Citi Trends NASDAQ: CTRN reported second-quarter fiscal 2026 results marked by double-digit comparable-store sales growth, higher margins and a return to positive adjusted EBITDA, prompting the retailer to raise its full-year outlook.
Comparable-store sales increased 10.5% in the second quarter, following growth of 19.7% on a two-year basis. Total sales rose 10.9% from a year earlier to $211.6 million. Chief Executive Officer Ken Seipel said the quarter marked the company’s eighth consecutive period of comparable-store sales growth and its sixth straight quarter with growth of at least 9%.
“Our second quarter results were defined by consistency, consistent sales trend, consistent execution, and a consistent customer response across every month of the quarter,” Seipel said. He added that the sales momentum had continued into the back-to-school period, with a two-year comparable-sales stack of about 25% in the third quarter to date.
Profitability Improves as Sales Grow
Adjusted EBITDA was $5.5 million in the second quarter, compared with an adjusted EBITDA loss of $1.1 million in the prior-year quarter. The $6.6 million improvement brought adjusted EBITDA margin to 2.6%, an increase of 320 basis points from a year ago.
Gross margin increased 60 basis points to 40.6%. Chief Financial Officer Heather Plutino said the improvement reflected higher merchandise margins and lower shrink, partially offset by higher freight costs tied to rising fuel surcharges.
Adjusted selling, general and administrative expenses rose to $80.4 million from $77.4 million a year earlier, largely due to costs supporting $21 million of incremental sales. However, adjusted SG&A declined as a percentage of sales by 260 basis points to 38% as the company leveraged its largely fixed expense base.
For the first half of fiscal 2026, comparable-store sales increased 12.2%, or 21.8% on a two-year basis. Adjusted EBITDA reached $19.4 million, up $14.1 million from the prior-year period, while EBITDA margin improved 300 basis points to 4.4%.
Seipel said first-half gross profit benefited from a 50-basis-point improvement in gross margin, supported by stronger selling margins and lower shrink. Store payroll was leveraged by 70 basis points year to date, while distribution-center costs declined by 60 basis points through productivity improvements, he said.
Merchandise and Customer Trends
Sales growth in the quarter was driven by both transaction count and basket size. During the question-and-answer session, Seipel said roughly half of comparable-sales growth came from higher transaction counts, while the other half came from components of the shopping basket, including units per transaction and average unit retail.
The company said every merchandise division, store climate zone and store-volume decile posted sales increases from the prior year. Apparel, non-apparel and home categories all grew during the quarter and year to date. Men’s, children’s and family basics were consistent performers, while the family footwear business recorded strong results from summer-oriented products, trend-focused styles and value pricing.
Seipel also pointed to an improvement in the women’s business. He said the second quarter was the first period in which the women’s team had delivered trend modules consistently to stores, resulting in a “nice step change” in performance across women’s categories, including Missy merchandise.
The retailer continues to organize assortments across good, better and best price tiers, combining opening-price products, core offerings, trend items and recognizable brands. Seipel said customers move across the tiers rather than shopping within a single price level. He added that shoppers with household incomes between $75,000 and $150,000 account for about 25% of Citi Trends’ customer base and generate more than 40% of its revenue.
Store Growth, Technology and Loyalty Initiatives
Citi Trends opened four stores during the second quarter and closed one location, ending the period with 594 stores. The new locations included two stores in Rochester, New York, as well as stores in Baltimore and Jackson, Tennessee. The company has opened nine stores since the fourth quarter of 2025, and Seipel said those locations are exceeding expectations.
The company remodeled 26 locations during the quarter, bringing its first-half total to 51 remodels. It now expects to open about 20 new stores in fiscal 2026, down from its prior projection of 25 due to timing, while increasing its remodel plan to approximately 60 to 65 locations from 50 previously. Citi Trends continues to target roughly 40 new store openings in fiscal 2027 and beyond.
Management said new locations are evaluated with AI-based site-selection tools and strict return requirements. The company is targeting approximately $1.5 million in mature sales and mid-teens four-wall contribution margins for new stores.
On July 15, Citi Trends launched its new customer relationship platform, the Insiders Club. Seipel said the program is intended to build loyalty, increase purchase frequency and provide customer insights that can help refine merchandising and marketing strategies. The company expects to begin engaging customers more broadly later in the fall and build momentum during the fourth quarter and into 2027.
Outlook Raised
Based on second-quarter results, Citi Trends raised its full-year fiscal 2026 guidance. The company now expects:
- Comparable-store sales growth of 9% to 11%, up from prior guidance of 8% to 10%.
- Total sales growth of 10% to 12%.
- Gross-margin expansion of approximately 50 to 70 basis points from fiscal 2025’s 39.6% margin.
- Adjusted SG&A leverage of 160 to 180 basis points, compared with prior expectations of 130 to 160 basis points.
- Adjusted EBITDA of $38 million to $42 million, up from prior guidance of $35 million to $40 million.
- Capital expenditures of $35 million to $40 million.
The company ended the quarter with $55.9 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 the $66 million reported at the end of the prior year.
Seipel also said the board approved a $100 million shelf registration to provide capital-market flexibility for potential strategic investments or acquisitions. He said the registration does not reflect an immediate financing need, and that existing liquidity and operating cash flow are expected to support the company’s current operations and organic growth plan. The company also has $40 million remaining under its existing share-repurchase authorization.
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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