Executive Summary

Q3 FY2025 results and call are not yet released as of Nov 20, 2025; Citi Trends scheduled the Q3 release and conference call for Dec 2, 2025 at 9:00 a.m. ET .
Momentum into Q3 remained intact per Q2 commentary: comps positive for 13 consecutive months through August; management reiterated broad-based traffic-led growth and raised FY25 guidance after Q2 .
Key setup into Q3: sustained comp growth (+9.9% in Q1; +9.2% in Q2), gross margin at multi-year high (40.0% in Q2), inventory leaner and fresher, and no debt with $50.4m cash at Q2-end .
Watch items for the print: SG&A run-rate including incentive comp; cadence of “extreme value” branded deal flow; early benefits from AI-based allocation (rolled out mid-Sept) impacting holiday/Q4; and whether FY25 guidance is tightened or raised again .

What Went Well and What Went Wrong

What Went Well

Sustained traffic-led comp growth with broad-based category strength; Q2 comps +9.2% (fourth straight quarter of mid-to-high single-digit comps) and YTD comps +9.6% with two‑year stack +10.3% .
Margin execution: Q2 gross margin 40.0% (highest Q2 since FY2021), +890 bps YoY on lower markdowns, improved shrink, more full-price selling, and lower freight; Q1 gross margin 39.6% (+90 bps YoY) .
Balance sheet/liquidity: Q2 cash $50.4m, no debt; inventory down 12.9% YoY with average in‑store inventory down 5.7%, supporting sales with leaner stock .

Quote (CEO): “Transaction growth has consistently accounted for the majority of our sales gain… Our performance was consistent across climate zones, regions and store volume deciles” .

What Went Wrong

Profitability quality in Q2: GAAP net income $3.8m was boosted by an ~$11.0m gain on building sale; adjusted net loss was $(6.8)m and adjusted EBITDA was $(2.6)m .
SG&A deleverage due to reinstated incentive compensation; Q2 adjusted SG&A rate rose 50 bps YoY to 41.3% even as underlying SG&A ex-bonus leveraged ~150 bps .
Distribution centers (DC) below expectations in Q1, with supply chain still in early-stage process improvements; management outlined workstreams to reduce days through DC and accelerate ticketing/receiving (benefits expected over 2H) .

Financial Results

Recent quarterly performance (Q1–Q2 FY2025)

Metric	Q1 FY2025	Q2 FY2025
Net Sales ($USD Millions)	$201.7	$190.8
Gross Margin (%)	39.6%	40.0%
SG&A ($USD Millions)	$74.9	$78.9
Net Income ($USD Millions)	$0.9	$3.8
Diluted EPS ($)	$0.11	$0.46
Adjusted Net Income ($USD Millions)	$1.4	$(6.8)
Adjusted EBITDA ($USD Millions)	$5.4	$(2.6)
Comparable Store Sales (%)	+9.9%	+9.2%
Cash & Equivalents ($USD Millions)	$41.6	$50.4
Merchandise Inventory ($USD Millions)	$109.9	$117.6
Store Count (End of Period)	591	590

Select YoY change indicators

Metric	Q1 FY2025 YoY	Q2 FY2025 YoY
Gross Margin YoY Change (bps)	+90 bps	+890 bps
Avg In-Store Inventory YoY	−4.9%	−5.7%

KPIs and operational metrics

KPI	Q1 FY2025	Q2 FY2025
Remodels Completed (quarter)	19	19
YTD Remodels	19	36
Store Openings (quarter)	—	—
Store Closures (quarter)	—	1
Comparable Store Sales Drivers	Traffic, basket, conversion up	Traffic, basket, conversion up

Note: No formal segment reporting disclosed in press releases; category color is qualitative .

Guidance Changes

FY2025 outlook progression

Metric	Period	Previous Guidance (Q1 FY2025 PR, Jun 3)	Current Guidance (Q2 FY2025 PR, Aug 26)	Change
Comparable Store Sales	FY2025	Mid-single digits (high end of prior low–mid)	Mid–high single digits	Raised
Gross Margin vs FY2024	FY2025	~+200 bps (slightly below prior)	~+210–230 bps (slightly above prior)	Raised
SG&A vs FY2024	FY2025	Leverage 60–80 bps	Leverage 60–90 bps	Raised
EBITDA	FY2025	$6–$10m	$7–$11m	Raised
Effective Tax Rate	FY2025	~0%	~0%	Maintained
New Store Openings	FY2025	Up to 5	3	Lowered
Remodels	FY2025	~50	~60	Raised
Closures	FY2025	Up to 5	3	Lowered
Capital Expenditures	FY2025	$18–$22m	$22–$25m	Raised

Earnings Call Themes & Trends

Topic	Q1 FY2025 (Jun 3)	Q2 FY2025 (Aug 26)	Current Period (Q3 FY2025 pre-release)	Trend
AI/Technology	AI-based allocation testing; full rollout planned pre-holiday; KPIs/dashboards deployed	AI allocation tests “well above expectations”; rollout by mid-Sept; AI merchandise planning under development for early 2026	AI allocation expected to impact holiday (Q4) given mid-Sept rollout	Improving
Supply Chain	DC performance below expectations; plans to improve speed and process	Days removed DC→store via UPS; work to accelerate receiving/ticketing; AI allocation to save ~2 days	Ongoing execution expected through Q3 to set up Q4	Improving
Tariffs/Macro	Uncertainty; teams holding net product costs flat; off-price opportunities	Navigating tariffs; robust deal environment; “be aggressive, remain flexible”	Monitor deal flow into holiday	Stable/Opportunity
Product Strategy	Broad-based growth; push into plus and big men; accessories under refinement	Trend director hired; brand deals (e.g., True Religion) across categories; women’s plus/big men strong	Category breadth supporting momentum into back-to-school	Improving
Regional/Store Trends	Stores improving experience; broad-based by region/volume	Broad-based across climate zones/regions/store volumes	Continuity into August	Stable
CRM/Loyalty	—	CRM and loyalty platform work underway	—	Initiating
Real Estate/Remodel	19 remodels in Q1; 36 YTD by June	19 remodels in Q2; ~60 planned in FY25; unit growth planning (25–40 new stores in 2026)	—	Accelerating planning

Management Commentary

Strategic framework: “Repair, Execute, Optimize… create the foundation for a disciplined approach to capture the near term and long term opportunity of growth” .
Growth drivers: “Transaction growth has consistently accounted for the majority of our sales gain… performance was consistent across climate zones, regions and store volume deciles” .
Margin execution: “We produced a 40% gross margin rate… an 890 basis point expansion versus Q2 last year… higher selling margins due to increased full price selling… and lower freight” .
Long-term target: “Our goal… is to achieve $40 million or more of EBITDA in 2027” .
Product/trend: “Trend director… distilling… into a handful of key focus trends… you’ll start to see the results… as we get into Q4” .

Q&A Highlights

SG&A run-rate and incentives: Modeling ~$78m per quarter back half with Q4 ~3% above Q3; incentive comp is key driver; ex-bonus SG&A leveraged in Q2 .
Profit flow-through: Target 20–25% EBITDA flow-through; normalized back half closer to ~25% in 2025 .
Product trend leadership: New trend director sharpening curation; early benefits seen in men’s; more visible by Q4 .
Q3 momentum/back-to-school: Momentum consistent with first-half trends; August marked 13th straight month of positive comps .
Remodel/unit economics: Remodel cost now ~$85k–$130k per store (remaining FY25 avg ~$100k) with sales lift; aiming for ~$1.45m per-door for new stores, rent ~10%, mid-teens 4-wall flow-through; 25–40 new stores targeted in 2026 .

Estimates Context

Wall Street consensus (S&P Global) for Q3 FY2025 was not accessible at the time of writing due to data access limits; therefore, vs-consensus comparisons are not included. We will update this recap post-release with S&P Global consensus and realized beats/misses. Values retrieved from S&P Global.*

Key Takeaways for Investors

Setup remains constructive into Q3 print: multi-quarter traffic-led comps, margin expansion, and raised FY25 outlook following Q2 .
Quality of profits matters: Underlying Q2 adjusted results remained negative; watch Q3 SG&A including incentive comp and whether adjusted profitability inflects .
Margin levers are working: Lower markdowns, improved shrink, and lower freight supported 40% GM in Q2; sustainability into 2H is a key stock driver .
Inventory discipline supports agility: Leaner/fresher inventory and faster DC-to-store flow should help chase in-season trends and support “extreme value” deals .
Tech-enabled execution: Chainwide AI allocation rolled out mid-September should aid allocation accuracy and turns; early outcome read-through likely in holiday metrics/gross margin .
Real estate optionality: Elevated remodel cadence in FY25 and a credible path to re-accelerating unit growth (25–40 openings in 2026) expand medium-term earnings power if four-wall economics hold .
Guide trajectory: Management raised FY25 guidance after both Q1 and Q2; Q3 commentary on full-year ranges and holiday posture may be the immediate stock catalyst .

Appendices

Prior quarter source documents

Q1 FY2025 8-K and press release (Jun 3, 2025)
Q1 FY2025 earnings call transcript (Jun 3, 2025)
Q2 FY2025 8-K and press release (Aug 26, 2025)
Q2 FY2025 earnings call transcript (Aug 26, 2025)
Q3 FY2025 earnings date announcement (Dec 2, 2025 release/call)

Citi Trends Inc (CTRN)·Q3 2025 Earnings Summary