Yahoo Finance Can Citi Trends' Fundamental Strength Keep It Going?
On Oct 7, 2015, Zacks Investment Research upgraded Citi Trends Inc. CTRN to a Zacks Rank #1 (Strong Buy).
Why the Upgrade?
Our optimism on Citi Trends is based on the company’s strong fundamentals, solid financial position, impressive earnings results and positive estimate revisions.
Citi Trends is more appealing to value-conscious customers looking for cheaper alternatives, given its practice of offering merchandise at about 20%–70% discount compared with other department and specialty stores’ regular prices.
Further, we are impressed with the company’s strategies such as better utilization of floor area, enhancement of merchandise margins and efficient inventory management which have been aiding in turn around its operating performance. This was evident from the company’s better-than-expected top and bottom-line results in the second quarter, which marked its first profitable second quarter since 2008.
Looking ahead, management expects to retain its ongoing comps growth trend as all of its businesses remain strong. Thus, the company expects to deliver positive comps for the next two quarters.
Based on the favorable outlook, the company’s earnings estimate has increased 18.8% to $1.14 per share for fiscal 2015 in the last 60 days.
Citi Trends also benefits from its inviting store formats that provide an edge over other off-price retailers and mass merchants. Apart from focusing on stores, the company is testing its website, with limited offerings, in order to capture the eCommerce business. Going forward, it plans to add more assortments to its site based on the response from customers.
The company is also focused on taking prudent steps to reduce inventory shrinkage. These include better supervision by the operations and loss prevention departments as well as installation of sophisticated surveillance systems in high shrinkage stores.
Finally, Citi Trends’ robust financial status offers a silver lining to the stock. The company’s healthy balance sheet and solid cash flow generation ability provide it with ample liquidity as well as the flexibility to fund its strategic endeavors. Additionally, the company demonstrated its commitment toward boosting shareholder value by recently announcing its first-ever dividend and share repurchase program.
All the aforementioned factors underscore Citi Trends’ inherent strength and strong future prospects, instilling confidence among investors.
Other Stocks to Consider
Other well performing stocks in the apparel-shoe industry include Express Inc. EXPR, Foot Locker Inc. FL and Stein Mart Inc. SMRT, all carrying a Zacks Rank #1.
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FOOT LOCKER INC (FL): Free Stock Analysis Report
CITI TRENDS INC (CTRN): Free Stock Analysis Report
EXPRESS INC (EXPR): Free Stock Analysis Report
STEIN MART INC (SMRT): Free Stock Analysis Report
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