Citi Trends Inc

Citi Trends, Inc. (NASDAQ: CTRN) is a specialty retailer of apparel, accessories, and home trends primarily for African American and multicultural families in the United States. It operates over 611 stores in urban, suburban, and rural markets in 33 states. It offers range of merchandise, including apparel for juniors, missy and women (plus size), including fashion sportswear, outerwear, sleepwear, lingerie and scrubs.

Recent Financial and Business Updates:

Financial Highlights – Second Quarter 2023:

• Total sales amounted to USD 173.6 million, indicating a 6.2% decline compared to Q2 2022.
• Comparable store sales experienced a 5.3% decrease compared to the same period in 2022, but this decline showed an 880-basis points improvement from Q1 2023.
• Gross margin for the quarter reached 38.2%, slightly up from 38.1% in Q2 2022, marking a 150 basis points increase from Q1 2023.
• Operating loss for the quarter was USD 7.9 million, or a loss of USD 7.8 million as adjusted, in contrast to a USD 3.3 million operating loss in Q2 2022.
• Net loss per share was (USD 0.61), or an adjusted net loss per share of (USD 0.60), compared to a net loss per share of (USD 0.31) in Q2 2022.
• The quarter-end total dollar inventory saw a 5.4% decrease compared to Q2 2022.
• Total liquidity at the quarter's end stood at approximately USD 141 million, comprising USD 65.8 million in cash, with no borrowings under a USD 75 million credit facility, and no debt.
• During Q2 2023, the company opened 5 new stores, closed 2 underperforming locations, and remodeled 8 stores, culminating in 611 total stores by the quarter's end.

Financial Highlights – 26 weeks ended July 29, 2023:

• Total sales for the 26-week period reached USD 353.2 million, reflecting a 10.2% decline compared to 2022.
• Comparable store sales mirrored this trend with a 10.0% decrease compared to the prior year.
• Gross margin for this period was 37.5%, or 37.6% as adjusted, compared to 38.6% in 2022.
• Operating loss amounted to USD 17.4 million, or a loss of USD 15.7 million as adjusted, contrasting with an operating income of USD 36.3 million in 2022.
• Net loss for the period was USD 11.7 million, or USD 10.4 million as adjusted, compared to a net income of USD 27.7 million in 2022.
• Adjusted EBITDA for the period was (USD 6.3) million, down from USD 12.1 million in 2022.
• Net loss per share was (USD 1.42), or an adjusted net loss per share of (USD 1.27), in contrast to diluted earnings per share of USD 3.34 in 2022.
  

Technical Observation (on the daily chart)

Currently, the stock is near an important zone of USD 25.00-USD 27.00, from where price has taken resistances and supports in the past. The price is expected to show a decent correction from the current levels before a continuation of the uptrend. The RSI (14 period) momentum indicator is at a value of 63.53, with expectations of some consolidation or a short-term correction. Moreover, the price is currently positioned above both the 21-day SMA and 50-day SMA trend-following indicators, which may act as dynamic short-term support levels.

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As per the above-mentioned price action, recent key business and financial updates, momentum in the stock over the last month, and technical indicators analysis, a ‘Watch’ rating has been given to Citi Trends, Inc. (NASDAQ: CTRN) at the closing market price of USD 23.15 as of August 29, 2023.

Individuals can evaluate the stock based on the support and resistance levels provided in the report in case of keen interest taking into consideration the risk-reward scenario. 

Markets are trading in a highly volatile zone currently due to certain macro-economic issues and prevailing geopolitical tensions. Therefore, it is prudent to follow a cautious approach while investing. 

Related Risk: This report may be looked at from a high-risk perspective and a recommendation is provided for a short duration. This report is solely based on technical parameters, and the fundamental performance of the stocks has not been considered in the decision-making process. Other factors which could impact the stock prices include market risks, regulatory risks, interest rates risks, currency risks, social and political instability risks etc. 

How to Read the Charts?

The Green colour line reflects the 21-period simple moving average (SMA) while the red line indicates the 50- period simple moving average (SMA). SMA helps to identify existing price trends. If the prices are trading above the 21-period and 50-period moving average, then it shows prices are currently trading in a bullish trend.

The Black colour line in the chart’s lower segment reflects the Relative Strength Index (14-Period) which indicates price momentum and signals momentum in trend. A reading of 70 or above suggests overbought status while a reading of 30 or below suggests an oversold status.

The Blue colour bars in the chart’s lower segment show the volume of the stock. The volume is the number of shares that changed hands during a given day. Stocks with high volumes are more liquid than stocks with lesser volume as liquidity in stocks helps in easier and faster execution of the order.

The Orange colour lines are the trend lines drawn by connecting two or more price points and used for trend identification purposes. The trend line also acts as a line of support and resistance.

Technical Indicators Defined: -

Support: A level at which the stock prices tend to find support if they are falling, and a downtrend may take a pause backed by demand or buying interest. Support 1 refers to the nearby support level for the stock and if the price breaches the level, then Support 2 may act as the crucial support level for the stock. 

Resistance: A level at which the stock prices tend to find resistance when they are rising, and an uptrend may take a pause due to profit booking or selling interest. Resistance 1 refers to the nearby resistance level for the stock and if the price surpasses the level, then Resistance 2 may act as the crucial resistance level for the stock. 

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices. 

The reference date for all price data, currency, technical indicators, support, and resistance levels is August 29, 2023. The reference data in this report has been partly sourced from REFINITIV. 

Abbreviations

CMP: Current Market Price

SMA: Simple Moving Average

RSI: Relative Strength Index

USD: United States dollar 

Note: Trading decisions require a thorough analysis by individual. Technical reports in general chart out metrics that may be assessed by individuals before any stock evaluation. The above are illustrative analytical factors used for evaluating the stocks; other parameters can be looked at along with additional risks per se. Past performance is neither an indicator nor a guarantee of future performance.

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