Zacks Investment Research downgraded Citi Trends Inc. to a Zacks Rank #5 (Strong Sell) on May 25.
Why the Downgrade?
Citi Trends has witnessed sharp downward estimate revisions after reporting disappointing first-quarter fiscal 2013 results. Shares of this value-priced retailer of urban fashion apparel and accessories have been range bound since reporting first-quarter earnings on May 22.
Citi Trends reported first-quarter earnings per share of 42 cents, missing the Zacks Consensus Estimate of 57 cents by 26.3% and the year-ago earnings of 69 cents by 39.1%.
Earnings were primarily affected by an 8% year-over-year decline in sales and a 4.1% downside in comps. Net sales of $181.8 million also fell below the Zacks Consensus Estimate of $198 million. Weakened sales and comps were mainly driven by weak sales at the company’s stores in February and March, followed by a recovery in April as the weather turned warmer post Easter.
We believe Citi Trends remains significantly impacted by the macroeconomic issues, wherein its customers continue to feel the pinch of increased payroll tax, higher fuel prices, high unemployment rate and delayed tax refunds.
Given the first-quarter results and the limited near-term catalysts, we expect the company’s share performance to remain strained in the near term.
Following the company’s muted performance, the Zacks Consensus Estimate for fiscal 2013 has moved down by 6 cents to a break-even point over the last 30 days. For fiscal 2014, most of the estimates were revised downward over the last 30 days, pulling the Zacks Consensus Estimate down by 8.7% to 21 cents per share.
Other Stocks to Consider
Not all apparel/shoe retailers are performing as poorly as Citi Trends. The apparel/shoe retailers with a favorable Zacks Rank that are performing well and are worth considering include New York & Co. Inc. (NWY - Free Report) , Gap Inc. (GPS - Free Report) and Lululemon Athletica Inc. (LULU - Free Report) . Of these, New York & Co. has a Zacks Rank #1 (Strong Buy), while Gap and Lululemon carry a Zacks Rank #2 (Buy).