Citi Trends Inc. (CTRN) has come up with disappointing preliminary sales results for the fourth quarter, which guided the company to project net loss for the upcoming quarter. Additionally, the company took a peek into fiscal 2013, providing an update on the expected trends in fiscal 2013. This Zacks Rank #1 (Strong Buy) stock is expected to report detailed results on Mar 15, 2013.
We note that the company’s fourth quarter and full year sales results include one additional week as compared to the prior-year periods. For the fourth quarter (14 weeks ended Feb 2, 2013), Citi Trends reported preliminary sales of $175.7 million, down 1.5% from $178.4 million in the prior-year quarter (13 weeks ended Jan 28, 2012). The additional week made for nearly $8.8 million of net sales in the fourth quarter of 2012. The fourth quarter sales also missed the Zacks Consensus Estimate of $191 million.
The decline in sales results for the quarter were mainly attributed to the loss of tax refund driven sales in the last two weeks of January this year, as the Internal Revenue Service pushed back the 2012 tax refund date to Jan 30 instead of the usual refunds date of Jan 13. This delay in refunds impacted the company’s fourth quarter comparable store sales by 7.5%. As a result, the company’s comparable store sales for the fourth quarter (14 weeks ended Feb 2, 2013) plummeted 11.8% compared with the year-ago 14 weeks period ended Feb 4, 2012.
By month, the company’s comparable store sales inched up 1% in January, while it declined 10% in December and 28% in January. Barring the sales decline in the last two weeks of January, comparable sales in the first three weeks of January rose 10%.
However, for fiscal 2012 (53 weeks ended Feb 2, 2013), the company’s net sales rose 2.2% to $654.7 million from $640.8 million reported in fiscal 2011 (52 weeks ended Jan 28, 2012). The fiscal 2012 sales missed the Zacks Consensus Estimate of $670 million.
Driven by the lower sales results in the fourth quarter, the company now expects to report a net loss per share of nearly 7 cents for the quarter, which is way below the Zacks Consensus Estimate of a gain of 31 cents per share. The company estimates the loss of sales in the last two weeks of January to impact net loss per share by about 35 cents.
Though the shift in the tax refunds date impacted sales in January, the company started witnessing tax refund driven sales improvements since the beginning of first quarter fiscal 2013. The company expects this improvement in sales to prove beneficial for its first quarter results.
Looking into fiscal 2013, the company remains stringently focused on improving its sales via enhancing the variety of its ladies business. Though the significance of the company’s Urban Brands continues to decline and non-branded business is not poised to make loss from the branded business, the company expects to gain from better focus on its ladies business in 2013.
Though the company has made significant progress on resolving pricing issues and remains on track to resolve fashion issues in 2013, the company expects its first and fourth quarter of fiscal 2013 to be impacted by the shift of one week of fiscal 2013 in fiscal 2012, due to the additional week that was accounted for in fiscal 2012. Nevertheless, the company is expected to benefit from the movement of the tax refund related sales into fiscal 2013.
Besides Citi Trends, other stocks in the retail-apparel/shoe sector that are currently performing well include Express Inc. (EXPR), which has a Zacks Rank #1 (Strong Buy), and American Eagle Outfitters Inc. (AEO) and Foot Locker Inc. (FL), both of which carry a Zacks Ranks #2 (Buy).
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