Citi Trends (NASDAQ:CTRN) executives highlighted accelerating momentum in the retailer’s turnaround as the company reported fourth-quarter and full-year fiscal 2025 results, pointing to broad-based comparable sales gains, gross margin improvement, and a stronger balance sheet heading into fiscal 2026.
Fourth-quarter results show broad-based demand
CEO Ken Seipel said the fourth quarter “caps an exceptional year of transformation,” citing disciplined execution and a renewed focus on delivering “style, value, and authenticity.” The company posted comparable store sales growth of 8.9% in the quarter, or 15.3% on a two-year basis, marking its sixth consecutive quarter of positive comps.
Profitability improved as well. The company delivered adjusted EBITDA of $11.9 million, up $4.8 million versus the prior year’s fourth quarter, with adjusted EBITDA margin increasing 180 basis points to 5.2%. Seipel noted EBITDA in the quarter increased 67% from the prior year period.
Gross margin in the quarter increased 20 basis points to 39.9%, driven by lower markdowns, though Plutino said results were “a bit short” of expectations due to slightly higher freight and markdowns taken to exit the quarter “clean.” Adjusted SG&A rose to $80.0 million from $76.7 million, reflecting higher store and distribution center expenses to support sales growth and $1.8 million of incremental incentive compensation. As a percentage of sales, adjusted SG&A leveraged 160 basis points to 34.7%. The company closed three stores during the quarter.
Category performance and brand marketing initiatives
Seipel described growth as broad-based across regions, store volume tiers, and both apparel and non-apparel categories. He called out several categories:
- Children’s delivered high single-digit growth again, supported by improved in-stocks and “highly desired styles.”
- Men’s posted another solid quarter, with the company balancing trend-forward product for younger shoppers and core styles for its existing customer base.
- Women’s footwear showed “early signs of progress” as off-price and extreme value strategies gained traction.
- Family Basics and sleepwear was among the top growth areas, which management linked to improved styling and better inventory positioning.
On the marketing front, Seipel said the company’s holiday “Joy Looks Good on You” campaign and refreshed social presence under @wearecititrends exceeded expectations. He said the flagship video generated over 55 million views and engagements, and described the campaign as an expression of the company’s brand promise: “styles that see you, prices that amaze you, and trends that tell your story.”
Full-year 2025: comps, margins, and operational changes
For fiscal 2025, Citi Trends reported total sales of $820 million, up 8.9% from the prior year, and comparable sales growth of 9.7% (or 13.1% on a two-year basis). Plutino said comps were again driven primarily by higher transactions, with average basket contributing the balance.
Gross margin expanded 210 basis points to 39.6%, which Plutino attributed to fewer markdowns, lower shrink, and a lower freight expense rate versus the prior year. Adjusted SG&A increased to $312.8 million from $296.3 million, including $9.7 million of incremental bonus and equity expense and higher store and DC costs to support $67 million of incremental sales. As a percentage of sales, adjusted SG&A leveraged 120 basis points.
Adjusted EBITDA for the year rose to $11.8 million, a $26 million increase from the prior year, with EBITDA margin up 330 basis points. Seipel said the company also funded an above-target annual bonus for employees for the first time in several years.
Management emphasized operational progress, including improved inventory efficiency. Plutino said year-end inventory declined 7.4% year-over-year, and year-end average in-store inventory fell 2%. Seipel said the company supported comp growth with less average store inventory, crediting improved buying, supply chain speed, and smarter allocation. He noted the company implemented an AI-based allocation system across all merchandising categories late in the second half of the year and is deploying AI-based planning systems to improve sales and inventory planning.
Store fleet actions included three openings, 62 remodels, and four closures, ending fiscal 2025 with 590 stores. Seipel highlighted pilot market “backfill” efforts in Jacksonville, Florida; Columbia, South Carolina; and Bainbridge, Georgia, and said the new locations performed “well above our expectations” after a full holiday season.
Balance sheet and 2026 guidance
Plutino said the balance sheet ended the year with $66 million of cash, no debt, and no borrowings on the company’s $75 million revolver.
For fiscal 2026, management guided to:
- Total sales growth: 6% to 8%
- Comparable sales growth: 5% to 7%
- Gross margin: approximately 100 basis points of expansion
- Adjusted SG&A leverage: 70 to 100 basis points versus an adjusted rate of 37.5% in fiscal 2025
- Adjusted EBITDA: $34 million to $38 million, compared with $17.2 million in fiscal 2025 (as adjusted for the company’s updated non-GAAP definition)
- Capital expenditures: $35 million to $40 million
- Store activity: approximately 25 openings, four closures, and 50 remodels (bringing the updated-format fleet to about 42% by year-end)
Plutino also disclosed a change to two non-GAAP metrics beginning in fiscal 2026: the company will exclude equity-based compensation from adjusted SG&A and adjusted EBITDA, describing it as a non-cash expense and saying the change should provide greater clarity on operating results and cash generation. She reported fiscal 2025 equity-based compensation totaled $5.4 million and estimated fiscal 2026 equity-based compensation of $5.5 million to $6.0 million.
Early Q1 trends, off-price mix, loyalty testing, and acquisition exploration
Seipel said momentum continued into fiscal 2026, with first-quarter-to-date comparable sales trending in the high single digits, supported by traffic and basket growth during tax refund season. In Q&A, management addressed January weather disruptions, with Seipel noting an impact in the last 10 days of the month and stating that at one point the company had “nearly half” of stores closed for multiple days. He said trends resumed quickly, with February and early March consistent with prior performance.
On closeouts and off-price sourcing, management said penetration varies by category, with higher closeout penetration in shoes. Seipel said closeouts represent about 30% of the overall mix and the company is “not quite there,” while its extreme value initiative is “less than halfway” to a long-term view of reaching about 10% over time. He described the deal market as “robust” and said these programs should support comp growth.
Regarding store openings, Plutino said Citi Trends had already opened two stores in February, with roughly 10 more targeted around July and the remaining 13 around October. Seipel added that the company intends to group openings into three annual periods—spring, mid-July, and mid-October—aligned with peak selling seasons.
Seipel also provided an update on a loyalty/CRM program, saying it is currently in testing in a few stores. He said the company paused broader rollout to refine messaging and marketing, but described engagement as high and expects a broader rollout in the back half of the year.
Finally, management said it is in early stages of evaluating “synergistic acquisition opportunities” that could complement its strategy, with Seipel emphasizing the company is not looking to pursue multiple deals and does not yet have specifics. Plutino said the company raised the topic to remain transparent with investors about longer-term possibilities beyond the current plan.
About Citi Trends (NASDAQ:CTRN)
Citi Trends, Inc (NASDAQ: CTRN) is an off-price retail apparel chain that focuses on value-priced urban fashion apparel and accessories for men, women, and children. Headquartered in Savannah, Georgia, the company offers a broad assortment of merchandise, including denim, sportswear, activewear, and seasonal styles, complemented by footwear, jewelry, cosmetics, and home goods. Through its purchasing model, Citi Trends sources closeouts, overstocks and canceled orders from name-brand vendors, enabling it to offer trending styles at competitive price points.
The company operates more than 500 stores across the Southeastern and Mid-Atlantic regions of the United States, with typical store footprints of approximately 11,000 square feet.
