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Why is Citi Trends (CTRN) Losing Sheen in the Stock Market?
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Citi Trends, Inc. (CTRN - Free Report) seems like a ‘touch-me-not’ stock for quite some time now. Shares of this Zacks Rank #5 (Strong Sell) have declined 16.4% in the past three months, against the Zacks categorized Retail-Wholesale sector that inched up 0.5% in the same time frame. Let’s find out more.
What’s Hurting the Stock?
Citi Trends’ estimates have been witnessing downtrend since it reported weaker-than-expected third-quarter fiscal 2016 results. Over the past 60 days, the Zacks Consensus Estimate of 91 cents and $1.21 declined 9 cents for both fiscal 2016 and 2017, respectively.
The company incurred a loss of 6 cents a share in the reported quarter, against earnings of 4 cents delivered in the year-ago quarter. Also, it recorded a negative earnings surprise of 300% in the quarter. Its quarterly performance was somewhat hurt by the seasonal nature of Citi Trends’ business, as it typically generates stronger sales during the first and fourth quarters, which are characterized by the spring and holiday seasons.
Further, comparable store sales (comps) dipped year over year and were hurt by external factor like the Hurricane Matthew that led to store closures. It was coupled with unseasonably warm weather that weighed upon demand for fall products.
In the trailing four quarters, the company posted an average earnings surprise miss of 63%. Further, Citi Trends’ both top and bottom lines have missed the Zacks Consensus Estimate in four and five out of seven consecutive quarters, respectively.
Additionally, management lowered its gross margin view owing to the soft sales trend, posing serious concerns for the company. Gross margin is envisioned to be 38.5% for fiscal 2016, down 50 bps from the old projection.
Alongside, macroeconomic headwinds, risks of changing fashion trends and intense competition also weigh upon the company’s financial performance.
However, the company remains optimistic about the improving comps trends and the Home division’s performance, going into the fourth quarter. Only time will tell whether Citi Trends should gain from its strategies like better utilization of floor area, improvisation of merchandise margins and efficient inventory management, which might bring it back on the growth trajectory. But for now, we believe that you should avoid the stock as it has been losing sheen and any recovery in the near term, seems to be unlikely.
The Children's Place, with a long-term earnings growth rate of 10.3%, has surged 53.6% in the past one year.
Tilly's, with a long-term earnings growth rate of 13%, has substantially increased 108.1% in the past six months.
Chico's, with a long-term earnings growth rate of 11.5%, has gained 29.6% in the past one year.
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Why is Citi Trends (CTRN) Losing Sheen in the Stock Market?
Citi Trends, Inc. (CTRN - Free Report) seems like a ‘touch-me-not’ stock for quite some time now. Shares of this Zacks Rank #5 (Strong Sell) have declined 16.4% in the past three months, against the Zacks categorized Retail-Wholesale sector that inched up 0.5% in the same time frame. Let’s find out more.
What’s Hurting the Stock?
Citi Trends’ estimates have been witnessing downtrend since it reported weaker-than-expected third-quarter fiscal 2016 results. Over the past 60 days, the Zacks Consensus Estimate of 91 cents and $1.21 declined 9 cents for both fiscal 2016 and 2017, respectively.
The company incurred a loss of 6 cents a share in the reported quarter, against earnings of 4 cents delivered in the year-ago quarter. Also, it recorded a negative earnings surprise of 300% in the quarter. Its quarterly performance was somewhat hurt by the seasonal nature of Citi Trends’ business, as it typically generates stronger sales during the first and fourth quarters, which are characterized by the spring and holiday seasons.
Further, comparable store sales (comps) dipped year over year and were hurt by external factor like the Hurricane Matthew that led to store closures. It was coupled with unseasonably warm weather that weighed upon demand for fall products.
In the trailing four quarters, the company posted an average earnings surprise miss of 63%. Further, Citi Trends’ both top and bottom lines have missed the Zacks Consensus Estimate in four and five out of seven consecutive quarters, respectively.
Additionally, management lowered its gross margin view owing to the soft sales trend, posing serious concerns for the company. Gross margin is envisioned to be 38.5% for fiscal 2016, down 50 bps from the old projection.
Alongside, macroeconomic headwinds, risks of changing fashion trends and intense competition also weigh upon the company’s financial performance.
Citi Trends Inc. Price and Consensus
Citi Trends Inc. Price and Consensus | Citi Trends Inc. Quote
However, the company remains optimistic about the improving comps trends and the Home division’s performance, going into the fourth quarter. Only time will tell whether Citi Trends should gain from its strategies like better utilization of floor area, improvisation of merchandise margins and efficient inventory management, which might bring it back on the growth trajectory. But for now, we believe that you should avoid the stock as it has been losing sheen and any recovery in the near term, seems to be unlikely.
Stocks that Warrant a Look
Better-ranked stocks in the same industry include The Children's Place, Inc. (PLCE - Free Report) , Tilly's, Inc. (TLYS - Free Report) , both sporting a Zacks Rank #1 (Strong Buy), and Chico's FAS, Inc. , carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Children's Place, with a long-term earnings growth rate of 10.3%, has surged 53.6% in the past one year.
Tilly's, with a long-term earnings growth rate of 13%, has substantially increased 108.1% in the past six months.
Chico's, with a long-term earnings growth rate of 11.5%, has gained 29.6% in the past one year.
"The Best Place to Start Your Stock Search
Today, you are invited to download the full list of 220 Zacks Rank #1 ""Strong Buy"" stocks – absolutely free of charge. Since 1988, Zacks Rank #1 stocks have nearly tripled the market, with average gains of +26% per year. Plus, you can access the list of portfolio-killing Zacks Rank #5 ""Strong Sells"" and other private research. See these stocks free >>"