Executive Summary

Q1 2026 delivered a clean beat: revenue $201.7M (+8.3% YoY), comps +9.9%, gross margin 39.6% (+90 bps YoY), adjusted EBITDA $5.4M (vs. $(0.8)M LY); management raised FY25 EBITDA and comps outlook while modestly trimming gross margin expansion due to supply-chain repair timing .
Against S&P Global consensus, CTRN beat on revenue ($201.7M vs. $195.8M*) and EPS (Primary/adjusted $0.17 vs. $(0.20)) and outperformed on EBITDA ($4.9M vs. $2.6M); # of estimates = 2* (Values retrieved from S&P Global).
Positive demand and broad-based category strength drove 40% sales-to-EBITDA flow-through; comps remain strong with Q2-to-date trending mid-to-upper single digits, a potential catalyst as investors reassess turnaround durability .
Risks: DC performance lagged plan; accessories underperformed; tariff uncertainty persists; 2H flow-through will be lower as bonus accruals normalize, tempering operating leverage .

What Went Well and What Went Wrong

What Went Well
- Strong top-line and profitability: comps +9.9%, gross margin +90 bps to 39.6%, adjusted EBITDA $5.4M with 40% flow-through; “all retail metrics trending positively” and broad-based category strength .
- Strategic progress: higher initial markups, lower freight, shrink improvement; average in-store inventory down 4.9% with fresher mix (45% less aged), supporting sales without bloating working capital .
- Outlook raised: FY25 comps to mid-single digits (high end of prior), SG&A leverage 60–80 bps (up from 30–50), EBITDA to $6–10M (from $5–9M) .
What Went Wrong
- Distribution centers “below expectations”; personnel/process changes underway to improve 2H performance .
- Accessories below plan; assortment being refined (handbags, jewelry, beauty) .
- Gross margin expansion for FY25 trimmed to ~200 bps (from ≥220 bps) due to an elongated repair phase; management also flagged lower 2H flow-through as bonus accruals normalize .

Financial Results

Headline trend (oldest → newest)

Metric	Q3 2025	Q4 2025	Q1 2026
Revenue ($USD Millions)	$179.1	$211.2	$201.7
Comparable Store Sales (%)	5.7%	6.4%	9.9%
Gross Margin (%)	39.8%	39.7%	39.6%
Adjusted EBITDA ($USD Millions)	$(3.3)	$7.1	$5.4
GAAP Diluted EPS ($)	$(0.86)	$(1.71)	$0.11
Store Count (Period-End)	593	591	591

YoY and operational KPIs

KPI	Q1 2026	Q1 2025 (YoY)
Revenue ($USD Millions)	$201.7	$186.3
Gross Margin (%)	39.6%	38.7%
Adjusted EBITDA ($USD Millions)	$5.4	$(0.8)
GAAP Diluted EPS ($)	$0.11	$(0.42)
Adjusted Diluted EPS ($)	$0.17	$(0.32)
Comparable Store Sales (%)	9.9%	—
Merchandise Inventory ($USD Millions)	$109.9	$119.0
Aged Inventory (≥7 months)	Down 45% vs. LY	—
Cash & Liquidity	Cash $41.6M; Liquidity ~ $117M	—
Share Repurchases (Q1)	250,555 shares; $6.3M; $40M remaining	—

Estimates vs. actuals (S&P Global consensus)

Metric (Q1 2026)	Consensus	Actual	Surprise
Revenue ($USD)	$195,764,500*	$201,728,000	+$5,963,500*
Primary EPS (Adjusted) ($)	-0.195*	0.17	+$0.365*
EBITDA ($USD)	$2,642,000*	$4,923,000*	+$2,281,000*
# of Estimates (EPS / Revenue)	2 / 2*	—	—

Values retrieved from S&P Global.
Note: Primary EPS “actual” aligns with adjusted diluted EPS as reported; adjusted EBITDA reported by the company was $5.4M, while S&P EBITDA reflects a standardized definition .

Segment breakdown: Not applicable (single-segment retailer).

Guidance Changes

Metric	Period	Previous Guidance (3/18/25)	Current Guidance (6/3/25)	Change
Comparable Store Sales	FY 2025	Low to mid-single digits	Mid-single digits, high end of prior	Raised
Gross Margin Expansion (vs. FY 2024)	FY 2025	≥220 bps	~200 bps	Lowered (timing)
SG&A Leverage (vs. FY 2024)	FY 2025	30–50 bps	60–80 bps	Raised
EBITDA	FY 2025	$5–$9M	$6–$10M	Raised
Effective Tax Rate	FY 2025	~0%	~0%	Maintained
New Stores	FY 2025	Up to 5	Up to 5	Maintained
Remodels	FY 2025	~50	~50	Maintained
Closures	FY 2025	Up to 5	Up to 5	Maintained
Capex	FY 2025	$18–$22M	$18–$22M	Maintained

Earnings Call Themes & Trends

Topic	Previous Mentions (Q3 2025, Q4 2025)	Current Period (Q1 2026)	Trend
Off-price / Extreme value	Introduced as a key growth driver; branded deals creating buzz; target to expand branded mix and extreme value treasure	Off-price extreme value accelerating; goal for extreme value to become ~10% of top line over time; branded deals at ≥50%–70% off MSRP	Strengthening
AI-based allocation	Simplified allocation clusters; planning advanced techniques; AI planned for 2025+	AI allocation test exceeded expectations; full rollout planned post-back-to-school and before holiday	Advancing
Supply chain / DCs	Two-week vendor-to-store time reduction; continued improvements targeted	DC performance below expectations; actions underway to improve 2H	Mixed; fix in progress
Shrink	Improvement initiatives in Q3; 160 bps GM expansion aided by shrink	Shrink improved again (179 physical counts); further progress expected	Improving
Tariffs / Macro	Off-price model reduces tariff exposure; stay aggressive and flexible	Teams held net product costs flat; tariff uncertainty remains but creates off-price deal flow	Managed risk / opportunity
Category performance	Broad-based; kids, home strong; footwear rebuilding	Broad-based growth; accessories below plan; plus-size and big men focus; footwear up high-single digit	Positive breadth; accessories fix
Remodels / Real estate	CTx remodels with reduced cost (~$110k avg); 50 planned in 2025	19 remodels in Q1; 36 YTD by early Q2; data-driven expansion work continues	On plan
Liquidity / Buybacks	Restarted $50M authorization; $3.8M in Q4; continued Q1	Repurchased ~251k shares; $40M remaining; liquidity ~$117M, no debt	Ongoing

Management Commentary

“The tide is rising on all fronts at Citi Trends… all retail metrics trending positively… growth in both apparel and non-apparel… Our sales momentum has continued with Q2’25 quarter-to-date comparable store sales growth trending in the mid to upper-single digits.” — CEO Ken Seipel .
“We’re in the final stages of testing our new AI-based allocation system… test performance has exceeded our expectations… a game changer for our inventory efficiency.” — CEO Ken Seipel .
“Adjusted EBITDA for the quarter was $5.4 million… Sales to EBITDA flow-through… 40%, well above our goal of 20–25%.” — CFO Heather Plutino .
“There is no doubt that there is a great deal of macro-economic uncertainty, particularly as it relates to tariffs… [we’ve] held net product costs flat… taking advantage of off-price opportunities created by the disrupted environment.” — CEO Ken Seipel .

Q&A Highlights

Off-price strategy and magnitude: Management differentiated end-of-season closeouts from in-season “extreme value” branded deals and targets ~10% incremental top-line from extreme value over time; it requires disciplined buying and processing but resonates strongly with customers .
Guidance cadence and conservatism: Back-half compares are tougher; management frames targets on a two-year stack and acknowledged some conservatism given macro uncertainty (tariffs, product flow) .
Category/color: Broad-based strength across categories; plus-size and big men are priority expansion areas; accessories below plan being reworked .
Remodel ROI: Early returns are “not inconsistent with prior” classes; too early for precise quantification .

Estimates Context

Q1 2026 beats across the board vs S&P Global consensus: revenue $201.7M vs $195.8M*, Primary (adjusted) EPS $0.17 vs $(0.20), EBITDA $4.9M vs $2.6M; EPS estimates based on two contributors* (Values retrieved from S&P Global).
Street likely revises FY25 up on comps and EBITDA guidance raise, though gross margin expansion trimmed (supply-chain repair timing) may cap near-term upward revisions to margin assumptions .

Key Takeaways for Investors

Turnaround traction is accelerating: comps +9.9%, GM +90 bps, strong 40% flow-through, and outlook raised (comps, SG&A leverage, EBITDA) — a constructive setup for estimate revisions and narrative momentum .
Off-price extreme value is a multi-year growth vector with clear customer resonance; success here plus branded mix expansion should support traffic, AUR, and margin over time .
AI-based allocation and shrink initiatives are tangible productivity levers; full chain AI rollout pre-holiday could be a 2H catalyst if execution stays on track .
Risks: DC execution (near-term), accessories execution, tariff volatility; management’s flexibility and sourcing agility are mitigating factors .
Balance sheet strength (no debt, ~$117M liquidity) plus disciplined capex/remodels and buybacks ($40M remaining) provide downside protection and capital for growth .
Modeling note: 2H EBITDA flow-through will be lower due to reinstated bonus accruals; avoid annualizing Q1 flow-through .

Values retrieved from S&P Global for estimate figures marked with an asterisk (*).

Citi Trends Inc (CTRN)·Q1 2026 Earnings Summary