Thomson StreetEventsSM

Conference Call Transcript

CTRN - Q3 2006 CITI TRENDS INC Earnings Conference Call

Event Date/Time: Nov. 17. 2006 / 9:30AM ET

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NOV. 17. 2006 / 9:30AM ET, CTRN - Q3 2006 CITI TRENDS INC EARNINGS CONFERENCE CALL

CORPORATE PARTICIPANTS

Tripp Sullivan
Corporate Communications, Inc. - SVP, Principal

Ed Anderson

 Citi Trends, Inc. - CEO

George Bellino

 Citi Trends, Inc. - President, Chief Merchandising Officer

Tom Stoltz

 Citi Trends, Inc. - SVP Finance, CFO

CONFERENCE CALL PARTICIPANTS

Tim Geyer

 Piper Jaffray - Analyst

Dorothy Lakner

 CIBC World Markets - Analyst

Elizabeth Montgomery

 Cowen & Company - Analyst

Phil DeFelice

 Wachovia Securities - Analyst

Patrick McKeever

 Avondale Partners - Analyst

Ronald Rotter

 RBR Capital - Analyst

Shaun Smolarz

 Sidoti & Company - Analyst

Bryan Korngut

 Falcon Fund - Analyst

Mike Grant

 Diker Management - Analyst

PRESENTATION

Operator

Good day and welcome to the Citi Trends conference call. Todays call is being recorded. At this time for opening remarks and introductions, I would like to turn the call over to Mr. Tripp Sullivan. Please go ahead, sir.

Tripp Sullivan  Corporate Communications, Inc. - SVP, Principal

Good morning. Thank you for joining us today. On the call today are Ed Anderson, Chairman and Chief Executive Officer, George Bellino, President and Chief Merchandising Officer, Tom Stoltz, Chief Financial Officer, and Chris Bergen, Director of Financial Reporting. By now everyone should have seen our third-quarter earnings release that was sent out this morning. If you have not received the release it is available on our company website under the investor relations section, in the subfolder investors at www.CitiTrends.com. You should be aware that the prepared remarks made during this call contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Management may make additional forward-looking statements in response to your questions. These statements do not guarantee future performance and therefore undue reliance should not be placed on them. Such statements involve known and unknown risks, uncertainties, and other factors that may cause actual results to differ materially. We refer all of you to the companys most recent report on Form 10-K as filed with

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the Securities and Exchange Commission for more detailed discussions of the factors that could cause actual results to differ materially from those described in any forward-looking statement.

Ed Anderson will give a brief presentation, after which Ed, George, and Tom will address any questions you may have. With that said, I will now like to turn the call over to Ed.

Ed Anderson  Citi Trends, Inc. - CEO

Thank you, Tripp. I will present an overview of the results for the quarter and make a few comments about the companys growth and future plans. In addition, I will review the financial results in more detail and conclude with an update to our earnings guidance for fiscal 2006 and give initial guidance for 2007. Then, we will be happy to answer your questions.

In the third quarter, net sales increased 24.6% over last year, to $87.1 million, from $69.9 million. Comparable store sales increased 6.2% in the quarter, compared with 25% a year ago. Net earnings for the quarter were $2.8 million or $0.20 per share compared with $0.18 per share in the prior year quarter. Sales and gross margin were better than we expected for the quarter as we successfully anniversaried the post hurricane results from a year ago.

Now, more detail on our sales performance. Sales were solid across most merchandise categories. Comparable sales increases for the quarter by category were, childrens up 14.5%, home furnishings up 12.5%, accessories up 12.2%, mens up 5.7%, and womens down 1.2%. Again, sales of nationally recognized urban brands increased at a higher rate than our other nonbranded merchandise in the quarter. Sales of nationally recognized urban brands such as Phat Farm, Baby Phat, Southpole, Dickies, Rocawear, Girbaud and Apple Bottoms accounted for 48% of our total sales for the quarter. Consistent with a trend we noted in the second quarter, comparable sales increases were again driven by an increase in average price of an item sold rather than an increase in customer traffic. We believe this trend is resulting from the heavier sales mix toward branded goods.

Total inventories at the end of the third quarter were up 38% over last years third quarter. Comparable store inventories were up about 20%, over the same time last year. We continue to be comfortable with the balance and content of the inventories. We opened 13 new stores in the third quarter bringing our new store count to 31 and total stores to 266 at the end of the quarter. We still expect to open 41 to 42 stores for the full year and increase selling square footage over 20% for the full year.

In the third quarter, our store openings were concentrated in existing markets particularly in Texas and Florida with one new market in Cleveland, Ohio. In the fourth quarter our openings will be concentrated in the midwest and southeast with no new states anticipated. Sales at our 2006 class of stores continue to exceed our new store model and have performed as well as the class of 2005. Based on the new store sales performance this year, were excited about what 2007 will bring as we enter new markets, such as Detroit and Chicago.

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