Yahoo Finance Citi Trends (CTRN) Slides to Strong Sell Post Dismal Q1
Zacks Investment Research downgraded Citi Trends Inc. CTRN to a Zacks Rank #5 (Strong Sell) on May 21.
Why the Downgrade?
Citi Trends has been witnessing downward estimate revisions since releasing dismal results for the first quarter of fiscal 2016. In fact, shares of this value-priced retailer of urban fashion apparel and accessories have slipped 2.4% since it posted first-quarter earnings on May 18.
In the first quarter of fiscal 2016, both the company’s top and bottom lines lagged estimates and declined year over year. Further, this marked the third straight quarter of both sales and earnings miss, highlighting the company’s unimpressive history.
Citi Trends’ first-quarter adjusted earnings of 61 cents per share trailed both the Zacks Consensus Estimate and the year-ago figure of 74 cents by 17.6%. Further, sales dipped 0.6% year over year to $193.7 million and fell short of the Zacks Consensus Estimate of $197 million.
While the bottom line was hurt by soft sales, the top line felt the pinch of a delayed start to the tax refund season. This also resulted in a decline in comparable store sales, which dropped 2.7%, trailing the company’s expectations. Apart from this, the company expects average units sold to remain pressurized in fiscal 2016, and be down in the low to mid-single digits, thus posing a concern.
Following Citi Trends’ muted performance and bleak outlook, estimates for fiscal 2016 and fiscal 2017 witnessed a downtrend over the last 7 days, as analysts turned less constructive on the company’s future performance. Evidently, the Zacks Consensus Estimate for fiscal 2016 and fiscal 2017 has dropped 22.7% to 92 cents per share and 1.6% to $1.29 per share, respectively.
Apart from this, Citi Trends remains prone to macroeconomic headwinds like increased payroll taxes, fluctuating fuel prices, risk of unemployment and delayed tax refunds. Also, its business is heavily dependent on the tastes and preferences of consumers that keep changing with time. Hence, the failure to identify consumer needs and act accordingly may reduce demand for its products and weigh on its financial performance.
Stocks to Consider
Better-ranked stocks in the same industry include The Children's Place, Inc. PLCE, with a Zacks Rank #1 (Strong Buy) and Destination XL Group, Inc. DXLG, with a Zacks Rank #2 (Buy). Another well-ranked stock in the related textile-apparel space is Delta Apparel Inc. DLA, with a Zacks Rank #1.
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