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Date
Tuesday, Aug. 26, 2025 at 9:00 a.m. ET
Call participants
Executive Chair — Ken Seipel
Chief Financial Officer — Heather Plutino
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Takeaways
Comparable sales-- Comparable sales increased 9.2% in the second quarter of the fiscal year ending Feb. 1, 2026, marking the fourth consecutive quarter of mid to high single-digit gains, with 13 straight months of positive comparable sales.
Net sales-- $190.8 million for the second quarter of the fiscal year ending Feb. 1, 2026, up 8% against the second quarter of the fiscal year ended Feb. 3, 2024.
Gross margin rate-- Achieved a 40% gross margin rate for the second quarter of the fiscal year ending Feb. 1, 2026, representing an 890 basis point expansion versus the second quarter last year, the highest such rate since the second quarter of the fiscal year ended Jan. 30, 2021.
Adjusted EBITDA-- Adjusted EBITDA for the quarter was a loss of $2.6 million, an improvement of $14.6 million versus the second quarter of the fiscal year ended Feb. 3, 2024.
SG&A expense-- Adjusted SG&A of $78.9 million for the second quarter of the fiscal year ending Feb. 1, 2026, compared to $72.1 million in the prior period; the adjusted SG&A rate rose by 50 basis points to 41.3% of revenue, driven solely by incentive compensation accruals.
In-store inventory-- Down 5.7% year-over-year in average in-store inventory for the second quarter of the fiscal year ending Feb. 1, 2026, while total inventory dollars decreased 12.9%.
Cash and liquidity-- Ended the second quarter of the fiscal year ending Feb. 1, 2026 with $50 million in cash, no debt, and a fully undrawn $75 million revolver.
Store remodel program-- Remodeled 19 stores in the quarter, reaching 28% of the fleet in updated formats; closed one store, ending with 590 total locations.
Outlook upgrades-- Raised full-year comparable store sales guidance to mid to high single-digit growth for the fiscal year ending Feb. 1, 2026 and lifted gross margin expansion projections to 210–230 basis points versus the fiscal year ended Feb. 3, 2024.
Full-year EBITDA guidance-- Increased to a range of $7 million to $11 million for the fiscal year ending Feb. 1, 2026 EBITDA, $21 million to $25 million above the fiscal year ended Feb. 3, 2024 results.
Capital expenditure guidance-- Updated to $22 million–$25 million for the fiscal year ending Feb. 1, 2026, with plans to remodel approximately 60 stores, open three new stores, and close three.
AI-based allocation implementation-- Management stated that test results for a new allocation system were "well above expectations" during the second quarter of the fiscal year ending Feb. 1, 2026, with company-wide rollout scheduled for mid-September 2025 to impact holiday sales.
Long-term EBITDA target-- Management disclosed a 2027 goal of $40 million or more in EBITDA (non-GAAP), supported by consistent sales growth and margin expansion.
Summary
The company reported 9.6% year-to-date comparable store sales growth for the first half of the fiscal year ending Feb. 1, 2026. Transaction counts increased by approximately 6%, supporting top-line momentum across climate zones and product categories. The gain on the sale of a 72,000-square-foot building in Savannah, Georgia contributed approximately $11 million to reported net income and reported EBITDA in the second quarter of the fiscal year ending Feb. 1, 2026, but was excluded from adjusted figures. Performance-based bonuses were reinstated in the second quarter of the fiscal year ending Feb. 1, 2026 after several years of minimal payouts, affecting overall SG&A rates. The company’s product assortment improvements, especially in branded and plus-size offerings, have strengthened engagement with its core African American demographic. Average remodeled store investment was guided at $100,000 per location, with management emphasizing both fleet refresh and incremental lift as objectives. Ongoing supply chain initiatives, including faster DC-to-store routing, have already shortened fulfillment timelines, with further improvements anticipated into the fourth quarter as system rollouts complete.
Heather Plutino said, "we now expect full year SG&A expense of approximately $310 million" for the fiscal year ending Feb. 1, 2026, reflecting higher sales and increased incentive compensation.
Management expects unit growth of 25–40 new stores in 2026, supported by advanced demographic and site-analytics work for market selection.
Ken Seipel commented, "Women's plus and big men's apparel had strong performance and both remain early-stage businesses with significant runway ahead."
Per store sales target for new openings is set at $1.45 million, with a rent goal of 10% and four-wall flow-through in the mid-teens percentage or higher as a management target.
Remodels are positioned to elevate entire markets through strategic clustering, exemplified by additional stores added in Jacksonville and Columbia, which will coincide with new store openings.
The company reiterated an expected effective tax rate of approximately 0% for the fiscal year ending Feb. 1, 2026.
Heather Plutino projected 20%–25% EBITDA flow-through for incremental sales as a normalized future profit target for periods following the fiscal year ending Feb. 1, 2026.
Industry glossary
Comp store sales (comparable store sales): A metric indicating the sales growth from stores open at least one year, reflecting organic revenue trends excluding new or closed units.
SG&A (selling, general, and administrative expense): Operating costs incurred outside direct production of goods, including payroll, rent, and administrative expenses.
Four-wall flow-through: A measure of the profit generated directly by store operations as a percentage of sales, before corporate overhead is allocated.
DC (distribution center): The company's logistics hub used for inventory processing and fulfillment to stores.
MSA (metropolitan statistical area): A geographic region with a relatively high population density and close economic ties, often used in retail site selection.
AI-based allocation system: An artificial intelligence–driven inventory management platform designed to optimize product distribution by store-level demand signals.
Full Conference Call Transcript
Ken Seipel: Thank you. Well, good morning, everyone, and thank you for joining us today on our second quarter earnings call. I'm pleased to report another quarter of consistent performance, demonstrating disciplined execution and progress across every area of our business. Our transformation remains guided by a clear three-phase framework designed to deliver sustainable profitable growth. First, Phase One is Repair, that's restoring our fundamentals and establishing a strong foundation. Phase Two is our Execute phase, embedding consistent best practices and driving reliable performance. And we are going to be entering in the future Phase Three, which is Optimize, leveraging new systems and expansion capabilities to accelerate our growth.
These three phases create the foundation for a disciplined approach to capture the near-term and long-term opportunity of growth for Citi Trends. Now turning to our results. In the second quarter, we generated strong comparable sales growth of 9.2%, marking our fourth consecutive quarter of mid to high single-digit comp sales growth. Year to date, we delivered year-over-year comp growth of 9.6%. And I'm happy to report that sales momentum consistent with our first half top-line trends has continued into the back-to-school season. This August, we'll be representing thirteen consecutive months of comparable store sales growth. Gross margin dollars have increased meaningfully, achieving our highest rate performance in the last several years.
As our buying teams have fine-tuned assortments for our core customers, we've experienced faster sell-throughs of regular-priced product, reduced markdowns, and improved operational controls for shrinkage and transportation rates. Our SG&A was slightly deleveraged in the quarter due to the inclusion of incentive compensation for the consistent financial performance of our employees. It's been quite a few years since the company achieved its bonus targets. So I'm excited to add performance-based bonus back to our financial profile. Excluding the new performance bonus incentive compensation, our SG&A leveraged in the quarter and leveraged year to date consistent with our guidance. Our top line continues to grow to be broad-based and healthy.
Transaction growth has consistently accounted for the majority of our sales gain, which validates the strategic advantage of our neighborhood locations. And additionally, we saw growth in units per transaction while maintaining stable average unit retails. Also, our performance was consistent across climate zones, regions, and store volume deciles, which underscores the breadth of improvement across the business. Our turnaround is rooted in a clear and unwavering focus on the needs of our African American customer, who is at the center of everything we do. Neighborhood-based locations remain a differentiated advantage with proximity and word-of-mouth serving as powerful traffic drivers.
We continue to strengthen this connection by elevating the cultural relevance of our assortments, refreshing the shopping experience to better align with our brand voice, and investing in customer engagement. Work is underway to design and implement a CRM and loyalty platform that will deepen interaction with our most frequent shoppers, thus enhancing long-term customer value. Our product performance in Q2 was broad-based and balanced across apparel, non-apparel, family basics, home and lifestyle, and children's categories. In all categories, customers responded well to elevated fashions and expansion of brand name apparel. Women's plus and big men's apparel had strong performance and both remain early-stage businesses with significant runway ahead.
Men's delivered improved results as trend-relevant assortments and improved in-stocks on basics resonated with customers. In Children's, a cornerstone of our business has continued strong year-over-year performance. And our customers continue to respond to extreme value deals on well-known brands at exceptional prices as we continue to build capabilities to expand this important segment of our strategy. Looking ahead in product, we've made good progress in improving our three-tiered good, better, and best product assortments, but we are still in early stages.
The majority of our initial initiatives, which include better in-stocks on basic product, accelerated growth of women's plus and big men's sizes, expansion of the consumables category, and the addition of extreme value products have had good early success. We see significant growth runway ahead though as we continue to fulfill consumer demand in all of these categories. In addition, our merchants have identified several growth opportunities through assortment refinement as we learn more about our customers. For example, our men's team is working to develop an expanded and more refined assortment for young men. We believe we are under-serving this trendy value-oriented consumer. Young men's will complement the already strong men's classic and core business.
In our women's apparel, customers are responding to the increased offering of trendy Missy-sized product. Missy product broadens the availability of style and size for women and complements the strong offering of junior product. Customer reaction to our best trendy product has been strong, giving us confidence there's more demand to address. This has led us to add a trend director to identify emerging trends and guide curation of product assortment. We were fortunate to find an accomplished trend director with a successful track record of trend curation at well-known brands in the industry.
I believe the elevation of trend in our men's and women's assortments will be additive and supportive to our merchant teams and resonate strongly with our customers. From an operational standpoint, we made continued progress on our initiatives in the second quarter. Foundational improvements in preseason product planning, in-season allocation execution, and supply chain speed have enabled us to support a 9.2% comp growth while operating with 5.7% less in-store inventory than last year. Working capital optimization provides liquidity and flexibility to react quickly to emerging trends and deal opportunities, while also enhancing gross margin. Our stores continue to make strides in improving neat, clean, and organized shopping experiences for customers.
We've implemented improved in-store navigation signing and updated presentation standards to make shopping experience easier. Our supply chain remains stable with progress against productivity and steam goals. And looking ahead, we're in the process of implementing improved work processes throughout the DCs and implementing special handling areas to assist us in overall processing speed and capacity to grow extreme value products and family footwear. I look forward to sharing more on this initiative on future calls. Looking ahead in operations, test results for our new AI-based allocation system have been well above expectations allowing us to more accurately allocate products based on individual store demand, which has in turn increased sales and improved inventory turns.
We are in the process of implementing AI-based allocations to all categories with expected completion in mid-September in time to impact holiday. And currently, we're in the early stages of developing a complementary AI-based merchandise planning system that we hope to have ready for early 2026. Here again, we'll keep you updated on our progress. As we all know, retail is detailed and execution without measurement is just simply guesswork, which is why our use of KPIs and dashboards for all key functions is critical. The visibility provided helps our team stay on track, identifying where we're hitting the plans and where we need more attention.
The combination of simple repeatable processes supported by operating procedures plus KPIs makes us confident that we'll be able to drive continual operational improvement for years to come. And a few comments on tariffs. As evidenced in our results, we are successfully navigating the ever-changing tariff landscape. In fact, we've actually found the off-price products deal-making environment to be very robust and advantageous. My direction to the team is be aggressive, remain flexible with ample liquidity. Our strategy is working. We intend to play our game and win at our game. Now I'll turn the call over to Heather to discuss the financial performance. Heather?
Heather Plutino: Thank you, Ken, and good morning, everyone. I'm excited to have the opportunity to walk you through the details of our second quarter and first half results as well as our improved outlook for the year. Before I do that, let me echo some themes from Ken's comments. The transformation of Citi Trends is underway and is driving significant improvement in both top and bottom line results. As I've said in previous calls, there's a new energy at Citi Trends and the results we get to share with you today are proof that our team's hard work is paying off. Turning to the specifics of second quarter results.
Starting with the top line, Q2 sales were $190.8 million, up 8% compared to Q2 2024 with comp store sales growth of 9.2%, our fourth consecutive quarter of mid or high single-digit comps. We delivered high single-digit comps in each month of the quarter and saw growth to last year in each of our retail metrics, traffic, basket, and conversion as the impact of our revised merchandise assortment, including off-price deals and more branded extreme value products continues to resonate strongly. As Ken mentioned in his remarks and similar to our first quarter results, second quarter top-line improvement to last year is a story of consistency.
We saw consistent results across climate zones and across store volumes, and we drove consistent broad-based strength across most product categories. We produced a 40% gross margin rate in the quarter as planned, our highest Q2 rate since fiscal 2021 and an 890 basis point expansion versus Q2 last year. Recall that in the second quarter of last year, we incurred significant markdowns from our strategic inventory reset, allowing us to exit aged and slow-moving products while freeing up open to buy for our revised product strategy. The effect of lapping that event, net of the in-season markdown cadence established last year, significantly improved year-over-year markdown expense.
We also drove decreased shrink expense in the quarter as a result of ongoing cross-functional efforts plus the lap of an accrual adjustment last year. Our broad-based Q2 margin rate improvement was also impacted by higher selling margins due to increased full-price selling and a favorable mix of higher margin products, all while maintaining our sharp price value equation throughout the store. And finally, we saw improvement in cost of freight from favorable contract rates put in place last fall. Second quarter adjusted SG&A expense totaled $78.9 million compared to $72.1 million in the prior period.
The increase to last year was driven by higher incentive compensation accrual on improved business performance and store and DC expense to process higher sales. As we shared with you in our last call, we reinstated incentive compensation accruals in 2025 after incurring very minimal bonus and equity expense in the last three quarters of fiscal 2024, causing a bonus to no bonus comparison in the second quarter. On a rate basis, Q2 adjusted SG&A was 41.3% of revenue, 50 basis points higher than the 40.8 rate in Q2 last year. The rate increase was driven entirely by this year's incentive compensation accruals.
All other SG&A levered by approximately 150 basis points in the quarter, reflecting continued disciplined cost controls and the impact of improved top-line results. And it's important to note that for the first half of the year, total adjusted SG&A, including incentive comp levered about 90 basis points to last year. Adjusted EBITDA for the quarter was a loss of $2.6 million in line with management expectations and an increase of $14.6 million versus Q2 2024 results. In the quarter, we sold our 72,000 square foot building in Savannah, Georgia, realizing a gain on the sale of approximately $11 million which is included in reported net income and reported EBITDA, but is excluded from adjusted results.
We will maintain our presence in Savannah, having leased a new smaller office space not far from the building we sold, giving our teams a fresh new space for continued collaboration. During Q2, we remodeled 19 stores, ending the quarter with 28% of the fleet in an updated format. We also closed one store in the quarter, bringing our total store count to 590 locations. Before turning to the balance sheet, let me provide a few details on our performance in 2025. First half comparable store sales were 9.6% with a two-year comp stack of 10.3%. First half comps were driven by approximately 6% increase in transactions.
Adjusted first half EBITDA was $2.8 million an increase of about $21 million to last year. EBITDA growth was driven by $29 million of incremental sales, 480 basis points of gross margin rate expansion and 90 basis points of SG&A leverage. Now turning to the balance sheet. Total inventory dollars at quarter end decreased 12.9% compared to last year, with average in-store inventory down 5.7%. Our success in driving high single-digit increases, sales increases with less inventory reflects our focus on improved inventory efficiency through higher churn, plus improvements in supply chain speed. We remain pleased with our inventory level, composition, and freshness.
At the end of the quarter, we remained in a healthy financial position with a strong balance sheet, including no debt, no drawings on our $75 million revolver and $50 million in cash. Now turning to our fiscal 2025 outlook. Based on our first half results, our confidence in the continued effectiveness of our turnaround plan plus recognition that the macroeconomic environment remains uncertain, we are pleased to update our outlook for 2025 as follows. With the strength of sales in the first half of the year, we now expect full year comp store sales growth of mid to high single digits above our previous outlook of mid single digit growth.
We now expect full year gross margin expansion of approximately 210 basis to 230 basis points versus 2024, slightly above previous outlook due to improved inventory efficiency and initial progress on our planned supply chain improvement. SG&A is expected to leverage in the range of 60 to 90 basis points versus 2024, consistent with our first half trend and an improvement to our previous outlook. Note that this is inclusive of the build of the incentive comp accrual. To be clear, we now expect full year SG&A expense of approximately $310 million an increase in EPS guidance due to cost to process and support higher sales and a higher bonus accrual on better business performance.
With these updates, we now expect full year EBITDA to be in the range of $7 million to $11 million an increase to previous outlook. This revised guidance is $21 million to $25 million above fiscal 2024 results. There is no change to our expected effective tax rate of approximately 0% for the year. We now expect to open three new stores, close three stores and to remodel approximately 60 locations in the year. And finally, full year capital expenditures are now expected to be in the range of $22 million to $25 million.
Before I turn the call back to Ken, I'll reiterate that we are very proud of our Q2 and first half results and the meaningful progress we've achieved so far. Our teams remain focused on continuous improvement with full recognition that there are still significant opportunities ahead of us. We still have processes to refine and areas to optimize as we continue the transformation of our business. The consistency of our performance over the past four quarters gives me confidence that we're building something durable and that our disciplined approach to driving shareholder value will continue to deliver results. With that, I'll turn the call back to Ken. Ken?
Ken Seipel: Thank you, Heather. Before we open the call to Q&A, I do want to share a few thoughts about our longer range of growth for Citi Trends. So looking forward, we are preparing for store expansion growth. We expect to remodel approximately 50 stores per year and expand square footage in the mid single digit range. We have engaged a third-party analytics team to assist us with dissecting the demographics, psychographics, and geo proximity location of our current customers right down to the individual household level. These insights, coupled with a robust financial pro forma, will greatly improve our accuracy and real estate site selection, leading to improved new store return on investment performance.
We've identified several MSAs that are attractive expansion opportunities for Citi Trends in 2026 and beyond. Long range, our goal at Citi Trends is to achieve $40 million or more of EBITDA in 2027. This will be driven by consistent single-digit sales growth, gross margin dollar expansion, leveraged SG&A, and new store expansion. Each initiative within our value creation plan is supported by clear accountability, key performance indicators, and execution rigor. Our leadership team is highly engaged in building out the detailed plans to execute and is fully committed to making these plans a reality. In summary, Citi Trends has delivered four consecutive quarters of comp growth underpinned by transaction increases, broad-based product strength, and disciplined execution.
Our strategy is working, our operational capabilities are advancing, and our customer connection is strengthening. But there's still a lot of work to do. We have processes to refine, we have categories to optimize, and more systems to build, but the path forward is clear. We are confident in our ability to deliver continued transformation, drive shareholder value, and expand our role as a leading neighborhood retailer for African American families. I'll say thank you to our Citi Trends team for their discipline, their dedication, and great results, and thank you to our shareholders for your continued confidence and support. And with that, I'll turn the call back over to the operator, for questions. Donna?
Operator: Thank you. The floor is now open for questions. Our first question today is coming from Michael Baker of D.A. Davidson. Please go ahead.
Michael Baker: Okay, great. Thanks. Hopefully, you can hear me. I wanted to ask great quarter. Thanks. Two one question, one follow-up. Let's first just talk about the expenses and the incentive comp and how that plays out going forward? And just sort of how should we think about expenses on a quarterly basis? I think the math implies about $78 million in SG&A for each quarter in the back half on average. Is that the right run rate going forward as we think about 2026 and 2027?
Heather Plutino: Hey, Mike. Heather, hear you loud and clear. A question on SG&A, sure. 78 per quarter, I think that's exactly right. The thing that I will remind you of though, that's a good average per quarter, but Q4 ticks up about 3% versus Q3 because of holiday sales. So just kind of think about that as you calendarize. And as we go forward into 2026, we haven't conveyed that yet broadly. I can help you with modeling in our follow-up call.
Michael Baker: Well, I guess I don't want to waste my follow-up on this, but let me ask two more if I could. One, just thinking about that and the gross margin outlook, what's the right sort of incremental margin flow through on incremental sales? I understand there's a lot of noise this year, particularly as you cycled some things last year, but more about 2026 and 2027. How do we think about incremental margins?
Heather Plutino: Yes. So we've mentioned before that our goal is 20% to 25% EBITDA flow through, which we define as the change in EBITDA over the change of sales versus the prior year. This particular fiscal year is a little choppy because of some odd compares in the last year period and the build of the incentive comp this year. So if you try to normalize that, then you end up at about 25% certainly in the back half of the year of 2025. But that's what we're looking at going forward is 20% to 25% profit flow through.
Michael Baker: Got it. All right. If I could sneak in one more. I'm intrigued by the trend director, I think you called her, or fashion creative director or him. I guess I don't know if it's her. Any examples of what you're learning from that new hire? How we think that might show up in terms of what the merchandise looks like?
Ken Seipel: Yeah, a couple of things on that, Mike. Thanks for the question. Since she's joined, she's really been acutely focused on really interpreting and understanding the consumer voice. But more importantly, the current landscape around the consumer. And what we've been able to gain from her insights is really taking what I call the voice of the consumer and starting to translate that into tangible style and tangible trends. So looking at obviously all the emerging things that are happening culturally around, on the landscape, it's pretty difficult to sift through all But she's done a nice job of sifting through all the things, all the noise out there, and distilling it into a handful of key focus trends.
And what that has allowed our merchants to do then is to go to market with very specific filters on curating against this trend. And so we're starting to see some of that show up. Gave props to our men's team earlier. They've done a nice job of embracing, the concept right out the gate, they're getting good results in addition to the work that they're doing in their core programs, which has been good work. So these two things kind of coming together give us a sense that we're onto something. And I believe that, you'll start to see the results of better, more accurate, and more thoughtful curation as we get into Q4.
I'm really excited about where we're headed there.
Michael Baker: Awesome. Great. Appreciate the time.
Ken Seipel: Thanks, Mike.
Operator: Thank you. The next question is coming from Jeremy Hamblin of Craig Hallum. Please go ahead.
Jeremy Hamblin: Thanks and congrats on the impressive results. I wanted to get into the commentary about, it sounds like the momentum has really continued here in Q3 even as you're lapping much, much tougher compares. Wanted to see if you can provide a bit more color on what's driving that sustained momentum? I know you talked about broad-based execution in Q2. But are you seeing more branded deals potentially driving the sustained strength for more well-rounded assortment? Any color you might be able to share on that would be helpful.
Ken Seipel: Yes. Sure, Jeremy. Thanks for the question. And it literally is all of the above. What's happened I think in the course of the last year is we've continued to refine starting first with I mentioned on the call earlier our preseason planning capabilities where we've really been thoughtful about how do we go in and attack the season, as we call it. So we really we put a good roadmap out there for winning in Q3 and what do we need to do to get Q3 off to a good start from a back-to-school perspective. And then that was supported with very thoughtful plans from all of our merchant teams.
We do something in a category review process where we're trying put stakes in the ground on what categories can grow. And then behind that, when we back that up with the finances, right, and the open to buy and the amount of receipts required to support those ideas. And it's a very basic program, to be honest with you. Most retailers do it, but I think we're doing it better than ever and very disciplined and very thoughtful about it. And then the bottom line is you can put a good plan together, but then it comes down to execution. So that's where our teams have been out, in the market, finding the better product, finding the better styles.
So I'd give you a combination, and you can see this in our store. But to give you one example, the team really embraced the brand True Religion, which has been around for a while, but it's actually resonated across the board with our consumers. And it was shared against multiple categories. And it's showing up across the store in all lines versus just in one category where we might have approached that in the past. And those ideas like that, there are many more that our teams are building on each other's ideas, and we're starting to see a much better curated product assortment for the total consumer.
And then I'd be remiss if I didn't mention our teams in the field and the execution that's going on there, where they've really stepped up their game considerably when it comes to moving freight from the backroom to the floor in a more expedient way. Presentation standards have improved. NRDC as well is moving things through. So it literally is from my desk. It's a combination of all things kinda coming together quite well.
And I guess I would also, share with you that as we sit around as leadership team and think about what's working and what opportunities we have ahead, frankly, come up with more things on the to do list than we do on the done list. Right? And, it's a little bit humbling to realize, how far we've come and how far we really have to go. But anyway, sorry about the rambling answer there, but the point is, is it really truly is, it's a combination of all of the detailed execution of the strategy kind of coming together.
Jeremy Hamblin: Very helpful. I wanted to shift gears then and talk a little bit about the store base. So you've increased the number of remodels, from 50 to 60 that you planned for this year and I think it sounds like 50 on an ongoing basis. And then as you plan to get back into a unit growth mode, should we be thinking that FY 2026 is a mid single digit type unit growth. And then if you could just share some of the economics behind how much the remodels cost, what type of lift you're getting from them and then what you expect kind of the new store economics to be on new openings on a go forward basis?
Ken Seipel: For sure. I'll give you some of the strategy then and have Heather fill in some of the color on the results there for you. Yes, a couple of things. So this year, we did adjust. We actually added a few more remodels. I think we previously announced 50 and we had line of sight to add 10 more for strategic reasons. Actually, to let you know what we're up to, we added some stores in our Jacksonville market and Columbia, South Carolina market to complement a couple of new store openings we have in those markets. We're going to try to go in and revitalize those markets and refresh the brand on an entire MSA basis.
I'm excited about what that might do. We're going to learn a little bit more about that. Our new stores open up in October, and all of those remodels will be completed there. So the reason we added 10 more stores was just to accomplish a full remodel in both of those marketplaces. Going forward on a new store growth perspective, we are going get into mid single digits. We have line of sight to a number of sites already for 2026. We don't have an exact number of where we're going to be in there, but there'll be some number between twenty five and forty new stores in 2026.
I would expect at least 25 in that mix and then maybe more, we'll see. We'll have I'll be able to announce that on future calls more specifically, but it'll be in that range. And then the out years after that, we'll have the flywheel built. So we're still kind of building our pipeline. And as I mentioned earlier in my remarks, we're looking very specifically at opportunistic MSAs across the nation. We've identified many of those already as places to go. And now we have the hard work of trying to get in and find the right site inside of the market. So that work is underway as we speak as well in a lot of key markets.
The final thing that I'll say in terms of return on investment at a high level, our new stores, we're putting them under a financial rigor. And I want you to think about our new store growth going forward as a triangle, right? There's on one side of the triangle is, the rigor and discipline around making sure that we have the right site selection, consumer demographics, and so forth. The other part of the triangle is the actual end market site itself, being an attractive center and so forth. And then the third part of the triangle, is financial rigor, which is making sure that we hold ourselves to a high standard of return on investment.
And so with that, I'll turn that over to Heather to let her fill in a little bit of color on that as well as the remodel question you had.
Heather Plutino: Yes. I'm going to start with a remodel, if you don't mind, Jeremy. Good morning, by the way. You asked about remodel expense and results. So remodel expense, you'll remember, I think it was 2023. We cut the expense of a remodel in about half, right? So on average, we're at somewhere between $85,000 per location to $130,000 I can tell you that the remaining remodels for this year are averaging at $100,000 per store. And these are high volume stores, like $1.9 million per. And then from a results perspective, we continue to see sales lift when we remodel stores. It varies by market, but we're still very comfortable that we're getting return.
I think it's important though that on a store by store basis that amount is going to change store by store. So in some locations, it's really a matter of refreshing the fleet and doing a market presentation, right? So Ken just talked about Jacksonville, talked about Columbia, South Carolina. We're going to touch stores in that market to make sure that we are doing a full market press on here's the new iteration of Citi Trends. We want excitement in every door. We want excitement with our associates. We don't want anybody to feel left behind.
So we're thinking about remodels maybe a little bit differently in that it's about fleet maintenance as much as it is about driving incremental sales. For new stores, the financial rigor that Ken spoke of, yes, We are applying financial metrics, making sure we've got the right return on investment. We've got the right payback period. We've got the right with the right, the right. We're looking at it very closely in partnership with our real estate team. Top line, you've heard Ken talk about this before. Ideally, we want our per store average at about 1.45, not to put too fine a point on it, but $1.45 million per door. Are we going get that every time?
No, but that's what we're striving for, right? And rent at 10%. We've got control payroll, all of that, right? So from a four wall flow through, we look for mid teens and up to make sure that we're supporting the financial performance of the full chain. So that's kind of a look behind the curtain there.
Jeremy Hamblin: That's great color. If I could sneak in just one more. Ken, on the last call you had mentioned some supply chain initiatives that you're working on trying to reduce, I think, the number of days in supply chain and that would allow you to save some money and cost. And I wanted to just understand where are you on that initiative? I know it sounds like as you make progress, you realize you have more progress to make. But I was hoping for a quick update on where that initiative stands. Thank you.
Ken Seipel: Yes, for sure, Jeremy. We are in, again, use the term early stages, but I think it's fair to say early stages there. We've, what I would call taking out the low hanging fruit. Obviously, we're much faster now. And so think about the supply chain in three big parts, okay? Part number one is vendor to DC. And we're better at managing that in our transportation routing and speed of picking up. From there, we've taken out a few days of that moment. Then you have your in DC processing. And then the third part is DC to store. And we've actually sped up the DC to store considerably. That we've changed, our routing, to, actually UPS carrier.
And it's taken three or four days out of supply chain from DC to store. So the team did that really at the beginning of the year. We learned how to optimize that, and so we're significantly faster there. The area that we're really focused on right now is what I would call the NDC portion. And some of the work that is underway is in our receiving characteristics. I mentioned earlier Invent Analytics, the AI-based system, when we throw the switch on that in September, that will save two days out of our receiving process, a day and a half right there.
And then we're gonna be adding to that better ticketing standards, which are already being worked on and getting in place right now. That will speed up our ticketing portion. And then there's a processing portion which will speed up as well. So those things have been designed now. We understand what we need to do. Now it's a matter of getting them implemented. And so we're at different stages of implementation. But I would expect over the third quarter that the majority of these ideas will at least be implemented in our DC. And then we'll start to kind of see and feel better optimization as we get into Q4.
So it definitely is a work in progress, but we've made good steps forward with a lot more to do there in the DC.
Jeremy Hamblin: Thank you so much for all the color. Appreciate it.
Ken Seipel: Karen. Thanks for the question, Jeremy. Appreciate it.
Operator: Thank you. At this time, I would like to turn the floor back over to Mr. Seipel for closing comments.
Ken Seipel: All right. Well, I want to thank everyone for joining us today. We look forward to keeping you updated on our progress. Goodbye.
Operator: Ladies and gentlemen, this concludes today's event. You may disconnect your lines and log off the webcast at this time and enjoy the rest of your day.