Q3 2024 Citi Trends Inc Earnings Call

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Greetings and welcome to the Citi trends third quarter 2023 earnings Conference call.

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.

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 Tuesday November 28, 2023, I would now like to turn the conference over to MS. Nitza Mckee Senior Associate. Please go ahead.

Thank you and good morning, everyone. Thank you for joining us on Citi trends third quarter 2023 earnings call on our call today is our Chief Executive Officer, David Mckeown, and Chief Financial Officer, Heather Patino. Our earnings release was sent out this morning at 645, a M. Eastern time, if you've not received a copy.

Speaker 1: Thank you and good morning, everyone. Thank you for joining us on City Trends 3rd quarter, 2023 earnings call. On our call, today is our Chief Executive Officer, David McEwan, and Chief Financial Officer Heather Plutino. Our earnings release was sent out this morning at 6.45 a.m. Eastern time. If you have not received a copy of the release, it's available on the company's website under the Investor Relations section at www.CityTrends.com.

Of the release, it's available on the company's website under the Investor Relations section at Www Dot Citi trends dotcom used.

Speaker 1: You should be aware that prepared remarks today made during this call may contain forward looking statements within the meaning of the Private Security's Litigation Reform Act of 1995. 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 these statements.

You should be aware that prepared remarks today 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.

Speaker 1: We refer you to the company's most recent report on form 10K 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 statement. I will now turn the call over to our Chief Executive Officer, David McEwan. David.

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, Dave.

Good.

Speaker 2: Thank you, Nita. Good morning, everyone, and thanks for joining us today on our third quarter fiscal 2023 earnings call. I will begin our call with highlights of our third quarter performance.

Thank you Mitra.

Everyone and thanks for joining us today on our third quarter fiscal 2023 earnings call.

We'll begin our call with highlights of our third quarter performance.

Speaker 2: Heather Plutino, our Chief Financial Officer, will then elaborate on our detailed financial results and our outlook. Then we'll open the call for your question.

Hello, Pacino, our Chief Financial Officer will then elaborate on our detailed financial results and our outlook then we'll open the call for your questions.

Speaker 2: In the third quarter, our team continued to advance our strategic initiatives while navigating a very challenging, selling environment, and controlling the controllables like we always do. We successfully managed the middle of the P&L as we registered a strong gross margin of 38.2% and kept operating expense dollars essentially flat compared to the prior year.

In the third quarter, our team continued to advance our strategic initiatives, while navigating a very challenging selling environment and controlling the controllable like we always do.

We successfully manage the middle of the P&L as we registered a strong gross margin of 38, 2% and kept operating expense dollars essentially flat compared to the prior year.

Speaker 2: That said, our third quarter top-line performance did not meet our expectations. With sales held back more than we expected, by the ongoing challenging macroeconomic backdrop.

That said, our third quarter topline performance did not meet our expectations with sales held back more than we expected by the ongoing challenging macroeconomic backdrop.

Speaker 2: Our primarily low income customer base, consisting mostly of families earning $45,000 and less per year is being very selective and purchasing much closer to need as they navigate higher cost of living.

Our primarily low income customer base, consisting mostly of families, earning $45000 and less per year is being very selective.

Purchasing much closer to need as they navigate higher cost of living.

Speaker 2: buying pattern further impacted by an seasonably warm weather throughout the course.

Our buying pattern further impacted by unseasonably warm weather throughout the quarter.

Speaker 2: Our third quarter cop sailed decline of 6.2%. While similar to the prior quarter's runway, did benefit from the intentional inventory rebuilds that I referenced during our Q2 earnings call. In particular, rebuilds in home, men's, big men's, and beauty were embraced by customers. Thanks to significantly better inventory levels, enhanced assortments, and better values than last year.

Our third quarter comp sales decline of six 2%, while similar to the prior quarter's run rate did benefit from the intentional inventory rebuilds that I referenced during our Q2 earnings call in particular, rebuilds and home mens big men's and beauty.

Embraced by customers, thanks to significantly better inventory levels enhanced assortments and better values than last year.

Speaker 2: Additionally, our ladies business benefited from excellent preseason trend forecasting that showed up in one of our best assortments ever. As the quarter unfolded, we experienced strong and consistent In store conversion, signaling that many components of our trend-wide assortment for all ages continue to resume.

Additionally, our ladies business benefited from excellent pre season trend forecasting that showed up in one of our best Assortments ever as.

As the quarter unfolded, we experienced strong and consistent in store conversion signaling that many components of our trend right assortment for all ages.

You need to resonate with our customers.

Speaker 2: Our total sales were held back equally by stubborn traffic and basket trend.

Our total sales were held back equally by stubborn traffic and basket trends.

Speaker 2: contributing to these trends was meaningfully warmer weather throughout most of the quarter across a large portion of our fleet

Contributing to these trends was meaningfully warmer weather throughout most of the quarter across a large portion of our fleet. Additionally.

Speaker 2: Additionally, in our latest research, it's clear that rent, utilities, food and gas are still real issues for our customers who top out at about $55,000 annual household income, which 50% of customers earning $25,000 or less per year.

Additionally, in our latest research, it's clear that rent utilities food and gas are still real issues for our customers who topped out at about $55000 annual household income with 50% of customers, earning $25000.

Or less per year.

Speaker 2: Our back to school and back to college business shelt this pressure as parents and students bought less during a volatile financial environment coupled with persistent heat waves that kept kids in shorts and short sleeves far longer than normal. Therefore, curtailing historically strong selling of fall goods.

Our back to school and back to college business shelf. This pressure as parents and students bought less during a volatile financial environment, coupled with persistent heat waves that kept kids and shorts and short sleeves far longer than normal.

Therefore, curtailing historically strong selling of fall goods.

Speaker 2: Even though we felt short of our quota of expectations, we continued to play off in.

Even though we fell short of our quarterly expectations, we continue to play offense.

Speaker 2: We began testing a more robust marketing strategy in a few markets to drive traffic and deeper customer engagement from current laps to new customers. And we are very pleased with early test results and are planning to have digital and radio marketing play a bigger role in our future.

Began testing a more robust marketing strategy in a few markets to drive traffic and deeper customer engagement from current lapsed and new customers and we are very pleased with early test results and are planning to have digital and radio marketing play a bigger role in our future <unk>.

Speaker 2: Additionally, our remodels in the quarter contributed strong sales lifts. More evidence that when we refresh our store experience and establish markets, our customers' excitement translates to better traffic and basket trends.

Additionally, our remodels in the quarter contributed strong sales lifts more evidence that when we refresh our store experience and established markets, our customers' excitement translates to better traffic and basket trends.

Speaker 2: Lastly, our focus on inventory and margin management in the face of discretionary sales headwinds continues with a steady hand at the wheel, ensuring we flow to stores the appropriate amount of newness, shoot it three times per week.

Lastly, our focus on inventory and margin management in the face of discretionary sales headwinds continues with a steady hand at the wheel, ensuring we flow to stores the appropriate amount of newness shoot to three times per week.

Speaker 2: With many important selling days ahead of us, I am pleased to report that we've experienced improved top line momentum for the quarter to date. Our customers are loving, are ready, set, gift campaign, supported by a timely setup of our holiday force set, and a wide offering of gifts, including great choice.

With many important selling days ahead of us I am pleased to report that we've experienced improved topline momentum fourth quarter to date.

Our customers are loving our ready set gift campaign supported by a timely setup of our holiday floor set and a wide offering of gifts, including great toys Mega Bluetooth Party speakers, the most amazing fragrance gift sets.

Speaker 2: Nego Bluetooth Party speakers, the most amazing fragrance gift sets, all the cozy a person could want, and of course, so much turn right clothing accessories in home for all ages, all incredible values. We are also ready with must-have fits to help our customers show up to their holiday gatherings with style and content.

All the cozy a person could want and of course, so much trend right clothing accessories and home for all ages all at incredible values were.

Also ready with must have fits to help our customers show up to their holiday gatherings with style and confidence.

Speaker 2: We know for sure that our customers show up in stores for the big moments in their life. And this holiday will be no exception.

No for sure that our customers show up in stores for the big moments in their lives and this holiday will be no exception.

Speaker 2: Our stores and staff are energized, and we feel really good about our jaw-dropping prices and appropriate inventory position. Notably, this year's extra selling deal, this year's extra selling day, between Thanksgiving and Christmas, and resulting super weekend is perfect for last minute shopping, a hallmark of our customers. Unconfidently.

Our stores and staff are energized and we feel really good about our jaw dropping prices and appropriate inventory position, notably this year's extra selling Dell.

This year's extra selling day between Thanksgiving and Christmas and resulting Super weekend is perfect for last minute shopping a hallmark of our customers I am confident we are well positioned.

Speaker 2: to win the holiday season. And we look forward to updating you in our progress during our fourth quarter call.

To win the holiday season, and we look forward to updating you on our progress during our fourth quarter call.

Speaker 2: Importantly, the strength of our balance sheet was total decudity of 135 million at quarter end with no debt. Provide just the necessary flexibility to navigate the dynamic consumer environment while maintaining our focus on our strategic initiatives as we seek to create long-term shareholder value.

Importantly, the strength of our balance sheet with total liquidity of 135 million at quarter end with no debt provides us the necessary flexibility to navigate the dynamic consumer environment, while maintaining our focus on our strategic initiatives as we seek to create long term shareholder value.

Speaker 2: I'd like to take a moment to express my gratitude to our teams for their unwavering dedication in serving our African-American and multicultural families across the United States, in the heart of their local neighborhoods, making them feel welcome each and every time they visit, particularly during the busy holidays.

I'd like to take a moment to express my gratitude to our teams for their unwavering dedication in serving our African American and multicultural families across the United States in the heart of their local neighborhoods, making them feel welcome each and every time they visit particularly during the busy holiday season.

Speaker 2: Before I pass it on to Heather for a review of our third quarter results and a discussion of our outlook, I want to quickly review the steps we are taking to improve our top line performance.

Before I pass it on to Heather for a review of our third quarter results.

A discussion of our outlook I want to quickly review the steps, we're taking to improve our top line performance.

Speaker 2: During the quarter we made significant progress against our forest strategic initiatives. To remind you, they are first driving comms to our portivity. Second, managing inventory and maximizing margin.

During the quarter, we made significant progress against our four strategic initiatives to remind you. They are first driving comp store productivity.

Second managing inventory and maximizing margin.

Speaker 2: Third, controlling SGNA expenses and leveraging our balance sheet and fourth, executing technology enhancements.

Third controlling SG&A expenses, and leveraging our balance sheet and fourth executing technology enhancements.

In addition.

Speaker 2: to these initiatives. We are taking decisive actions to drive top-line sales for the remainder of 2023 and into first quarter of 2024. Examples include first, marketing tests.

Through these initiatives, we are taking decisive actions to drive top line sales for the remainder of 2023 and into first quarter of 2024. Examples include first marketing testing as I mentioned during the third quarter, we began testing a more robust marketing strategy in a few.

Speaker 2: As I mentioned, during the third quarter, we began testing a more robust marketing strategy and a few select markets. Early with...

Select markets.

Early results are promising and we have advanced this marketing effort to approximately 20% of our fleet for the holiday season. The first time with Citi trends history next.

Speaker 2: And we have advanced this marketing effort to approximately 20% of our fleet for the holiday season. The first time in city trends history.

Speaker 2: Next up, optimizing inventory. We are still bullish regarding the ongoing benefits of building optimal inventory levels for specific categories that offer unique items and upsides at the best values around.

Next up optimizing inventory, we are still bullish regarding the ongoing benefits of building optimal inventory levels for specific categories that offer unique items and upsides at the best values around.

Speaker 2: Many of these categories, such as home, big men's, and beauty, were not rebuilt during last year in spring.

Many of these categories, such as home Big men's and beauty, we're not rebuilt during last year in spring.

Speaker 2: So we're excited to see continue momentum during holiday and continue traction when we turn the corner into 2024.

So we're excited to see continued momentum during holiday and continued traction when we turn the corner into 2024.

Speaker 2: Third, delivering a differentiated story experience.

Third delivering a differentiated store experience we are laser focused on improving our in store experience. This includes heightened attention towards visual merchandising.

Speaker 2: We are laser focused on improving our in-store experience. This includes heightened attention towards visual merchandising, accentuating newness, and putting together head-to-toe looks. NS.

Accentuating newness and putting together head to toe looks in essence.

Speaker 2: creating a specialty store vibe within everyday emphasis on style, quality and affordability.

Creating a specialty store vibe.

With an everyday emphasis on style quality and affordability are.

Speaker 2: Our customers think of us as a guide or a coach providing all ages with today's trends at totally getable prices.

Our customers think of us as a guide or approach, providing all ages with today's trends at totally <unk> prices.

Speaker 2: Lastly, in the list of quick decisive actions.

Lastly in the list of quick decisive actions improved spring 'twenty four setup. We are looking forward to the spring selling season and from a product standpoint, we are highly focused on flowing newness on a regular basis, while delivering our spring assortments to our warmer.

Speaker 2: improved spring 24 setup. We are looking forward to the spring selling season. And from the product standpoint, we are highly focused on flowing newness on a regular basis while delivering our spring assortments to our warmer weather stores earlier than last year.

Are there stores earlier than last year.

Speaker 2: Our decision to launch spring assortments earlier was influenced in part by our new ERP system launched in the early portion of the third quarter.

Our decision to launch spring Assortments earlier was influenced in part by our new ERP system launched in the early portion of the third quarter. This is a significant upgrade from our previous ERP system and allows for a more dynamic analytics.

Speaker 2: is a significant upgrade from our previous ERP system and allows for more dynamic analytics.

Speaker 2: product allocation and assortment planning. Our teams across the organization are benefiting from this new and exciting tool. Looking ahead to next year, we believe the new ERP system will gradually improve our planning and allocation functions and lead to more precise allocations of the right product to the right store at the right time. As you can hear,

Product allocation and assortment planning our teams across the organization are benefiting from this new and exciting tool looking ahead to next year. We believe the new ERP system will gradually improve our planning and allocation functions and lead to more precise allocations of the right product to the right store at the right time.

As you can hear we are not standing still.

Speaker 2: We have highly engaged loyal customers that shoppest frequently procurated mate for them trends.

We have highly engaged loyal customers that shop as frequently procure rated made for them trends fashion and basics for whaler spend.

Speaker 2: Ashen in basics for way less spend and lots of complementary accessories home and impulsive items that they just can't resist. I've met with customers during the last quarter in the heart of our most important neighborhood.

Lots of complementary accessories home and impulse of items that they just can't resist.

I've met with customers during the last quarter in the heart of our most important neighborhoods.

Speaker 2: from Jackson, Mississippi, to Birmingham, to Tuscaloosa, to Jacksonville, to Savannah, to Charleston, to Atlanta, and beyond. And I can assure you that our customers love their city trends. Our job is to deliver goods aligned to their trend-based wantson needs and values that fit within their needs.

From Jackson, Mississippi to Birmingham, Tuscaloosa to Jacksonville to Savannah to Charleston to Atlanta, and beyond and I can assure you that our customers love their Citi trends, our job is to deliver goods aligned to their trend based wants and needs at values that fit within their needs.

Speaker 2: It's what we know how to do for our core African American customer base.

It's what we know how to do for our core African American customer base.

Speaker 2: With that, I'll turn the call over to Heather. She will discuss our third quarter results in detail as well as our outlook. Heather?

With that I'll turn the call over to Heather She will discuss our third quarter results in detail as well as our outlook Heather.

Heather.

Thank you David and good morning, everyone.

Speaker 1: As David mentioned, our third quarter results were softer than expected, given the difficult macro environment that continued to pressure our customers, coupled with unseasonably warm weather.

As David mentioned, our third quarter results were softer than expected given the difficult macro environment that continued to pressure our customers coupled with unseasonably warm weather.

Speaker 1: The quarter was highlighted by Healthy Gross Margin of 38.2%, flat to the second quarter, continued expense control, an inventory that remained in good shape throughout the quarter, as we may progress on improving in-stocks in targeted merchandise categories.

The quarter was highlighted by healthy gross margin of 38, 2% flat to the second quarter.

<unk> expense control and inventory that remained in good shape throughout the quarter as we made progress on improving in stocks and targeted merchandise category.

Speaker 1: We finished the quarter with a strong balance sheet that provides us with the financial flexibility to continue to navigate the current uncertain environment.

We finished the quarter with a strong balance sheet that provides us with the financial flexibility to continue to navigate the current uncertain environment.

Speaker 1: Importantly, we are very proud of our team's execution against our strategic initiatives that will continue to drive our business forward as we focus on driving profitable growth.

Accordingly, we are very proud of our team's execution against our strategic initiatives that will continue to drive our business forward as we focus on driving profitable growth ahead.

Speaker 1: Turning to the specifics of our third quarter financial results.

Turning to the specifics of our third quarter financial results.

Speaker 1: Photo sales for the quarter were $179.5 million, a decrease of 6.7% versus Q3 2022.

Total sales for the quarter were $179 $5 million.

Decrease of six 7% versus Q3 2022.

Speaker 1: Strong shopper conversion throughout the quarter once again served as proof that our assortment is resonating with our customers. That gets, while still under pressure versus last year, though trends consistent with the second quarter.

Strong shopper conversion throughout the quarter. Once again served as proof that our assortment is resonating with our customers basket, while still under pressure versus last year.

<unk> consistent with the second quarter.

Speaker 1: Third quarter comp sales decreased 6.2% compared to last year.

Third quarter comp sales decreased six 2% compared to last year.

Speaker 1: Rose margin remained strong in the third quarter at 38.2%. While flat to prior quarter, we did see contraction versus prior year, driven primarily by higher freight expense, as we moved more cartons through the network.

Gross margin remained strong in the third quarter at 38, 2%, while flat to prior quarter, we did see contraction versus prior year, driven primarily by higher freight expense as we moved more cartons through the network.

Speaker 1: The decline to last year was also impacted by higher shrink with a small group of stores accounting for most of the impact.

The decline to last year was also impacted by higher shrink with a small group of stores accounting for most of the impact.

Speaker 1: Through cross-functional collaboration, we remain keenly focused on minimizing the impact of strength.

Through cross functional collaboration we remain keenly focused on minimizing the impact of shrink.

Speaker 1: SGNA expense dollars remained well controlled and flat to prior year at $69.7 million for the quarter or 70.8 million dollars as a just

SG&A expense dollars remained well controlled and flat to prior year at $69 7 million for the quarter or $70 8 million as adjusted.

Speaker 1: Lower sales in the quarter drove adjusted SGA D leverage to a rate of 39.5% of total sales.

Lower sales in the quarter drove adjusted SG&A deleverage to a rate of 39, 5% of total sales.

Speaker 1: operating loss with $6 million in the quarter or $7.2 million as adjusted compared to operating income of $31.6 million or $2.4 million as adjusted for the impact of a sale lease back transaction in Q3 2022.

Operating loss was $6 million in the quarter or $7 2 million as adjusted compared to operating income of $31 6 million or $2 4 million as adjusted for the impact of a sale leaseback transaction in Q3 2022.

Speaker 1: Net loss per share was $0.47 or $0.56 as adjusted versus the looted earnings per share of $3.02 or $0.24 as adjusted in the third quarter of fiscal 2022.

Net loss per share was <unk> 47.

Or <unk> 56, as adjusted versus diluted earnings per share of $3 and <unk> 24 cents as adjusted in the third quarter of fiscal 2022.

Speaker 1: During the third quarter, we closed five stores and remodeled seven stores, bringing our total store count at the end of the quarter to 606 and our year-to-date remodel count to 15 stores. The third quarter, we closed seven stores and remodeled seven stores, bringing our total store count at the end of the quarter to 606 and our year-to-date remodel count to 15 stores.

During the third quarter, we closed five stores and remodeled seven stores, bringing our total store count at the end of the quarter to 606, and our year to date remodel count to 15 stores.

Now turning to the balance sheet.

Speaker 1: total inventory dollars at quarter end increased 0.9% versus Q3 2022 as we stock the force for the holiday season and continue to rebuild certain categories.

Total inventory dollars at quarter end increased 0.9% versus Q3 2022, as we stopped the fourth for the holiday season and continued to rebuild certain categories.

Speaker 1: We remain comfortable with the level and makeup of our inventory as we enter the holiday gift-giving season. As David mentioned, our stores are geared up to delight customers with our Ready-Fet Gift Campaign.

We remain comfortable with the level and makeup of our inventory as we enter the holiday gift, giving season as David mentioned, our stores are geared up to delight customers with already set gift campaign.

Speaker 1: Additionally, we are pleased with the buying environment as we procure attractive merchandise for spring 2024 for our value seeking customer.

Additionally, we are pleased with the buying environment as we procure attractive merchandise for spring 2024 for our value seeking customers.

Speaker 1: Finally, we ended the quarter with $135 million of liquidity made up of approximately $60 million of cash.

Finally, we ended the quarter with $135 million of liquidity made up of approximately $60 million of cash <unk>.

Speaker 1: no borrowings under our $75 million revolving line of credit and no debt.

No borrowings under our $75 million revolving line of credit and no debt.

Now turning to our outlook.

Speaker 1: As we've discussed in prior earnings calls, our previous guidance assumes improvement in the second half of the year, driven primarily by our initiatives, plus slight economic relief for our customers.

As we've discussed in prior earnings calls our previous guidance assumes improvement in the second half of the year.

Given primarily by our initiatives, but slight economic relief for our customers.

While we still believe in our initiatives what we've learned is that our customers remained under more pressure than our expectations assumed our shopping closer to need and are reducing their average spend per basket.

Speaker 1: While we still believe in our initiatives, what we've learned is that our customers remain under more pressure than our expectations assumed, our shopping closer to need, and are reducing their average spend per bath.

Speaker 1: We now believe that this dynamic will continue for the low-income families that we serve through the balance of the fiscal year.

We now believe that this dynamic will continue for the low income families that we serve through the balance of the fiscal year.

Speaker 1: As a result, we are updating our outlook as follows for fiscal 2023.

As a result, we are updating our outlook as follows for fiscal 2023.

Speaker 1: Total sales for the year are expected to be down mid single digits as compared to fiscal 2022.

Total sales for the year are expected to be down mid single digits as compared to fiscal 2022.

Speaker 1: Full year, Growth Margin is still expected to be in the high third.

Full year gross margin is still expected to be in the high thirty's.

Speaker 1: Folier, Yvada is expected to be in the range of 1 million to $7 million.

Full year EBITDA is expected to be in the range of 1 million to $7 million.

Speaker 1: are expected to be in the range of $17 to $20 million.

Full year capital expenditures are expected to be in the range of $17 million to $20 million.

Speaker 1: And urine cash balance is expected to be in the range of 80 million to 90 million dollars.

And year end cash balance is expected to be in the range of 80 million to $90 million.

Speaker 1: Well, we don't give quarterly guidance, given where we are in the year, let me help clarify what this revised annual guidance implies for the fourth quarter.

Well, we don't give quarterly guidance, given where we are in the year. Let me help clarify with this revised annual guidance implies for the fourth quarter.

Speaker 1: Fourth quarter total sales are expected to be approximately flat to up low single digits versus Q4 2022.

Fourth quarter total sales are expected to be approximately flat to up low single digits versus Q4 2022.

Speaker 1: As a reminder, the fourth quarter this year includes 14 weeks compared to 13 weeks last.

As a reminder, the fourth quarter. This year includes 14 weeks compared to 13 weeks last year.

Speaker 1: Comp sails for the quarter, which is measured on a 13 to 13 week basis, are expected to be in the range of down mid single digits is flat to last year.

Comp sales for the quarter, which is measured on a 13 to 13 week basis are expected to be in the range of down mid single digits.

<unk> the last year.

EBITDA is expected to be in the range of 9 million to $15 million in Q4.

Speaker 1: Yvita is expected to be in the range of 9 million to $15 million in Q4.

Speaker 1: In closing, there is no doubt that this is a difficult selling environment and that our customer is under pressure.

In closing there is no doubt that this is a difficult selling environment and that our customer is under pressure.

Speaker 1: while we aren't satisfied with our top and bottom line results in the third quarter. We remain focused on our strategic initiatives while carefully managing our expenses and inventory investments.

While we arent satisfied with our top and bottom line results in the third quarter, we remain focused on our strategic initiatives, while carefully managing our expenses and inventory investments.

Speaker 1: Doing so will allow us to continue navigating the current environment alongside our loyal customer base. And in the longer term, we'll fuel our ability to drive the full earnings potential of this important

Doing so will allow us to continue navigating the current environment alongside our loyal customer base and then the longer term will fuel our ability to drive the full earnings potential of this important brand.

Speaker 1: With that, I'll turn the call back to David for closing comments. David? David?

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

Thanks Heather.

Speaker 2: As a brand and a company, we're really proud of our connection to our neighborhoods, employing and serving true locals with a high-quality experience. During our 77 years of operation, our differentiated positioning in markets where others aren't.

As a brand and a company, we're really proud of our connection to our neighborhoods employing in serving true locals with a high quality experience during our 77 years of operation our differentiated positioning in the markets where others aren't.

Speaker 2: including the vast majority of stores located within five miles or less of our core customer has fueled our ongoing presence in more than 250 amazing neighborhoods in 33 states.

<unk> the vast majority of stores located within five miles or less of our core customer has fueled our ongoing presence in more than 250 amazing neighborhoods in 33 states.

Speaker 2: Importantly, our strong and expanding partnerships with our vendors continue to supply our customers with a compelling merchandise offering that drives our customers loyalty and continued engagement, even in a challenging environment. As we look ahead, we will continue to execute against our key strategies in support in support of our city life purpose, which is live bold, live proud, respect all.

Importantly, our strong and expanding partnerships with our vendors continue to supply our customers with a compelling merchandise offering that drives our customers' loyalty and continued engagement even in a challenging environment.

As we look ahead, we will continue to execute against our key strategies in sport in support of our city life purpose, which is live bold live proud respect all.

Speaker 2: Perhaps most vital is our ability to help our customers show up for whatever comes their way.

Perhaps most vital is our ability to help our customers show up for whatever comes their way.

Speaker 2: bring opportunities to life at prices that don't break the bank.

Bring opportunities to life at prices that don't break the bank.

Speaker 2: We continue to be excited to drive the full potential of our brand as we focus on driving long-term, profitability and shareholder value.

We continue to be excited to drive the full potential of our brand as we focus on driving long term profitability and shareholder value.

Speaker 2: Before I turn the call over to the operator, I want to again extend my gratitude and appreciation to our city trends team. It is their execution that drives our strategy forward and reinforces my confidence and excitement in our future. Up.

Before I turn the call over to the operator I want to again extend my gratitude and appreciation to our Citi trends team. It is their execution that drives our strategy forward and reinforces my confidence and excitement in our future.

Happy holidays to all we are now ready to take your questions over to you Frank.

Speaker 2: and I'm ready to take your questions. Over to you, Frank.

Yes.

Thank you.

Speaker 3: If you would like to register a question, please press the one four on your telephone.

If you would like to register a question. Please press the one four on your telephone.

Speaker 3: You will hear a three-tone prompt to acknowledge your request. If your question has been answered and you would like to withdraw your registration, please press the one fall by the three. Once again, to register a question, please press the one four on your telephone. One moment, please, for the first question.

You will hear it III prompt to acknowledge your request. If your question has been answered and you would like to withdraw your registration. Please press. The one followed by three once again to register a question. Please press the one four on your telephone one moment. Please for the first question.

Speaker 3: Our first question comes from Jeremy Hamlin, with Craig Hallum, Capital Group.

Our first question comes from Jeremy Hamblin, with Craig Hallum Capital Group.

Please proceed.

Thanks for taking the questions. So I wanted to start by.

Speaker 4: Thanks for taking the questions. So I wanted to start by

Speaker 4: getting an understanding of the cadence of comps that you saw throughout the quarter you know that on the August call that July was the best month that you had in q2 uh... and wanted to get a sense you know given that you missed your own expectations you know uh... does that imply that uh... you know with September worse than you expected or October worse than you expected um... you know

Getting an understanding of the cadence of comps that you saw throughout the quarter.

On the August call that July was the best month that you had in Q2.

And wanted to get a sense.

Given that you missed your own expectations.

Does that imply that you know with September worse than you expected or October worse than you expected.

Speaker 4: Can you provide a little bit more color and then also just get a sense for what you're seeing thus far in Q4 on a famed store sales base?

Can you provide a little bit more color and then also just to get a sense for what youre seeing thus far in Q4.

On a same store sales basis.

Speaker 1: Hey, Jeremy, good morning. This is Heather. I'll take at least part of that question.

Hi, Jeremy Good morning. This is Heather I'll take a shot at least part of that question cadence of comp in the quarter. In Q3. It was it was really consistent the range between the months with fairly tight.

Speaker 1: Paydens of comp in the quarter in Q3, it was really consistent. The range between the months was fairly tight and just really in line with full Q2. So you're right, so I was our strongest month in the second quarter, but that's what I'll say about Q3, right? Tight fans more in line with the full quarter of Q2 results. So when you peel it back and you look underneath the cover of those months.

And just really in line with Q2 so.

You're right July was our strongest month in the second quarter, but that's what I'll say about Q3, right type and more in line with the full quarter of Q2.

So when you Peel it back and you look underneath the cover of of those months.

<unk>.

Speaker 1: It's really a story of whether it was abnormally warm, comfort down, whether it's not back, comfort or up. And I will say that we thought we used the word stubborn.

It's.

It's it's really a story of weather.

Weather was abnormally warm comps are down whether its not bad comps are up.

And I will say that the we thought we use the word stubborn stubborn traffic and basket trends throughout the quarter as well for all the reasons that we talked about in the call right continued pressure are buying closer to need and we've talked about this in many earnings release calls right that that need equals weather changes for our customers.

Speaker 1: sub-ern traffic and basket trends throughout the quarter as well for all the reasons that we talked about in the call, right? Continued pressure. Contrast, traction run, short run, short run, average range range, without any

Speaker 1: buying closer to need. And we've talked about this in many earnings release calls, that need equals weather changes for our customer as well, right, not just gifting moments, but weather changes. Back to school is a good example. The mom and dad were only buying what the kid has needed. And if they're going back.

Well right not just gifting.

Gifting moments, but the weather changes back to school is a good example.

The mom and dad were only buying what the Kid is needed and if theyre going back in 90 degree weather. They are wearing the T shirts and shorts that they will run during the summer.

Speaker 1: 90-degree weather, they are wearing the t-shirts and shorts that they were wearing during the summer. We mentioned in the prepared remarks, right? So that had an impact on fall selling for sure throughout the quarter. …per- Chernigar. …per- Chernigar.

We mentioned in the prepared remarks, right. So that had an impact on fall selling for sure throughout the quarter.

And it's Dave.

Thanks, Yeah.

Speaker 2: Yeah, Jeremy, it's Dave, and thanks for calling. On the Q4 question, yeah, I mean, the headline really is like we stated in our release.

Jeremy It's David Thanks for calling on the Q4 question, Yes, I mean, the headline really is like we stated in our release improved momentum has been really encouraging.

Speaker 2: improved momentum has been really encouraging, driven by a really timely setup of our gift presentation, kind of within the context of our ready-set gift holiday campaign. We were in boxes by late October , meaning in our stores with the right assortment, that's driving the momentum. And we've seen some decent weather snaps.

Driven by a really timely setup of our gift presentation kind of within the context of our ready set gift holiday campaign, we were in.

In boxes by late October meeting in our stores with the right assortment.

<unk> the momentum and we've seen some decent weather snaps throughout some not all of it.

Speaker 2: throughout some not all of November . And so that's all contributing to the improved momentum, giving us a nice run into the rest of the quarter. So we're excited about what we're seeing.

Remember and so that's all contributing to the improved momentum, giving us, giving us a nice run into the rest of the quarter. So we're excited about what we're seeing.

So just coming back then to what you saw in Q3.

Speaker 4: So just coming back then to what you saw on Q3, so if comp trends were relatively steady, then you were expecting more of an acceleration on comps than what you got, and you think maybe that didn't happen because of weather, or maybe was.

If comp trends were relatively steady than you were expecting more of an acceleration on comps than what you got and you think maybe that didn't happen because of because of weather.

Or maybe was with a macro maybe more of a factor.

Speaker 4: macro maybe more of a factor. Just trying to understand the difference between your expectation and the end result.

Trying to understand the difference between your expectation and the end result.

Speaker 2: They were both important factors, Jeremy. And as we stated in the Q2 call, we entered BTS setup really well, similarly to the setup that I just mentioned for Q4. So we were confident in our offering, in our values, in the mix across all ages. And what really bamboozled the quarter in our view was

They were they were both important factors Jeremy as we stated in the Q2 call. We entered Bts set up really well similarly to the setup that I just mentioned for Q4. So we were confident in our offering and our values and then the mix across all ages and.

What really bamboozle the quarter and our view was.

Speaker 2: weather and the macro impact being far more pressurized than we anticipated, right? As we've often said, we can't predict the macro. We do our best to estimate whether it gets worse or better, but in this case, it really presented a lot of pressure. And I think one of the telltale metrics, Jeremy, that we've shared before, is our conversion remains incredibly good.

Weather and the macro impact being far more pressurized than we than we.

<unk> right as we've often said we can't predict the macro we do our best to estimate.

Whether it gets worse or better but in this case it really presented a lot of pressure and I think one of the telltale metrics Jeremy that we've shared before is our conversion remains incredibly good so for those who come in and have the means to shop.

Speaker 2: So for those who come in and have the means to shop, we convert.

So consistently I mean, it's been 24 months of consistent conversion, but what we see as Heather pointed out in her remarks as the stubborn traffic excuse me the stubborn basket pressure.

Speaker 2: so consistently. I mean, it's been 24 months of consistent conversion, but what we see as Heather pointed out in her remarks is the stubborn traffic, excuse me, the stubborn basket pressure.

Speaker 2: is just kind of presenting more of a fight for every dollar in the basket. We're getting the conversion. We're getting the transactions. It's just the basket pressure. So, and it's both, right? It's the normally hot weather.

Just kind of presenting more of a fight for every dollar in the basket, we're getting the conversion we're getting the transactions. It's just the basket pressure so.

And it's both right.

Normally hot weather.

Speaker 2: It's the macro, so can't give you exact percentages, but they're both being felt for sure.

It's the macro so can't give you exact percentages, but it's they're both being felt for sure.

Speaker 4: That's helpful clarity. And just coming back to Q4, because I want to make sure that, you know, on the guidance, is it implying like a down one to a down four comp?

That's helpful clarity and just coming back to Q4, because I want to make sure that.

On the guidance.

Is it implying like a down one to a down for comp.

Speaker 4: that kind of what your expectations are. And there's some noise around it, obviously, with the extra weak in Q4.

Does that kind of what your expectations are.

There is some noise around it obviously with the extra week in it.

Q4.

Speaker 1: Well, CompGAN is on a 13 to 13 week basis, so that's the cleanest way to look at it, Jeremy. And as I mentioned in the prepared remarks, we are expecting down mid-single digits to flat in the quarter.

Well comp again as it is on a 13 to 13 week basis. So that's the cleanest way to look at it Jeremy as I as I mentioned in the prepared remarks, we are expecting down mid single digits to flat.

Uh huh.

In the quarter from a comp perspective.

Okay.

Speaker 4: Okay. All right, just, and then moving on, I want to understand a little bit about the gross margin impact. So down 160 basis points, Euro.

Alright, and then moving on I wanted to understand a little bit about the gross margin impact so down 160 basis points.

Year over year.

Speaker 4: Conversion remains strong. I think you noted two things in here. Higher shrink, higher freight expense.

Conversion remains strong.

You noted two things in here higher shrink higher freight expense year over year wanted understand attribution of each of those components and if there was anything else.

Speaker 4: year over year, wanted to understand attribution of each of those components and if there was anything else that might have contributed to it given where you were in Q2, which was also the 38.2% gross margin, but on a year over year basis, certainly was a bit more of a step back, theibBrad compliment for his hope not? Did you guys think the Understand?

That might have contributed to it given.

Where you were in Q2, which was also up to 38, 2% gross margin.

But on a year over year basis, certainly was a bit more of a step back I think than expected.

Speaker 1: Yeah, it's as you mentioned, the two components really are free and shrink. We're heavily weighted towards free.

Yeah. It's it's a as you mentioned the two the two components really are freight and shrink heavily more heavily weighted toward freight.

And.

Speaker 1: And the issue there is that, as I mentioned, we've got more cartons going through this.

The issue there is that that as I mentioned, we've got more cartons going through that.

Speaker 1: system and if you think about some of the rebuilds that David called out big men, home, footwear, those are bulky items right so that in the weeds there Jeremy forgive me but the units per carton are lower so in order to get that that 1% increase in inventory that we reported at the end of the quarter you're moving a lot more cartons through the system. The higher volume equals higher freight expense.

The system and if you think about some of the rebuilds that David called out Big men home footwear.

Those are bulkier items right so that in the weeds there Jeremy forgive me, but the units per carton are lower so in order to get that that 1% increase in inventory that we reported at the end of the quarter, you're moving a lot more cartons through the system, so higher volume equals higher freight expense.

Speaker 1: And we expect that to mitigate in Q4, as the rebuild, the bulk of the rebuild is behind us. So for the shrimp.

And we expect that to mitigate in Q4.

As we as the rebuild the bulk of the rebuild is behind us.

So for the shrink line.

Speaker 1: is a smaller component but still a component. It, as I mentioned,

Which is a smaller component, but still a component.

As I mentioned.

Speaker 1: And I think you know this, we talked about this in the past. Our cadence is to take physical inventories and a section of our stores every month, as opposed to other retailers to do it maybe one time, a year or two times a year. So we're testing our results every month.

And I think you know that we talked about this in the past our cadence is to take our physical inventories in our section of our stores every month as opposed to other retailers to do it may be one time, a year or two times a year. So we're testing our results every month, but it is subject to how those particular stores are performing from a shrink perspective.

Speaker 1: But it is subject to how those particular stores are performing from a shrink perspective.

Speaker 1: So in Q3, we had a group of stores, a class of stores, if you will, who had higher shrinks than the balance of the chain, which was driving the majority of that increase in shrink expense. So, you know,

So in Q3, we had a group of stores that class of stores. If you will who had higher shrink than than the balance of the chain, which was driving the majority of that increase in shrink expense. So you.

No.

Speaker 1: Bummer for sure. As I mentioned, we're really focused on controlling strength. We've got a cross-functional team, lost prevention, field HR, field leadership.

Bummer for sure as I mentioned, we're really focused on controlling shrink we've got a cross functional team loss prevention.

Field HR field leadership.

Speaker 4: that are really, really focused on controlling shrink, whether it's from a talent perspective, from a reporting perspective, from a local law enforcement perspective, we are all over it. So hopefully I'm giving you the feel that we are all over both shrink and freight and don't expect those same level of headwinds going forward.??.

They are really really focused on controlling shrink whether it's from a.

Talent perspective from a reporting perspective from a local law enforcement perspective, we are all over it.

So so hopefully I'm, giving you the feel that we.

Our Oliver both shrink and freight and don't expect those same level of headwinds going forward.

Got it thanks, so much for the color and best wishes.

Thanks, Jeremy Thanks, Jeremy.

Speaker 3: Our next question comes from Mike Baker with DA Davidson. Please proceed.

Our next question comes from Mike Baker with D. A Davidson. Please proceed.

Okay.

Speaker 5: little bit of fall up and in some new questions i guess for the fourth quarter are that does that guidance of uh... down mid single digits to flat what is that and that i'm pli pick up throughout the rest of the quarter and i guess maybe another way to ask you might as well you're up against by month from from the fourth quarter last year the comparisons get easier harder et cetera and in the few are expected

Little bit of follow up in some new questions.

I guess for the.

Fourth quarter.

Does that guidance of.

Down mid single digits to flat what does that does that imply a pickup throughout the rest of the quarter or not.

And I guess, maybe another way to ask that can you remind us what you're up against by month from from the fourth quarter of last year, the comparisons get easier or harder et cetera, and if you are expecting a pick up you know I presume if people are shopping closer to need then last year, you were assuming that sales get better as get closer to the holidays, but just wanted to confirm that.

Speaker 5: I presume if people are shopping closer to need, then last year you're assuming that sales could better as you get closer to the holidays, but just wanted to...

Speaker 1: Yeah, Mike. Thanks for the questions. Good to hear you. So the Q4 guidance does in a zoom improvement, right? Down mid single digits to flat versus the down six that we produced in Q.

Yeah, Mike Thanks for the thanks for the question good to hear you.

So the Q4 guidance does it assume improvement right down mid single digits to flat.

Versus the down sell.

<unk> that we produced in Q.

Speaker 6: Q3 for sure as I look at the speaking slowly as I find the numbers as I look at the

Q3 for sure as I look at the.

And I'm speaking slowly as I find the numbers as I look at the.

Speaker 6: the forecast throughout the month. I mean, it won't surprise you. It's really about the moments within the quarter, right? So November .

The forecast throughout the month I mean, it won't surprise you is it's really about the moment within the quarter right. So.

November.

Speaker 6: It's about the lead-in to Thanksgiving. That's where we see it.

It's about the lead into Thanksgiving, that's where we see it.

Speaker 6: strong sales, right? And we expect because of all of the merchant initiatives that David laid out, we expect to have stronger performance around the lead-in to Thanksgiving. And reminder, our customer actually, the Wednesday before Thanksgiving is very important to our customers.

Strong sales rate and we expect because of all of the merchant initiatives that David laid out we expect to have stronger performance around.

The lead into Thanksgiving and a reminder.

Our customer actually the Wednesday before Thanksgiving is very important to our customer.

Speaker 6: as opposed to Friday after. Still important, but they're coming in to dress for their, their,

As opposed to Friday, after still important, but they're they're coming in to to dress for there.

There are.

There is that right and then as we get closer to the holiday actual Christmas holiday later in December that becomes important as well so it's really about the moment within but.

But yes improvement throughout and then as I look at versus last year.

I would say David I might ask for a bail out here I would say that there's we had softer than expected holiday season last year as well. So I don't think there's anything that I would say is as a headwind tailwind as it was there's room to improve for sure.

Speaker 2: David, anything good add? Yeah, Mike, I think the last thing I'd add, good to hear from you, is these rebuilds that we've been talking about, give us some added fuel for the quarter.

David anything you'd add yeah, yeah, Mike I think the last thing I'd ask you to hear from you is.

These rebuilds that we've been talking about give us some added fuel for the quarter and so theres nothing really abnormal from a lapping perspective, I'd call out, but I would give.

Speaker 2: So there's nothing really abnormal from a laughing perspective I call out, but I would give you confidence and it gives us confidence that there's a bunch of what I call added firepower to Q4 that...

Give you confidence and it gives us confidence that there is a there's a bunch of what I would call added firepower to queue for that.

Speaker 2: weren't kind of in the mix last year as strong as we would have wanted them to be. Example, our home business was weaker last year than this year from an inventory quality value standpoint. So we believe we're much better positioned in that very...

<unk> work kind of in the mix last year as strong as we would have wanted them to be example, our home business was weaker last year than this year from an inventory quality and value standpoint. So we believe we're much better positioned and that vary.

Speaker 2: Pinedexing holiday category because we embedded that that category our gifts and our toys and our throws and all the things that people gift

Hi, indexing holiday category, because we embedded in that that category, our gifts and our toys R throws in all of the things that people gift.

Speaker 2: So that's what gives us good confidence in being able to improve our trend from Q3 as you can tell and as it's framed in the guide.

So that's what gives us good confidence in being able to improve our trend from from Q3 as you can tell.

Its framed.

Got it.

Speaker 5: okay uh... for enough uh... couple more questions one within the gross margin commentary uh... you know nothing on on markdowns or clearance right like that can you give us a sense as to you know full price selling or or if with salesman a little bit weaker this quarter is any kind of markdown risk or you know how that may have impacted

Okay Fair enough a couple more questions one within the gross margin commentary.

Nothing on on markdowns or clearance or anything like that can you just give us a sense as to full price selling or if with sales being a little bit weaker. This quarter is there any kind of markdown risk or you know how that may have impacted gross margins on a year over year basis.

Speaker 2: It, you know, I'll go check that one. Like, I mean, basically, Heather's highlighted, shrink and freight, which we've got to handle on.

Yeah, I'll take that one Mike.

Basically heather's highlighted shrink and freight which we've got a handle on that you can hopefully hear from her past answer where really the big reasons for the slight deleverage in gross margin versus Earl y.

Speaker 2: Hopefully here from her past answer, we're really the big reasons for the slight de-leveraging growth margin versus LY. From a markdown perspective, the team's done a really good job managing our inventory.

A mark down perspective, the team has done a really good job managing our inventory.

Speaker 2: and trying to, you know, in the moment, make adjustments and all that good stuff. It is a little bit of fancy footwork, especially when the fall goods, as I pointed out in my comment.

And trying to in the moment make adjustments and all that good stuff. It is a little bit of fancy footwork, especially when the fall goods as I pointed out in my comments.

Speaker 7: are selling a little slower than we like or get sell a little slower than we like in Q3. But we're taking appropriate action when it matters the most, which is in the time period spell, not waiting too long and all that good stuff. So we're on it, but there was no news where the item in Q3 to call out. It was pretty much as we expected. And in line with prior year. Okay.

Our selling a little slower than we'd like or gets a little slower than we liked in Q3, but we're taking appropriate action when it matters. The most which is in the in the time period cells not waiting too long and all that good stuff. So we're on it but there was no no newsworthy item in Q3 to call out it was pretty much as we.

<unk>.

And in line with prior year.

Okay, that's good and one more if I could.

The new marketing initiatives.

Speaker 5: What kind of sales lift is it driving and what's the cost associated with that? Your SGNA has been pretty consistent around 70 million quarter. Does that go up because of the marketing initiative or do you have to see the comps? You don't work out before you invest in that. Just how should we think about that?

Any more color on that but what kind of sales lift is it is it driving and what's the cost associated with that you know your SG&A has been pretty consistent around $70 million a quarter does that go up because of the marketing initiative or do you have to see the comps you don't work out before you before you invest in that just how should we think about that.

Speaker 2: Yeah, it's a great question. Well, first off, Mike, on the test base for Q3 that I comment on. It's too small. It's a rounding error in SQNA, so you don't need to worry about that. But what the test did inform us about is our ability to drive both new and lapped customers back into the fold.

Dynamic yeah. It is.

So great question, well first off Mike on the on the test base for Q3 that I comment on it it's too small it's a it's a rounding error in SG&A. So you don't need to worry about that but what the test did inform us about is our ability to drive both new and lapsed customers back into the <unk>.

Speaker 2: And so our ability kind of see lifts in traffic and conversion, which was nice to see and even a little bit basket for customer

Bold and so our ability to kind of see lifts in traffic and conversion, which was nice to see and even a little bit in basket for customer.

Speaker 2: show that we can reignite the audience in very established markets. I want to be clear these tests were not in new markets where capturing new customers you could argue is easy. These are in long time legacy city trend markets, very African-American and fact markets, where we wanted to test the water. So we're seeing some I would couch it as healthy lifts, encouraging lifts.

Showed that we can we can reignite the audience in various stablish markets I want to be clear. These tests were not in new markets. We're capturing new customers. You could argue is easy user and long time legacy city trend markets very African American and stock markets, where we wanted to test the water. So we're seeing.

Some some I would couch it as healthy lifts encouraging lifts and that what drove us to drive into about 20% of the change for Q4 again that number is not huge it's embedded in our SG&A.

Speaker 2: And that would drove us to drive into about 20% of the change for Q4. Again, that number is not huge. It's embedded in our S-GNA. And really what's exciting is, and I'll give a little sneak peak, we're going to figure out how to do more of this in Q1. And more to come on that. But we're bullish on, basically.

And really whats exciting is and I'll give a little sneak peek, where we're going to figure out how to do more of this in Q1.

And more to come on that but we're bullish on basically.

Speaker 2: reawakening, lapsed customers, and convincing even some existing ones to shop a little more often during an even post-the advertising exposure window. So more to come, but we're pretty pumped about what we're seeing and what can it do for top-line improvement.

Reawakening lapsed customers and and convincing even some existing ones to shop, a little more often.

And even post the advertising exposure window, so more to come but we're we're pretty pumped about what we're seeing and what kind of what kind of due for topline improvement.

Understood, but just to be specific.

Speaker 5: understood, but just to be specific, so any reason, you know, do we bump up? Well, SGNA, just on the marketing be higher than it has been. You know, what kind of dollar investment is embedded in that SGNA, in that market.

Any reason do we bump up.

Just on the marketing would be higher than it has been what kind of dollar investment is embedded in that SG&A and that marketing.

Speaker 2: We don't release that line level detail mic, but I can tell you we work. We're, I'll call it, we're self-funding it out of our, our expected and what you have expected in our SGA budget for Q4. Not a big enough number to unsettle that overall SGA.

We don't really give that level of detail, Mike, but I can tell you. We are I'll call. It we're self funding it out of our our expected than what you had expected in our SG&A budget for Q4.

Not a big enough number to.

Settled out overall SG&A.

Speaker 6: 70 ranges still fine. Yep. Put a 9.0 at my 70 ranges to find. Yep. Yep.

Got it 70 range is still fine yeah got it.

My 70 range of Joanne Yep Yep.

Speaker 3: Thanks, my bad thanks, question comes from Chuck Grom with Gordon Haskett. Please proceed.

Thanks, Mike. Our next question comes from Chuck Grom with Gordon Haskett. Please proceed.

Speaker 5: Hey guys, hope you're well and nice Thanksgiving. I just wanted to vote on Mike's question just on the quarter to day. You talk about a lot of improvement and you're not alone, a lot of retailers have called that out at this point. I'm just curious if you guys are in that range that the down mid single digits, the flat. I believe your holiday comp last year was a down 17-5. So I just wanted you to just confirm that for us. Thanks.

Hey, guys hope, you're well and this Thanksgiving.

Just wanted to move up on Mike's question, just on the quarter to date, you're talking about a lot of improvement.

You're not alone in a lot of retailers have called that out at this point.

I'm just curious if you guys are are in that range.

Mid single digits to flat and I believe your holiday comp last year was down 17, five so I just wonder if you could just confirm that for us. Thanks.

Speaker 2: Hey Chuck, thanks for calling in. Yes, good Thanksgiving. I hope you did too. Yeah, we won't divulge an exact number, but what I can leave you with Chuck is that it is within the negative five to negative one. So it's certainly shown improvement versus our run rate for both Q2 and Q3.

Hey, Chuck Thanks for calling in yes, a good Thanksgiving I hope you did too yes.

We won't divulge an exact number but what I can leave you with Chuck is that it is within the negative five to negative one so it's a it's certainly shown improvement versus our run rate for both Q2 and Q3.

Speaker 2: And we're, we're, you know, cautiously optimistic about December being a strong month. Based on some of the answers I've provided, in a more firepower from the inventory quality and availability standpoint, even better values than last year. And this, this phenomenon that we've seen, largely all year long, where our customers are so tied to these family moments.

And we're cautiously optimistic about December being a strong months based on some of the answers I provided in a more firepower from the inventory quality and availability standpoint.

Even better values than last year.

And this this phenomenon that we've seen largely all year long, where our customers are so tied to these family moments.

Speaker 2: So we're excited for what's to come. You know, I think the one wild card, which I know you study a lot, Chuck is weather. You know, we've definitely seen, as you've heard, and can ascertain to our Q3 comment.

So we're we're excited for what's to come.

I think the one wildcard, which I know you study a lot Chuck is is whether we.

We've definitely seen as you heard and can ascertain as of our Q3 comments that our customers are more than they used to be sensitive to the weather in part tethered to their economic status. They are just holding off until they really need something so I would I would asterisk Q4, a little bit with weather.

Speaker 2: that our customers are more than they used to be sensitive to the weather.

Speaker 2: in part tethered to their economic status. They're just holding off until they really eat something.

Speaker 2: So I would, I would asterisk to for a little bit with it's whether it goes the wrong way. I'll have an impact, but at the same token, we know that particularly in the last two weeks of December , our customers come out and jose whether it's 70 or 20 out. They were ready for them. So that's how I described kind of the back out for the rest of the quarter.

It goes the wrong way that will have an impact but at the same token we know that particularly in the last two each in December our customers come out and jobs, whether it's 70 or <unk> out and we're ready for them. So that's how I would describe kind of the backdrop with the rest of the quarter.

Speaker 8: Okay, great, that's very helpful thanks, David. And then just looking ahead to spring, and I wonder if you guys could talk about the opportunity from the new ERP system and the product, in the inventory product that you can be rolling out in terms of the new NISI, where I'm going to say is one of the four sales drivers for next year. So maybe just dive into that a little bit more.

Yes.

Okay great.

Very helpful. Thanks, David.

And then just looking ahead to spring and wanted to see if you guys could talk about the the opportunity from the new ERP system and the product.

And the inventory product is going to be rolling out in terms of the newness that you referenced I was one of the four sales drivers for next year. So if you could maybe just dive into that a little bit more.

Speaker 2: Yeah, for sure. I think, you know, A, our ERP system went live in August as we as we told everybody it would.

Yeah for sure I think.

Our ERP system went live end of August as we as we told everybody it would and we've been learning and using and adopting to the new system, which is pretty normal I'll call. It change management and at the end of the day. What we're discovering is it's going to deliver on many of the commitments we made to all of you.

Speaker 2: and we've been learning and using and adapting to the system, which is pretty normal, you know, call it change management.

Speaker 2: And at the end of the day, what we're discovering is it's going to deliver on many of the commitments we made to all of you starting back in last first quarter of this year. And I'll highlight a couple of shots because it relates directly to your spring question. First off, we've got much deeper analytics. I've been touting this ever since we announced our plans to do in the new ERP system. And the analytics are powerful.

Starting back in last first quarter of this year and I'll highlight a couple of Chuck because it relates directly to your spring question first off we've got much deeper analytics.

Italian this ever since we announced our plans to do in your new ERP system, and the analytics are powerful and insightful and enable a far better action second we're able to really dissect and define our chain differently.

Speaker 2: and it's insightful and enable far better action. Second, we're able to really dissect and define our chain differently. I've mentioned in this call prior to that.

I've mentioned in this call prior of that we've been more accustomed to peanut buttering a lot of our allocations across the chain and our chain is pretty dynamic we've got Uber Hot you've got warm we've got kind of cool and then we've got cold within our 600 600, plus stores and they all need a little bit of love for about an hour.

Speaker 2: We've been more accustomed to peanut buttering a lot of our allocations across the chain. And our chain is pretty dynamic. You know, we've got uber hot, we've got warm, we've got kind of cool, and then we've got cold within our 600 plus stores.

Speaker 2: And they all need a little bit of love from an allocation standpoint based on the climate. And so this system allows us to get at a much finer level of detail around all of that and allows us to better allocate back into the demand that we see in those different climates as an example. So our allocation would be number three, being being more precise.

Occasion standpoint based on the climate and so this system allows us to get a much finer level of detail around all of that and.

Allow us to better allocate back into the demand that we see in those different climates. As an example, so our allocation would be number three being being more precise and accurate about where things go at what time.

Speaker 2: and accurate about where things go at what time. And so that's a perfect lead into setting up our warm and hot stores, which we have a lot of. It's well over 40% of our fleet. We can be more accurate in sending them the right good that they'll more likely adopt in as early as late December , or during as early as late December , and certainly in January and February . So what does all leads to as it sets itself for?

And so that's a perfect lead into setting up our warm and hot stores, which we have a lot of it's well over 40% of our fleet.

We can be more accurate than sending them the right goods adult more likely adopt in.

As early as late December or during as early as late December and certainly in January and so what this all leads to us it sets us up for the tax refund season in mid to late <unk>.

Speaker 2: the tax refund season in mid to late step. And we're excited to comment on that because...

And and.

We're excited to comment on that because we're pretty bullish on all of the things we're doing.

Speaker 2: We're pretty bullish on all of the things we're doing across that list of four items, Chuck, it's gonna have marketing, it's gonna have different inventory optimization. It's gonna have better experience and it's gonna have more appropriate products for the climates that we serve. So a lot of that will be additive, we believe in contributing to a strong Q1 and 24 as we look into the future. Does that make sense?

Cross that list of four items, Chuck it's gonna have marketing its going to have different inventory optimization. It's got to have better experience and that's going to have more appropriate products for the clients that we serve so a lot of that will be additive we believe in contributing to.

A strong Q1 of 'twenty four as we as we look into the future does that makes sense.

Speaker 8: Yeah, that's what it does. It seems like a big opportunity. My last question is for Heather.

Yeah, no. So it seems like a bigger opportunity.

My last question is for Heather looking.

Speaker 8: Looking at the 24, and just in the scenario that comps stay, you know, called flat to down, just the opportunity to get, you know, ebit margins, not ebit margins back in a positive territory. Can you just maybe speak to that opportunity? And then as a follow-up, you know, how should we be thinking about?

Looking out to 'twenty four.

And just in the scenario that the comps they call it flat to down.

Just the opportunity to get.

EBIT margins not EBITDA EBIT margins back and back into positive territory can you just maybe speak to that opportunity and then that's it.

Follow up how should we be thinking about new store growth and 24, the number of CTX for models, which are clearly good.

Speaker 8: new store growth in 24, the number of CTX for models, which are clearly good. That's my final question.

That's my final question.

Speaker 6: Yeah, Chuck, thanks. We're not revealing anything really about 24 right now, but in the spirit of being helpful. It really is all about top line. Right. So, you know, you asked it.

Yeah, Chuck Thanks, we're not revealing anything really about 24, right now, but in the spirit of being helpful.

It really is all about top line right. So.

I know you asked that.

Speaker 6: say that the conformist says the same, but that's not our plan. Our plan is that top line improves. And as we've talked about many times in the past, that's the real juice here. You get the top line going, the flow through, to get that EBITDA margin, an EBIT margin.

You say that that comp performance stays the same but that's not our plan. Our plan is that top line improves and as we've talked about many times in the past that's the real Juicy are you get the topline going to flow through to get that EBITDA margin and EBIT margin.

Speaker 6: is there. We have very limited variable expenses, relative to other retailers. We believe we have a healthy margin, so the flow through is really strong. So I'm gonna tell you that it's really a solid about the top line. And that's why driving constant productivity always is number one. When we talk about our strategic initialization.

Is there and we have very limited.

Variable expenses relative to other retailers, we believe we have a healthy margin.

Flow through is really strong so I'm going to I'm going to tell you that it's really it's all about the top line and that's why driving comp store productivity always is number one when we talk about our strategic initiatives.

Speaker 6: And then news stories, it's too soon to say

And then new stores, it's too it's too soon to say, what we're going to deal with new stores in 2024. So.

But I will say that remodel.

You know that we like our.

Speaker 6: remodeled cadence. We like what we see from remodels. We get a nice lift mid to high single digit lift after the remodel. It's important to us.

Remodel cadence, we like what we see from Remodels, we'd get a nice lift mid to high single digit lift after the remodel that's important to us it's important to our stores.

Speaker 1: important to our store associates and it's important to our customers, right? They get excited about what have we done to refresh their city-trans store and that buzz is real and it shows up in top line. Again, our most important lever top.

Store associates, and it's important to our customers right. They get excited about what have we done to refresh their Citi trends store in that Buzz is real and it shows up in top line again, our most important lever topline.

Speaker 6: So more to come on 24, but that's what we're thinking right now.

So more to come on 24, but that's what we're thinking right now.

Great. Thank you.

Okay.

Speaker 3: Our next question comes from John Lawrence with Benchmark. Please proceed. you

Our next question comes from John Lawrence with Benchmark. Please proceed.

Hi, good morning, guys.

Good morning, John Good morning, John.

Speaker 9: uh... david not not to be the dead horse here own on the weather etc but uh...

David.

To beat a dead horse here on the weather et cetera, but.

The stores here in the South I mean.

Speaker 9: The stores here in the south, I mean...

Speaker 9: the weather situation. Am I correct that if you looked at the planogram with the weather, you only had about 10 days to two weeks of weather correct merchandise that matched the weather in the quarter.

The weather situation and am I correct that if you looked at the plant and Graham with the weather you only had about 10 days to two weeks.

Whether correct merchandise that match.

Match, the weather in the quarter.

Speaker 10: You're referring to kind of an estimate on the number of days we in the quarter that was more suitable to sell fall goods Is that what you're asking? Yeah, that's correct. You're not far off

John you're referring to kind of an estimate on the number of days weeks in the quarter that was more suitable to sell fall goods is that what you're asking.

Yeah, that's correct, you're not far off.

Speaker 2: And we made this comment in the prepared remarks. The weather impact was spelled across the entire quarter. I mean, we had stores in the part of our chain, you know, we see at a Texas that were 10, 15, 20 degrees hotter for prolonged periods of time with zero rain. People were staying inside, et cetera, et cetera, or just wearing, you know, short slage and shorts all day long. And so when the weather snapped, which you got your mask generally right, John , it was a couple of weeks. Matt.

And we made this comment in the prepared remarks, the weather impact was felt across the entire quarter and then we had stores in the part of our chain, Louisiana, Texas that were 10, 15 20 degrees hotter for prolonged periods of time with zero rate people were staying inside et <unk>.

Et cetera, or just wearing shorts fleece and shorts all day long.

And so when the weather snap, which you got your math generally right. John It was a couple of weeks Max that snapped and we saw an appropriate almost immediate bounce back to a much better trend than the quarterly trend.

Speaker 10: that snapped and we saw, you know, the appropriate, almost immediate bounce back to a much better trend than the quarterly trend. And that's what, you know, prompted me to share that comment in the last question from Chuck and that, the sensitivity is even more heightened. But I really believe it's brought on by a lot of Mac.

And Thats, what prompted me to share that comment in the last question.

From from shock in that.

Sensitivity is even more heightened but I really believe that brought on by a lot of macro too but.

Speaker 2: but the weather is certainly not helping to be in our favor.

But the weather is certainly not helping to be in our favor.

Speaker 9: And once again, just briefly here that, you know, my checks and stores saw, for instance, the NBA hoodies or the NFL hoodies really didn't fly until that, obviously, to let...

And once again, just just briefly here that.

You know my my checks in stores. So for instance, the NBA hoodies or the NFL hoodies.

Really didn't fly until that obviously to what.

Speaker 9: First of November , first week of November , and once it was weather correct, they flew off the shelf and was with the hottest item in the store.

First of November 1st week of November and once it was weather correct. They flew off the shelf and was was the hottest item in the store.

Speaker 9: Can you explain to me, am I looking at that right? So when the customer has the need, as you talk about, to come get the hoodie, does that spread then to picking to making other purchases around the store for home, et cetera, because of the need for that hoodie?

Can you explain to me am I looking at that right.

So when the customer has the need as you talk about to come get the hoodie.

Does that spread them to picking up to making other purchases around the store for home et cetera.

Because of the need for that.

Speaker 2: John , thanks for being in our stores. And then secondly, second question in a row, you're right on. Yeah, I mean, I don't have a lot to add to your findings. We are really...

John Thanks for being in our stores and then secondly.

Second question in a row Youre right on yeah, I mean, I don't I don't have a lot to add to your you find things.

We are really.

Speaker 2: Confident in our assortment, you know, I mentioned our ladies assortment being on trend better than anything other to see in a my tenure here I can probably get all that for some of the other businesses men's is another example We are just we're nailing it with you know team apparel

Im confident in our assortment I mentioned, our ladies assortment being on trend better than anything I've ever seen in my tenure here.

I can probably do that for some of the other businesses men's as another example, we are just we're nailing it with team apparel.

Speaker 2: branded a peril and then a trip to the settlement like we do in ladies of you know made for the African American custom.

Branded apparel and then a terrific assortment like we do in ladies of made.

Made for the African American customer.

Speaker 2: So we're out there with the right inventory and you're right when the weather snaps, boy oh boy, they come on in and slow into our stores, our conversion goes up in those weeks.

So we're out there with the right inventory and you're right when the when the weather snaps oil boy they come on in and flow into our stores. Our conversion goes up in those weeks up from already a high high level and you're absolutely right generally all boats rise it's not like they come only in for the Guy stuff if I'm a guy in.

Speaker 2: Fub from already a high high level and you're absolutely right. Generally all boats rise. It's not like they come only in for the guy's stuff if I'm the guy and I walk out.

Speaker 2: They're walking around, getting other stuff, building a basket, same for mom, same for the young singles that come into our stores, you know, Gen Z and young millennials, et cetera.

I walk out they are walking around getting other stuff building a basket same for same for young singles that comes into our stores Gen Z and millennials et cetera. So.

Speaker 2: So we watched it like clockwork and what you said is true. And so, you know, where we are in Q4, I'll maybe do tell you in a number of comments.

We watch it like Clockwork.

And what you said is true.

So.

Where we are in Q4 I'll, maybe dovetail you remember comments, we've got a bunch of really important moments, we just got through Black Friday and block we call Black Wednesday.

Speaker 2: We've got a bunch of really important moments. We just got to Black Friday and we call it Black Wednesday. And now we're going into massive stock up on gift smooth and make sure you got enough under the tree. And we've taken our prices down, John , in some cases. So we've got like for like item.

And now we're going into a massive stock up on gifts mode and make sure you got enough under the tree and we've taken our prices down John in some cases, so we've got like for like items.

Speaker 2: 2i versus a whole other down, three and five and $10 in some cases. So the team's done just an amazing job, frankly responding to the pressure that the customer is under and offering important vignettes within our sortments that are like, they're just, they're unbeatable and stoppable values. So we think that also helps.

<unk> versus how why they're down three.

Three in five and $10 in some cases so the team has done just an amazing job frankly responding to the pressure that the customer is under an offering important.

And our Assortments that are like.

They are unbeatable unstoppable values. So we think that also helps.

Speaker 2: Garner engagement and continues to feel our conversion and shouldn't feel the basket we hope in the rest of the quarter.

Gartner engagement.

Continues to fuel our conversion and shouldn't feel the basket, we hope in the rest of the quarter.

Speaker 9: All right, just the tough subject, and I'll leave it alone, but the shrink situation, I know you're indicating you're all over it, but is there any parts or any stores that have gotten significant or difficult enough that you might consider closing?

Alright, just the tough subject I'll leave it alone, but the shrink situation I know as you.

You're indicating you're all over it but.

Is there any parts of any stores that have gotten significant or difficult enough that you might consider closing.

Speaker 1: Yeah, we're not there yet, son. I appreciate the question. We're not there yet.

Yeah, we're not there yet John I appreciate the question, we're not there yet.

Speaker 6: from a shrink perspective. I know other retailers have made the difficult decision based on the environment. That is a, that's not, if we close the store, it's, there are bigger factors going into it. Shrink for us, as you know, particularly in the market that you know very well, Memphis, right, is something that we're very keenly aware of and are managing closely.

From a from a shrink perspective, I know I know other retailers have made the difficult decision based on the environment that is.

Not if we close a store it there are bigger factors going into it shrink for us as you know, particularly in the market that you know very well Memphis right.

It's something that we have.

Very keenly aware of and are.

Managing closely.

Speaker 6: For us, the external theft happens.

It is for us the externals that happened.

We're not.

Speaker 6: I feel like I shouldn't say this out loud because I'm going to tempt the universe, right? But we're not subject to some of this matching grab that you've seen in headlines that you see for others. We knock on wood that that doesn't come to us, but it's more small. It happens that occasion, you know that, you've seen that. But it's not like broad based. So we're really focusing on what can we control, right? And we say that a lot, right? Control the controllable. True to.

I feel like I Shouldnt say this out loud because I'm gonna attempt the universe right, but we're not subject to some of this massive grab that you've seen in headlines that you see for others.

Would that that doesn't come to us, but it's a.

It's it's more small.

It happens on occasion, you know that you've seen that but.

But it's not like broad based it so we're really focusing on what can we control right and we say that a lot right control the controllable.

<unk> two and shrink.

Speaker 7: What can we control? We make sure we have the right people on the team that we've got solid citizens who are looking out for the city trans family, that we've got reporting, that helps us understand if we've got concerns that need to be addressed. We partner with local law enforcement to make sure that we're aware of what the environment is, et cetera, et cetera. So that's a long way of saying, no, shrink is not causing us to determine that we need to close the stores. . . . . . .

What can we control we make sure we have the right people on the team.

We've got solid citizens, who are looking out for the Citi trends family.

That we've got reporting that helps us.

Is that concerns that need to be addressed we partner with local law enforcement and make sure that we're aware of what the environment is etcetera etcetera. So that's a long way of saying.

No shrink is not causing us to determine that we need to close the stores.

Great. Thanks, and last question for me.

Speaker 9: David, you've mentioned about the rebuilds. I mean, back several months ago, you were talking about, and I think Toys is one of those areas that there were opportunities for.

David you've mentioned about the rebuilds I mean back several months ago, you were talking about in our I think toys is one of those areas.

There were opportunities for us.

Speaker 9: freshness, new brands, et cetera, assume across the platform. I assume that continues to be the case. Yeah, great, great.

Freshness, new brands et cetera, I assume across the platform I assume that continues to be the case.

Yes, great Great last question, John, but I'm talking about gifts and Youre absolutely right a good memory, we saw an opportunity to get into the toys business earlier like I mentioned in my comments set it up earlier for the customer to consider and gravitate to and we have a little thing called layaway.

Speaker 2: And you're absolutely right, good memory. We saw an opportunity to...

Speaker 2: Get into the toys business earlier, like I mentioned in my comments, set it up earlier for the customer to consider and gravitate to, and we have a little thing called let's

Speaker 2: and Layaway is a meaningful part of our sales during Q4, but what the customer does is they come in in October , slash even first couple of weeks in November , and they go, oh, that's a pretty cool African-American Barbie playset as an example, or that's a really cool remote control.

And lay away as a meaningful part of our sales during Q4, but what the customer does is they come in in October slash, even first couple of weeks in November and they go Oh, that's a pretty cool.

African American Barbie place that as an example, or that's a really cool remote control.

Speaker 2: Race car. I'm going to put that end of bunch of other stuff on layaway and come back and get it in December .

<unk> car I'm going to put that and a bunch of other stuff on layaway and come back and get it in December and so we rely pretty importantly on that I'll call. It pre consideration on what to put in lay away I'm going to put a little down payment on it and I'm going to pay it off pick it up in time to put it under the tree and December I'm sorry.

Speaker 2: And so we rely pretty importantly on that. I'll call it pre-consideration. I'm gonna put it in layaway. I'm gonna put a little down payment on it and I'm gonna pay it off, pick it up in time to put it under the tree in December . So you're absolutely right. Rebuilding and getting those, I'll call it layaway friendly businesses out on the floor earlier is really terming part of the intentional rebuilds that we've been doing. So we're looking forward to a good time. It's just a time zone. So that's what we've been doing. That is it. I'm glad it's a successful

Absolutely right rebuilding and getting those I'll call. It layaway friendly businesses out on the floor earlier is really germane as a part of the.

Intentional rebuilds that we have been doing.

So we're looking forward to a good choice selling season as a result.

Great. Thanks, Thanks for your help good luck.

Speaker 2: Thanks John , happy holidays. Thanks.

Thanks, John Happy holidays. Thanks.

Speaker 3: The Kamehkuin, Darnell, for the questions at this time, I will now turn the call back to you.

Mr. Mcewan Darnel further questions at this time I will now turn the call back to you.

Speaker 2: Thanks Frank, thanks everybody for joining us today. Have a great holiday. See you at the next one. Bye.

Thanks, Frank Thanks, everybody for joining us today have a great holiday.

The next one.

Speaker 3: That does conclude the conference call for today. We thank you for your participation and ask that you please disconnect your line. Have a great day, everyone.

That does conclude the conference call for today, we thank you for your participation and ask that you. Please disconnect. Your line have a great day everyone.

Speaker 11: The.

[music].

Uh huh.