Citi Trends, Inc. (CTRN)

Trends for the Citi Trends (CTRN) do not seem to follow a healthy trend considering the unsupportive market conditions. Although, revenues in the first quarter of fiscal 2007 which is one of the best selling quarter has spurt by 16.2 percent, the bottom-line suffered, as a result of massive deleveraging in the operating expenses. Easter has been one of the prime selling period of the company however, unseasonably cool weather has curtailed the sales of spring and summer apparel in 2007 thereby truncating the revenue growth immensely.





Lately, SG&A expenses were the main culprits in the reduced net income of the company. These expenses are primarily related to store opening and distribution and corporate costs related to the openings. Management has plans to open 28 to 30 more stores in the remaining period of fiscal 2007. However, the probability of driving sales in the future arouses skepticism as the economic slowdown and rising oil prices would aggravate consumer spending. This could put pressure on the margins considering the expenses incurred to build new stores.





Target market for the company, which is African Americans, looks good considering their wide presence in southeast and the spending levels. However, management expects bleak same-store sales growth for fiscal 2007 based on the poor revenue performance in the best season. As a result, company expects a measly over 8% rise in their EPS, which is much lower than the historical levels. Thus, CTRN looks pretty expensive scrip to buy at the current levels.