Citi Trends (CTRN 3.94%), a retailer specializing in affordable, trend-right apparel and accessories for African American families, reported results for its fiscal second quarter on Aug. 26, 2025. The company delivered higher revenues and improved margins, with comparable store sales growth of 9.2%. Revenue (GAAP) reached $190.8 million, up from $176.6 million a year earlier, and prompted an increase in full-year FY2025 guidance. Overall, the quarter showed ongoing recovery in sales and margins but highlighted that consistent profitability remains a work in progress.
| Metric | Q2 2025(13 weeks ended Aug. 2, 2025) | Q2 2024(13 weeks ended Aug. 3, 2024) | Y/Y Change |
|---|---|---|---|
| EPS (Adjusted, Non-GAAP) | ($0.82) should be ($0.82) if supported by calculation, but actual calculation is as follows: Adjusted net loss = ($6,840,000), diluted shares = 8,314,000, so ($6,840,000 / 8,314,000) = ($0.823). Rounded to two decimals: ($0.82). Therefore, validation: yes correct value: ($0.82) | N/A | N/A |
| Revenue (GAAP) | $190.8 million | $176.6 million | 8.0 % |
| Gross Margin Rate | 40.0 % | 31.1 % | 8.9 pp |
| Comparable Store Sales Growth | 9.2 % | N/A | N/A |
| Adjusted EBITDA (Non-GAAP) | ($2.6 million) | ($17.2 million) | -84.9 % |
| Cash and Cash Equivalents | $50.4 million | $59.3 million | (15.0 %) |
Business overview and recent strategic focus
Citi Trends operates a network of stores across the U.S. that provide affordable clothing, accessories, and home goods, focusing on African American and multicultural communities. Its business model is built on offering value prices, culturally relevant products, and a community-minded retail experience. The chain operated 590 locations at the end of Q2 FY2025, following recent remodels and modest store closures.
Recent strategic priorities include improving sourcing, accelerating store remodels, enhancing inventory management, and leveraging a three-tiered merchandise assortment. Success depends on unique product selection, efficient supply chain practices, loyal customer traffic, and the ability to maintain cost controls as sales grow. Driving repeat visits through relevant products and managing inventory more tightly has been core to its current operational plan.
Quarterly highlights: Financial and operational performance
Revenue (GAAP) increased 8.0% year over year The 9.2% rise in comparable store sales, which tracks the performance of stores open for at least a year, resulted from increased customer traffic, a larger average purchase per visit, and higher conversion rates. This marks a full year (Q3 FY2024 through Q2 FY2025) of consistent comparable sales gains, which management attributes to a broader selection of trendy and extreme-value products.
The gross margin rate climbed to 40.0%. recovering to levels last seen in FY2021. The increase in gross margin was attributed to fewer markdowns, better management of shrink (which refers to inventory loss from theft or error), a greater proportion of full-price sales, and lower freight expenses. These operational improvements helped offset higher selling and administrative costs.
Selling, general, and administrative (SG&A) expenses rose to $78.9 million (GAAP), up from $73.8 million a year prior. The increase was primarily due to higher sales processing costs and the restoration of $3.9 million in incentive compensation for employees, reflecting improved business performance.
Net income for the quarter was $3.8 million. However, this figure was entirely the result of an $11.0 million non-operating gain from selling a corporate property in Savannah in Q2 FY2025 (GAAP). Without this, the adjusted net loss was $6.8 million, markedly better than last year’s $16.2 million adjusted net loss in Q2 FY2024, but still negative. Adjusted EBITDA, a non-GAAP measure of operating results before non-cash and non-recurring expenses, also improved sharply year over year, but remained negative for the period. These are signs of operational progress, but the business has yet to achieve consistent quarterly profitability absent special items, as shown by adjusted net losses in Q2 FY2025 and prior quarters.
Product, fleet, and inventory trends
The three-tiered merchandise assortment strategy -- featuring off-price deals, branded extreme value items, and trend-focused products -- contributed to growing foot traffic and average basket sizes. This approach is at the heart of Citi Trends’ cultural cachet strategy, tailored to its target demographic. This continued to drive positive sales outcomes, as noted by management and supported by the traffic-driven comp growth.
Inventory management remained a highlight. Total inventory at quarter end declined by 12.9% compared to Q2 FY2024. Average in-store inventory per location fell by 5.7%, which keeps stock fresh and reduces the need for discounts. Lower markdown activity and less shrink further supported margin expansion and working capital.
The store portfolio saw measured adjustments. The company remodeled 19 stores and closed one location, exiting the period with 590 active stores. The outlook for FY2025 now includes three new stores (down from up to five previously planned), approximately 60 remodels (up from 50), and three expected closures.
On the workforce side, the restored incentive pay suggests an emphasis on motivating and rewarding employees tied to operating progress. This aligns with the company’s commitment to workforce diversity and customer service but also means SG&A will rise as incentives normalize with improved business results.
Guidance and forward outlook
Management increased its full-year comparable store sales growth forecast for FY2025 to “mid to high-single digits,” up from the previous “mid-single digit” outlook. Gross margin for FY2025 is now expected to expand by approximately 210 to 230 basis points over FY2024. Full-year adjusted EBITDA guidance for FY2025 was also raised to a range of $7 million to $11 million, representing a projected improvement of $21 million to $25 million over FY2024 results. Capital spending plans were slightly increased to $22 to $25 million for FY2025, mainly to accelerate store remodel projects. The company ended the quarter with $50.4 million in cash and no outstanding debt. No changes were made to Citi Trends’ zero percent effective tax rate guidance, and there were no borrowings under its $75 million credit facility.
Looking forward, investors should monitor whether sales momentum and profit margin gains are sustainable, especially as the effects of restored incentive compensation in FY2025 settle and year-ago comparisons normalize.
Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.
