Citi Trends, Inc. (NASDAQ:CTRN) Q3 2022 Earnings Call Transcript

Heather Plutino: Yeah. So just a further reminder that our guide is for the fall season, right? So, just wanted to make that point. Versus 2019, there are a couple of pressure points that we just want to keep in mind. One is, we think about the freight environment. 2019, we’re told by our external sources is levels of freight rates that we might not see anytime in the near-future, even though we’re starting to see some relief. That compare will always be tough for Q4 versus 2019. The other on the SG&A front, of course, we’re carrying the lease expense from the two sale-leaseback transactions versus 2019. So we’ll have — that will make for a harder compare as well. And then within SG&A — continuing within SG&A, merit increases from 2019 to 2022 in stores, DCs, we’re not immune to that. I want to make sure we keep our people — keep them happy. So those compares are what I would ask you to keep in mind.

Chuck Grom: Thanks. And just a follow-up on that. Can you just remind us the impact to the fourth-quarter and I guess maybe on an annual basis the impact of rent expense from the two sale-leasebacks that you did this year.

Heather Plutino: Yeah, for sure. I will tell you, in the third quarter it was $1.6 million. So use that as a proxy for fourth quarter. $2.8 million on a year-to-date basis through the third-quarter. And then on an annualized basis, think $7.6 million for the two.

Chuck Grom: Okay, great. Thank you very much. And then, David, when you take a step-back, 2021 square foot, it’s close to 150 this year, back to 128, which was pretty consistent with 2019 and 2020 levels, when you look out over the next couple of years. Can you share with us your thoughts on where you think you can grow that productivity? And then also the initiatives that you have laid out for us in terms of CTX, the new ERP system Q lines, some of the assortment upgrades to women’s and missy’s. Just what has you most excited and where do you think you can grow that productivity level over the next couple of years. Thanks.

David Makuen: Thanks, Chuck. I appreciate the opening words and I’m happy to answer this question. Yeah. I think, look, as we look over the next few years, there’s no doubt that we have a number of initiatives that we intend to use to fuel productivity gains and obviously overall topline gains, while continuing to expand our gross margins from a kind of topline sales point-of-view, which I sort of went on. The opportunity to grow productivity, we think is very, very bright and possible based on some serious initiatives that here to primarily haven’t been part of our mix. And so, as you asked, we will sort of force rank them. The first and foremost is product and it’s what you hit on, it is the adding of key options to our guy and woman and kids that we haven’t had prior.

And so, I probably put it in kind of one bucket, which is, enhancing our juniors business, that’s anchored really by offering missy sizing. From a men’s standpoint, we’re beginning to see incredible traction and appealing to more multicultural guy, where we were really zeroed in on the African-American guy American guy. And we’re seeing some excellent traction there. So that will grow sales per square-foot in the guys business. And then obviously contribute to the box. And then on the kids front, I think where we have the biggest opportunity is growing our girls business. And specifically, appealing to the tween girl just kind of in between the younger girl and first entry into juniors size range and we’ve been testing that throughout 2023 with — excuse me in 2022 with some great results in a limited number of stores.