Citi Trends Q1 Earnings Call Highlights

Key Points

• Strong first quarter performance: Citi Trends reported total sales of $230.9 million, up 14.4%, with comparable sales rising 13.9% and adjusted EBITDA more than doubling to $13.9 million. Management said the turnaround strategy is gaining traction, with traffic and basket size both improving.
• Broad merchandising improvements drove gains: The company saw strength across key categories including family footwear, men’s, children’s, accessories and women’s apparel. Executives said their “good, better and best” pricing strategy and added extreme-value deals are helping boost customer response.
• Full-year outlook was raised: Citi Trends now expects fiscal 2026 comparable sales growth of 8% to 10% and adjusted EBITDA of $35 million to $40 million. The company also plans continued store expansion, remodels and the July launch of its new CRM program, the Insiders Club.

Citi Trends NASDAQ: CTRN reported a sharply stronger first quarter for fiscal 2026, with management pointing to broad-based comparable sales gains, improved margins and expense leverage as evidence that its turnaround strategy is gaining traction.

Chief Executive Officer Ken Seipel opened the company’s earnings call by calling the quarter “excellent,” saying momentum from 2025 carried into the new fiscal year. He said nearly every metric accelerated in the first quarter and that early second-quarter comparable sales were running in the high single digits.

“Our strategy is working and our execution is becoming increasingly consistent,” Seipel said.

Comparable Sales Rise 13.9%

Citi Trends generated total sales of $230.9 million in the first quarter, up 14.4% from the same period last year, Chief Financial Officer Heather Plutino said. Comparable store sales increased 13.9%, ahead of the company’s expectations, and were up 23.8% on a two-year stacked basis.

Seipel said the company has now posted 21 consecutive months of sales growth, with gains across all product divisions and store climate zones. While tax refund timing helped the quarter, he said underlying sales trends before and after the refund period remained strong on a two-year basis.

In response to a question from D.A. Davidson analyst Michael Baker, Seipel said Citi Trends generally considers the tax refund period to run from mid-February through Easter, or about six to seven weeks this year. He said the company believes the difference between its baseline trend and the stronger first-quarter sales performance was “probably attributed dominantly” to tax refunds.

Seipel also said increased customer traffic drove nearly half of the sales increase, while basket size improved as customers responded to the company’s assortment and value proposition.

Merchandising Strategy Drives Broad Gains

Management attributed the quarter’s sales performance to refinements in trend, style and value across Citi Trends’ core merchandising assortment, along with selected “extreme value” deals intended to add excitement to the shopping experience.

Seipel highlighted several categories:

• Family footwear continued momentum from the fourth quarter, helped by expanded branded offerings across genders.
• Men’s delivered a strong quarter, supported by streetwear trends for younger customers and updated styling for the company’s core male customer.
• Children’s benefited from improved in-stock levels and product selection, with Seipel calling the category a “cornerstone” of the business.
• Women’s accessories posted meaningful gains as the company adjusted the assortment toward more branded and trend-right products.
• Women’s apparel showed improvement, particularly in Missy, though management said the broader women’s business remains a significant opportunity.

Seipel said Citi Trends continues to refine a three-tier “good, better and best” merchandising strategy. The opening-price “Citi Score” offering is aimed at budget-conscious customers, while the “better” tier, typically priced between $7 and $12, remains the foundation of the business. The “best” tier includes more fashion-forward and branded extreme value products, sometimes offered at discounts of up to 75% off MSRP, he said.

Asked by Craig-Hallum Capital Group analyst Jeremy Hamblin about future category opportunities, Seipel said footwear is still in the early stages of improvement and could “more than double” over time. He also cited young men’s trend assortments and women’s fashion, including Missy, as areas with substantial growth potential.

Adjusted EBITDA More Than Doubles

Adjusted EBITDA rose to $13.9 million in the first quarter, up from $6.4 million a year earlier. Plutino said adjusted EBITDA margin expanded 280 basis points to 6% of sales.

Gross margin increased 40 basis points year over year to 40%, helped by improved merchandise margins and the company’s investments in allocation and loss prevention systems. Higher freight costs, driven by fuel surcharges, partially offset those gains.

Adjusted selling, general and administrative expenses were $78.3 million, compared with $73.4 million a year earlier. Plutino said the increase was mainly tied to higher sales support costs and higher store and corporate bonus accruals due to stronger performance. As a percentage of sales, adjusted SG&A improved by 250 basis points to 33.9%.

Plutino said the company adjusted its incentive compensation accrual earlier than usual in the first quarter, moving from 100% at the start of the year to about 128%.

Company Raises 2026 Outlook

Citi Trends updated its fiscal 2026 outlook following the stronger-than-expected first quarter. The company now expects comparable store sales growth of 8% to 10% for the full year, implying high single-digit comps for the remaining quarters. Total sales are expected to increase 9% to 11%.

Gross margin is expected to expand by about 50 to 70 basis points from 39.6% in fiscal 2025. Plutino said that is lower than the prior outlook for 100 basis points of expansion because of freight pressure from fuel surcharges, though markdowns and shrink are improving.

Adjusted SG&A leverage is now expected to range from 140 to 160 basis points, better than the previous forecast of 70 to 100 basis points. Adjusted EBITDA is projected at $35 million to $40 million, with adjusted EBITDA margin expected to expand about 200 basis points over fiscal 2025.

The company ended the quarter with $81.1 million in cash, no debt and no borrowings on its $75 million revolving credit facility. Plutino said Citi Trends expects year-end cash to be approximately flat with last year’s $66 million as it invests in inventory, new stores and remodels.

Store Growth, CRM and Longer-Term Expansion

Citi Trends opened two stores in the quarter, in St. Louis and Baltimore, and closed one location, ending the period with 591 stores. The company also remodeled 25 stores during the quarter and another 26 in early second quarter, completing its remodel program for the year.

Management maintained plans to open approximately 25 new stores, close four locations and remodel approximately 50 locations in fiscal 2026. Capital expenditures are expected to be $35 million to $40 million.

Seipel said the company is preparing to accelerate store growth in 2027, with a target of about 40 new stores. He said Citi Trends is using artificial intelligence tools and three years of transaction data to guide site selection, and that the model has demonstrated about 90% accuracy in sales prediction. The company is targeting mature store averages of about $1.5 million in sales and mid-teens four-wall contribution margins.

The company also plans to launch a customer relationship management platform in July called the Insiders Club. Seipel said the program is intended to turn traffic into loyalty and frequency, while helping Citi Trends become more of a “relationship-driven brand.”

Seipel said the company remains focused on consistent execution, profit flow-through from sales growth and accelerated but disciplined expansion. He also said Citi Trends is beginning to evaluate potential synergistic acquisitions that align with its strategic priorities, while maintaining a focus on financial returns.

About Citi Trends NASDAQ: CTRN

Citi Trends, Inc NASDAQ: CTRN is an off-price retail apparel chain that focuses on value-priced urban fashion apparel and accessories for men, women, and children. Headquartered in Savannah, Georgia, the company offers a broad assortment of merchandise, including denim, sportswear, activewear, and seasonal styles, complemented by footwear, jewelry, cosmetics, and home goods. Through its purchasing model, Citi Trends sources closeouts, overstocks and canceled orders from name-brand vendors, enabling it to offer trending styles at competitive price points.

The company operates more than 500 stores across the Southeastern and Mid-Atlantic regions of the United States, with typical store footprints of approximately 11,000 square feet.

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