Q3 2021 Citi Trends Inc Earnings Call

November 30, 2021

[music].

Greetings and welcome to the Citi trends three Q 'twenty, one earnings conference call.

During the presentation, all participants will be in a listen only mode. Afterwards, we will conduct a question and answer session at that time. If you have a question. Please press the one followed 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 Tuesday November 30th 2021.

I would now like to turn the conference over to Nitza Mckee Senior Associate. Please go ahead.

Thank you Jason and thank you all for joining us on the city tons third quarter 2021 earnings call on our call today is our Chief Executive Officer, David Mcewen, Chief Financial Officer, Pam Edwards, and Vice President of Finance, Jason Moss Shneur.

Our earnings release was sent out this morning at 645, a M. Eastern time, if you've not received a copy of the release it's 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 today are made during this call may contain forward looking statements within the meaning of the private securities.

Litigation Reform Act of 1995 management May make additional forward looking statements in response to your questions. These statements do not guarantee future performance and therefore, you should not place undue reliance on these statements. 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 a more detailed discussion of the factors that can cause actual results to differ materially from those described in the forward looking statements I will now turn the call over to our Chief Executive Officer, David Mcewan David.

Thank you Neil good.

Good morning, everyone.

And thanks for joining us today on our third quarter fiscal 2021 earnings call. This morning, I will begin by reviewing the continued transformation of our business and highlight our strong financial and operational results for the third quarter before updating you on our progress related to the evolution of our cities.

Astra plant and the activity in support of our strategic priorities.

Then Ken Edwards our CFO.

To elaborate on our stellar financial results and provide details of our upwardly revised guidance for the year as we close in on a record $1 billion in sales and record operating results.

I want to take a moment to express my sincere gratitude to our high performance teams across our organization.

Superb execution by the entire Citi trends crew, which simply amazing.

Securing merchandise to successfully managing the significant supply chain disruptions impacting our industry to appropriately staffing our highly differentiated specialty value stores.

All of these efforts enabled us to meet the strong broad based demand.

Apparel accessories and home trends for way less spend resulting in an excellent third quarter.

Our continued focus on elevating the Citi trends in store experience and expanding our brands many more underserved Appleton American Olympic Phoenix communities has never been stronger.

Our people are the heart and soul of the Citi trends culture, we are aligned to servicing our customers unique needs each and every day.

Supporting our efforts are our ever expanding vendor partners from big to small our vendor partners worked closely with our agile merchant teams and enabled us to keep it fresh and fun for the entire family.

Consistently delivering new and exciting products at extraordinary price points.

That don't break the bank.

Okay.

While we are still in the early innings of our transformation. We have made great progress and are confident that the execution of our strategic priorities.

Enable us.

Additional sales and leverage expenses to sustain our top and bottom line growth.

Citi trends future is bright and the runway for growth.

Exceedingly strong.

Turning to our results.

We are thrilled to report excellent third quarter results that exceeded our internal expectations and continued the positive momentum from the first half of the year.

Key highlights of our third quarter performance include the following.

Total sales of $228 million increased 14, 5% compared to Q3 of 2020 and 24, 5% compared to Q3 2019.

This growth was supported by a terrific comparable store sales increase of 13.1.

Versus Q3 of 2020.

That was on top of a positive six 3% from last year.

This is the ninth consecutive quarter of positive opened only comparable store sales for Citi trends.

On top of outstanding sales results.

Can you many positive.

K P I trends in this city.

When comparing the 2019.

These hot Kpis trends include Spa.

Expanding gross margin, reducing average store inventories.

Leveraging SG&A.

And producing astounding increases in operating income and margin.

More details from Pan in just a few minutes.

Lastly, we opened 11, new stores during the quarter, including a brand new city in Wichita, Kansas.

Quickly remodeled three stores that were severely damaged by hurricane item.

That leaves our store count at the end of the quarter at 600 stores.

And better yet well end the year with approximately 611 stores.

Moving on to Department.

Apartment.

Once again, we saw strength across our cities or categories. As we continue to enhance the shopping experience and our unique specialty value stores by placing our customer.

At the center of how we curate trends fashion and basics.

Cross an increasingly wider variety of apparel non apparel and even consumables.

You registered another quarter of strong double digit growth versus 19 across five of our six cities.

They are women's men's and kids beauty and accessories and home and lifestyle.

Before I pass to Pam I would like to highlight a handful of progress updates across our bi move sell and support operational pillars are continued to evolve as you scale the business.

By it is without question the team's successful navigation of the fluid dynamics of the marketplace we draw from.

Our masters of delivering trend quality value and brand.

We are only.

We are often the only destination or neighborhoods that does what we do and combining art with science to deliver a highly differentiated assortment.

And Jay out is how we shine.

This differentiation manifests itself in our strong back to school and back to dorm seasons.

Followed by a brisk start to holiday self purchasing and early gift shopping.

Four move or our supply chain team, we embarked on multiple projects to improve throughput and productivity.

It's really a combination quick wins and longer term projects designed to move goods through the pipe at a faster rate, while optimizing processes and labor overtime.

This showed up in meaningful ways at the onset of the quarter as we fueled stores with fresh goods from either our D CS or via drop ship deliveries direct from our most flexible vendor partners.

All the while managing freight costs to a smaller than expected headwinds.

For cell.

Our real estate and stores divisions. We are most excited about that the results of our lab stores for CTX store upgrades.

Some really big news, we've decided to greenlight this top to bottom revolution in our store experience to all new stores and Remodels.

Ran differentiation is everything to us and being able to impact so many stores and our journey from 600 stores today to a thousand in the future.

Combined with higher productivity Remodels.

As a major new development in our transformation journey.

Lastly, our support pillar is made up of finance HR, it and legal while sometimes the unsung heroes. These teams are.

Are changing the way we work.

From a recently launched Pos system to our cloud based analytics platform.

Our city cares Council, we are chipping away at countless opportunities to improve internal productivity.

Under the act based insights establish new cultural norms.

And attract the best talent to grow the Citi trends experience and make a difference in the neighborhoods we serve one city at a time.

As we look to the remainder of the year.

We feel really good about our positioning for the holiday season and are excited about our give get gather holiday campaign punctuated by plenty of amazing gifts stocking stuffers and trend right looks for the entire family.

So that and we expect to close the year strong and are raising our full year 2021 guidance for both sales and EPS.

With that I'll turn it over to Pam Edwards our CFO.

Our third quarter results as well as our outlook in more detail Ken.

Thanks, David and good morning, everyone. Our impressive third quarter performance is a testament to our entire team continued agility disciplined operational execution.

The transformation of Citi trends is well underway and as David mentioned this is our ninth consecutive quarter opened only comp store sales growth.

In addition, we continue to improve our bottom line, despite widely discussed macro supply chain headwind.

Now, let's turn to the specifics of our Q3 financial results.

As mentioned in our earnings press release, we are reporting operating results for Q3 2021 relative to Q3 2019 to provide a more normalized comparison of performance due to the uniquely challenging operating environment in Q3 of 2020.

As with our second quarter call I want to first address the top of mind topic, which is supply chain.

We continue to successfully navigate the supply side environment, which remains fluid.

We have strategically leverage opportunistic inventory buys from last season, and we have more effectively procure goods in season in response to customer demand.

Therefore, we are in really good shape with the inventory that we need to deliver a strong holiday season.

In addition, while transportation costs are up.

Diligently work through what we can control by streamlining and increasing the efficiency of our internal operations and processes.

This discipline has allowed us to reduce our reliance on third party providers and manage the supply chain impact to the low end of the 120 to 150 basis points, we talked about in Q2.

We will continue to monitor as the environment is expected to stay fluid through at least mid next year.

Now, let me turn to the review of our third quarter results.

Total sales of $228 million in the third quarter grew by 14, 5% compared to Q3 of 2020 and 24%.

24, 5% compared to Q3 2019.

Comp sales grew 13, 1% on top of a six 3% positive comp in Q3 2020.

Growth in the quarter versus Q3 of 2019 was driven primarily by an increase in the average basket size. The result of a healthy balance of growth and unit retail selling price and higher units per transaction.

We achieved gross margin in the quarter a 43%.

An increase of 290 basis points compared to 37, 4% in the third quarter of 2019.

The strong increase in our quarterly gross margin rate continues to be primarily the result of strong full price selling and fewer markdowns offset partially by increased freight expense.

SG&A leverage 300 basis points versus 2019 to 32, 8%.

Due to strong sales growth and disciplined expense management.

Operating income of $11 6 million grew by $2 2 million versus Q3 of 2020.

Paired to Q3 of 2019 this is a $13 2 million increase.

This improvement in our results is reflective of the transformation of our operating model, which is showing improved flow through to the bottom line.

Thanks to the tremendous efforts of our bi moves out and support teams. We believe more opportunity lies ahead.

Net income of 9 million compared to $7 million in Q3 of 2020.

And an operating loss of $1 1 million in Q3 of 2019.

Earnings per diluted share were $1 <unk>. This.

This is up over 50% compared to the 67.

In Q3 of 2020 and compared to a loss of nine cents.

Q3 of 2019.

Turning to inventory.

Quarter end inventory is on plan.

Increasing 10, 9% compared to the end of Q3, 2020 and decreased six 3% compared to Q3 of 2019.

The inventory increase to last year is largely a factor of the depleted inventory levels experienced at the end of Q3 last year combined with opportunistic buys we made during the third quarter of this year.

We continue to experience record turn as our inventory management has improved markedly year on year. This buying muscle we are creating is really kicking in buying less upfront.

Chasing into sales demand, which gives us the agility and result in a record level of product.

Lastly, the company repurchased approximately 521000 share of it.

Common stock at an aggregate cost of approximately $42 $8 million in the third quarter.

In total for the first nine months of this year, we have repurchased a million 273000 shares at an aggregate cost.

$107 2 million.

We ended the third quarter with approximately $8 1 million remaining on the existing buyback authorization.

In addition, we announced today that our board of directors authorized another $30 million share repurchase program.

Turning to our fiscal 2021 outlook.

Following our strong performance in Q3, and the strong start to Q4, we expect an increase in comparable store sales in the high teens in the fourth quarter of 2021 compared to the fourth quarter of 2019, and we expect gross margin to be in the high thirty's to low 40.

Translating that to the fiscal year guidance.

We are raising our full year 2021 sales outlook.

A range of 1 billion to $1 15, and EPS guidance to a range of $6 95.

The $7.10 compared to our prior EPS range of 636 50.

This represents.

An increase of nearly 400% at the EPS mid point when compared to fiscal 2019.

I'll turn the call back to David for closing comments David.

Thanks Pam.

You know when I take a step back and look at how we manage the business through an incredibly challenging period, what I'm. Most proud of is the way. This team has successfully reshaping and retooling our brand and its 75th year of operation.

In fact, how we think about it is today so the trend should be thought of like a 75 year old startup.

You don't hear that too often do.

Modernizing of why we do what we do and.

And how we do what we do is just getting underway.

I'm humbled to be a member of the team that shares my passion for growing and building something really special for the customers and crew members that care deeply about the success of Citi trends.

Looking forward to fiscal 2022, I thought I would share some of our preliminary views on how we are positioning the business.

As you've heard before we are primarily focused on four strategic priorities number one growing our fleet and expanding our customer base number two optimizing our product mix and number three reinvesting in our infrastructure.

Before making a difference within the communities we serve.

We have added talent.

In systems and created new processes to kick start momentum across these priorities.

Some really compelling themes are emerging.

Including but not limited to opportunities to drive further customer engagement.

Build increments.

Within our boxes.

Leverage expenses and develop cohesive neighborhood connections.

We are on track with our transformation and confident in the trajectory of the business as we continue our journey to a thousand stores. We plan to open approximately 40, new stores in fiscal 2022, coupled with remodeling approximately 40 stores all reflecting our <unk>.

<unk> CTX store upgrades.

At a high level. We believe we are positioned to deliver fiscal 'twenty to total sales growth of low to mid single digits coupled.

Coupled with at least low double digit EPS growth.

You'll hear additional details.

Via our new City Master plan at ICR in early January.

Before I wrap up I also wanted to mention two new additions to our board of directors during the quarter, we announced the appointment of two new independent Directors Kristina Francis President of Magic Johnson Enterprises, and Kara Saban CEO of sundial brands has joined our board.

We are thrilled to add two highly accomplished executives to our board and the expansion of the board reflects Citi trends is heightened commitment to diversity equity and inclusion.

In summary, we are so pleased with our third quarter financial and operational results, which reflect the agility and disciplined execution of our teams efforts within a dynamic operating environment.

Transformation remains on track and our updated guidance is reflected.

Reflective of our confidence in the underlying momentum of the business.

Including expectations for a strong holiday season.

Excited about the significant growth runway, we see for the Citi trends.

And believe we are poised to continue capitalizing on the tremendous opportunity ahead, as we focus on delivering long term sustainable growth.

I want to reiterate my gratitude to the entire Citi trends crews for their commitment to our loyal and growing customer base.

We appreciate your interest in this exciting growth story and wish you all a happy holiday season, as you give get and gather.

Operator, we are now ready to take questions.

Thank you.

If you would like to register a question. Please press the one followed by the four on your telephone you will hear a three tone prompt to acknowledge your request.

Your question has been answered and you would like to withdraw your registration. Please press the one followed by the three <unk>.

One moment please for the first question.

And our first question comes from the line of Jeremy Hamblin with Craig Hallum Capital Group. Please proceed with your question.

Thank you and congratulations on a really impressive update.

I wanted to.

First by just getting a little bit more color around Q4, you called out I think five of the six cities is really strong I think our footwear. It sounds like it's a little bit of a laggard I think that might be the most impacted by.

Supply chain disruption, maybe with some vendors a little behind that shipments, but just wanted to get a sense in terms of what you are seeing thus far in the quarter.

The.

Two year stack same store sales up high.

High teens that would suggest I think comps roughly flat or so on top of the really impressive 16, 7% last year.

But just wanted to get a sense for the category performance that you were seeing kind of quarter to date.

<unk> and.

If there is any of.

Of your categories that are.

Either.

Outperforming significantly or maybe underperforming.

Hey, Jeremy it's David Thanks, so much for joining thanks for your kind words and good questions. Here's how I'd frame that we got ahead of everything first and foremost and since we started understanding the supply chain.

Wins earlier this year, we were able to get a leg up on understanding what goods, we could get to our stores should be able to start to gifts and holiday self purchase needs off to a good start and that's exactly what the team did so we really kicked off a lot of our gift and self purchase for the fall winter months.

Well, it's really early we were set up in stores late October early November which is perfect for us and the customer really responded.

So that's been from a setup standpoint really beneficial to the start of a strong quarter in terms of city performance. It's really broad based it's strong against all of the apparel categories.

And we're seeing some really great traction in our consumables business, which as you know.

Young and and continued traction across our non apparel and home business you nailed. It footwear is the one that's kind of taken a little slower to catch up although we're seeing some really good momentum in that business as some of the supply chain issues abate.

Overall, its really the whole family shopping our stores you know the month of November was mainly around self purchasing and start of gifting and our layaway program has been been strong for us and Thats really when a customer decides to go who I don't want to lose out on that great set of gifts, So I'm gonna put China.

In the back room, and it's our version of buy now pay later and we do a nice business in that area as well. So all of that combined has given us good confidence that the customers really excited to be out there and like you've seen in the general news, she and he and the kids are shopping.

Yeah.

That too.

Jeremy for that for the comps to lap.

Last year, our comps were.

He had a wide range of performance for the three months. So November last year for your call was down 1%.

Remember with up 17% in January was up 44%.

So as you mentioned it was 17% on a quarter or so.

Just in terms of where we're.

Being at the high teens versus the 2019 number but implied is flattish to low single versus last year.

Great. Thank you for that clarification.

The only thing I wanted to ask about was staffing.

You've had some retailers that have had.

It had a challenge in terms of getting.

You know holiday staffing in place and getting people.

Two to show up someone had to obviously pay.

Little bit higher wages I wanted to see Pam if you could give us any color in terms of what youre seeing.

Staffing trends here for holiday.

Can you give us any color in terms of the types of hourly wage increases that you're seeing year over year.

Yeah, I mean, similar to what others are reporting we are seeing a tougher labor market, particularly for stores and not.

Not so much in the D C and we're addressing on a store by store basis and that includes an increase in wage rates and market.

If it calls for that and adjusting operating hours, if it makes sense, but.

Yes from a preview from this past weekend, we had little to no issues with with labor and people.

I'm showing up so.

We're feeling good but we know that it's not over until.

Until we get through the quarter. So we continue just to monitor on a case by case basis for the rest of the season and going forward.

Great last one for me and then I'll hop back in the queue.

Yeah.

You really surprised me with the commentary around FY 'twenty two it sounds really incredible with the two.

To expect.

Both topline growth next year.

But you know then low double digits.

<unk> growth next year on top of the extraordinary results this year.

Would be incredible.

Is that a reflection of confidence in.

<unk> experience.

Stores.

Reflected in there, but you know I think.

Maybe you could share in terms of why.

Kind of putting that out there today.

Sure Jeremy Yeah.

That color and maybe people will wrap here and catch you later of course.

It's really a combination of a bunch of factors its confidence in our base underlying business and our regular good old comp stores. We believe we have opportunities to lap the headwinds and continued to post up strong productivity numbers within our four box four wall boxes, and then couple of them.

Really good expense leverage as you can tell from the E. P. S game that we are sharing at a high level and then and then certainly the I would say in 2022, it's more icing, but it's good I sing the impact of CTX. You know if you think about it it'll hit of roughly around 80 projects 40, new.

New and 40, Remodels, so it definitely contributes but but it's a cogs.

So you know the bulk of our comp stores.

Feeling good about how they're performing today and what we have in store for next year.

Coupled with no question, some upside from the CTX coming into play in that.

Of course, we'll have a bigger role as you get into three and 'twenty four and so forth if that makes sense.

Absolutely congratulations and thanks for taking the questions.

Thanks, Jeremy.

Our next question comes from the line of Dana Telsey with Telsey Advisory Group. Please proceed.

Congratulations David and team terrific results can you expand a little bit on CTX and what you're seeing there how those boxes differ in terms of performance versus the base boxes and given the expansion to 40 40, New 40 remodel what the Capex implications are for this and I just have a follow up.

Yeah.

Sure Hi, Dana Thanks for your kind words.

First half and then Pam will take the second half.

First half, let me quickly frame for everybody on the call. What CTX is we have a frame of reference really it's our re imagination of the Citi trends experience in our four walls, it's a top to bottom front door to back door.

<unk> and traction by not changing a thing about our products literally around the same product we have in all of our other stores, but just a rang it differently and are in this kind of revenue version of a Citi trends so different than you've seen in the past 10 to 20 years and are just seeing the adoption by the <unk>.

Customer of the same product in a different experience at the rate. We're seeing has made us really excited and obviously bullish on rolling it out.

And I think what's most important to understand we can't share all the details but at a high level is we're seeing conversion lifts. So once he and she come in they're basically walking out a more frequent basis and we're seeing nice conversion changes. So the basket is very similar to our control groups in our U P. Teas are very similar.

But its conversion that's zooming, which is kind of exactly what we'd hope to be the case.

We're liking what we're seeing and we're excited to roll it out Pam will comment a little bit on the capex.

Occasions, which are which are small, but she can highlight those more.

Yeah.

So Dana at the current new store that we have so I'm speaking in that thing.

The old model.

The Capex is about 315, Nat and a remodel is roughly about 150 to 175.

Matt So the cost of that new and remodeled CTX format. It is slightly higher and it's driven mainly by the expanded scope so different type of flooring Leds light oil.

So it is a slight increase however, what we're seeing is is that we're getting the sales increase associated with those changes which is largely experiential.

So I think.

From a total Capex standpoint, we'll provide that context in January when we present, our long range plan because that way you can see how it all comes together.

With our strategies and see that financial and operational implications, including the Capex then total capital allocation strategy from there.

Great and then any update on pricing and how you are positioning on pricing in this new environment with supply chain and David I like what you said about the theme is it building incrementally in the box can you expand on that thank you guys.

Sure Dana Yeah, I'm happy to do that yeah, I think pricing, we've taken really seriously at Citi trends and I would say and I mentioned this a little bit on the call. This idea of combining quality trend value and brand wherever we can.

Making for a really interesting optimization of how we do.

Not only sourcing design goods, often proprietary to our box into our customer, but also how we pack value and benefits and features into the product therefore, allowing us to perhaps in certain cases charge a bit of a higher retail than we normally would have experienced.

Experience for similar ish product so.

It's a way of saying, where we're looking at every SKU every hanger and understanding hey, what does this work to our consumer and what does the consumer expects from us via the SKU whatever whether it's a.

Really cool piece of distressed torn and trade denim or a really high quality.

So down vest and we look at those items and basically are starting to look at pricing in a totally different way than we ever had at Citi trends and what that's done is it's a it's shown that we can definitely offer a bit of a higher price point as long as we passed that item with a bit more value features and benefits et cetera.

And making sure the quality is as good as ever and then secondly, we're experimenting with different pack sizes and different ways to even offer like I'll call. It the bulk purchase if you will certain basics and so forth. So what we're doing across trends fashion basics, we're looking at price points within all of those buckets and understanding.

What is that.

If there is any if there's any resistance at all but most importantly, determining what's that take rate and adoption rate and we continue to do a lot of testing and learning as you've heard me speak about before and we probably don't make a move on any of this until we test it and see a quick read and then we jump on it if it's showing the right.

Right indicators, and then remove them go and so as Pam mentioned R. R.

<unk> results were definitely driven by continued basket health.

And within that basket.

You are.

It's really showing a nice rate of increase but again I want to stress not for like for like product meeting today versus the past the same stuff for a higher price, it's really better stuff at a slightly higher price and it's translating across a lot of our cities or categories.

Great. Thank you.

Thank you Dana and have a great one.

[laughter].

Yeah.

Our next question comes from the line of John Lawrence with Benchmark. Please proceed with your question.

Thank you and good morning, David and team.

Good morning, Johnny.

Congratulations.

I just wanted to start David could you give us a sense of.

Obviously, the 80 projects for next year that you talk about.

Where do you think.

As these remodels and the new stores developed during the course of the summer in the fall.

Can you give a sense of when you started the project where did where did you say how many Henry process did you think maybe would be for next year and is this really an expansion of that program.

I think I understand your question John in terms of our outlook on how many projects. We felt made sense for fiscal 'twenty to 'twenty. Two I would tell you that this is in line with with what we had previously shared in terms of our our anticipated new store and remodel target accounts.

Over the course of multiple years, we had not been as specific as we work today, but we're feeling good about announcing the approximately 40, new 40 remodels.

And we hope to.

Get a lot of those done in a bit earlier in the year versus our all in the later portion we tended to be a bit weightier. This year because of the impact of the pandemic and such.

We were a little later in the year than we did and we like to be so we're we're doing our best to plan those a little earlier and.

If there's opportunities to go up we will certainly look at those but we like the number of ADR team can handle it we're really good at deploying these remodels, we never closed our stores during a remodel and we're shortening the time to open our new stores by significant amounts. So we can get out into the market places that that want a citi trends. So we're.

We're pretty we're pretty bullish on not only doing the number but also making sure. They are big hits around the country, which is obviously the Angola.

Yeah, Thanks, and just one follow up when.

When you when you talk about some of the things that we're doing in the new CTX stores.

What have you learned and can you give examples of where you've taken some of those low cost maybe practices policies back to the to the base change.

How that learning is.

Help them.

The base group of source.

Yeah, I think there's a good good question John I would tell you.

We are doing some of that.

Good good conclusion, youre, making where we're seeing what's working in the lab stores CTX stores and there are a couple of things were taken back to the chain.

Sometimes slowly sometimes quicker, but my probably my favorite example is our <unk> line.

Turn it on its head and and especially within our CTX stores, we took an opportunity to formalize a queue line and really.

Enable the customer to kind of snake through it and get some last minute stuff in a way. They go well, we've taken that to probably half if not two thirds of the chain because we were so excited about what we saw in our lab stores I think that answers. Your question and then theres other aspects of what we're learning we're learning adjacencies.

A matter.

Big way, meaning we didn't think too much about them in the past and now we think about them. Almost every time, we launch a new business within one of our cities and we make sure that we're putting fixed string in the right spot where signing in the right way and the customer by and large is responding to those decisions.

This year, we added the visual merchandising function to the company, we had never had one and.

The woman Kelly, who leads that effort is doing a fantastic job training our field training the stores on how to be proud about your merchandising in your adjacencies in the outfits that you're setting up on a four way presentations that line the race track of our stores and so forth and all of this matter so much because what I'll what I'll.

Underlying is our unique differentiated specialty store like environment is really what's winning our customer respect. The fact that we are respecting them by serving up in merchandising our goods and attractive helpful. Ways. So we can take a little I'm thinking out of their head and give them out to.

Gestures and pair this with that suggestions and it's starting to work and show up in our results. So you can tell I'm, a I'm pretty excited about it.

Thanks, a lot congratulations again and good luck for the holidays.

Thanks, John Good luck to your to you and happy holidays.

And as a reminder, if you'd like to register a question. Please press the one followed by the four.

Our next question comes from the line of Chuck Grom with Gordon Haskett. Please proceed.

Okay. Thank you good quarter I just wanted you guys to speak to the health of your customer today, and there's a lot of.

Puts and takes out there in or about the <unk>.

Michael the stimulus from from last January I was wondering if you know if you're seeing any regional performance.

French edition in states, where some of those unemployment benefits expired in September just your overall view on that front.

Hey, Chuck Thanks for joining sure no problem, Yeah, I think I'll maybe.

Maybe the geography question first we're not really seeing anything that we can you know statistically or analytically tied to the change in the unemployment benefits or any other movements, whether it was the change in the eviction moratorium and so forth we tried.

But I think in a good way our customer has remained pretty resilient, even despite those changes and I think from an overall health of our customer what we continue to derive from some of our own data.

And combining that with some of the macro data is that they're still in a really good healthy financial position and we expect that to run run forward.

I think as we look at 2022, we were pretty bullish on the health of our consumer a his and her liquidity to be able to continue shopping at Citi trends stores, and I think theres an opportunity for us as we build more incremental categories within our boxes, there's an ability to capture more.

Our wallet share as.

As we move forward the other thing I'd share with you is we've seen a.

Really interesting shift from cash to debit and credit, which I know has been happening and a lot of brands, but for us it's a stick around and it's and it's the trends were seeing really give us.

A lot of confidence in that our customer has a little more credit than they used to and and we believe that that will continue into 2022. So I think youre hearing for me generally a good picture of how he and she will be set up for for early part of next year and going forward.

Okay. That's helpful. And then you spoke to how November was off to a strong start obviously the compare was it was pretty easy just wondering if you could just maybe unpack that for us a little bit how it was relative to expectations did you do you think you saw some pull forward in the beginning of the month and the end of the month was a little bit softer was a was it consistent throughout just you know I think.

Probably one of the first companies to report after the Black Friday weekend. So just wondered if you could amplify on that front for us.

Yeah, Yeah yeah.

Right Great question I think overall I'd leave you with it was very consistent so it really wasn't a lot of sea saw him in the months once the weather turn cold in late October we saw a nice spike in our fall cold weather goods. That's continued given the weather trends, but its been yeah pretty non.

Non stop every week, which is which is great and I think from an overall.

Comparison to last year, the big difference Chuck is that we had more inventory.

That's definitely helped in the securing of opportunistic forward buys back last January and February with some really great stuff as you know that was afraid of disruption as well and that disrupted inventory. If you will as served us well. So that's flowed into stores starting in October providing some of them.

Believable values.

<unk> said that with great quality and recognition and that a lot of our if you will private label goods, particularly in the gift area as I mentioned earlier on the call are hit early November and that gave us some traction so.

To us the consistency was a great indicator of just continued underlying strength from both our customer and our assortment.

Okay. That's great and then just bigger picture lots of question for me would be you know yourself per square foot.

Roughly $25 you know over the past over the past couple of years and I'm. Just wondering if you could maybe look at your best stores and speak to what their productivity is and then I guess.

So on the earlier questions on Pizza CTX I guess, what are those stores doing a productivity because clearly the opportunity there relative to some of your peers is pretty sizeable and can drive the needle here over the next several years.

Yeah.

Yes, good question.

I'm not at Liberty to share exact productivity differences by cohort, if you will but what I can share is.

We're studying the cohorts and as you can imagine.

Meaningful variations between I'll call it the top the mid and the low.

And I think what we're doing Chuck is as we look at the remodel opportunity in particular.

We're being very strategic and surgical about what is the potential of the store.

Two to achieve a more market share a higher person maybe higher traffic within the marketplace. So we're taking that CTX learning and then we're taking are pretty sophisticated modeling of our entire chain with a third party that says hey here are 50 stores.

The number 40 systems our number here.

<unk> 40 stores that you're you're owed if you will ex amount of business and they fall into each of those cohorts. Some of them are currently really good productivity stores. Some of them are fine average and some a little below average and so we're going at it with a totally different mindset, let's attack. The 40 pick maybe you know.

10, 10, 10, and there's a wildcard of 10 based on some other criteria and that's what we go after versus the old days would be you know it hasnt been touched in 27 years, you should really remodel that start and that's not necessarily a databased argument to do it and be it doesn't necessarily yield or have any projected build.

Two it it's more of a feel good so I would tell you we're using a lot of the analytics derived from CTX combined with another third party that we use to model Hey, if we go and attack one of our Orange and black scores.

Built in 2012 and the model based on the company excuse me based on the population around the store says we should be doing 500 K more per year.

<unk> remodeled that.

And then we will start with what's really needed is we'll start to measure that and see how close we get to that modeling project ability number that came from a third party and so on and so forth. So we're hoping that answers your question, but we're really taking a whole new look at it.

Using those takeaways from CTX.

And that other party too.

Triangulate I think a way better approach and answer than we used to in the past.

Okay. That's great to hear and then just one quick one if I could just on the on the 'twenty two.

Wanted to just ask that you do expect to achieve that that's sort of like your initial view for next year in terms of low to mid single digit sales growth and then <unk>.

Insulating into earnings growth in the low double digits.

At a high level, we're positioning the business to deliver.

Those numbers you know I think there's there it remains I guess the caveat I would add Chuck as there remains a as you know a lot of fluidity out there in the marketplace. I think we're looking at a full year perspective, it's gonna be wonky throughout the year as we know first half tougher compares in the second half, but overall, that's how we're approaching.

<unk> the business.

As you know in this business, we're approaching our buys in that way of approaching our supply chain on how to solve for that and so forth and so on so that's what we're planning, but you'll hear more in January at ICR, we're going to we're going to be looking to share more details. So.

You and others can get a better handle on the color behind that positioning.

Got it thanks a lot.

Thanks Chuck.

Mr. Mcewan there are no further questions at this time I'll turn the call back to you for closing remarks.

Perfect. Thanks, Jason and thanks, everybody for joining and have a great holiday C. In January at ICR Bye Bye.

Okay.

That does conclude the conference call for today, we thank you for your participation and ask that you. Please disconnect your line.

Okay.

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Greetings and welcome to the Citi trends three Q 'twenty, one earnings conference call during.

During the presentation, all participants will be in a listen only mode.

Afterwards, we will conduct a question and answer session at that time. If you have a question. Please press the one followed 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 Tuesday November 30th 2021 I would now like to turn the conference over to Nitza Mckee Senior Associate. Please go ahead.

Thank you Jason and thank you all for joining us on our city tons third quarter 2021 earnings call on our call today is our Chief Executive Officer, David Mcewen, Chief Financial Officer, Pam Edwards, and Vice President of Finance, Jason Marschner.

Our earnings release was sent out this morning at 645, a M. Eastern time, if you've not received a copy of the release it's 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 today made during this call may contain forward looking statements within the meaning of the private securities.

Thank you Nita and good.

Good morning, everyone.

And thanks for joining us today on our third quarter fiscal 2021 earnings call.

This morning, I will begin by reviewing the continued transformation of our business and highlight our strong financial and operational results for the third quarter.

Before updating you on our progress related to the evolution of our cities Master planning and activity in support of our strategic priorities.

Pam Edwards, our CFO will elaborate on our stellar financial results and provide details of our upwardly revised guidance for the year as we close in on a record $1 billion in sales and record operating results.

I wanted to take a moment to express my sincere gratitude to our high performance teams across our organization.

Superb execution by the entire Citi trends crew, which simply amazing from.

From securing merchandize to successfully managing the significant supply chain disruptions impacting our industry to appropriately staffing our highly differentiated specialty value stores.

All of these efforts enabled us to meet the strong broad based demand.

Our apparel accessories and home trends for way less spend resulting in an excellent third quarter.

Our continued focus on elevating the Citi trends in store experience and expanding our brands and many more underserved Appleton American Olympic Phoenix communities has never been stronger.

Our people are the heart and soul of the Citi trends culture, we are aligned to servicing our customers unique needs each and every day.

Supporting our efforts for our ever expanding vendor partners.

Big to small our vendor partners were closely with our agile merchant teams and enabled us to keep it fresh and fun for the entire family.

Consistently delivering new and exciting products at extraordinary price points.

That don't break the bank.

While we are still in the early innings of our transformation, we have made great progress and are confident.

The execution of our strategic priorities will enable us to capture additional sales and leverage expenses to sustain our top and bottom line growth.

So he trends future is bright and the runway for growth.

Exceedingly strong.

Turning to our results.

We are thrilled to report excellent third quarter results that exceeded our internal expectations and continued the positive momentum from the first half of the year.

Key highlights of our third quarter performance include the following.

Total sales of $228 million increased 14, 5% compared to Q3 of 2020 and 24, 5% compared to Q3 2019.

This growth was supported by a terrific comparable store sales increase of 13.1.

Q3 of 'twenty 'twenty.

And that was on top of a positive six 3% from last year.

This is the ninth consecutive quarter of positive opened only comparable store sales for Citi trends.

On top of outstanding sales results.

Can you many positive K.

K P I trends in this city.

When comparing the 2019.

These hot Kpis trends include.

<unk> gross margin, reducing average store inventories leveraging SG&A.

And producing astounding increases in operating income and margin.

More details from Pan in just a few minutes.

Lastly, we opened 11, new stores during the quarter, including a brand new city and Wichita, Kansas.

Quickly remodeled three stores that were severely damaged by hurricane either.

That leaves our store count at the end of the quarter at 600 stores.

And better yet well end the year with approximately 611 stores.

Moving on to Department.

Department.

Once again, we saw strength across our cities or categories. As we continue to enhance the shopping experience and our unique specialty value stores by placing our customer.

At the center of how we curate trends fashion and basics across an increasingly wider variety of apparel non apparel and even consumables.

You registered another quarter of strong double digit growth versus 19 across five of our six cities.

They are women's men's and kids beauty and accessories and home and lifestyle.

Before I pass the Pam I would like to highlight a handful of progress updates across our bi move sell and support operational pillars are continued to evolve as you scale the business.

By it is without question the team's successful navigation of the fluid dynamics of the marketplace we draw from.

Our masters of delivering trend quality value and brand.

We are only.

We are often the only destination or neighborhoods that does what we do in combining art with science to deliver a highly differentiated assortment day in and day out is how we shine.

This differentiation manifests itself in our strong back to school and back to dorm seasons.

Followed by a brisk start to holiday self purchasing and early gift shopping.

Four move or our supply chain team, we embarked on multiple projects to improve throughput and productivity.

It's really a combination of quick wins and longer term projects designed to move goods through the pipe at a faster rate, while optimizing processes and labor overtime.

This showed up in meaningful ways at the onset of the quarter as you fueled stores with fresh goods from either our D CS or via drop ship deliveries direct from our most flexible vendor partners.

All the while managing freight costs to a smaller than expected headwinds.

For cell.

Our real estate and stores divisions. We are most excited about the results of our lab stores for CTX store upgrade.

Some really big news, we've decided to greenlight this top to bottom revolution in our store experience to all new stores and Remodels.

Ran differentiation is everything to us and being able to impact so many stores and our journey from 600 stores today to a thousand in the future.

Combined with higher productivity Remodels.

As a major new development in our transformation journey.

Lastly, our support pillar is made up of finance HR I T and legal while sometimes the unsung heroes. These teams.

Are changing the way we work.

From our recently launched Pos system to our cloud based analytics platform.

Our city cares Council, we are chipping away at countless opportunities to improve internal productivity.

On Earth.

Insights establish new cultural norms.

Pain and attract the best talent to grow the Citi trends experience and make a difference in the neighborhoods we serve.

One city at a time.

As we look to the remainder of the year.

So that and we expect to close the year strong and are raising our full year 2021 guidance for both sales and EPS.

With that I'll turn it over to Pam Edwards, our CFO to discuss our third quarter results as well as our outlook in more detail.

Thanks, David and good morning, everyone. Our impressive third quarter performance is a testament to our entire team continued agility disciplined operational execution.

The transformation of Citi trends is well underway and as David mentioned this is our ninth consecutive quarter on a comp store sales growth.

In addition, we continue to improve our bottom line, despite widely discussed macro supply chain headwind.

Now, let's turn to the specifics of our Q3 financial results.

As with our second quarter call I want to first address the top of mind topic, which is supply chain.

We continue to successfully navigate the supply side environment, which remains but.

We have strategically leverage opportunistic inventory buys from last season, and we have more effectively procure goods in season in response to customer demand. Therefore.

Therefore, we are in really good shape for the inventory that we need to deliver a strong holiday season.

In addition, while transportation costs are up we have diligently worked through what we can control by streamlining and increasing the efficiency of our internal operations and processes.

This discipline has allowed us to reduce our reliance on third party providers and manage the supply chain impact to the low end of the 120 to 150 basis points, we talked about in Q2.

We will continue to monitor as the environment is expected to stay fluid through at least mid next year.

Now, let me turn to the review of our third quarter results.

Total sales of 228 million in the third quarter grew by 14, 5% compared to Q3 of 2020 and 24%.

24, 5% compared to Q3 2019.

Comp sales grew 13, 1% on top of a six 3% positive comp in Q3 2020.

Growth in the quarter versus Q3 of 2019 was driven primarily by an increase in the average basket size. The result of a healthy balance of growth in both.

Unit retail selling price and higher units per transaction.

We achieved gross margin in the quarter of 43%.

An increase of 290 basis points compared to 37, 4% in the third quarter of 2019.

The strong increase in our quarterly gross margin rate continues to be primarily the result of strong full price selling and fewer markdowns offset partially by increased freight expense.

SG&A leverage 300 basis points versus 2019.

32, 8%.

Due to strong sales growth and disciplined expense management.

Operating income of $11 6 million grew by $2 2 million versus Q3 of 2020.

Paired to Q3 of 2019 this is a $13 2 million increase.

This improvement in our results is reflective of the transformation of our operating model, which is showing improved flow through to the bottom line.

Thanks to the tremendous efforts of our bi moves out and support teams. We believe more opportunity lies ahead.

Net income of $9 million compared to 7 million.

Three of 2020.

And an operating loss of $1 1 million in Q3 of 2019.

Earnings per diluted share were $1 three Sam this.

This is up over 50% compared to the 67.

In Q3 of 2020 and compare to a loss of nine cents.

Q3 of 2019.

Turning to inventory.

Quarter end inventory is on plan.

Increasing 10, 9% compared to the end of Q3, 2020 and decreased six 3% compared to Q3 of 2019.

The N inventory.

Inventory increased to last year is largely a factor of the depleted inventory levels experienced at the end of Q3 last year.

Find with opportunistic buys we made during the third quarter of this year.

We continue to experience record churn as our inventory management has improved markedly year on year. This fine muscle, we're creating is really kicking in buying less upfront.

<unk> into sales demand, which gives us the agility and result in a record level of product progression.

Lastly, the company repurchased approximately 521000 share of it.

Common stock at an aggregate cost of approximately $42 $8 million in the third quarter.

In total for the first nine months of this year, we have repurchased a million 273000 shares at an aggregate cost.

$107 2 million.

We ended the third quarter with approximately $8 1 million remaining on the existing buyback authorization.

In addition, we announced today that our board of directors has authorized another $30 million share repurchase program.

Turning to our fiscal 2021 outlook.

Translating that to the fiscal year guidance, we are raising our full year 2021 sales outlook to a range of 1 billion to $1 15, and EPS guidance to a range of $6 95.

$7.10 compared to our prior EPS range of <unk>.

<unk> 36 50.

This represents an <unk>.

Increase of nearly 400% at the EPS midpoint, when compared to fiscal 2019.

I'll turn the call back to David for closing comments David.

Thanks Pam.

You know when I take a step back and look at how we've managed the business through an incredibly challenging period.

What I'm most proud of is the way. This team has successfully reshaping and retooling our brand and its 75th year of operation.

In fact, how we think about it.

Today, so the trend should be thought of like a 75 year old startup.

You don't hear that too often do the math.

Modernizing of why we do what we do and.

And how we do what we do is just getting underway.

I'm humbled to be a member of the team that shares my passion for growing and building something really special for the customers and crew members that care deeply about the success of Citi trends.

Looking forward to fiscal 2022, I thought I would share some of our preliminary views on how we are positioning the business.

As you've heard before we're primarily focused on four strategic priorities number one.

Growing our fleet and expanding our customer base number two optimizing our product mix and number three reinvesting in our infrastructure.

Before making a difference within the communities we serve.

We have added talent.

In systems and created new processes to kick start momentum across these priorities.

Some really compelling themes are emerging.

Including but not limited to opportunities to drive further customer engagement.

Build increments.

Within our boxes.

Leverage expenses and develop cohesive neighborhood connections.

Reflecting our elevated CTX store upgrades.

At a high level. We believe we are positioned to deliver fiscal 'twenty to total sales growth of low to mid single digits.

Coupled with at least low double digit EPS growth.

You'll hear additional details.

Via our new City Master plan at ICR in early January.

Before I wrap up I also wanted to mention two new additions to our board of directors during the quarter, we announced the appointment of two new independent Directors Kristina Francis President of Magic Johnson Enterprises, and carrier Saban CEO of sundial brands has joined our board.

We are thrilled to add two highly accomplished executives to our board and the expansion of the board reflects Citi trends is heightened commitment to diversity equity and inclusion.

In summary, we're so pleased with our third quarter financial and operational results, which reflect the agility and disciplined execution of our teams efforts within a dynamic operating environment.

Transformation remains on track and our updated guidance is reflected.

Collective of our confidence in the underlying momentum of the business.

Including expectations for a strong holiday season.

Excited about the significant growth runway, we see for the sudden trends brand and believe we are poised to continue capitalizing on the tremendous opportunity ahead.

We focus on delivering long term sustainable growth.

To reiterate my gratitude to the entire Citi trends crews for their commitment to our loyal and growing customer base.

We appreciate your interest in this exciting growth story in <unk>.

Wish you all a happy holiday season, as you give get and gather.

Operator, we are now ready to take questions.

Thank you.

If you would like to register a question. Please press the one followed by the four on your telephone you will hear a three tone prompt to acknowledge your request. If your question has been answered and he would like to withdraw your registration. Please press. The one followed by the three one.

One moment please for the first question.

And our first question comes from the line of Jeremy Hamblin with Craig Hallum Capital Group. Please proceed with your question.

Thank you and congratulations on a really impressive update.

I wanted to start first by just getting a little bit more color around <unk>.

Q4.

You called out I think five of the six cities is really strong I think.

Where it sounds like it's a little bit of a laggard I think that might be the most impacted by <unk>.

By chain disruption, maybe with some vendors a little behind that shipments, but just wanted to get a sense in terms of what you are seeing thus far in the quarter.

The.

Two year stacked same store sales up high high teens that would suggest I think comps roughly.

Flat or so on top of the really impressive 16, 7% last year.

But just wanted to get a sense for the category performance that you're seeing kind of quarter to date.

<unk> and.

If there is any of.

Of your categories that are.

Either.

Outperforming significantly or maybe underperforming.

<unk>, we could get to our stores should be able to start to gifts and holiday self purchase needs off to a good start and that's exactly what the team did so we really kicked off a lot of our gift and self purchase for the fall winter months.

Well, it's really early we were set up in stores late October early November which is perfect for us and the customer really responded.

So that's been from a setup standpoint really beneficial to the start of a strong quarter in terms of city performance, It's really broad based it's against all of the apparel categories.

And we're seeing some really great traction in our consumables business, which as you know.

Young and and continued traction across our non apparel and home business. You you nailed. It footwear is the one that's kind of taken a little slower to catch up although we're seeing some really good momentum in that business as some of the supply chain issues abate.

Overall, its really the whole family shopping our stores you know the month of November was mainly around self purchasing and start of gifting and our layaway program. That's been it's been strong for us and that's really when a customer decides to go who I don't want to lose out on that great set of gifts, So I'm gonna put China.

In the back room, and it's our version of buy now pay later and we do a nice business in that area as well. So all of that combined has given us good confidence that the customers really excited to be out there and like you see in the general news, she and he and the kids are shopping.

Yeah, I just wanted to ask.

Two.

Jeremy for that for the comps to lap.

Last year, our comps were.

He had a wide range of performance for the three months. So November last year of your call was down 1%.

Remember with up 17% in January was up 44%.

So as you mentioned it was 17% on a quarter so I'm.

Just in terms of.

We're projecting at the high teens versus the 2019 number but implied as flat to low single versus last year.

Great. Thank you for that clarification.

The only thing I wanted to ask about was staffing.

I know you've had some retailers that have.

<unk> had a challenge in terms of getting.

You know holiday staffing in place and getting people.

You know two to show up.

Obviously you pay.

A little bit higher wages I wanted to see Pam if you could give us any color in terms of what youre seeing.

Staffing trends here for holiday.

Can you give us any color in terms of the types of hourly wage increases that you're seeing year over year.

Yeah, I mean, similar to what others are reporting we are seeing a tougher labor market, particularly for stores and not so much in the D. C and we're addressing on a store by store basis and that includes in increasing wage rates and market. If it calls for that and adjusting operating hour.

If it makes sense, but just you know from a preview from this past weekend, we had little to no issues with with labor and people.

I'm showing up so we're.

We're feeling good but we know that it's not over until the.

Until we get through the quarter. So we continue just to monitor on a case by case basis for the rest of the season and going forward.

Great last one for me and then I'll hop back in the queue.

In terms of you really surprised me with the commentary around FY 'twenty two it sounds really incredible what.

To expect.

Both top line growth next year.

But then low double digit EPS growth next year on top of the extraordinary results this year.

Would be incredible.

Is that a reflection of confidence in.

<unk> experience.

Does that mean.

Reflected in there, but you know.

And then maybe you could share in terms of why.

You know you're kind of putting that out there today.

Sure Jeremy Yeah.

Color and maybe people will wrap here and catch you later of course.

It's really a combination of a bunch of factors its confidence in our base underlying business in our regular good old comp stores. We believe we have opportunities to lap the headwinds and continued to post up strong productivity numbers within our four box four wall boxes, and then couple of them.

With really good expense leverage as you can tell from the E. P. S game that we are sharing at a high level and then and then certainly the I would say in 2022, it's more icing, but it's good I think the impact of CTX. You know if you think about it it'll hit a roughly around 80 projects 40.

New and 40, Remodels, so it definitely contributes but but it's tough.

So you know the bulk of our comp stores.

Feeling good about how they're performing today and what we have in store for next year.

Coupled with no question, some upside from the CTX coming into play in that.

Of course, we'll have a bigger role as you get into three and 'twenty four and so forth if that makes sense.

Absolutely congratulations and thanks for taking the questions.

Thanks, Jeremy.

Our next question comes from the line of Dana Telsey with Telsey Advisory Group. Please proceed.

Yeah.

Sure Hi, Dana Thanks for your kind words first half than that.

Pam will take the second half so first half let me quickly frame for everybody on the call. What CTX is we have a frame of reference really it's our re imagination of the Citi trends experience in our four walls, it's a top to bottom front door to back door.

Really revolution in our experience from the flooring to the ceiling to the lighting fixtures to the lay out to the adjacencies and so forth and why we're so pleased by it as we have seen continued lift and traction by not changing a thing about our products literally a rang the same product we have it all.

All of our other stores, but just a rang it differently and are in this kind of revenue.

<unk> of Citi trends, so different than you've seen in the past 10 to 20 years and are just seeing the adoption by the customer of the same product in a different experience at the rate. We are seeing is made us really excited and obviously bullish on rolling it out.

And I think what's most important to understand we can't share all the details but at a high level is we're seeing conversion lifts.

Once he and she come in they're basically walking out a more frequent basis and we're seeing nice conversion changes. So the baskets very similar tour control groups in our U P teaser very similar but it's conversion that's zooming, which is kind of exactly what we'd hope to be the case.

We're liking what we're seeing and.

We're excited to roll it out Pam will comment a little bit on the capex.

Implications, which are which are small, but she can highlight those yeah.

Yeah.

So again at the current new store that we have some speaking.

The old model.

The Capex is about 315, Nat and a remodel is roughly about $1 50 to 175.

Matt So the cost of that new and remodeled CTX format. It is slightly higher and it's driven mainly by the expanded scope so different type of flooring.

The light oil.

Fixtures. So it is a slight increase however, what we're seeing is that we're getting the sales increase associated with those changes, which is largely experiential so I think.

From a total Capex standpoint, we'll provide that context in January when we present, our long range plan because that way you can see how it all comes together.

With our strategies and see the financial and operational implications, including the Capex, then total capital allocation strategy from there.

Great and then any update on pricing and how you are positioning on pricing in this new environment with supply chain and David I like what you said about the theme building incrementally in the box can you expand on that thank you guys.

Sure Dana Yeah, I'm happy to do that.

Pricing, we've taken really seriously at Citi trends, and I would say and I mentioned this a little bit on the call. This idea of combining quality trend value and brand wherever we can.

Making for a really interesting optimization of how we.

Not only sourcing design goods, often proprietary to our box into our customer, but also how we pack value and benefits and features into the product and therefore, allowing us to perhaps in certain cases charge a bit of a higher retail than we normally would have.

Experience for similar ish product. So it's a way of saying where we're looking at every SKU every hanger and understanding hey, what is this worth to our consumer and what does the consumer expect from us via the SKU whatever whether it's a really cool piece of distressed torn and trade denim or.

Or a really high quality.

Oh down vest and we look at those items and basically are starting to look at pricing in a totally different way than we ever have and Citi trends and what that's done is it's a it's shown that we can definitely offer a bit of a higher price point as long as we passed that item with a bit more value features and benefits et cetera.

Making sure the quality is as good as ever and then secondly, we're experimenting with different pack sizes and different ways to even offer like I'll call. It the bulk purchase if you will certain basics and so forth. So what we're doing across trend fashion basics were looking at price points within all of those buckets and understanding.

What is that.

We probably don't make a move on any of this until we test it and see a quick read and then we jump on it if it's showing the right.

Right indicators, and then remove them go and so as Pam mentioned R. R.

<unk> results were definitely driven by continued basket health.

And within that basket.

You are.

It's really showing a nice rate of increase but again I want to stress not for like for like products meeting today versus the past the same stuff for a higher price, it's really better stuff at a slightly higher price and it's translating across a lot of our cities or categories.

Yeah.

Great. Thank you.

Thank you Dana I have a great one.

Yeah.

Our next question comes from the line of John Lawrence with Benchmark. Please proceed with your question.

Thank you good morning, David and team.

Good morning, Johnny.

Congratulations.

I just wanted to start David could you give us a sense of.

Obviously, the 80 projects for next year that you talk about.

Where do you think.

As these remodels and the new stores developed during the course of the summer in the fall.

Can you give a sense of when you started the project where did where did you say how many Henry projects did you think maybe would be for next year and is this really an expansion of that program.

I think I understand your question John in terms of our outlook on how many projects. We felt made sense for fiscal 2022 I would tell you that this is in line with with what we have previously shared in terms of our our anticipated new store and remodel target accounts.

Over the course of multiple years, we had not been as specific as we work today, but we're feeling good about announcing they approximately 40.

40, Remodels and ER and we hope to.

You get a lot of those done a bit earlier in the year versus all in the later portion we tended to be a bit weightier. This year because of the impact of the pandemic and such we we were a little later in the year. Then we can go that we like to be so we're we're doing our best to plan those a little earlier.

You know if there's opportunities to go up we will certainly look at those but we like the number of 80 our team can handle it we're really good at deploying these remodels, we never closed our stores during a remodel and we're shortening the time to open our new stores by a significant amount. So we can get out into the market places that.

I Wanna Citi trends. So we're we're pretty we're pretty bullish on not only doing the number but also making sure. They are big hits around the country, which is obviously the other angle.

Yeah, Thanks, and just one follow up.

When you when you talk about some of the things that we're doing in the new CTX stores.

What have you learned and can you give examples of where you've taken some of those low cost maybe practices or policies back to the to the base change in how the how that learning has helped them.

The base group of source.

Yes, I think there's a good good question John I would tell you.

We are doing some of that.

Good good conclusion, you're making where we're seeing what's working in the lab stores CTX stores and there are a couple of things were taken back to the chain.

You know, sometimes slowly sometimes quicker, but my probably my favorite example is our <unk> line.

Three and four years ago Citi trends didn't really have an official Q. If it was it was a little bit of a cobble together piece of sort of impulse C. H b a stuff at the at the last portion of your checkout experience, we really turn it on its head and especially within our CTX stores, we took an opportunity to formalize a queue line and really.

Enable the customer to kind of snakes through it and get some last minute stuff in a way. They go well, we've taken that to probably half if not two thirds of the chain because we were so excited about what we saw in our lab store. So I think that answers. Your question and then theres other aspects of what we're learning we're learning adjacencies.

A matter.

Big way, meaning we didn't think too much about them in the past and now we think about them. Almost every time, we launch a new business within one of our cities and we make sure that we're putting fixed string in the right spot we're signing it in the right way and the customer by largely responding to those decisions.

This year, we added the visual merchandising function to the company, we have never had one and.

The woman Kelly, who leads that effort is doing a fantastic job kind of training our field training the stores on how to be proud about your merchandising in your adjacencies in the outfits that you're setting up on a four way presentations at line.

Race track of our stores and so forth and all of this matter so much because what I'll what I'll underline is our unique differentiated specialty store like environment is really what's winning our customer respect. The fact that we are respecting them by serving up in merchandising our goods and attractive.

Four ways. So we can take a little thinking out of their head and give them outfits suggestions and pair this with that suggestions and it's starting to work and show up in our results. So you can tell I'm, a I'm pretty excited about it.

Thanks, a lot congratulations again and good luck for the holidays.

Thanks, John Good luck to your to you and happy holidays.

And as a reminder, if you'd like to register a question. Please press the one followed by the four.

Our next question comes from the line of Chuck Grom with Gordon Haskett. Please proceed.

Okay. Thank you good quarter I, just wonder if you guys can speak to the health of your customer today, and there's a lot of kind.

Puts and takes out there in or about the cycle that stimulus from from last January I was wondering if you can if youre seeing any regional performance.

<unk> in states, where some of those unemployment benefits expired in September just your overall view on that front.

Hey, Chuck Thanks for joining sure no problem, Yeah, I think I'll take maybe the geography question first we're not really seeing anything that we can you know statistically or analytically tied to the change in the unemployment benefits or any other movements, whether it was the change in the eviction moratorium in.

So for US we tried.

I think in a good way our customer has been remained pretty resilient, even despite those changes and I think from an overall health of our customer and what we continue to derive from some of our own data.

Combine that with some of the macro data is that they are still in a really good healthy financial position and we expect that to run run forward.

I think as we look at 2022, we were pretty bullish on the health of our consumer.

His and her liquidity to be able to continue shopping at Citi trends stores.

And I think theres, an opportunity for us as we build more.

More incremental categories within our boxes, there is an ability to capture more wallet share.

As we move forward the other thing I'd share with you is we've seen a.

Really interesting shift from cash to debit and credit, which I know has been happening a lot of brands, but for us. It's it's.

Stick around and it's and it's the trends were seeing really give us a.

A lot of confidence in that our customer has a little more credit than they used to and and we believe that that will continue into 2022. So I think you're hearing from me.

Generally a good picture of how he and she will be set up for for early part of next year and going forward.

Okay. That's helpful. And then you spoke to how November was off to a strong start obviously the compare was pretty easily just wondering if you could just maybe unpack that for us a little bit how it was relative to expectations did you do you think you saw some pull forward in the beginning of the month and the end of the month was a little bit softer was it was a consistent throughout just you know I think you are.

Probably one of the first companies to report after the Black Friday weekend. So just wondered if you could amplify on that front for us.

Yeah, Yeah, no. It's a great great question I think overall I'd leave you with it was very consistent so it really wasn't a lot of sea saw him in the months once the weather turn cold in late October we saw a nice spike in our fall cold weather goods. That's continued given the weather trends but.

It's Ben Yeah, pretty nonstop every week, which is which is great and I think from an overall.

Paris in the last year, the Big difference Chuck is that we had more inventory.

That's definitely helped in the securing of opportunistic forward buys back last January and February with some really great stuff as you know that was a bit of disruption as well and that disrupted inventory. If you will as served us well. So that's flowed into stores starting in October providing some.

<unk> values.

And brands at that with great quality and recognition and then a lot of our if you will private label goods, particularly in the gift area as I mentioned earlier on the call are hit early November and that gave us some traction so to us the consistency was a great indicator of just continued underlying strength from.

Both our customer and our assortment.

Okay. That's great and then just bigger picture lots of question for me would be you know yourself per square foot.

Roughly $25 you know over the past over the past couple of years and I'm. Just wondering if you could maybe look at your best stores and speak to what their productivity is and then I guess.

On the earlier questions on Pizza CTX I guess, what are those stores doing a productivity because clearly the opportunity there relative to some of your peers is pretty sizeable and can drive the needle here over the next several years.

Yes.

Yes, good question.

I'm not at Liberty to share exact productivity differences by cohort if you will but what I can share is a we're studying the cohorts and as you can imagine.

Meaningful variations between I'll call it the top the mid and the low end.

I think what we're doing Chuck is as we look at the remodel opportunity in particular.

We're being very strategic and surgical about what is the potential of a store.

Two to achieve a more market share.

Hi Christian.

And maybe higher traffic within the marketplace. So we're taking that CTX learning and then we're taking are pretty sophisticated modeling of our entire chain with a third party that says hey here are 50 stores are all used the number 40 systems our number here.

Europe 40 stores that you're you're owed if you will ex amount of business and they fall into each of those cohorts. Some of them are currently really good productivity stores. Some of them are fine average and some a little below average and so we're going at it with a totally different mindset, let's attack. The 40 pick maybe you know.

10, 10, 10, and there's a wildcard of 10 based on some other criteria and that's what we go after versus the old days would be you know it hasnt been touched in 27 years, you should really remodel that start and thats not necessarily a databased argument to do it and be it doesn't necessarily yield or have any.

<unk> ability to it it's more of a feel good. So I would tell you we're using a lot of the analytics derived from CTX combined with another third party that we used to model Hey, if we go and attack one of our Orange and black stores.

Built in 2012 and the model based on the company excuse me based on the population around the stores as we should be doing 500, K more per year, that's good remodel that.

And then we'll start to what's really needed is we'll start to measure that and see how close we get to that modeling project ability number that came from the third party and so on and so forth. So we're hopefully answers your question, but we're really taking a whole new look at it.

Using those takeaways from CTX.

And that other party too.

Triangulate I think a way better approach and answer than we used to in the past.

Okay. That's great to hear and then just one quick one if I could just on the on the 22.

Wanted to just ask that you do expect to achieve that that's sort of like your initial view for next year in terms of low to mid single digit sales growth and then <unk>.

I didn't get the earnings growth in the low double digits.

At a high level, we're positioning the business to deliver.

Those numbers I think there is there it remains I guess the caveat I'd add Chuck as there remains a as you know a lot of fluidity out there in the marketplace I think we are.

Looking at a full year perspective, it's gonna be walkie throughout the year as we know first half tougher compares in the second half, but overall, that's how we're approaching the business.

As you know in this business, we are approaching our buys in that way of approaching our supply chain on how to solve for that and so forth and so on so that's what we're planning, but you'll hear more in the in January at ICR, we're going to we're going to be looking to share more details. So.

You and others can get a better handle on the color behind that positioning.

Got it thanks a lot.

Thanks Chuck.

Mr. Mcewan there are no further questions at this time I'll turn the call back to you for closing remarks.

Perfect. Thanks, Jason and thanks, everybody for joining have a great holiday.

In January at ICR Bye bye.

Okay.

That does conclude the conference call for today, we thank you for your participation and ask that you. Please disconnect your line.

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