How did Citi Trends' revenue and expenses shift in Q3 2025?

Citi Trends experienced a notable shift in its revenue and expenses during Q3 2025, reflecting strategic initiatives and market adjustments. Here's a detailed analysis: 1. **Revenue Shift**: - **Increase in Total Sales**: Citi Trends reported total sales of $179.1 million for Q3 2024, which decreased by 0.3% versus Q3 2023. However, when comparing the same period on a shifted 13-week basis, total sales increased by 5.7%. This indicates a positive trend in sales performance, driven by improvements in traffic, basket size, and conversion rates. - **Gross Margin Expansion**: The company's gross margin stood at 39.8% in Q3 2024, marking an expansion of 160 basis points from Q3 2023. This improvement was attributed to markup expansion and a 40-basis-point reduction in shrinkage, reflecting enhanced inventory management and pricing strategies. - **Comparable Store Sales Growth**: Citi Trends achieved a 5.7% increase in comparable store sales, calculated on a shifted 13-week basis, compared to Q3 2023. This growth was supported by enhanced product offerings, better allocation methods, and increased customer traffic. 2. **Expense Shift**: - **SG&A Costs**: The company's SG&A (Selling, General, and Administrative) expenses amounted to $74.7 million in Q3 2024, up from $69.7 million in Q3 2023. When adjusting for certain items, the increase was approximately $1.6 million, attributed to one-time strategic costs supporting turnaround efforts, including market insight studies and consulting to improve operational processes. - **Adjusted EBITDA Loss**: Citi Trends reported an adjusted EBITDA loss of $3.3 million in Q3 2024, an increase from the adjusted EBITDA loss of $2.3 million in Q3 2023. This indicates a challenge in converting revenue to net income, primarily due to the strategic costs and operational improvements. - **Store Closures**: The company closed four stores, resulting in a total of 593 locations at the end of Q3 2024. This reflects a strategic decision to streamline its store portfolio and focus on high-performing formats. 3. **Financial Position and Outlook**: - **Liquidity and Debt**: Citi Trends maintained a strong financial position with liquidity of approximately $114 million and no debt, supporting its operational and strategic initiatives. - **Holiday Season Performance**: The company's performance during the holiday season was robust, with total sales for the quarter-to-date period ending January 4, 2025, amounting to $174.4 million, an increase from $169.0 million in the same period in 2023. This growth was driven by a 7.1% increase in comparable store sales, reflecting strong customer acceptance of its product assortment and operational improvements. - **Fiscal 2025 Outlook**: Citi Trends anticipates low to mid-single-digit comparable store sales increases and significant improvements in EBITDA for Fiscal 2025, building on the momentum achieved in Q4 2024. In conclusion, Citi Trends demonstrated resilience in revenue growth, driven by strategic enhancements in product offerings and customer engagement. However, increased SG&A costs and the need for operational improvements posed challenges, as evidenced by the adjusted EBITDA loss. The company's strong financial position and positive holiday season results offer a foundation for optimism in its outlook for Fiscal 2025.