Citi Trends posts profit surge on margin gains
Adjusted EBITDA more than doubled to $13.9 million in the quarter.
The value-focused apparel retailer Citi Trends (CTRN) reported first-quarter net income of $7.8 million, a sharp rebound from $0.9 million a year earlier. The result capped a quarter in which sales growth accelerated and operating leverage turned positive across every line of the income statement.
The period marked the strongest top-line momentum in six quarters, with total sales rising 14.4% to $230.9 million and comparable-store sales climbing 13.9%—both measures accelerating from the prior quarter’s 9.1% and 8.9%, respectively. Management attributed the gains to higher customer traffic and larger basket sizes, a trend that has now held for two consecutive quarters.
Revenue growth was matched by margin expansion. Gross margin widened 40 basis points to 40.0%, building on a 20-basis-point gain in the fourth quarter. Adjusted EBITDA more than doubled year-over-year to $13.9 million, lifting the margin to 6.0% from 3.2% in the same period last year. The company said adjusted SG&A expenses leveraged 250 basis points to 33.9% of sales, an improvement that outpaced the 160-basis-point leverage achieved in the prior quarter.
Inventory levels rose 4.8% to $115.2 million, reversing a 7.4% decline in the fourth quarter. The increase reflected planned receipts ahead of the back-to-school season, management said. On the balance sheet, cash climbed to $81.1 million, leaving the company debt-free.
Looking ahead, Citi Trends raised its full-year guidance. Adjusted EBITDA is now expected to reach $35–40 million, up from the prior range of $34–38 million and more than double the $11.8 million reported in fiscal 2025. Comparable-store sales growth is projected at 8–10%, an increase from the previous 5–7% target, while total sales growth is now forecast at 9–11%, up from 6–8%. Gross margin expansion guidance was trimmed to 50–70 basis points from 100 basis points due to fuel surcharge headwinds, while adjusted SG&A leverage guidance was raised to 130–160 basis points from 70–100 basis points.
The company also updated its definition of adjusted EBITDA and adjusted SG&A to include equity-based compensation expense, which is expected to total $5.5–6.0 million in 2026. Store activity remained on plan, with two new locations opened, one closed, and 25 remodeled during the quarter.