CTRN - Citi Trends stock hits 3-week low on weak results dimmed outlook amid slowing demand

Citi Trends ( NASDAQ: CTRN ) stock fell to an over 3-week low on Wednesday after the apparel chain posted weak Q2 results and slashed its 2022 guidance as customers cut back on discretionary shopping amid high inflation.

CTRN will now focus cutting SG&A expenses to align with lower sales expectation.

"... we are taking swift action on ~$10M in expense savings for H2 2022, or about 7% of total H2 SG&A expenses, including a 10% staff reduction," said CEO David Makuen.

CTRN now expects low single digit increase in H2 total sales vs. H1 total sales. For 2022, this represents 8-10% decline from the mid-point of previous guidance of $870M.

Gross margin is projected to remain in the high 30s to low 40s range for H2.

CTRN expects significantly less SG&A expense deleverage in H2 vs. year-ago period due to swift cost cuts net of incremental lease expense from sale-leaseback deals.

H2 operating income is expected to be approx. in-line with H2 2019. CTRN expects year-end cash balance of ~$85M-$100M.

CTRN also announced a sale-leaseback deal with an affiliate of Oak Street Real Estate Capital, a unit of Blue Owl, for its distribution center in Roland, Oklahoma. The deal will likely close in Sept. for expected purchase price of $36M.

CTRN reported Q2 EPS of -$0.31 vs. $1.36 in Q2 2021, while revenue fell 22% Y/Y to $185.01M. Comparable sales decreased 24.9% vs. 25.6% growth in Q2 2021.

Total dollar inventory at the end of Q2 grew 25.5% Y/Y. Excluding packaway goods, inventory increased 8% Y/Y.

Shares of CTRN declined 71.4% YTD.

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