06 September 2005

Citi Trends (CTRN)

I first learned about Citi Trends (CTRN) in today's IBD:

CitiTrends plays in an already crowded discount retailer market, but it’s making a name for itself by targeting an underserved segment of the population. It sells trendy urban brandnames like Ecko, Members Only, Phat Farm and Rocawear geared toward a black American client base. The Savannah, Ga.-based chain also offers home decor, as well as private-label branded apparel. Big national brands account for roughly 30% of its sales, while less recognized brands make up 60% and private-label products, 10%. CitiTrends runs 221 stores located in affordable strip malls throughout 12 states in the Southeast, North Atlantic and in Texas. New states it plans to enter this year include Delaware, Kentucky, New Jersey and Pennsylvania. Slated for 2006 are Indiana, Illinois, Michigan, Missouri and Ohio. The firm keeps costs down by focusing on strip malls in low to moderate income neighborhoods, and leasing previously occupied spaces instead of brand-new ones. Same-store sales rose 20%in August, up from 7% a year ago. Total sales jumped 49% to $24.8 million. But September sales may be affected by Hurricane Katrina, as some stores along the Gulf Coast were temporarily closed.
Nancy Gondo

CITI TRENDS INC (CTRN) Grp 189 $26.03
12.8M Shares 91 Comp. Rating 98 EPS RS 94 ROE 36%
(44 IN GA AND 32 IN SC).

As I've previously mentioned in this blog, while complaining about J.Crew and their conservative clothes that wear out liberally, my idea of fashion is wearing a particularly striking shade of argyle sock, or on the weekend, promoting bands I enjoy via loud t-shirts bought downstairs at the Bowery Ballroom. My exposure to to the brands mentioned in the IBD piece and sold at Citi Trends usually occurs on the subway. There, I notice the fashions seem right off the rack. Yes, these clothes could just be impeccably maintained, but I think these young "urban" men could also be a bit more fashion conscious than I, and likewise, spend more on clothing, and more often. From CTRN's numbers, it looks as though Citi Trends is serving "urban" men quite well.

But in fact, CTRN is not yet serving markets like New York. So there is still growth potential in this stock. As the article states, CTRN has stores in only 12 states, and has expansion plans in significant markets, like NJ, PA, MI, and IL.

CTRN could allow me to invest in trendy clothes without having to develop a fashion sense. CTRN also alleviates the risks involved in attempting to choose a single designer for investment purposes. The futures of these fashion houses come and go. Did you notice in the article that Members Only is apparently back in style after a 20-year hiatus? I don't have the eye to make calls on individual lines, but I won't need to with a holding like CTRN.

If anyone reading this has had any personal experience with Citi Trends, please comment. For now, CTRN has a place on the Stock Watch List.

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