailed crazy, benefit up will 'XX looking. of But have well it with eventually kind got go that deliver Jeremy, of our the and be to forward pretty of and it, kind live 'XX, if really learning much baking some size it. traction have we in and

real faces looking lots greeted we're it's a And to to So changer. game I smiling and forward going is users. upgrade of as It's with stated, the it. be

Jeremy Hamblin

on progress. Congrats the

David Makuen

Jeremy. Thanks,

Heather Plutino

Jeremy. Thanks,

Operator

Chuck of Our next question Gordon Haskett. from Grom is with the line

Greg Sommer

for kind what months, dig is student is to just on prices This Chuck. debt consumer your debt. just hitting Sommer seen to of rising a your confidence are in factored even wanted higher kind into I couple can half Greg and improve. I guess of gas outlook? student to rent gas under-indexed prices. wanted kind gives Obviously, we've is of then, you And I second potentially confirm combat or of into probably the to

Heather Plutino

to hear you. Greg, good Yes. from

here's So that our that customer say. been half. improvement in talking will for now still modest while We've anticipate economists some with I we've a the we And second holds. for that third-party confirmed what

to on harm we that under-index Gas here's . right our focus no increases we can really controlling are on debt. we control. price doubt. there's student what You is But customer, what need

if be laid to margin, is voting the expected before, right, as think four way sure known technology. to in are customer the best; sure our good, Making that wallet; improvement adjusting the our our driving making got their and right we've with you better, leveraging controlling about managing that is of the being mix the are is our heard expenses you've right we -- agile in we initiatives we as product out, that that has in So half. what David second have the stores;

-- really sitting we're it's and back relief, gets love waiting that. we we're hopeful very consumer, So much some but that for our not who

pretty after the We pull. going levers of can are in all being aggressive we that

Greg Sommer

if direction comment just you could basket had and I and is wondering kind follow-up. basket the was units? I of between the also quick breakdown your a AURs then trending that of Great. on

Heather Plutino

Yes, Greg. sure. Thanks,

UPT by say that happy has quarter, we're So first it's improved the versus really basket and the primarily. second in to driven quarter

our filling telling their opening accordingly. our to in move put points to more basket is store, they're responding us price that's our So customer that and

Operator

is question John Lawrence line from of Benchmark. next Our with the

John Lawrence

a a talk you talked would about bit we've David, about system. the -- little lot ERP

really work that hard margin line. to XXs, You're you doing high maintain and gross

does on benefits a little and does gets spend on I gross of it Can 'XX the all a line? you all in the expense the Looking bit? possibility return. of what for XX-plus talked help time you is see you I that We've And that. a about leverage obviously, mean, that that do it forward, margin, line system a little reasonable? 'XX and

David Makuen

hear to good you. from John,

upgraded and I system it summarize in the what drive towards following the think right significant right will, The at foremost planning ERP the time. the product and I'd new and first better catered allocations. adds way. smarter say of right impact the Meaning stores, functionality into

to So really top the anchor sales, we're Citi and always around what relatively line cost benefit within improving high, frankly, want model. which, Trends aggressively fixed as is structure you know, a given the chasing,

to want all we I So that be about ERP anchor that impacts around line. talks sure system the always top it's our

will little how we a it you point, a think That game your about definitely over to and of mentioned not the compelling next way the interesting in, or early the margin, minutes mentioned just yet, in kind point. from a here, gross comment run to and can't kicks business we too hit few it a ago, we'll whether I couple us way course years, provides but 'XX. of number in believe, the differently allocation of Now like really impact planning the

Still, looking forward. if consider which holistically. DCs. we're little really as kind side, expense thinking which theory, you answer, inform it of impact we're tell my even impact might expense expense it yes, we you because our that, us an tough should, "markdown From should, again, we early, about it and but bit very of It might out by better can freight a to how in -- expense", distribute

then a First in organization, believe, benefit including well. we'll functions and different kind see, I It as driving. it's finance Heather's the foremost, of world. sales But sprinkled has benefits throughout team

all forward we as that just impacts make sense? a So come time phase it. will take of on, they those Does any looking it we're event, kind of and into to bit little as

John Lawrence

Yes.

The give how follow-up. I'm are the some year prior are us against a get, they update before, doing as you can the those comp of sure an against never-ending Just remodels you history? question on and comping how is,

Heather Plutino

kind We associates of a they of of like we've starts still take high to their Yes, like of our I'll down used Right with better, a start right? getting to time, we We look, got CTX John, period perform mid- that. that bit perform customers the look. comp a pleased delta but market, for to our mean, program. I come after in our are year-over-year now, to over range degree our because that we'll keep and comping XX% And a we're And our and to opportunities remain store, to look format. single-digit the We our excited see fleet like remodel customers in on time lift remodel really I basis, they the So to stores. right? over look, like love still said. for it, something our about. the we're looking refresh like

Operator

the There David for to are no closing further call turn I'll questions remarks. on the line time. at back this

David Makuen

of for on next you everyone, summer, remainder Have Take care. call. a great us we'll joining Thanks, the and Thanks, today. the see Chris.

Operator

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

Citi Trends (CTRN) 22 Aug 232024 Q2 Earnings call transcript