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Value-priced retailer of urban fashion apparel and accessories, Citi Trends Inc. (CTRN - Analyst Report), marked an improvement in its third quarter 2012 results as the company reported loss per share of 25 cents, compared with a loss per share of 41 cents reported in the year-ago quarter (excluding the impact of severance expenses).

Moreover, the company’s quarterly loss compared favorably with the Zacks Consensus Estimate of a loss of 41 cents per share.

Turning to Numbers

During the quarter, Citi Trends recorded a 4.1% rise in net sales to $149 million, compared to $143.1 million in the comparable prior-year quarter. Moreover, total revenue came ahead of the Zacks Consensus Estimate of $142 million. Comparable store sales inched up 0.5% during the quarter.

Citi Trends' gross profit augmented 6.3% to $51.2 million from $48.2 million in the year-ago quarter, whereas gross margin expanded 70 basis points to 34.4%.

Selling, general and administrative expenses in the quarter decreased 3.6% year over year to $51.1 million, while depreciation and amortization expenses waned 7.5% to $6 million. The company's loss from operations came in at $6.6 million compared with $12.1 million in the year-ago period.

Financials

Citi Trends had no debt on its balance sheet at the end of the quarter. Cash and cash equivalents were $36.2 million compared with $33.2 million at the end of the third quarter of fiscal 2011. Shareholders' equity totaled $196 million compared with $202.5 million in the prior-year period.

Stores Count

During the third quarter, Citi Trends slightly paced up its stores with the opening of one new store and relocation of two. This brought the company’s total store count to 513 at the end of the quarter. The company operates across 29 states in the Southeast, Mid-Atlantic and Midwest regions as well as in the states of Texas and California.

Our Recommendation

Citi Trends operates in a highly fragmented specialty retail sector and faces intense competition from larger off-price rivals such as The TJX Companies Inc. (TJX - Analyst Report) and Ross Stores Inc. (ROST - Analyst Report).

Citi Trends currently has a short-term Zacks #3 Rank, which translates into a ‘Hold’ rating. Moreover, we retain our long-term ‘Neutral’ recommendation on the shares.

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