Citi Trends Delivers Unexpected Profit in 3rd Qtr.

Citi Trends surprised analysts with a third-quarter profit, but November comps fall as outerwear sales decline.

Surprising analysts with a third-quarter profit, urban apparel specialist Citi Trends Inc. said it expects to maintain its positive same-store sales momentum during the holiday season.

This story first appeared in the November 25, 2009 issue of WWD.  Subscribe Today.

For the three months ended Oct. 31, the Savannah, Ga.-based specialty retailer generated net income of $606,000, or 4 cents a diluted share, versus a year-ago loss of $687,000, or 5 cents. Sales rose 21.4 percent, to $127.4 million from $104.9 million, and increased 6.3 percent on a comparable-store basis. Comps were up 19 percent for accessories, 7 percent for men’s wear and 6 percent for women’s wear.

Analysts surveyed by Yahoo Finance, on average, expected Citi Trends to lose 1 cent a share on sales of $121 million.

On Tuesday, shares fell 27 cents, or 1 percent, to $27.72.

Gross margin improved to 37.4 percent of sales, from 36.9 percent in the year-ago quarter, as selling, general and administrative expenses grew more slowly than sales, expanding 20.4 percent to $79.7 million, and shrinkage declined.

The company attributed the increases to a strong back-to-school season and depressed year-ago results because of “abnormally high gasoline and food prices.”

During a conference call, David Alexander, chief executive officer, noted same-store sales were down 1 percent in November because of a slowdown in outerwear. If outerwear dollars had been flat, overall comps would be up 2 percent.

“Most of our markets have experienced a very warm November,” he said. “In the few areas that we have seen cold snaps, our outerwear selection has been very well-received. So we believe that this business will come around.”

The firm projected full-year earnings per share of between $1.30 and $1.35, implying fourth-quarter earnings of between 72 cents and 77 cents, based on its anticipated comp gain of 1 to 3 percent during the current quarter. However, analysts had estimated fourth-quarter earnings of 78 cents a diluted share.

For the nine months, net income expanded 15.5 percent to $8.5 million, or 58 cents, while sales added 11.8 percent, to $382.1 million.