Citi Trends, Inc. (NASDAQ:CTRN) Q4 2022 Earnings Conference Call March 21, 2023 9:00 AM ET

Company Participants

David Makuen - CEO

Heather Plutino - CFO

Nitza McKee - Senior Associate, ICR IR

Conference Call Participants

Dana Telsey - Telsey Advisory Group

Jeremy Hamblin - Craig-Hallum Capital Group

Chuck Grom - Gordon Haskett

John Lawrence - The Benchmark Company

Operator

Greetings, and welcome to the Citi Trends Fourth Quarter and Fiscal Year 2022 Earnings Conference Call. During the presentation, all participants will be in a listen-only mode. Afterwards, we’ll conduct a question-and-answer session. [Operator Instructions] As a reminder, this conference is being recorded, Tuesday, March 21, 2023,

I would now like to turn the conference over to Nitza McKee, Senior Associate. Please go ahead.

Nitza McKee

Thanks, and good morning, everyone. Thank you for joining us on Citi Trends’ fourth quarter 2022 earnings call. On our call today is our Chief Executive Officer, David Makuen; and Chief Financial Officer, Heather Plutino. Our earnings release was sent out this morning at 6:45 a.m. Eastern Time. If you have not received a copy of the release, it's available on the company's website under the Investor Relations section at www.cititrends.com.

You should be aware that prepared remarks today made during this call may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Management may make additional forward-looking statements in response to your questions. These statements do not guarantee future performance. Therefore, you should not place undue reliance on these statements. We refer you to the company's most recent report on Form 10-K and other subsequent filings with the Securities and Exchange Commission for a more detailed discussion of the factors that can cause actual results to differ materially from those described in the forward-looking statements.

I will now turn the call over to our Chief Executive Officer, David Makuen. David?

David Makuen

Thank you, Nitza. Good morning, everyone, and thanks for joining us today on our fourth quarter and full-year fiscal 2022 earnings call. I will begin our call with highlights of our fourth quarter and full-year financial and operational performance. Heather Plutino, our Chief Financial Officer, will then elaborate on our detailed financial results and a few other items related to our outlook. Then we'll open your call or your questions.

I'm pleased to report that we delivered on every aspect of our stated guidance for the fourth quarter and second half of 2022. This outcome was driven by our talented teams, whose grit and dedication never ceases to amaze me. For the full-year 2022, we are really proud of achieving a healthy gross margin rate of 39.1%, while driving operating expenses lower than 2021 by 9%. Our inventories were well managed across all of our product cities, or categories, with dollars down nearly 15% to the prior year. We also ended the fiscal year in a better-than-expected cash position of nearly $104 million, coupled with zero debt. Despite what remained a highly challenging economic environment, especially for low-income African American families, the bulk of our customer base, our team successfully leveraged our flexible operating model while executing our strategic priorities, including optimizing our product mix, enhancing our in-store experience, and investing in our infrastructure. Lastly, about 13% of our fleet now reflects our CTx enhanced store experience. Our expanded and new categories are working, including our Q line, our Missy size offering, and our Tween girl styles expansion, and the broadening of our assortment to attract the fast-growing multicultural audience is well underway. Looking forward, our strong balance sheet enables us to invest in key merchandise categories to continue to delight our customers with fresh, exciting products at prices that will never break the bank.