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US retailer Citi Trends expects gross margin in high 30s for FY23

09 Jan '24
2 min read
Pic: Citi Trends
Pic: Citi Trends

Insights

  • Citi Trends expects a gross margin in the high thirties but a mid-single-digit sales decline in FY23.
  • Full year EBITDA is forecast between $1-7 million, with $17-20 million in capex.
  • Q4 sales are projected flat or slightly up, with EBITDA at $9-15 million.
  • Quarter-to-date sales reached $179.5 million, a small drop from $181.9 million last year.
Citi Trends, a leading specialty value retailer of apparel, anticipates its gross margin to be in the high thirties in fiscal 2023 (FY23), indicating a strong return on sales. However, the company has projected a decline in total sales, with expectations set at a mid-single-digit decrease compared to fiscal 2022.

Another significant aspect of the outlook is the company's earnings before interest, taxes, depreciation, and amortisation (EBITDA). For the full year, EBITDA is expected to range between $1 million and $7 million.

Capital expenditures (capex) for the year are also part of the forecast, expected to be in the range of $17 million to $20 million. Additionally, Citi Trends predicts a robust year-end cash balance, ranging between $80 million and $90 million, the company said in a press release.

Focusing on the fourth quarter, Citi Trends anticipates a steady performance with total sales expected to be approximately flat or up by a low-single digit percentage compared to the fourth quarter of fiscal 2022. Comparable store sales are forecast to range from a low-single-digit decline to being flat compared to the same period last year. The EBITDA for the fourth quarter is expected to lie between $9 million and $15 million.

The quarter-to-date performance as of January 6, 2024, reveals total sales of $179.5 million, a slight decrease from $181.9 million in the corresponding period of 2022. Comparable store sales for this period experienced a marginal decrease of minus 0.3 per cent compared to the same period in FY22.

"I am pleased to report that our holiday sales were at the high end of our expectations as our Ready. Set. Gift! Campaign resonated well with the families we serve. Our nearly flat comp was driven by strategic inventory investments while continuing to generate strong gross margin. Importantly, our holiday sales results represent a significant trend change to the prior quarter with an improvement in comp sales performance of approximately 600 basis points," said David Makuen, chief executive officer.

Fibre2Fashion News Desk (DP)

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