Citi Trends, Inc. · NASDAQ:CTRN
Citi Trends — Investor Presentation (January 2019)
25 slides from Citi Trends's investor presentation, Jan 14, 2019
Slide 1: Cautionary Note about Forward-Looking Statements
This presentation contains “forward-looking statements” within the meaning of the federal securities laws and is intended to qualify for the Safe Harbor from liability established by the Private Securities Litigation Reform Act of 1995, including statements regarding expected sales, the outlook for
Slide 2: The Citi Trends Investment Opportunity
3 The Citi Trends Investment Opportunity 1. GROWTH 2. Merchandising Initiatives 3. Operational Initiatives 4. Commitment to Return Excess Capital to Shareholders
Slide 3: Company Overview
Company Overview Retailer of value-priced, urban fashion apparel and accessories Large customer base focused on trend-setting fashions at a value; 70% African American Differentiated apparel & non-apparel for the entire family Current fashions and brands that are 20% to 70% below mall and specialty
Slide 4: Existing store base of locations
Existing store base of 558 locations Corporate Headquarters Distribution Center New markets entered in FY 2005 – 2018 Buying Office Store Locations 49 6 35 6 13 26 52 64 31 44 17 48 21 6 17 28 5 23 20 6 6 1 9 1 2 2 9 1 2 2 4 5 2
Slide 5: The Citi Trends Customer
Serving the under-served low-to- moderate income consumer Serving the entire family with apparel, footwear, accessories and home High focus on current fashions, but has to be at a value Spends a higher proportion of income on apparel than other consumers The Citi Trends Customer 6
Slide 6: The Citi Trends Customer
Serving the under-served low-to- moderate income consumer Serving the entire family with apparel, footwear, accessories and home High focus on current fashions, but has to be at a value Spends a higher proportion of income on apparel than other consumers
Slide 7: Family-Focused Merchandise Offering
Family–Focused Merchandise Offering Value-priced apparel Growth in non-apparel Destination focus for the entire family Differentiated from competitors Net Sales(a) Fiscal 2017 Includes footwear, handbags, jewelry and other categories 8 Ladies’ 23% Children's 23% Men's 17% Accessories (b) 32% Home 5%
Slide 8: The Citi Trends Investment Opportunity
9 The Citi Trends Investment Opportunity 1. GROWTH 2. Merchandising Initiatives 3. Operational Initiatives 4. Commitment to Return Excess Capital to Shareholders
Slide 9: 1. Growth
10 1. GROWTH Store base potential up to 800 Concept travels well – top 20 profitable stores are represented by 18 different cities African American-dominant locations Only 6 existing stores are 4-wall negative 48% cash-on-cash ROI in year 1 for stores opened in the last four years 2019 test in Hispa
Slide 10: Opportunity in Hispanic-Dominant Markets
Opportunity in Hispanic-Dominant Markets Already have Hispanic penetration in existing stores: 36 existing stores with at least 40% Hispanic population within 3 miles Sales in such stores are 10% higher than the Company average 4-wall profit is virtually identical to the Company average 200 existing
Slide 11: 2. Merchandising Initiatives
12 2. Merchandising Initiatives Store-level planning by merchandise category New ranking system allows for improved allocation at each level of the merchandise hierarchy Management resources dedicated to store planning First division on the system experienced 4% comparable store sales increase on 2%
Slide 12: Store Level Ranking System Results – First Division
13 Store Level Ranking System Results – First Division First Division on the System Results – 1st 9 Months of 2018 Number of Stores in Group Comp Inventory Change Comp Sales Change Increased by 2 ranking levels 5 14% 8% Increased by 1 ranking level 133 6% 5% Maintained rank level 266 -1% 4% Decrease
Slide 13: Inventory Turn Improvement
Inventory Turn Improvement Merchandising system initiatives provide opportunity to improve inventory turnover Goal – 6% improvement in turn annually each of next three years Turn improvement should lead to: More timely response to fashion changes Fewer markdowns Higher free cash flow 14
Slide 14: Strategy to Diversify into Complementary Product Lines
Strategy to Diversify into Complementary Product Lines Our strategy to grow sales of the non-apparel categories of accessories (including footwear) and home products has contributed positively to revenue growth and diversification Accessories & Home ($ in millions) 15 $134 $166 $181 $219 $232 $250 $
Slide 15: Strategy Has Driven Substantially Improved Performance
Strategy Has Driven Substantially Improved Performance Our merchandising strategies have been a vital factor in driving significant increases in total customer transactions and units sold, as well as improving gross margins significantly due to reduced markdowns Gross Margin Trend Customer Transacti
Slide 16: 3. Operational Initiatives
17 3. Operational Initiatives Packing system upgrade at distribution center Expected payroll reduction - $500k annually starting Q2 2019 Freight consultant engaged Implement a Transportation Management System Leverage consultant’s relationship with shippers Expand the number of in-bound trucking opt
Slide 17: 4. Return of Excess Capital
4. Return of Excess Capital Began returning excess cash to stockholders in 2015 - by Initiating a regular dividend Completing a $15 million share buyback Enhanced our capital return program in 2017 – while ensuring adequate reserves to fund growth initiatives and meet other contingencies – by Increa
Slide 18: Long-Term Goals
Long-Term Goals Expectations of: Consistent comparable store sales growth in a range around 3% o System initiatives o Expand growth categories Store square footage growth of 4% to 5% o Opportunity in Hispanic-dominated markets 12% to 15% annual earnings growth Return excess capital to shareholders o
Slide 19: Results of Operations – Fiscal Year 2017
Results of Operations – Fiscal Year 2017 comp store sales increase = 4.5%; comp decreases in 2015 & 2016 less than 1%; comp increase in 2014 of 7.5% Gross margin improvement versus 2013 due to stronger inventory management Expense leverage due to comparable store sales increases and strong expense c
Slide 20: Results of Operations – Year-to-Date Q3 2018
Results of Operations – Year-to-Date Q3 2018 2012 ($ in millions, except per share data) YTD Q3 2017 YTD Q3 2018 Sales $543.1 $568.4 Gross Profit $208.4 $218.2 Gross Margin 38.4% 38.4% SG&A-adjusted for proxy costs $178.9 $186.5 SG&A (adj.) as % of Sales 32.9% 32.8% Adjusted EBITDA $29.5 $31.7 Incom
Slide 21: Reconciliations of Non-GAAP Financial Measures
Reconciliations of Non-GAAP Financial Measures APPENDIX 22
Slide 22: Reconciliation of Non-GAAP Financial Measure: EBITDA & Adjusted EBITDA
Reconciliation of Non-GAAP Financial Measure EBITDA(1) & Adjusted EBITDA reconciled to Net Income (Loss) (1) Earnings before interest, taxes, depreciation & amortization. ($ in thousands) 2013 2014 2015 2016 2017 First 3Q 2017 First 3Q 2018 Net income (loss) $464 $8,966 $15,527 $13,331 $14,574 $9,32
Slide 23: Reconciliation of Non-GAAP Financial Measure
Reconciliation of Non-GAAP Financial Measure 24 The Company makes reference in these slides to expenses and income per diluted share adjusted for proxy contest expenses and the effect of the Tax Cuts and Jobs Act. The Company believes that excluding proxy contest expenses and their related tax effec
Slide 24: Reconciliation of Non-GAAP Financial Measure
Reconciliation of Non-GAAP Financial Measure ‘The Company makes reference in these slides o expenses and income per diluted share adjusted for proxy contest expenses and the effect of the Tax Cuts and Jobs Act. The Company believes that excluding proxy contest expenses and ther related tax effects a
Slide 25: ja A a
ja A a | lait ay |