Zacks_Analysts' Blog : Disappointing 3Q for Citi Trends - Analyst Blog

Citi Trends Inc. (CTRN) recently reported disappointing third-quarter 2011 results. The company's net loss widened 12 folds to $4.9 million compared with $0.4 million in the year-ago quarter.

Adjusted net loss per share came in at 38 cents versus 3 cents in the year-ago quarter, primarily due to negative comparable store sales. Moreover, net loss was higher than the Zacks Consensus Estimate of 37 cents per share. On a reported basis, net loss per share came in at 46 cents.

During the quarter, Citi Trends recorded a 2.2% year-over-year growth in net sales to $143.1 million, missing the Zacks Consensus Estimate of $144.0 million. Comparable store sales dropped 9.3% in the third quarter of fiscal 2011.

Citi Trends' gross profit plunged 6.8% from the prior-year period to $48.2 million, mainly due to higher cost of sales. Gross margin came in at 33.7% compared with 36.9% in prior-year quarter.

Selling, general and administrative expenses increased 12.3% year over year to $53.1 million. Accordingly, the company's operating loss increased more than 12 folds to $12.1 million compared with $0.9 million in the year-ago period.

Citi Trends ended the quarter with debt-free balance sheet and cash and cash equivalents of $33.2 million compared with $69.6 million in the prior-year period. Shareholders' equity at the end of the quarter was $202.5 million compared with $195.9 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 511 stores across 29 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).

Currently, Citi Trends retains a short-term Zacks #3 Rank (‘Hold’). However, we hold a long-term ‘Underperform’ recommendation on the stock.