Citi Trends (CTRN) delivered a stellar Q2 2025 with EPS of $0.46 (beating -$0.92 estimate), 8% revenue growth, and 9.2% same-store sales surge, driven by its three-tier product strategy and operational improvements.
Citi Trends (CTRN) Q2 2025 Earnings: EPS Soars 151% Amid 9.2% Same-Store Sales Growth
Article Summary
Citi Trends (CTRN) reported exceptional Q2 2025 results, with earnings per share (EPS) surging from -$0.78 to $0.46, marking a 151% turnaround. Revenue grew 8% to $190.8 million, while same-store sales jumped 9.2%—the fourth consecutive quarter of growth. The company's three-tier product strategy and operational efficiencies drove gross margin expansion to 40.0%, prompting an upward revision of full-year guidance. This analysis explores the key drivers behind the strong performance and future outlook.
Company Business Overview
Citi Trends (NASDAQ: CTRN) is a leading off-price retailer focused on African American families, offering apparel, accessories, and home goods through a "trendy, branded, and extreme-value" product mix. With 590 stores across 33 U.S. states, the company targets value-conscious consumers by balancing fashion relevance and affordability. Its business model emphasizes customer traffic growth and inventory optimization, which has translated into 12 consecutive months of same-store sales gains.
Financial Performance Analysis
Key Financial Metrics
| Metric | Q2 2025 | Q2 2024 | YoY Change |
|---|---|---|---|
| Total Revenue | $190.8 million | $176.6 million | +8.0% |
| Comparable Store Sales | +9.2% | -1.7% | +10.9 percentage points |
| Gross Margin | 40.0% | 31.1% | +890 basis points |
| EPS | $0.46 | -$0.78 | N/A (from loss to profit) |
| Net Income | $3.8 million | -$18.4 million | N/A (from loss to profit) |
Significant Variances: EPS turnaround driven by margin expansion; gross margin improvement from reduced markdowns and lower freight costs; same-store sales growth fueled by increased traffic and basket size.
Profitability Analysis
The company's gross margin reached 40.0% (highest Q2 since 2021), up 890 basis points YoY, primarily due to:
- Reduced markdowns on seasonal inventory
- Improved inventory shrinkage control
- Higher full-price selling ratio
- Optimized supply chain costs
Operating expenses increased 7% to $78.9 million, mainly from incentive compensation and store renovation costs, but were offset by revenue growth. Adjusted EBITDA loss narrowed to $2.6 million from $17.2 million in Q2 2024.
Business Highlights
Product Strategy Effectiveness
Citi Trends' three-tiered product strategy delivered strong results:
- Trendy Items: Fashion-forward merchandise drove customer traffic, particularly in apparel
- Off-Price Deals: 20-30% discounts on branded products improved conversion rates
- Extreme-Value Products: $5-$10 essential items increased basket size by 12%
CEO Ken Seipel noted: "Our focus on the core African American customer and improved product assortments have encouraged more frequent shopping and higher transactions."
Operational Improvements
- Inventory Efficiency: Merchandise inventory down 12.9% YoY, reducing carrying costs
- Store Optimization: 15 store renovations completed, with 50 planned for FY2025
- Supply Chain: Freight costs per unit decreased 4.3% through carrier negotiations
Future Outlook
The company raised full-year guidance:
- Same-store sales growth: Mid-to-high single digits (up from mid-single digits)
- EBITDA: $7-$11 million (vs. $21-$25 million YoY improvement)
- Back-to-school season momentum expected to continue driving Q3 growth
Risk Factors: Competitive pressures from Dollar General; macroeconomic sensitivity of core customer base; inventory alignment with fashion trends.