Citi Trends (CTRN) Q4 2025 Earnings Transcript

<p>Image source: The Motley Fool.</p>
<h2>DATE</h2>
<p>Tuesday, March 17, 2026 at 9 a.m. ET</p>
<h2>CALL PARTICIPANTS</h2>
<ul>
<li> <p class="yf-1fy9kyt">Executive Chairman — Kenneth Seipel</p></li>
<li> <p class="yf-1fy9kyt">Chief Financial Officer — Heather Plutino</p></li>
</ul>
<p>Need a quote from a Motley Fool analyst? Email [email protected]</p>
<h2>Full Conference Call Transcript</h2>
<p>Kenneth Seipel: Well, good morning, everyone, and thank you for joining us today on our fourth quarter and full year fiscal 2025 earnings call. I am proud to report that our fourth quarter performance caps an exceptional year of transformation at Citi Trends, Inc. The progress we delivered in 2025 really reflects the disciplined execution across the organization and a renewed focus on serving our customer with style, value, and authenticity. Our team has worked incredibly hard this year to strengthen the foundation of this business. As a result, we are entering 2026 with growing momentum, a clear strategic direction, and increased confidence in our long-term growth trajectory. Let me begin first with our fourth quarter results.</p>
<p>Citi Trends, Inc. delivered an 8.9% comparable store sales growth in Q4, representing a 15.3% growth on a two-year basis and marking our sixth consecutive quarter of positive comparable sales. And in the quarter, I am also pleased to report that we achieved EBITDA of $11,900,000,000, which is a 67% increase over Q4 of the prior year. What is particularly encouraging about our fourth quarter performance is the broad-based nature of the growth. We saw strength across all store volume tiers, all geographic regions, and both apparel and non-apparel categories. Customer traffic drove the majority of our growth.</p>
<p>Transaction counts grew mid to upper single digits during the quarter; we also saw continued improvement in our basket size, demonstrating that our merchandising strategy is resonating. More customers visit our stores, and once inside, they continue to respond to our improving merchandise assortment and our value proposition. Our customers are telling us when we deliver compelling product, at great value, they show up and they purchase. Encouragingly, that momentum has continued into fiscal 2026. Quarter-to-date, Q1 comparable store sales are trending in the high single digits supported by increased traffic and basket size during this important tax refund season.</p>
<p>In Q4, Children’s once again delivered an outstanding quarter, posting high single-digit growth and extending consistency and momentum for the year. This business has become a cornerstone of our company and is a model of disciplined execution. The team continues to deliver highly desired styles, consistent value, and improved in-stock positions. As we refine our merchandising strategies in Children’s, the category continues to strengthen and remains one of our most reliable traffic drivers. Men’s also posted another solid quarter of growth. Our updated strategy balances trend-forward product for younger customers while serving the sound preferences of our core male customer, good values, and improved in-stocks.</p>
<p>The results validate that balanced approach, and we believe there is a significant runway for continued growth in our Men’s category. Women’s footwear continued to show early signs of progress. The off-price and extreme value strategy is beginning to gain traction in our shoe area, and we are seeing improved customer response. We are also pleased with the progress across the board, and we believe that the broader footwear category represents significant growth potential going forward. Family basics and sleepwear was one of our top growth areas in the quarter. Our merchants introduced better styling and trend to complement the already strong values.</p>
<p>The combination of trend-relevant styles and improved inventory positioning generated a strong top-line sales performance and helped drive both traffic and conversion. From a marketing and brand perspective, this holiday season marked an important moment for Citi Trends, Inc. with the launch of our Joy Looks Good On You campaign and refreshed social media presence under @wearecititrends. The results exceeded our expectations. Our flagship Joy video generated over 55,000,000 views and engagements, demonstrating the power of authentic storytelling that reflects the communities we serve. If you have not seen it yet, I encourage you to visit www.cititrends.com for the original video and original content celebrating real moments of joy across the Black community. This campaign represents more than marketing.</p>
<p>It brings to life our brand promise, which is “styles that see you, prices that amaze you, and trends that tell your story.” Going forward, the customer brand promise guides everything we do as we continue to strengthen our relationship with the communities we proudly serve. Now let us turn our attention to the full year 2025 results. In 2025, we executed against our three-phase strategy framework: repair, execute, and optimize. Our first priority was the repair phase, restoring the fundamental and foundational business disciplines required to run a successful retail company.</p>
<p>I am very pleased with the work our team accomplished to strengthen our foundation, sharpen our merchandise strategy, and improve the operational disciplines required to support long-term profitable growth. For the year, comparable store sales increased 9.7%. Two-year comparable growth was 13.1% and net sales reached a total of $820,000,000. In addition, we achieved more than 200 basis points of gross margin improvement, 120 basis points of SG&amp;A leverage, and EBITDA growth of $26,000,000 on a year-over-year basis to $11,800,000. Our EBITDA growth was achieved while also funding an above-target annual bonus for our team for the first time in several years.</p>
<p>These results represent significant achievement in a relatively short period of time and reflect the early success of our transformation strategy. Our fiscal 2025 growth was driven by four factors: a sharper focus on our core Black customer, stronger merchandising assortments, better value communication, and a more engaging in-store experience. As I have shared previously, our rapid turnaround is enabled by Citi Trends, Inc.’s clear points of differentiation. First, our laser focus on serving Black customers, a customer segment that we understand deeply. Second, a strategic advantage of neighborhood-based locations that put us in the heart of the communities we serve. Citi Trends, Inc. holds a unique position as the only off-price retailer dedicated to Black consumers.</p>
<p>Its cultural relevance is a significant competitive advantage. Black customers are trendsetters. They are early adopters of fashion, which enables us to curate assortments with immediate, authentic appeal. Our connection to this customer has been strengthened through the comprehensive consumer insights study we conducted, combined with the expertise of our trend director who identifies and translates current and relevant trends into actionable merchandising strategies. This dual approach allows us to not only reflect our customer’s style preferences with greater precision, but also anticipate emerging trends before they hit the mainstream with popularity. This work is a key reason that we generated consistent comp store increases for the past 19 months.</p>
<p>Transaction counts grew mid to upper single digits year over year every quarter in fiscal 2025, while basket size expanded throughout the year. We are attracting more customers and they are spending more per visit, powerful evidence that our updated product assortment strategy is resonating. Our customers are discerning shoppers who recognize true value extends beyond price alone. When we deliver on-trend fashion, the right style, and quality merchandise, they are willing to invest more, and this insight guides our merchandising strategy. Beyond merchandising, we also made major strides operationally in 2025. We leveraged SG&amp;A by 120 basis points through foundational business practices that drove better execution. Inventory management reached new levels of efficiency this quarter.</p>
<p>We supported comp store sales growth with less average store inventory than last year, which is a testament to our improved buying processes, supply chain improvements, and smarter allocation. This efficiency creates a powerful flywheel effect: optimizing working capital, greater flexibility to respond to emerging trends, and protecting our gross margins. Speed improvements in our supply chain allowed us to maintain optimal in-store inventory while reducing overall inventory levels. Enhanced work processes, productivity standards, and day-to-day management enabled us to significantly reduce in-process inventory. In late second half of this year, we implemented the AI-based allocation system across all of our merchandising categories. The results have exceeded our expectations.</p>
<p>We are now deploying AI-based planning systems to streamline sales and inventory planning for our merchant teams and further enhance their effectiveness. Throughout 2025, we fundamentally transformed how we operate. We now run the business through standardized KPIs, real-time dashboards, structured business reviews, and performance-linked incentives. As I often say, retail is detail, and execution without measurement is just guesswork. Our KPI data-driven approach provides visibility that keeps teams aligned and drives continuous improvement, which is the cornerstone of our execution strategy. In 2025, we also executed a strategic expansion and modernization program that positions us well for accelerated store growth. Our stores are embedded in communities where we have built trust over many years.</p>
<p>The combination of convenient proximity and strong word-of-mouth recommendations creates powerful and sustainable traffic drivers. We opened three new locations and remodeled 62 stores in 2025, bringing approximately 30% of our fleet to an updated format. These refreshed stores inspire our teams, elevate brand perception, and signal our commitment to investing in local neighborhoods. Our late fall openings in Jacksonville, Florida, Columbia, South Carolina, and Bainbridge, Georgia exemplified our pilot market backfill approach, strategically opening new stores while simultaneously remodeling existing locations to capture greater market share. We remodeled nine additional stores across these markets—five in Columbia and four in Jacksonville—and amplified our presence through local marketing initiatives including branded city bus wraps.</p>
<p>After a full holiday season, these new locations have performed well above our expectations, validating our data-driven site selection methodology and giving us confidence to scale and accelerate our store growth. Before I turn the call over to Heather for more information on 2025, I want to take a moment to recognize the Citi Trends, Inc. team. A turnaround of this nature is hard work. There is a lot of speed and a lot of dedication required. I am proud of our team; each person is highly engaged, very focused on our customer, and focused on building a better and more profitable company.</p>
<p>I simply want to say thank you to everybody for the long hours, the consistent energy, the unwavering dedication, and the commitment to continuous improvement. I will now turn the call over to Heather to review the Q4 and fiscal 2025 business results in more detail, and then I will return to talk more about the 2026 outlook. Heather?</p>
<p>Heather Plutino: Thank you, Ken, and good morning, everyone. I am excited to walk you through our financial results for the fourth quarter and for fiscal 2025, a highly transformational year for Citi Trends, Inc. We have accomplished a lot in a short period of time, but as we say, we are just getting started. Our momentum will continue through 2026, and the guidance I will share with you shortly will demonstrate that our objective of increasing shareholder return remains at the core of our transformation. Our performance in the fourth quarter demonstrates significant progress in our business transformation.</p>
<p>We achieved robust top- and bottom-line results with comparable store sales increasing 8.9% and adjusted EBITDA of $11,900,000, both at the high end of our guidance range, confirming that our turnaround strategies continue to gain traction. Total sales for the fourth quarter increased 9.1% compared to Q4 2024 to $230,400,000. Comparable store sales increased 8.9% with about two-thirds of comp sales growth from increased transactions and the remaining third from a higher average basket. On a two-year stack basis, comp increased 15.3%. As Ken said, this marks our sixth consecutive quarter of positive comp growth.</p>
<p>Gross margin increased 20 basis points versus last year to 39.9% driven by lower markdowns reflecting the impact of our improved merchandise assortment and value proposition, upgraded allocation process, and our inventory efficiency efforts, While we are pleased with our gross margin rate, it did fall a bit short of our expectations for the quarter due to slightly higher-than-expected freight expense and slightly higher markdowns to ensure we exited the quarter clean. Fourth quarter adjusted SG&amp;A expenses totaled $80,000,000 compared to $76,700,000 a year ago. The increase to last year is due to increased store and DC expenses to support higher sales, and $1,800,000 of incremental incentive compensation expense.</p>
<p>SG&amp;A was lower than expected in the quarter due to store and DC closures during January’s winter storm and a true-up of our year-end bonus accrual on actual KPI results. Adjusted SG&amp;A as a percent of sales was 34.7%, leveraging 160 basis points versus last year. Adjusted EBITDA grew $4,800,000 over last year to $11,900,000, with adjusted EBITDA margin, EBITDA as a rate of sales, up 180 basis points to 5.2%. During the quarter, we closed three stores. Turning to our full year fiscal 2025 results, total sales for the year increased 8.9% over last year to $820,000,000. Comparable store sales increased 9.7% and 13.1% on a two-year basis.</p>
<p>Consistent with each quarter of the year, full-year comps were driven mostly by increased transactions with increased average basket contributing the balance. Gross margin expanded 210 basis points to 39.6% driven by fewer markdowns and lower shrink as we anniversaried last year’s strategic inventory reset as well as a reduction in freight expense rate versus last year. Adjusted SG&amp;A expenses were $312,800,000 compared to $290,300,000 in 2024. The dollar increase to last year includes $9,700,000 of incremental bonus and equity expense, pl