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Citi Trends Inc (CTRN)·Q4 2025 Earnings Summary

Executive Summary

  • Q4 FY2024 (reported March 18, 2025) delivered total sales of $211.2M, +6.4% comparable store sales, and 39.7% gross margin; EPS was -$1.71, driven by a noncash tax valuation allowance, while adjusted EBITDA was $7.1M .
  • Against S&P Global consensus, revenue was essentially in line ($211.2M vs $211.5M*) and EPS was a significant miss ($-1.54 actual primary EPS vs $0.18*), largely due to the valuation allowance recorded in the quarter; Q3 slightly beat revenue and was near in-line on EPS* .
  • FY2025 outlook calls for low-to-mid single-digit comp growth, gross margin expansion of at least 220 bps, SG&A leverage of 30–50 bps, and EBITDA of $5–$9M; management highlighted AI-driven allocation, branded off-price expansion, remodels (~50), and share repurchases ($10M to-date) as execution pillars .
  • Near-term catalysts include continued mid-single-digit comps Q1-to-date, margin tailwinds from freight and shrink initiatives, and extreme value branded deals to drive traffic and basket; valuation allowance creates non-GAAP EPS volatility, but is noncash .

What Went Well and What Went Wrong

What Went Well

  • Broad-based top-line momentum: Q4 comps +6.4%, strongest in the 9-week holiday period (+7.1%) on traffic, conversion, and basket growth .
  • Gross margin expanded 60 bps YoY to 39.7% on lower freight and improving shrink, with normalized adjusted EBITDA comparable to Q4 2023 ($7.4M vs $7.6M) .
  • Strategic initiatives gaining traction: off-price “extreme value” branded tests boosted traffic; AI-based product allocation pilot showed superior store-level demand prediction; inventory fresher with average in-store inventory down 6.7% YoY .
    • Quote: “The new AI system… enhances our ability to accurately place product based on localized demand… Early test results are encouraging” .

What Went Wrong

  • GAAP EPS heavily impacted by noncash tax valuation allowance: tax expense $15.8M including ~$15.5M valuation allowance on deferred tax assets (NOLs), yielding Q4 net loss of $(14.2)M .
  • Plus-size apparel execution miss (expected to be repaired by Q2), and footwear still early in its expansion curve despite Q4 high single-digit growth .
  • Q2’s inventory reset and shrink accrual step-up depressed 1H profitability and set a low base, necessitating back-half improvement and FY2025 execution to deliver EBITDA guidance .

Financial Results

MetricQ2 FY2024Q3 FY2024Q4 FY2024
Revenue ($USD Millions)$176.6 $179.1 $211.2
Comparable Store Sales (%)-1.7% +5.7% +6.4%
Gross Margin (%)31.1% 39.8% 39.7%
SG&A ($USD Millions, Adjusted)$73.8 (Adj $76.75) $74.7 (Adj $74.57) $77.5 (Adj $76.75)
Adjusted EBITDA ($USD Millions)$(17.2) $(3.33) $7.10
Net Income ($USD Millions)$(18.4) $(7.15) $(14.18)
Diluted EPS ($)$(2.21) $(0.86) $(1.71)
KPIQ4 FY2024
Store Count (end of period)591
Liquidity~$136M
Cash~$61M
Inventory (YoY change)-6.0% total; avg in-store -6.7%
Share Repurchase$10.0M, 395,793 shares since restart
Estimates vs. ActualsQ2 FY2024Q3 FY2024Q4 FY2024
Revenue Consensus Mean ($USD)$179.0M*$178.3M*$211.54M*
Revenue Actual ($USD)$176.6M $179.1M $211.2M
Surprise ($USD)-$2.4M*+$0.8M*-$0.3M*
Primary EPS Consensus Mean ($)-0.485*-0.75*0.18*
Primary EPS Actual ($)-1.943*-0.781*-1.536*
Surprise ($)-1.458*-0.031*-1.716*

Values retrieved from S&P Global.*

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Comparable Store Sales GrowthFY2025N/ALow to Mid Single Digits New
Gross MarginFY2025N/AExpand ≥220 bps vs FY2024 New (Raised vs baseline)
SG&A LeverageFY2025N/ALeverage 30–50 bps vs FY2024 New (Leverage)
EBITDA ($USD)FY2025N/A$5–$9M New
Effective Tax RateFY2025N/A~0% New
Stores (Openings/Closures)FY2025N/AOpen up to 5; close up to 5 New
RemodelsFY2025N/A~50 stores (18 already remodeled) New
CapEx ($USD)FY2025N/A$18–$22M New

Earnings Call Themes & Trends

TopicPrevious Mentions (Q-2 and Q-1)Current Period (Q4 FY2024)Trend
Off-price extreme value & branded dealsQ2: Began inventory reset; building branded relationships and off-price sourcing • Q3: Strong holiday start, treasure hunt strategy, sequential comp improvement Q4: Extreme value branded tests drove traffic; plan to double branded mix to 20–30% Accelerating
AI-driven product allocationQ2: Simplifying allocation clusters; evaluating AI bolt-on Q4: AI pilot shows superior demand prediction; expected to impact 2025+ Positive adoption
Shrink mitigationQ2: Accrual reset; internal/admin/external actions; consultant engaged • Q3: 40 bps improvement in shrink; many physical counts Q4: Continued improvement from physical counts; focus to reach historic baseline Improving gradually
Supply chain speedQ2: Speed from vendor to store a focus (carrier disruption) Q3: Two-week reduction vendor-to-store Q4: Expect further reduction alongside AI allocation
Tariffs/macroQ3: Holiday optimism, cautious on calendar comps Q4: Monitoring new administration policy changes; off-price model limits tariff exposure Watchful, mitigated
Fleet strategy (remodels/new stores)Q3: Aggressive remodel program; cost reduced ~$85–$130K per store Q4: 50 remodels planned; new store growth to ramp in 2026+ Building growth platform
Capital allocationQ3: Resumed buyback expected in Q4 Q4: $10M repurchases to-date; $40M remaining authorization Ongoing

Management Commentary

  • “We delivered total sales of approximately $211 million… comparable store sales growth of 6.4%… gross margin rate of 39.7%… inventories down 6% compared to the prior year.” — CEO Ken Seipel .
  • “Adjusted EBITDA for the quarter was $7.1 million… When normalizing… $7.4 million this year versus $7.6 million last year.” — CFO Heather Plutino .
  • “As of quarter end… $61 million of cash, no debt and no drawings on our $75 million revolver.” — CEO Ken Seipel .
  • “Full-year gross margin is expected to expand a minimum of 220 basis points versus 2024… Full-year EBITDA… $5 million to $9 million.” — CFO Heather Plutino .

Q&A Highlights

  • Off-price and branded mix trajectory: Extreme value items currently ~1–2% of business with a long-term goal around 10%; broader branded mix expected to reach 20–30% of merchandise, focusing on “top-of-mind” brands at unique pricing .
  • EBITDA build and flow-through: Management targets ~25% flow-through on incremental sales, plus ≥220 bps gross margin expansion and SG&A leverage of 30–50 bps to drive FY2025 EBITDA ($5–$9M) .
  • Longer-term margin target: Return EBITDA margin to 5–7% over time, restoring $40–$50M EBITDA with stronger sales and margin flow-through .
  • Guidance mechanics: Base SG&A set to absorb low-to-mid single digit comp guidance; higher tiers of sales could expand the EBITDA range .

Estimates Context

  • Q4 FY2024 revenue of $211.2M was essentially in line with consensus ($211.54M*; surprise -$0.3M*) while primary EPS materially missed ($-1.536* actual vs $0.18* consensus; surprise -$1.716*), largely driven by a noncash valuation allowance on deferred tax assets .
  • Q3 FY2024 saw a slight revenue beat ($179.1M vs $178.3M*) and a near in-line EPS (-$0.781* vs -$0.75*); Q2 FY2024 missed on both revenue and EPS amid inventory reset and shrink accrual step-up*.
    Values retrieved from S&P Global.*

Key Takeaways for Investors

  • Momentum is real: Two consecutive quarters of positive comps (Q3 +5.7%, Q4 +6.4%) with continued mid-single-digit comps Q1-to-date; traffic, conversion and basket trends support top-line trajectory .
  • Margin recovery underway: Freight tailwinds, improving shrink, AI-driven allocation, and branded mix should support ≥220 bps gross margin expansion in FY2025; watch execution pace and shrink normalization .
  • EPS noise from tax accounting: The $15.5M valuation allowance created a GAAP EPS headwind; it is noncash and adjusts through the balance sheet, but it can drive headline EPS volatility .
  • Capital allocation supportive: Debt-free balance sheet, ~$136M liquidity, and $10M buybacks to-date (with $40M remaining) provide flexibility to invest and support shares .
  • Off-price branded is a traffic lever: Management intends to more than double branded penetration and scale extreme value deals, which are margin-accretive and drive basket size .
  • Operational catalysts: AI allocation, supply chain speed, and remodels (~50 in 2025) should improve turns, working capital, and in-store productivity; monitor cadence of store remodel ROI .
  • Watch comps vs calendar effects: Q4 comps benefited from strong holidays (+7.1%); management remains cautious on macro/tariffs but views off-price model as a hedge .