Q4 2019 Earnings Call

Greetings and welcome to the see Trn for Q 19 earnings conference call. During the presentation, all participants will be in the listen only mode. Afterwards, we will conduct a question and answer session.

That time, if you have a question. Please press the one fall by the four on your telephone if at any time during the conference you need to reach an operator. Please press star Zero as a reminder, this conference is being recorded on Friday March 13, 2020, I would now like to turn the conference over to and it's a monkey senior associate with.

She our please proceed.

Thank you our earnings release, the send out this morning at 645 am Eastern time, if you have not received a copy of the released its available on the company's website under the Investor Relations section at Www Dot Citi trends Dot com.

You should be aware that prepared remarks made during this call may contain forward looking statements within the meaning of the private Securities Litigation Reform Act of 1990 Fives management may make additional forward looking statements in response to your question. These statements do not guarantee future performance. Therefore, you should not place undue reliance on Easter.

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We refer you to the company's most recent report on form 10-K, and other subsequent filings with the Securities and Exchange Commission for more detailed discussion of the factors that can cause actual results could differ materially from those described in the forward looking statement I will now turn the call over to our executive Chairman Peter succeed Peter.

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Thank you need so a good morning, everyone. It's a pleasure to be speaking with you the swabbing and I'm truly excited about the world that lies ahead for Citi trends.

We have put in place a clear strategic roadmap and we are well on our way.

And take it on the interim CEO role in December it what's my goal to establish a framework and culture Oh successful at this company with a clear focus to enter into the next growth phase for Citi trends.

And establishing that framework, we made key hires including Lisa Palmer, our chief merchandising officer.

So joined US from century 21, she has 30 years of retail experience 20 of which four with TJ acts in merchandising and planning walls.

<unk> is a tremendous partner and a true leader.

Well full hired Charlie high.

In the critical role of senior VP of supply chain.

Before joining us trolley spent the last eight years with Burlington and prior to that he was the supply chain Council.

We look forward to leveraging Charlie's expertise.

And rounded out our leadership team I am thrilled with the recent appointment updated Mcewen, that's our C O.

Even if it's only been with us for five days, what is already engaging with our teams David comes to US with over 24 years of retail experience. Most recently as executive Vice President of marketing strategy on E Commerce for five below.

It was a member of the leadership team that oversaw five belows explosive growth over the last eight years.

Steve its proven leadership experience along with his unique skill sets gives us confidence that's useful right leader to drive Citi trends long term strategic plan.

With that let me allowed David to introduce themselves.

Thank you Peter.

Hi, I'm incredibly excited to join the Citi trends team and I see this is a tremendous opportunity.

The uniqueness of Citi trends its value proposition servicing the complete apparel accessories and home goods needs.

Looking at American consumers.

Provides a significant platform for growth.

I look forward to working alongside you and that sounded team at Citi trends as we set our sights on growing our business into a 1 billion dollar branch.

Thanks, so much data.

Along with David's appointment as far as CEO. Our board has also appointed me that's exactly them chairman.

In my new role I will work alongside David as he transitions into the CEO role.

David This is aligned with and will lead the strategic vision, we laid out for the company that they I see our conference in January.

Now ill jump into a few highlights of our fourth quarter results.

We ended 2019 on a high know, what's very strong top and bottom line performance.

Oh, Sorry Testament to the early successful implementation of our strategic plan.

Our fourth quarter sales increased nearly 5%.

$211 million, we delivered a comparable store sales increase of 3.1%.

Reflecting strong full price selling and lower markdown rates, our gross profit expanded by 235 basis points to 39.7%.

Selling general and administrative expenses de Levered 151 basis point in the fourth quarter to 32.1%.

Primarily due to higher distribution center labor cost and the reversal of an accrual for incentive compensation of prior year.

Our operating profit margin was up 116 basis points and operating profit dollars grew 20% to 11.3 million, that's compared to the fourth quarter and 22.

Fourth quarter earnings per diluted share, where 84 cents compared with 59 cents on the fourth quarter fiscal 2018 on a GAAP basis or 87 in the fourth quarter fiscal 2019, when we adjust for interim CEO related expenses.

And our corner in inventory was down 1.1% compared very favorably to the 5% totaled feldenkreis, which led to a high quality inventory position entering into spring season.

And looking at the comp store sales performance by merchandise categories for the fourth quarter. We continue to successfully shut offering more towards the not apparel merchandise categories, which comped positive 11.7% for the period more than offsetting in apparel category.

Sorry comp decline of 2.2%.

Moving next to our fiscal 2019 resolved.

Total sales increased 1.6% to 782 about.

That's inclusive of a slight comp store sales declined 8.1 precisely.

Our earnings per diluted share as adjusted for interim CEO exposed to.

Proxy talk to him.

Fences and asset impairment expenses, once $1.56, which exceeded our prior guide.

Well the year, we opened 16, new stores, we modeled relocated or expanded 25 stores and we closed seven stores to end the year at a total store comp of 571.

And we've returned approximately 32 million to our shareholders and look form of share repurchases antibody.

No for an update on our performance quarter to date and our guidance for the first quarter and the fiscal year 2020.

Despite a delay in income tax refunds that materially affected the third week of February.

The first five plus weeks of fiscal 2020.

I'm pleased to report that our comparable store sales are up 3.6%.

For the first quarter fiscal 2020, our guidance for adjusted earnings per diluted share isn't a range of 87 themselves to 91 side.

That compares to 72 cents on adjusted basis last year, it mid point year over year increase of approximately 24%.

Our first quarter guidance is based on a comparable store sales increase of approximately two of the after 3%.

For fiscal 2020.

We are guiding adjusted earnings per diluted share to be in the range of $1.75 to $1.85, which assumes a comparable store sales increase in a range up to the half.

Three and a half precise.

As you have heard from many others, we're paying close attention to developments relating to the outbreak of the Corona virus.

First and foremost we're focused on the health and safety of our employees and our customers as well as planning for business continuity.

We're closely monitoring local.

They and federal government agencies and will follow all recommendation.

The extend duration of the impacts that the Corona buyers may have on our business are not knowing that this time.

But we are monitoring developments in order to be in a position to take the appropriate action.

2020 guidance does not include any potential impact related to the Corona virus.

Let me conclude with an update on our long term strategic plan as an update on our capital return program.

We are continuing to make meaningful progress on our long term strategic plan.

We have approved 22.

The plan 30 store openings for 2020.

We have completed 20 of the 50 planned Remodels for 2020, what's the remaining 30 targeted could be complete by the end of May.

We have hired delight to identify and help us execute our strategic systems Road map.

And we are making major improvements and supply chain, including reductions and freight costs and efficiencies within our distribution centers.

On the capital return trough.

We completed the 25 million Telo share repurchase program that was announced in November of 29 team.

And as I mentioned earlier in 2019, we returned approximately 32 million to our shareholders in the form of share repurchase and some dealt with it.

I am pleased to report that the board today about the authorization of another $30 million share repurchase program, which we expect to fog from cash on hand.

In summary, we ended the year on the high though.

We believe that we have the right team in place to leap Citi trends into our next phase of growth and I'm confident we're well positioned to achieve our three year objectives include doing that self cagar of approximately eight and a half or sub.

Reaching 1 billion in sales by 2022, and delivering earnings per share CAGR of 20% to 25%.

With that need so we are ready to take any questions.

Thank you.

If you like to register a question. Please press the one fall by the four on your telephone you will hear a three tome problem to acknowledge your request. If your question has been answered I never like to withdraw your registration. Please press the one fall by the three.

One moment please for the first question.

Our first question comes from Eric better with S.C.C. Research. Please proceed.

Good morning, Congratulations on a solid Q4 and start to the fiscal year.

Thanks Mark.

Just talk a little bit about inventory yeah, we've heard that the core of virus has been somewhat disruptive inventory flows what are you seeing and how are you responding to that.

Eric at this point, we have had no disruption to the supply chain the flow of inventory we are in constant contact with our our major vendor partners out there and working with them very closely.

Today, we don't see any trouble getting merchandise.

That's great when you look at the.

Remodels.

Well what are you seeing in terms of the impacting the Remodels how are you looking at that.

How much of the store base. After this year's 50 should be remodeled and kind of how would you feel that speaking the consumer and what their purchasing when they use remodels are occurring.

Yeah, well, we're getting them a very positive reaction from the customer.

Well, it's from our store employees. They are proud to work in the remodeled stores that our customers are incredibly appreciative that we are spending money in their Citi trends. So we have said a stated there that we intend to do 50 Remodels every year over the next.

Three that being 20 2050 in 21 and 50 in 2022.

Based on the results that could accelerate we could do more if we got even higher.

Our lives than what we anticipated or they could go to a little less if we got lower ones, but we anticipate 50 every year for the next three years.

We did show the merchandise I'm, sorry, I've got just want to.

Your last comment about what their by we did ship the from more not apparel than the remodeled stores, which is what we're doing chain wide. We just accelerated that stuff in the remodels and we are accelerating that shift in the new stores as well and we're seeing positive results from both of those.

What does the approximate cost per store for the remote.

So slightly over $100000.

Okay, and when you're rolling out the new stores is there a particular region or area are you looking at what is the focus in terms of the new stores and where you're putting them.

[laughter].

The new stores are you asking about no Eric yeah.

Yeah.

Where we are well, it's a combination of filling strategy and some new markets, We're lucky and most importantly at the most viable I've assays, a where our concept.

And that that might be a fill in market it might be a new markets.

But that's that's the way where our approach.

Great again, congratulations and good luck in 2020.

Thank you work.

Our next question comes from Alex Silverman with aid W.M. investment company. Please proceed.

Good morning, congratulations on pretty spectacular quarter.

I'm wondering if you could talk a little bit about the tax refund season.

What you're seeing in terms in terms of the linearity of the year versus a year ago.

Yeah, I'd be happy to I think it's been fairly widely reported.

That there was a significant decline in the third week of February and as I stated in my remarks.

We felt that the client.

So we were materially affected them a third week of February.

I'm happy to report.

The other four weeks, if we got five weeks and thus far have all had positive comps tool but.

The government for whatever reason.

I didn't get the money out that they've got all the year ago and substantially less than two years ago did that third week of February and our customer felt that subsequently we felt.

Got it.

Very good thank you very much.

Thank you.

[noise] Mr. Succeed there are no further questions at this time, please continue which presentation or closing remarks.

I think we're all set Frank Thank you so much everybody for participating today, and we look forward to talking to you again.

[laughter] that does conclude the conference call for today, we thank you for your participation and as such you. Please disconnect your lines.

I have a great to everyone.

We see.

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