Zacks_Analysts' Blog : Cit Trends' Net Loss Widens - Analyst Blog

Citi Trends Inc. (CTRN) recently reported disappointing second-quarter 2011 results. The company's net loss widens 16 folds to $10.0 million compared with $0.6 million in the year-ago quarter.

Net loss per share came in at 69 cents versus 4 cents in the year-ago quarter, primarily due to negative comparable store sales. Moreover, net loss was higher than the Zacks Consensus Estimate of 64 cents per share. 

During the quarter, Citi Trends recorded a 0.9% year-over-year growth in net sales to $130.2 million, missing the Zacks Consensus Estimate of $131.0 million. Comparable store sales dropped 11.9% in the second quarter of fiscal 2011.

Citi Trends' gross profit plunged 10.0% from the prior-year period to $43.5 million, mainly due to higher cost of sales. Gross margin came in at 33.4% compared with 37.4% in prior-year quarter.

Selling, general and administrative expenses increased 14.1% year over year to $50.7 million. Accordingly, the company's operating loss increased almost 16 folds to $15.2 million compared with $0.9 million in the year-ago period.

Citi Trends ended the quarter with a debt-free balance sheet and cash and cash equivalents of $49.5 million compared with $84.6 million in the prior-year period. Shareholders' equity at the end of the quarter was $208.7 million compared with $195.6 million in the year-ago period.

Citi Trends is a value-priced retailer of urban fashion apparel and accessories including nationally recognized brands, private-label products and has a limited assortment of home décor items. The company currently operates 482 stores across 27 states in the Southeast, Mid-Atlantic and Midwest regions as well as in the states of Texas and California.

The company operates in a highly fragmented specialty retail sector and faces intense competition from larger off-price rivals, such as The TJX Companies Inc. (TJX) and Ross Stores Inc. (ROST), and mass merchants including Wal-Mart Stores Inc. (WMT) and Kmart.

Currently, Citi Trends retains a short-term Zacks #4 Rank (Sell rating). However, we hold a long-term Neutral recommendation on the stock.