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What changed in Citi Trends Inc's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Citi Trends Inc's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+225 added−246 removedSource: 10-K (2023-04-13) vs 10-K (2022-04-14)

Top changes in Citi Trends Inc's 2023 10-K

225 paragraphs added · 246 removed · 182 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

65 edited+8 added−8 removed36 unchanged
Biggest changeSee “Community Involvement” under “Human Capital Management” below for more information on our initiatives to make a difference, including our CITI cares Council formed in August 2020 to create and oversee initiatives of change that will have a positive impact in the lives of our customers and associates .
Biggest changeOur team is committed to making a difference in the African American and multicultural communities that we serve. We are on a journey towards enhancing our company-wide sustainability, diversity and inclusion and ethics-based efforts. See “Community Involvement” under “Human Capital Management” below for more information on our initiatives to make a difference.
Our buying team tests new emerging trends before reordering and actively manages the mix of basic, fashion, trend and branded products in our stores to keep the offering fresh and current. Superior Value Proposition . We seek to offer top quality, fashionable merchandise for way less spend.
Our buying team tests new and emerging trends before reordering and actively manages the mix of basic, fashion, trend and branded products in our stores to keep the offering fresh and current. Superior Value Proposition . We seek to offer top quality, fashionable merchandise for way less spend.
Our store associates are trained to provide friendly and helpful customer service to deliver a positive shopping experience. Many of our store associates live in the neighborhoods where our stores are located and frequently shop our stores themselves.
Friendly and Helpful Store Associates . Our store associates are trained to provide friendly and helpful customer service to deliver a positive shopping experience. Many of our store associates live in the neighborhoods where our stores are located and frequently shop our stores themselves.
We also believe we offer a more inviting store format than the traditional retailers, including our assortment and layout of merchandise, use of carpeted floors and colorful signage, and fixtures that are easy to shop.
We also believe we offer a more inviting store format than the traditional retailers, including our assortment and layout of merchandise, use of carpeted floors and colorful signage, and use of fixtures that are easy to shop.
In addition, three of our nine board members are African American females. Citi Trends embraces diversity and is committed to continued improvements throughout the Company. The Corporate Social Responsibility (“CSR”) Committee of the board monitors the Company’s progress towards its diversity and inclusion objectives, metrics and compliance with the Company’s responsibilities as an equal opportunity employer.
In addition, three of our nine board members are African American females. Citi Trends embraces diversity and is committed to continued improvements throughout the Company. The Corporate Social Responsibility (“CSR”) Committee of the board monitors the Company’s progress towards its diversity and inclusion objectives and metrics and compliance with the Company’s responsibilities as an equal opportunity employer.
In February 2021, we launched our Black History Makers program to honor Black entrepreneurs who are making an impact in their communities. The program is designed to increase awareness of Black-owned businesses and provided ten $5,000 grants to Black business owners.
In February 2021, we launched our Black History Makers program to honor Black entrepreneurs who are making an impact in their communities. The program is designed to increase awareness of Black-owned businesses, and we provided ten $5,000 grants to Black business owners.
Our merchandise is represented by six distinct “Citis” within the store: ● Ladies: a wide selection of apparel for juniors and women (plus size), including fashion sportswear, outerwear, sleepwear, lingerie and scrubs. ● Mens: a wide selection of apparel for men and big men, including fashion sportswear and outerwear. ● Kids: fashion clothing for boys and girls up to size 20 and sizes for newborns, infants and toddlers, as well as kids uniforms and kids accessories. ● Accessories and Beauty: fashionable handbags, luggage, hats, belts, sunglasses, jewelry and watches for men and women, as well as basic undergarments for the entire family and expansive beauty and fragrance offerings for women and men. ● Home and Lifestyle: home goods for the bedroom, bathroom, kitchen and decorative accessories, plus an eclectic composition of wants and needs such as books, food, tech products, team sports products, toys, health and beauty products and seasonal items. ● Footwear: casual and dress footwear in sizes for mens, ladies and kids.
Our merchandise is represented by six distinct “Citis” within the store: ● Ladies: a wide selection of apparel for juniors, missy and women (plus size), including fashion sportswear, outerwear, sleepwear, lingerie and scrubs. ● Mens: a wide selection of apparel for men and big men, including fashion sportswear and outerwear. ● Kids: fashion clothing for boys and girls up to size 20 and sizes for newborns, infants and toddlers, as well as kids uniforms and kids accessories. ● Accessories & Beauty: fashionable handbags, luggage, hats, belts, sunglasses, jewelry and watches for men and women, as well as basic undergarments for the entire family and expansive beauty and fragrance offerings for women and men. ● Home & Lifestyle: home goods for the bedroom, bathroom, kitchen and decorative accessories, plus an eclectic composition of wants and needs such as books, food, tech products, team sports products, toys, health and beauty products and seasonal items. ● Footwear: casual and dress footwear in sizes for Mens, Ladies and Kids.
We merchandise our stores to create a specialty store environment that serves as a destination that meets the apparel and non-apparel needs of the entire family. Every store offers a wide variety of always-changing products for men and women of all sizes and children from newborn to size 20.
We merchandise our stores to create a specialty store environment that serves as a destination that meets the apparel and non-apparel needs of the entire family. Every store offers a wide variety of always-changing, curated products for men and women of all sizes and children from newborn to size 20.
Our buyers also regularly review the age and performance of merchandise and manage both the reordering and markdown processes. Store Operations Our stores are located in the heart of the vibrant lower income communities we serve. We hire a diverse staff of women and men from the local area surrounding our stores.
Our buyers also regularly review the age and performance of merchandise and manage both the reordering and markdown processes. Store Operations Our stores are located in the heart of the lower-income communities we serve. We hire a diverse staff of women and men from the local area surrounding our stores.
Second, we maintain strong relationships with nationally recognized brands that we partner with to buy and customize products that are geared in size, color and style to our core customers. The majority of our merchandise is first-quality and purchased in season.
Second, we maintain strong relationships with nationally recognized brands that we partner with to buy and customize products that are geared in size, color and style towards our core customers. The majority of our merchandise is first-quality and purchased in season.
Our buying team located primarily in New York City plans, develops and creates curated assortments by purchasing goods developed specifically with our customers in mind and opportunistically available excess inventory from reliable and trustworthy vendors, with the majority of our merchandise purchased for the current season and a lesser quantity held for sale in future seasons.
Our buying team, located primarily in New York City, plans, develops and creates (i) curated assortments by purchasing goods developed specifically with our customers in mind and (ii) opportunistically available excess inventory from reliable and trustworthy vendors, with the majority of our merchandise purchased for the current season and a lesser quantity held for sale in future seasons.
We believe that building connections between our associates, their families and our communities creates a more meaningful, fulfilling and enjoyable workplace. We formed the CITI cares (“cares” - Citi Trends Against Racism Employee Solutions) Council in August 2020 to create and oversee initiatives of change that will have a positive impact in the lives of our customers and associates.
We believe that building connections among our associates, their families and our communities creates a more meaningful, fulfilling and enjoyable workplace. We formed the CITI cares (“cares” - Citi Trends Against Racism Employee Solutions) Council in August 2020 to create and oversee initiatives of change that will have a positive impact in the lives of our customers and associates.
Our management team plans and drives our growth strategy, which is based on our constant focus on providing trend-driven merchandise anchored in value to the lower income, underserved 4 Table of Contents African American and Latinx populations. We believe our management team is integral to our success and positions us well for long-term growth.
Our management team plans and drives our growth strategy, 4 Table of Contents which is based on our constant focus on providing trend-driven merchandise anchored in value to the lower income, underserved African American and multicultural populations. We believe our management team is integral to our success and positions us well for long-term growth.
We have always led with a diverse and inclusive workplace; more than 80% of our store associates are African American or Latinx, and more than 90% of our store management positions are filled by women. As a result, our store associates cultivate a unique culture at our stores that creates a high level of connectivity with our customers.
We have always led with a diverse and inclusive workplace; more than 80% of our store associates are African American or multicultural, and more than 90% of our store management positions are filled by women. As a result, our store associates cultivate a unique culture at our stores that creates a high level of connectivity with our customers.
We believe these core values represent the emotional connection that our customers and associates have with Citi Trends and are integral to the successful achievement of our growth plans. Diversity and Inclusion . We believe that a diverse and inclusive team is critical to our success.
We believe these core values represent the emotional connection that our customers and associates have with Citi Trends and are integral to the successful achievement of our long-term growth plans. Diversity and Inclusion . We believe that a diverse and inclusive team is critical to our success.
The typical store is staffed with a Customer Experience Manager (“CEM”), Citi Merchandise Manager (“CMM”) and Citi Operations Manager (“COM”), along with seven to eight part-time Sales Associates, all of whom rotate work days on a shift basis.
The typical store is staffed with a Customer Experience Manager (“CEM”), Citi Merchandise Manager (“CMM”) and Citi Operations Manager (“COM”), along with five to eight part-time Sales associates, all of whom rotate work days on a shift basis.
The Darlington distribution center has 550,000 square feet of space, while the Roland distribution center has 565,000 square feet of space. The distribution center value-added services include, but are not limited to, receiving, price ticketing, packing and shipping specific store-allocated quantities.
The Darlington distribution center has 550,000 square feet of space, and the Roland distribution center has 565,000 square feet of space. The distribution centers’ value-added services include, but are not limited to, receiving, price ticketing, packing and shipping specific store-allocated quantities.
The following table provides the percentage of net sales for each Citi within the store: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fiscal Year Citis 2021 2020 2019 Ladies ​ 26 % 26 % 26 % Kids ​ 22 % 23 % 23 % Mens ​ 18 % 18 % 16 % Accessories & Beauty ​ 18 % 16 % 17 % Home & Lifestyle ​ 9 % 9 % 7 % Footwear ​ 7 % 8 % 11 % ​ Our goal is to deliver outstanding value every day.
The following table provides the percentage of net sales for each Citi within the store: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fiscal Year Citis 2022 2021 2020 Ladies ​ 26 % 26 % 26 % Kids ​ 23 % 22 % 23 % Accessories & Beauty ​ 18 % 18 % 16 % Mens ​ 17 % 18 % 18 % Home & Lifestyle ​ 8 % 9 % 9 % Footwear ​ 8 % 7 % 8 % ​ Our goal is to deliver outstanding value every day.
We welcome everyone with “Hi, welcome to Citi Trends” and we develop a longstanding rapport with many of our customers, many of whom we know by name. Every Citi Trends store presents a specialty store environment with a wide array of offerings.
We welcome everyone with “Hi, welcome to Citi Trends,” and we develop a longstanding rapport with many of our customers, many of whom we know by name. Every Citi Trends store presents a specialty store environment with a wide array of offerings.
To foster vendor relationships, we pay vendors promptly and do not ask for typical retail concessions, such as promotional and markdown allowances. Dynamic Experience in a Friendly and Fun Environment . We seek to provide a fashion-focused shopping environment that is similar to a specialty apparel retailer, rather than a typical discount or big box retailer.
To foster vendor relationships, we do not ask for typical retail concessions, such as promotional and markdown allowances. Dynamic Experience in a Friendly and Fun Environment . We seek to provide a fashion-focused shopping environment that is similar to a specialty apparel retailer, rather than a typical discount or big box retailer.
We strive to make our stores a destination where everyone is welcome, and our store associates foster that vision every day through enriched customer engagement. Cost-Effective Store Locations and New Store Economics . We locate our stores in high-traffic outdoor community shopping centers that are convenient to low and moderate income neighborhoods.
We strive to make our stores a destination where everyone is welcome, and our store associates foster that vision every day through enriched customer engagement. Compelling and Cost-Effective Store Locations . We locate our stores in high-traffic outdoor community shopping centers that are convenient to low and moderate income neighborhoods.
The average selling space of our 609 stores is approximately 11,000 square feet, which allows us the space and flexibility to organize our six “Citis” of business in exciting and appealing ways.
The average selling space of our 611 stores is approximately 11,000 square feet, which allows us the space and flexibility to organize our six “Citis” of business in exciting and appealing ways.
We strongly believe that our growth strategy centered around these four areas will accelerate our sales and earnings growth. 5 Table of Contents Product and Value Our merchandising strategy is to offer fresh and fashionable apparel, accessories and home trends for way less spend for value-conscious families.
We strongly believe that our business strategy centered around these four areas will accelerate our long-term sales and earnings growth. 5 Table of Contents Product and Value Our merchandising strategy is to offer fresh and fashionable apparel, accessories and home trends for way less spend for value-conscious families.
We strive to provide our customers with a place that is fresh 3 Table of Contents and fun for the family at prices that don’t break the bank . We believe the following business strengths differentiate us from our competitors and are important to our success: Focus on Fashion and Trend Mix .
We strive to provide our customers with a place that is fresh and fun for the family at prices that don’t break the bank . We believe the following business strengths differentiate us from our competitors and are important to our success: Focus on Fashion and Trend Mix .
As a result, we believe there is significant demand for a specialty value retailer that addresses the market of low and moderate income customers generally and, particularly, African American, Latinx and other customers who seek extreme value for fashion apparel, accessories and home goods. See Item 1A. Risk Factors in this Report for additional information regarding competition in our markets.
As a result, we believe there is significant demand for a specialty value retailer that addresses the market of low-income customers who seek extreme value for fashion apparel, accessories and home goods, particularly, African American and multicultural customers. See Item 1A. Risk Factors in this Report for additional information regarding competition in our markets.
ITEM 1. BUSINESS Overview Citi Trends, Inc. (“Citi Trends” or the “Company”) is a growing specialty value retailer of apparel, accessories and home trends for way less spend, primarily for African American and Latinx families in the United States.
ITEM 1. BUSINESS Overview Citi Trends, Inc. (“Citi Trends” or the “Company”) is a leading specialty value retailer of apparel, accessories and home trends for way less spend, primarily for African American and multicultural families in the United States.
We strive to foster an intentionally inclusive, diverse and productive working environment where our associates are valued and respected. We continue to focus on attracting, developing and retaining team members that reflect the diverse communities we serve. As of January 29, 2022, more than 80% of our team members are African American or Latinx and 84% are female.
We strive to foster an intentionally inclusive, diverse and productive working environment where our associates are valued and respected. We continue to focus on attracting, developing and retaining team members that reflect the diverse communities we serve. As of January 28, 2023, more than 80% of our team members are African American or multicultural and 84% are female.
We believe we have a competitive advantage in our offering of fashion and trends at everyday low prices, and our strategy of focusing on African American and Latinx customers puts Citi Trends in a unique competitive position.
We believe we have a competitive advantage in our offering of fashion and trends at everyday low prices, and our strategy of focusing on African American and multicultural customers puts us in a unique competitive position.
Information on our website is not part of this or any other report we file or furnish to the SEC . 10 Table of Contents
Information on our website is not part of this or any other report we file or furnish to the SEC .
As of January 29, 2022, more than 80% of our store associates are African American or Latinx, and more than 90% of our store management positions are filled by women. We cater to entire families and offer a one-stop shopping experience in the underserved communities in which we operate.
As of January 28, 2023, more than 80% of our store associates are African American or multicultural, and more than 90% of our store management positions are filled by women. We cater to entire families and offer a one-stop shopping experience in the communities in which we operate.
We believe our value proposition provides important access to trends that would otherwise be out of reach for the lower income customers we serve. We do not employ high-low pricing strategies; instead, our everyday low price points offer superior value, allowing our customers to purchase multiple items per visit.
We believe our value proposition provides important access to trends for the lower-income customers we serve. We do not employ high-low pricing strategies; instead, our everyday low price points offer superior value, allowing our customers to purchase multiple items per visit.
We also maintain an informational website at www.cititrends.com which showcases our latest in-store products and provides information about our business, including a store locator. 7 Table of Contents Distribution The substantial majority of merchandise sold in our stores is shipped directly from our company-owned distribution centers in Darlington, South Carolina and Roland, Oklahoma, utilizing third-party delivery partners.
Our website at www.cititrends.com showcases our latest in-store products and provides information about our business, including a store locator. 7 Table of Contents Distribution The majority of merchandise sold in our stores is shipped directly from our company-operated distribution centers in Darlington, South Carolina and Roland, Oklahoma, utilizing third-party delivery partners.
As of January 29, 2022, we had approximately 3,000 full-time and approximately 2,400 part-time associates. Of these associates, approximately 4,500 are employed in our stores and the remainder are employed in our distribution centers, buying offices and corporate office. We are not a party to any collective bargaining agreements, and none of our associates are represented by a labor union.
As of January 28, 2023, we had approximately 2,700 full-time and approximately 2,100 part-time associates. Of these associates, approximately 4,000 are employed in our stores and the remainder are employed in our distribution centers, buying offices and corporate office. We are not a party to any collective bargaining agreements, and none of our associates are represented by a labor union.
A store-level planning system assists our planning and allocation team in their efforts to allocate merchandise to individual stores based on sales performance and planned inventory levels. We plan to implement significant technology upgrades to each of these systems in fiscal 2022.
A store-level planning system assists our planning and allocation teams in their efforts to allocate merchandise to individual stores based on sales performance and planned inventory levels. We plan to implement significant technology upgrades to each of these systems in fiscal 2023 after a system disruption at the end of fiscal 2022 delayed our original plans.
We will continue to execute on our roadmap in fiscal 2022 with the planned implementation of an upgraded ERP system for our merchandising and finance teams in 2022, as well as an increased focus on modernizing our supply chain systems and further enhancing our merchandising, planning and allocation systems to advance our use of data and analytics.
We will continue to execute on our roadmap in fiscal 2023 with the planned implementation of an upgraded ERP system that was delayed due to the cyber disruption at the end of fiscal 2022, as well as an increased focus on modernizing our supply chain systems and further enhancing our merchandising, planning and allocation systems to advance our use of data and analytics.
Competition The markets we serve are highly competitive. We compete with a broad range of retailers, including national chains, mass merchants, discount stores and specialty stores with both physical locations and online stores. The principal measures of competition in the retail business are fashion, assortment, pricing and presentation.
Competition The markets we serve are highly competitive. We compete with a broad range of retailers, including national chains, mass merchants, discount stores and specialty stores with both physical locations and online stores.
Our CTx format is a completely redesigned floor layout with an emphasis on visual merchandising that provides an enhanced shopping experience for our customers and drives sales conversion. Going forward, all of our new and remodeled stores will be based on the CTx format. Friendly and Helpful Store Associates .
Our CTx format is a completely redesigned floor layout with an emphasis on visual merchandising that provides an enhanced shopping experience for our customers and drives sales conversion. Going forward, all of our new and remodeled stores will be based on the CTx format. Approximately 13% of our fleet was in the CTx format as of January 28, 2023.
Our stores receive multiple shipments of merchandise each week from our distribution centers. In addition, we initiated a drop-shipment program in fiscal 2020 that we continued to expand in fiscal 2021 that enables us to expedite the delivery of select merchandise to our stores by shipping directly from our vendors.
Our stores receive multiple shipments of merchandise each week from our distribution centers. In addition, we initiated a vendor direct-to-store shipping program in fiscal 2020 that continues to enable us to expedite the delivery of select merchandise to our stores by shipping directly from our vendors.
We use our social media channels to highlight our brand and engage our customers with compelling digital content on a regular basis.
We generally focus our advertising efforts on utilizing emails, social media and text messaging. We use our social media channels to highlight our brand and engage our customers with compelling digital content on a regular basis.
We generally utilize previously occupied store sites, which enables us to obtain attractive rents. At the same time, from an investment perspective, we seek to design stores that are inviting and easy to shop, while limiting startup and fixturing costs. Our store growth is supported by our new store economics, which we believe to be compelling.
We generally utilize previously occupied store sites, which enables us to obtain attractive rents. At the same time, from an investment perspective, we seek to design stores that are inviting and easy to shop, while limiting startup and fixturing costs. Highly Talented and Motivated Leadership Team .
Historically, sales in the first and fourth quarters have been higher than sales achieved in the second and third quarters of the fiscal year. Expenses and, to a greater extent, operating income, vary by quarter.
Historically, sales in the first and fourth quarters have been higher than sales achieved in the second and third quarters of the fiscal year. Expenses and, to a greater extent, operating income, vary by quarter. Results may fluctuate due to changes in our business, consumer spending patterns and the macroeconomic environment.
Patent and Trademark Office on the Principal Register for various apparel brands: “Citi Steps,” “Citi Trends Fashion for Less,” “Lil Ms Hollywood,” “Red Ape,” and “Vintage Harlem.” Our policy is to pursue registration of our marks and to oppose vigorously infringement of our marks. Seasonality The nature of our business is seasonal.
Patent and Trademark Office include “Citi Trends,” “Citi Steps,” “Citi Trends Fashion for Less,” “CitiHome,” “CitiCARES,” “Lovestar,” “MCMXXXIII,” “Lil Ms Hollywood,” “Red Ape,” and “Vintage Harlem.” Our policy is to pursue registration of our marks and to vigorously protect them. Seasonality The nature of our business is seasonal.
Our new store model presents an attractive average payback period of two years on our initial investment. Highly Talented and Motivated Leadership Team . Our senior management team, led by David Makuen, our Chief Executive Officer, has extensive value retail experience across a broad range of disciplines, including merchandising, real estate, finance, store operations, supply chain management and information technology.
Our senior management team, led by David Makuen, our Chief Executive Officer, has extensive retail experience across a broad range of disciplines, including merchandising, real estate, finance, store operations, supply chain management and information technology.
Growth Strategy We believe that Citi Trends is in a unique position for growth. We have a loyal customer base, a long runway for store growth and a motivated leadership team, supported by a healthy balance sheet. We have identified four strategic areas of focus that we believe will accelerate our sales and earnings growth over the next few years.
Business Strategy We believe that Citi Trends is in a unique position to serve our loyal customer base, with a long runway for store growth and a motivated leadership team supported by a healthy balance sheet. We have identified the following four priorities that we believe will support long-term sales and earnings growth: Driving Comparable Store Productivity.
We are currently investing in systems and data to enhance our teams’ roles and how they operate. ​ ● “Move” translates to our supply chain and how we move goods from the time an order is placed through getting it to the selling floor.
We are currently investing in systems and data to enhance our teams’ roles and operations. ​ ● “Move” comprises our supply chain and our methods for moving goods from the time an order is placed until it arrives at the selling floor.
Investments in this area are in progress and include upgrades to our distribution centers and system enhancements in order to increase speed and productivity. ​ ● “Sell” relates to both operations at our retail stores and adding new stores to our fleet. Our investments in this area consist primarily of expanding and enhancing the chain in our new CTx format.
Investments in this area include upgrades to our distribution centers and system enhancements in order to increase speed and productivity. ​ ● “Sell” relates to operations at our retail stores, remodels of our existing stores and additions of new stores to our fleet.
In addition to salaries, these programs (which vary by position) include annual bonuses, stock awards, a 401(k) match, healthcare and insurance benefits, paid time off and personal/family leave. Training and Development . Our associates are critical to achieving our goals, and we strive to hire associates with high energy levels and motivation.
We provide competitive compensation and comprehensive benefits programs to help meet the needs of our associates. In addition to salaries, these programs (which vary by position) include annual bonuses, stock awards, a 401(k) match, healthcare and insurance benefits, paid time off and personal/family leave. Training and Development .
Commensurate with the introduction of our new purpose and values, we are in the process of developing significant enhancements to our training and development programs to further ensure they provide associates with the resources they need to help achieve their career goals, build management skills and lead their organizations. Community Involvement .
Commensurate with our purpose and values, we continually seek ways to enhance our training and development programs to further ensure they provide associates with the resources they need to help achieve their career goals and build management and leadership skills. 9 Table of Contents Community Involvement .
The CITI cares Council is a diverse group of associates who are passionate about making a difference. They represent every division and level of the company, including both genders, multiple ethnicities and different geographies.
The CITI cares Council is a diverse group of our associates who are passionate about making a difference. They represent every division and level of the company that reflects gender, ethnic and geographic diversities.
We have well-established store operating policies and procedures and an extensive 30-day in-store training 9 Table of Contents program for new store management members. Sales associates also participate in a 14-day customer service and store procedures training program, which is designed to enable them to assist customers in a friendly and helpful manner.
Sales associates also participate in a 14-day customer service and store procedures training program, which is designed to enable them to assist customers in a friendly and helpful manner.
Our stores average approximately 11,000 square feet of selling space and are typically located in outdoor community shopping centers across a variety of urban, suburban and rural markets. As of January 29, 2022, we operated 609 stores in 33 states with a focus on delivering a memorable store experience anchored in value.
Our stores average approximately 11,000 square feet of selling space and are typically located in outdoor community shopping centers across a variety of urban, suburban and rural markets.
We also leverage consumer insights and analytics to add incremental assortments to our offerings. Continued expansion of non-apparel categories and investments in systems and automation will further optimize our product mix.
We practice rigorous inventory management, prioritizing choice and breadth over depth, improving our speed to market and driving faster turns. We also leverage consumer insights and analytics to add incremental assortments to our offerings appealing to both African American and multicultural families. Continued expansion of non-apparel categories and investments in systems and automation will further optimize our product mix.
In February 2022, we launched our second annual campaign for this program to build on the momentum from last year.
We conducted the program again in February 2022, and we launched our third annual campaign for this program in February 2023 to continue building on the momentum.
Through a combination of products made exclusively for our core customers and highly recognized brands grounded in everyday value, we are known for delivering constant newness and freshness, resulting in a high repeat shopping rate. We practice rigorous inventory management, prioritizing choice and breadth over depth, improving our speed to market and driving faster turns.
Through a combination of products made exclusively for our core customers and highly recognized brands grounded in everyday value, we are known for delivering newness and freshness, resulting in a high-repeat shopping rate. Our open-to-buy process allows us to be flexible and respond to trends.
In response to the COVID-19 pandemic, we implemented significant changes that we determined were in the best interest of our associates as well as the communities in which we operate. We continue to follow guidance released by state and federal health officials to create a safe environment for our associates to work and our customers to shop.
Accordingly, we are committed to the health, safety and wellness of our associates. In response to the COVID-19 pandemic, we implemented significant changes that we determined were in the best interest of our associates as well as the communities in which we operate.
Competitive Strengths and Strategies Our goal is to be the leading specialty value retailer of apparel, accessories and home trends for African American and Latinx families with an average annual household income of approximately $40,000.
As of January 28, 2023, we operated 611 stores in 33 states, with a focus on delivering a memorable store experience anchored in value. 3 Table of Contents Competitive Strengths and Strategies Our goal is to be the leading specialty value retailer of apparel, accessories and home trends for African American and multicultural families with an average annual household income of approximately $38,000.
Intellectual Property Our trademarks and service marks have significant value and are important to our marketing efforts. We have registered “Citi Trends” as a trademark with the U.S. Patent and Trademark Office on the Principal Register for retail department store services. We have also registered the following trademarks with the U.S.
Intellectual Property Our trademarks and service marks have significant value and are important to our marketing efforts. Our marks registered with the U.S.
Advertising and Marketing Our marketing goals are to build the Citi Trends brand, promote customers’ association of the Citi Trends brand with value, quality, fashion and everyday low prices, and drive traffic into our stores. We generally focus our advertising efforts utilizing emails, social media and influencer marketing.
After completing a study in 2020 with a third-party provider, we believe we can grow our fleet to approximately 1,000 stores over time. Advertising and Marketing Our marketing goals are to build the Citi Trends brand, promote customers’ association of the Citi Trends brand with value, quality, fashion and everyday low prices and drive traffic into our stores.
The CSR Committee works closely with the Compensation Committee and the Nominating and Corporate Governance Committee of the board to develop processes to achieve the Company’s diversity objectives and metrics . In addition, our Chief Executive officer has signed the CEO Action Pledge for Diversity & Inclusion, the largest CEO-driven business commitment to advance diversity and inclusion in the workplace.
The CSR Committee works closely with the Compensation Committee and the Nominating and Corporate Governance Committee of the board to develop processes to achieve the Company’s diversity objectives and metrics. Health, Safety and Wellness . The success of our business is fundamentally connected to the well-being of our people.
If the purchase is not completed, the customer receives a Citi Trends gift card for amounts paid less a re-stocking and layaway service fee. Our unique focus on underserved African American and Latinx families offers us the opportunity to pinpoint highly targeted and highly visible store locations. Cost-effective store locations are an important part of our store profitability model.
Our unique focus on underserved African American and multicultural families offers us the opportunity to pinpoint highly targeted and highly visible store locations. Cost-effective store locations are an important part of our store profitability model. Accordingly, we look for locations in outdoor community shopping centers that offer attractive rents and meet our demographic and economic criteria.
Accordingly, we look for locations in outdoor community shopping centers that offer attractive rents and meet our demographic and economic criteria. We have a dedicated real estate management team responsible for new store site selection, and we employ rigorous analysis to approve final store selection decisions.
We have a dedicated real estate management team responsible for new store site selection, and we employ rigorous analysis to approve final store selection decisions. In selecting a location, we target urban, suburban and rural markets, and our strategy includes both further densification of existing markets and entering new markets over time.
In selecting a location, we target urban, suburban and rural markets and our strategy includes both further densification of existing markets and entering new markets over time. In addition, we require convenient site accessibility, as well as strong co-tenants, such as grocery stores, dollar stores, beauty stores and other value stores.
In addition, we require convenient site accessibility, as well as strong co-tenants, such as grocery stores, dollar stores, beauty stores and other value stores. We aim to be an integral part of our customers’ community by providing a compelling shopping destination and career opportunities.
As of the end of fiscal 2021, many of the associates at the Company’s corporate and buying offices continued to work from home. Compensation and Benefits . We provide competitive compensation and comprehensive benefits programs to help meet the needs of our associates.
We continue to follow guidance released by state and federal health officials to create a safe environment for our associates to work and our customers to shop. As of the end of fiscal 2022, many of the associates at the Company’s corporate and buying offices continued to work remotely. Compensation and Benefits .
Further, we employ disciplined product development and pricing studies to expand margin in certain areas of our assortment, particularly with our products that are highly curated for our core customers. Investing in Our Infrastructure .
Further, we employ disciplined pricing studies to underpin our value offering while expanding margin, and we offer balanced “good, better, best” pricing tiers in certain areas of our assortment. Investing in Our Infrastructure .
This represents a potential 65% increase in the size of our current fleet and will give us the opportunity to build stores in both African American and multicultural geographies. An integral component of growing our fleet is the introduction of our CTx format, an exciting refresh to our store format and experience.
This goal, supported by a third-party study conducted in 2020, represents a potential 65% increase in the size of our current fleet, giving us the opportunity to increase our presence in both African American and multicultural geographies. Managing Inventory and Maximizing Margin . We believe that our sourcing methodology further differentiates our model.
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Our new store model assumes a store size of approximately 11,000 square feet that achieves sales of approximately $1.4 million in the first full year of operations and an initial cash investment of approximately $0.4 million comprised of store build-out costs (net of tenant allowances), inventory (net of accounts payable) and cash pre-opening expenses.
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We believe that our unique ability to curate assortments for our target customers differentiates our model while driving customer loyalty and repeat visits. Sharpening our focus on trend development and actively refining our assortment strategies will enable us to continue to exceed our customers’ expectations while broadening the appeal of the brand.
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These areas of focus are: Growing Our Fleet and Expanding our Customer Base . We believe that we have the potential to grow to more than 1,000 stores as a result of a third-party study conducted in 2020.
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We believe that our store associates, many coming from the neighborhoods we serve, are another key component of the in-store experience. They create an exciting and welcoming shopping experience for our customers and serve as a valuable source of insights on our core customers’ needs and preferences.
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Along with adding new stores, we will continually remodel existing stores in this new CTx format, with expectations that more than 50% of our stores will have the new CTx format by the end of fiscal 2024. Optimizing the Assortment . We believe that our unique ability to curate assortments for our target customers further differentiates our model.
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Finally, we believe that an integral part of our sales growth is the continued roll-out of our CTx format, an exciting refresh to our store format and experience. We are continuing to remodel existing stores in this new CTx format, and all new stores will open in the CTx format.
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In fiscal 2021, we implemented important tools such as a new point-of-sale system and workflow apps to improve store productivity. Making a Difference . Our team is committed to making a difference in the African American and Latinx communities that we serve.
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While we believe that maximizing the productivity of our existing fleet provides significant opportunity for sales and earnings growth, we continue to believe that Citi Trends can grow to approximately 1,000 locations over time.
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We are on a journey towards being more sustainable as a company, taking diversity and inclusion to the next level, and ensuring we operate with the highest of ethics.
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Our investments in this area consist primarily of expanding and enhancing the chain in our new CTx format. In addition, we are investing in our store associates through enhanced training programs to further their development while enhancing our customers’ in-store experience. Making a Difference .
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We aim to be an integral part of our customers’ community by providing a compelling shopping destination and career opportunities. After completing a study in fiscal 2020 with a third-party provider, we believe we can grow our fleet to more than 1,000 stores over time.
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We plan to continue to integrate social and environmental sustainability into business practices to support long-term growth.
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Results of a period shorter than a full year may not be indicative of results expected for the entire year due to changes in our business, consumer spending patterns, and the macroeconomic environment, including those resulting from the COVID-19 pandemic.
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If the purchase is not completed, the customer receives a Citi Trends gift card for amounts paid less a re-stocking and layaway service fee. In addition, we offer a buy-now-pay-later program through an external vendor that allows customers to split purchases into four installments over six weeks.
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We have delegated a diverse group of Company ambassadors to pursue the actions outlined in the pledge to advance diversity and inclusion in the workplace. Health, Safety and Wellness . The success of our business is fundamentally connected to the well-being of our people. Accordingly, we are committed to the health, safety and wellness of our associates.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeThe extent to which COVID-19 will impact our business operations, consolidated financial results and liquidity will depend on future developments, which are highly uncertain and cannot be predicted, including the duration and scope of the pandemic (including the emergence of new variants or additional waves of cases); our ability to adjust our business strategies to mitigate the impact of the pandemic; the re-closure of any or all of our retail stores or distribution centers; the negative impact the pandemic has on global and regional economies and economic activity, including inflation, the duration and magnitude of its impact on consumer discretionary spending and the extent of any recession resulting from the COVID-19 pandemic, including how quickly economies recover after the pandemic subsides; the duration and extent of economic stimulus; higher insurance costs, changes in consumer shopping patterns and the impact on traditionally strong sales periods; the ability of our suppliers, vendors and customers to successfully address the impacts of the pandemic; supply chain interruptions, higher freight and other distribution costs, increased payroll expenses, labor shortages and other difficulties hiring and retaining labor, increased costs to maintain safe work and shopping environments and actions taken by governments, businesses and individuals in response to the pandemic.
Biggest changeThis includes the duration and scope of any such event; our ability to adjust our business strategies to mitigate the impact of any such health emergency; the temporary closure of any or all of our retail stores or distribution centers; the negative impact any such event has on global and regional economies and economic activity, including inflation; the duration and extent of economic stimulus; higher insurance costs, changes in consumer shopping patterns and the impact on traditionally strong sales periods; supply chain interruptions; higher freight and other distribution costs; increased payroll expenses; difficulties hiring and retaining labor; and actions taken by governments, businesses and individuals in response to any such public health emergency.
We also face a variety of other risks generally associated with relying on vendors that do business in foreign markets and import merchandise from abroad, such as: ● political or labor instability, natural disasters, public health emergencies, including the current COVID-19 pandemic, or the threat of terrorism, in particular in countries where our vendors source merchandise; ● increases in merchandise costs due to raw material price inflation or changes in purchasing power caused by fluctuations in currency exchange rates; ● enhanced security measures at United States and foreign ports, which could delay delivery of imports; ● imposition of new or supplemental duties, trade restrictions, sanctions, tariffs, quotas, taxes, environmental regulations, emissions standards and other charges on imports; ● compliance with new or changing import/export controls; ● delayed receipt or non-delivery of goods due to the failure of foreign-source suppliers to comply with import regulations, organized labor strikes or congestion at United States ports; ● concerns about human rights and working conditions in countries where our merchandise is manufactured and produced; and ● local business practice and political issues, including issues relating to compliance with domestic or international labor and environmental standards.
We also face a variety of other risks generally associated with relying on vendors that do business in foreign markets and import merchandise from abroad, such as: ● political or labor instability, natural disasters, public health emergencies, including the COVID-19 pandemic, or the threat of terrorism, in particular in countries where our vendors source merchandise; ● increases in merchandise costs due to raw material price inflation or changes in purchasing power caused by fluctuations in currency exchange rates; ● enhanced security measures at United States and foreign ports, which could delay delivery of imports; ● imposition of new or supplemental duties, trade restrictions, sanctions, tariffs, quotas, taxes, environmental regulations, emissions standards and other charges on imports; ● compliance with new or changing import/export controls; ● delayed receipt or non-delivery of goods due to the failure of foreign-source suppliers to comply with import regulations, organized labor strikes or congestion at United States ports; ● concerns about human rights and working conditions in countries where our merchandise is manufactured and produced; and ● local business practice and political issues, including issues relating to compliance with domestic or international labor and environmental standards.
Any cyberattack or a breach of our data could expose us to costly fines, private litigation and response measures, credit card brand assessments, government enforcement actions, disruption of business operations, negative publicity, erode customer confidence in the effectiveness of our data security measures, and decrease our current or potential customers’ willingness to shop in our stores which could adversely affect our business and financial conditions.
Any future cyberattack or a breach of our data could expose us to costly fines, private litigation and response measures, credit card brand assessments, government enforcement actions, disruption of business operations, negative publicity, erode customer confidence in the effectiveness of our data security measures, and decrease our current or potential customers’ willingness to shop in our stores which could adversely affect our business and financial conditions.
We cannot assure you that these registrations will prevent imitation of our name, merchandising concept, store design or private label merchandise or the infringement of our other intellectual property rights by others. Further, the use of social media by us and consumers has also increased the risk that our image and reputation could be negatively impacted.
We cannot assure that these registrations will prevent imitation of our name, merchandising concept, store design or private label merchandise or the infringement of our other intellectual property rights by others. Further, the use of social media by us and consumers has also increased the risk that our image and reputation could be negatively impacted.
In addition, we cannot assure you that others will not try to block the manufacture or sale of our private label merchandise by claiming that our merchandise violates their trademarks or other proprietary rights since other entities may have rights to trademarks that contain the word “Citi” or may have rights in similar or competing marks for apparel and/or accessories.
In addition, we cannot assure that others will not try to block the manufacture or sale of our private label merchandise by claiming that our merchandise violates their trademarks or other proprietary rights since other entities may have rights to trademarks that contain the word “Citi” or may have rights in similar or competing marks for apparel and/or accessories.
We compete against a diverse group of retailers, including national chains, mass merchants, smaller discount retail chains that sell only women’s products and general merchandise discount stores which offer a variety of products, including apparel, home fashions and other merchandise we sell for the value-conscious consumer.
We compete against a diverse group of retailers, including national chains, mass merchants, smaller discount retail chains that sell only women’s products and general merchandise discount stores that offer a variety of products, including apparel, home fashions and other merchandise we sell for the value-conscious consumer.
A significant disruption to our distribution process or southeastern retail locations could have an adverse effect on our business, financial condition and results of operations. Our ability to distribute our merchandise to our store locations in a timely manner is essential to the efficient and profitable operation of our business.
A significant disruption to our distribution process or retail locations could have an adverse effect on our business, financial condition and results of operations. Our ability to distribute our merchandise to our store locations in a timely manner is essential to the efficient and profitable operation of our business.
Risks Related to General Economic and Market Conditions Our sales could decline and our store operations could be disrupted as a result of general economic and other factors outside of our control, such as changes in consumer spending patterns and declines in employment levels.
Risks Related to General Economic and Market Conditions Our sales could decline and our store operations could be disrupted as a result of general economic and other factors outside of our control, such as inflation, changes in consumer spending patterns and declines in employment levels.
Because our success depends significantly on our brand image among our core customer market, damage to our brand image as a result of our failure to identify and respond to changing trends and tastes could have a material negative impact on our business.
Because our success depends significantly on our brand image among our core customer, damage to our brand image as a result of our failure to identify and respond to changing trends and tastes could have a material negative impact on our business.
Our ability to attract consumers to our stores depends on several factors, including the success of the outdoor community shopping centers where our stores are located. We locate our stores primarily in outdoor community shopping centers where we believe our consumers and potential consumers shop.
Our ability to attract consumers to our stores depends on several factors, including the success of the outdoor community shopping centers where our stores are primarily located. We locate our stores primarily in outdoor community shopping centers where we believe our current and potential consumers shop.
We depend on our suppliers for the continued availability and satisfactory quality of our merchandise. Most of our suppliers could discontinue selling to us at any time.
We depend on our suppliers for the continued availability and satisfactory quality of our merchandise. Our suppliers could discontinue selling to us at any time.
The success of opening new stores is dependent upon, among other things, the current retail environment, the identification of suitable markets and the availability of real estate that meets our criteria for traffic, square footage, co-tenancies, lease economics, demographics, and other factors, the negotiation of acceptable lease terms, construction costs, the increased hiring, training and retention of competent sales personnel, and the effective management of inventory to meet the needs of new and existing stores on a timely basis.
The success of 15 Table of Contents opening new stores is dependent upon, among other things, the current retail environment, the identification of suitable markets and the availability of real estate that meets our criteria for traffic, square footage, co-tenancies, lease economics, demographics, and other factors, the negotiation of acceptable lease terms, construction costs, the increased hiring, training and retention of competent sales personnel, and the effective management of inventory to meet the needs of new and existing stores on a timely basis.
If we decide to close stores, we may be required to continue to perform obligations under the applicable leases, including, among other things, paying rent and operating expenses for the balance of the lease term, or paying to exercise rights to terminate, and the performance of any of these obligations may be expensive.
If we decide to close stores or distribution centers, we may be required to continue to perform obligations under the applicable leases, including, among other things, paying rent and operating expenses for the balance of the lease term, or paying to exercise rights to terminate, and the performance of any of these obligations may be expensive.
Our computer systems and the third-party systems we rely on are also subject to damage or interruption from a number of causes, including power outages; computer and telecommunications failures; computer viruses, malware, phishing or distributed denial-of-service attacks; security breaches; cyber-attacks; catastrophic events such as fires, floods, earthquakes, tornadoes, hurricanes; acts of war or terrorism and design or usage errors by our employees or contractors.
Our co mputer systems and the third-party systems we rely on are also subject to damage or interruption from a number of causes, including power outages; computer and telecommunications failures; computer viruses, malware, ransomware, phishing or distributed denial-of-service attacks; security breaches; cyber-attacks; catastrophic events such as fires, floods, earthquakes, tornadoes, hurricanes; acts of war or terrorism and design or usage errors by our employees or contractors.
Our ability to meet our labor needs and control labor costs is subject to various external factors, including increased market pressures with respect to prevailing wage rates, unemployment levels and health and other insurance costs; the impact of legislation or regulations governing labor relations, immigration, minimum wage, and healthcare benefits; changing demographics; the continuing impacts of the COVID-19 pandemic; and our reputation within the labor market.
Our ability to meet our labor needs and control labor costs is subject to various external factors, including increased market pressures with respect to prevailing wage rates, unemployment levels and health and other insurance costs; the impact of legislation or regulations governing labor relations, immigration, minimum wage, and healthcare benefits; changing demographics; the continuing impacts of COVID-19 and other future pandemics; and our reputation within the labor market.
We are also subject to several provisions of the Delaware General Corporation Law that could delay, prevent or deter a merger, acquisition, tender offer, proxy contest or other transaction that might otherwise result in our stockholders receiving a premium over the market price for their common stock or may otherwise be in the best interests of our stockholders. 20 Table of Contents
We are also subject to several provisions of the Delaware General Corporation Law that could delay, prevent or deter a merger, acquisition, tender offer, proxy contest or other transaction that might otherwise result in our stockholders receiving a premium over the market price for their common stock or may otherwise be in the best interests of our stockholders.
Failure to deliver merchandise to our distribution centers and our retail stores in a timely, effective and economically viable manner could adversely affect our business, financial condition and results of operations. We do not own or operate any manufacturing or production facilities and therefore depend upon third parties for the manufacture of all of our merchandise.
Failure to deliver merchandise to our distribution centers and our retail stores in a timely, effective and economically viable manner could adversely affect our business, financial condition and results of operations. 14 Table of Contents We do not own or operate any manufacturing or production facilities and therefore depend upon third parties for the manufacture of all of our merchandise.
A failure on our part to anticipate, identify or react appropriately and timely to changes in styles, trends, brand preferences or desired image preferences is likely to lead to lower demand for our merchandise, which could cause, among other things, sales declines, excess inventories and higher markdowns, which could materially adversely affect our business and our brand image.
A failure on our part to anticipate, identify or react appropriately and timely to changes in styles, trends, brand preferences and images is likely to lead to lower demand for our merchandise. This could cause, among other things, sales declines, excess inventories and higher markdowns, which could materially adversely affect our business and our brand image.
When the current lease terms for our stores expire, we may be unable to negotiate renewals which could lead to the closing or relocating stores on less favorable terms or in a less favorable location.
When the current lease terms for our stores or distribution centers expire, we may be unable to negotiate renewals which could lead to the closing or relocating stores or centers on less favorable terms or in a less favorable location.
Downturns, or the expectation of a downturn, in general economic conditions, including the effects of unemployment levels, salaries and wage rates, inflation in energy, food and other consumer good prices, interest rates, higher insurance costs , levels of consumer debt, taxation (including delays in the distribution of tax refunds), government stimulus, consumer confidence, increased fuel costs or fuel shortages, increased shipping, transportation and distribution costs and other macroeconomic factors, could adversely affect consumer spending patterns, our sales and our results of operations.
Downturns, or the expectation of a downturn, in general economic conditions, including the effects of unemployment levels, salaries and wage rates, inflation in energy, food and other consumer good prices, interest rates, higher insurance costs , levels of consumer debt, changes in tax rates and policies (including delays in the distribution of tax refunds), government stimulus, consumer confidence, consumer perception of economic conditions, increased fuel costs or fuel shortages, increased shipping, transportation and distribution costs and other macroeconomic factors, could adversely affect consumer spending patterns, our sales and our results of operations.
We presently have no intention to reinstate the dividend, and there can be no assurance that we will resume paying dividends on a regular basis . Provisions in our certificate of incorporation and by-laws and Delaware law may delay or prevent our acquisition by a third party.
We presently have no intention to reinstate the dividend, and there can be no assurance that we will resume paying dividends on a regular basis . 19 Table of Contents Provisions in our certificate of incorporation and by-laws and Delaware law may delay or prevent our acquisition by a third party.
Our ability to expand successfully into other geographic markets will also depend on acceptance of our retail store experience by customers in those markets, including 16 Table of Contents our ability to design our stores in a manner that resonates locally and to offer the correct product assortment to appeal to consumers in such markets.
Our ability to expand successfully into other geographic markets will also depend on acceptance of our retail store experience by customers in those markets, including our ability to design our stores in a manner that resonates locally and to offer the correct product assortment to appeal to consumers in such markets.
If our manufacturers do not ship orders to us in a timely manner or meet our quality 15 Table of Contents standards, it could cause delays in responding to consumer demands or inventory shortages and negatively affect consumer confidence in the quality and value of our brand or negatively impact our competitive position.
If our manufacturers do not ship orders to us in a timely manner or meet our quality standards, it could cause delays in responding to consumer demands or inventory shortages and negatively affect consumer confidence in the quality and value of our brand or negatively impact our competitive position.
Any natural disaster or other disruption to the operation of either of these facilities or our drop shipping capabilities due to fire, accidents, public health emergency such as the current COVID-19 pandemic, weather conditions, including natural disasters, or any other cause could damage a significant portion of our inventory, impair our ability to stock our stores adequately and may result in increased supply chain costs or lost sales.
Any natural disaster or other disruption to the operation of either of these facilities or our direct shipping capabilities due to fire, accidents, public health emergencies such as the COVID-19 pandemic, weather conditions, including natural disasters, or any other cause could damage a significant portion of our inventory, impair our ability to stock our stores adequately and may result in increased supply chain costs or lost sales.
Factors negatively affecting us during the first and fourth quarters, including adverse weather, public health emergencies such as the COVID-19 pandemic, unfavorable economic conditions, reduced governmental assistance, and tax refund patterns for our customers, will have a greater adverse effect on our financial condition than if our business was less seasonal. Seasonal fluctuations also affect our inventory levels.
Factors negatively affecting us during the first and fourth quarters, including adverse weather, pandemics such as COVID-19, unfavorable economic conditions, reduced governmental assistance, and tax refund patterns for our customers, will have a greater adverse effect on our financial condition than if our business was less seasonal. Seasonal fluctuations also affect our inventory levels.
We do not sell our products through the internet. As the retail industry experiences an increase in online sales, our sales could be adversely affected. The retail landscape is changing with consumers’ shopping habits shifting away from the traditional brick-and-mortar stores to online retailers.
We do not sell our products through the internet. As the retail industry experiences an increase in online sales, our sales could be adversely affected. The retail landscape has changed with consumers’ shopping habits shifting away from the traditional brick-and-mortar stores to online retailers.
This information may be stored within our internal information technology environments or hosted by third party service 18 Table of Contents providers. We have implemented security procedures and technology that are intended to safeguard this information from cybersecurity attacks and data breaches.
This information may be stored within our internal information technology environments or hosted by third party service providers. We have implemented security procedures and technology that are intended to safeguard this information from cybersecurity attacks and data breaches.
In addition to the risks specifically described above, the impact of COVID-19 is likely to implicate and exacerbate other risks disclosed in this Item 1A, including co nsumer behavior and expectations, cybersecurity threats, technology systems disruption, supply chain disruptions, labor availability and cost, implementation of our strategic goals, litigation, and regulatory requirements . 11 Table of Contents Our success depends on our ability to anticipate, identify and respond rapidly to changes in consumers’ fashion tastes, and our failure to adequately evaluate fashion trends could have an adverse effect on our business, financial condition and results of operations.
In addition to the risks specifically described above, the impact of any pandemic, epidemic or other public health emergency is likely to implicate and exacerbate other risks disclosed in this Item 1A, including consumer behavior and expectations, cybersecurity threats, technology systems disruption, supply chain disruptions, labor availability and cost, implementation of our strategic goals, litigation, and regulatory requirements . 10 Table of Contents Our success depends on our ability to anticipate, identify and respond rapidly to changes in consumers’ fashion tastes, and our failure to adequately evaluate fashion trends could have an adverse effect on our business, financial condition and results of operations.
Our stock price has been volatile in the past and may be influenced in the future by a number of factors, including: ● actual or anticipated fluctuations in our operating results; ● changes in preferences of our customers; ● changes in securities analysts’ recommendations or estimates of our financial performance or our failure to meet any such estimates; ● changes in market valuations or operating performance of our competitors or companies similar to ours; ● announcements by us, our competitors or other retailers , including strategic actions by us or our competitors, such as acquisitions, restructurings, significant contracts, joint marketing relationships, joint ventures or capital commitments ; ● market and industry perception of our success, or lack thereof, in pursuing our growth strategy; ● additions and departures of key personnel; ● changes in accounting principles; ● the passage of legislation or other developments affecting us; ● the trading volume of our common stock in the public market and size of our public float ; ● changes in economic or financial market conditions; ● global economic, legal and regulatory factors unrelated to our performance; ● natural disasters, public health emergencies, terrorist acts, acts of war or periods of civil unrest; and ● the realization of some or all of the risks described in this section entitled “Risk Factors.” These and other factors may cause the market price and demand for our common stock to fluctuate substantially, which may limit or prevent investors from readily selling their shares of common stock and may otherwise negatively affect the liquidity of our common stock.
Our stock price has been volatile in the past and may be influenced in the future by a number of factors, including: ● actual or anticipated fluctuations in our operating results; ● changes in preferences of our customers; ● changes in securities analysts’ recommendations or estimates of our financial performance or our failure to meet any such estimates; ● changes in market valuations or operating performance of our competitors or companies similar to ours; ● announcements by us, our competitors or other retailers , including strategic actions by us or our competitors, such as acquisitions, restructurings, significant contracts, joint marketing relationships, joint ventures or capital commitments ; ● market and industry perception of our success, or lack thereof, in pursuing our growth strategy; ● additions and departures of key personnel; ● changes in accounting principles; ● the passage of legislation or other regulatory developments affecting us; ● the trading volume of our common stock in the public market and size of our public float ; ● changes in economic or financial market conditions, including without limitation, the systemic failure of the banking system in the United States or globally; ● global economic, legal and regulatory factors unrelated to our performance; ● our involvement in any litigation or investigations by government authorities, including litigation judgments, settlements or other litigation-related costs; ● cyber events, such as the ransomware incident we experienced in January 2023; ● natural disasters, public health emergencies, such as the COVID-19 pandemic, terrorist acts, acts of war or periods of civil unrest; and ● the realization of some or all of the risks described in this section entitled “Risk Factors.” These and other factors may cause the market price and demand for our common stock to fluctuate substantially, which may limit or prevent investors from readily selling their shares of common stock and may otherwise negatively affect the liquidity of our common stock.
If one or more of the destination retailers or anchor stores located in the community shopping centers where our stores are located close or leave, or if there is significant deterioration of the surrounding areas in which our stores are located, it could result in reduced sales at our stores and leave us with excess inventory, which could have a material adverse effect on our financial results or business..
If a destination retailer or anchor store in our community shopping centers closes or leaves, or if there is significant deterioration of the surrounding areas in which our stores are located, it could result in reduced sales at our stores and leave us with excess inventory, which could have a material adverse effect on our financial results or business.
Part of our growth strategy involves expanding our stores to the Latinx demographic, and we may not be able to successfully market to or predict demographic trends among this demographic.
Part of our growth strategy involves expanding our stores to the multicultural demographic and other multicultural groups, and we may not be able to successfully market to or predict demographic trends among these groups.
Our business depends upon our operations to continue to generate strong cash flow to supply capital to support our general operating activities, to fund our growth and our return of cash to stockholders through our stock repurchase programs, if any, and to pay our interest and debt repayments.
Our business depends upon the cash on our balance sheet as well as our operations to continue to generate strong cash flow to supply capital to support our general operating activities, to fund our growth and our return of cash to stockholders through our stock repurchase programs, if any, and to pay our interest obligations.
We also face certain risks from our use of third-party order fulfillment and drop shipping by our product vendors for products we do not hold in inventory such as freight cost increases, timely delivery and customer service and delays due to work stoppages.
We also face certain risks from our use of third-party order fulfillment and direct shipping for products we do not hold in inventory such as freight cost increases, timely delivery and customer service and delays due to work stoppages. We base our purchases of inventory, in part, on our sales forecasts.
Although we maintain insurance on our stores and other facilities, the economic effects of a natural disaster that affects our distribution centers and/or a significant number of our stores could have an adverse effect on our business, financial condition and results of operations.
Such weather events may become increasingly frequent or severe as a result of climate change. Although we maintain insurance on our stores and other facilities, the economic effects of a natural disaster that affects our distribution centers and/or a significant number of our stores could have an adverse effect on our business, financial condition and results of operations.
If our store locations fail to attract sufficient consumer traffic whether because of consumer preferences to shop on the internet or at large warehouse stores, concerns over indoor shopping in light of the COVID-19 pandemic, increased competition in areas where our stores are located, the amount spent on advertising and promotion to attract consumers to our stores, an economic slowdown or a decline in the popularity of outdoor community shopping centers, or if we are unable to locate replacement locations on terms acceptable to us, our business could suffer.
Our business could suffer if our store locations fail to attract sufficient consumer traffic due to consumer preferences to shop on the internet or at large warehouse stores, increased competition in our shopping areas, the amount we spend on advertising, an economic slowdown or a decline in the popularity of outdoor community shopping centers, or if we are unable to locate replacement locations on terms acceptable to us.
We rely on numerous third parties to supply quality merchandise that complies with applicable product safety laws and other applicable laws, but these third parties may not comply with all such applicable laws.
Regulations in this area may change from time to time. We rely on numerous third parties to supply quality merchandise that complies with product safety laws and other applicable laws, but these third parties may not comply with all such applicable 12 Table of Contents laws.
Although we use marketing to drive customer traffic through various media including digital/social media and e-mail, some of our competitors expend more for their marketing programs than we do, or use different approaches than we do, which may provide them with a competitive advantage. 17 Table of Contents Further, we may not effectively implement strategies with respect to rapidly evolving Internet-based and other digital or mobile communication channels, including social media.
Although we use marketing to drive customer traffic through various media including digital/social media and e-mail, some of our competitors expend more for their marketing programs than we do, or use different approaches than we do, which may provide them with a competitive advantage.
We depend upon strong cash flows from our operations to supply capital to fund our operations, growth, stock repurchases and interest and debt repayments.
We depend upon strong cash flows from our operations, as well as cash on our balance sheet, to supply capital to fund our operations, growth, stock repurchases and interest obligations.
Any interruption in these systems could impair our ability to manage our inventory effectively, which could have an adverse effect on our business.
Any interruption in these systems, such as the interruption we experienced in January 2023 (described below), could impair our ability to manage our inventory effectively, which could have an adverse effect on our business.
These risks may increase with further growth, and we may not be able to execute our growth strategies successfully, on a timely basis, or at all, which may adversely affect our business plans, sales and results.
These risks may increase with further growth, and we may not be able to execute our growth strategies successfully, on a timely basis, or at all, which may adversely affect our business plans, sales and results. We may engage in strategic transactions that could negatively impact our liquidity, increase our expenses and present significant distractions to management.
Compromises, interruptions or shutdowns of our systems, including those managed by third parties, whether intentional or inadvertent, could lead to delays in our business operations and, if significant or extreme, affect our results of operations. We depend on third-party suppliers to maintain and periodically upgrade our management information systems.
Compromises, interruptions or shutdowns of our systems, including those managed by third parties, whether intentional or inadvertent, could lead to delays in our busine ss operations and, if significant or extreme, affect our results of operations.
Consumer confidence may also be affected by domestic and international political or social unrest (including related protests or disturbances), acts of war or terrorism, natural disasters, public health emergencies like the COVID-19 pandemic, or other significant events outside of our control.
The low-income consumer, which is our core customer, is especially sensitive to these factors. Consumer confidence may also be affected by domestic and international political or social unrest (including related protests or disturbances), acts of war or terrorism, natural disasters, pandemics like COVID-19, or other significant events outside of our control.
These factors, together with growing competition among potential employers, may result in increased salaries, benefits, or other employee-related costs, or may impair our ability to recruit 14 Table of Contents and retain employees, which could have an adverse impact on our business, financial condition and results of operations.
These factors, together with growing competition among potential employers, may result in increased salaries, benefits, or other employee-related costs, or may impair our ability to recruit and retain employees, which could have an adverse impact on our business, financial condition and results of operations. 13 Table of Contents In addition, we rely heavily on the experience and expertise of our senior management team and other key management associates, and accordingly, the loss of their services could have a material adverse effect on our business strategy and results of operations.
As federal and/or state minimum wage rates increase, we may need to increase not only our employees’ wage rates that are under the new minimum, but also the wages paid to our other hourly employees. Additionally, if we fail to pay such higher wages we could suffer increased employee turnover.
Wage rates for many of our employees are slightly above the federal minimum wage. As federal and/or state minimum wage rates increase, we may need to increase not only our employees’ wage rates that are under the new minimum, but also the wages paid to our other hourly employees.
In addition, a number of our suppliers are smaller, less capitalized companies and are more likely to be impacted by unfavorable general economic and market conditions, including economic downturns caused by natural disasters, acts of terror, or public health emergencies (including the COVID-19 pandemic), than larger and better capitalized companies.
In addition, a number of our suppliers are smaller, less capitalized companies and are more likely to be impacted by unfavorable general economic and market conditions than larger and better capitalized companies.
Risks Related to our Business and Operations Our financial and operating performance may be materially and adversely affected by the outbreak of the novel coronavirus (“COVID-19”). The COVID-19 pandemic has continued to cause significant public health concerns as well as economic disruption, uncertainty, and volatility, all of which have impacted and are expected to continue to impact our business.
Risks Related to our Business and Operations Our financial and operating performance may be materially and adversely affected by pandemics, epidemics or other public health emergencies such as the ongoing COVID-19 pandemic. The ongoing COVID-19 pandemic has caused public health concerns as well as economic disruption, uncertainty, and volatility, all of which have impacted our business.
Accordingly, our success is heavily dependent on our ability to anticipate, identify and capitalize on emerging fashion and home trends, including products, styles and materials that will appeal to our target consumers.
The apparel industry in general and our core customer in particular are subject to rapidly evolving fashion trends and shifting consumer demands. Accordingly, our success is heavily dependent on our ability to anticipate, identify and capitalize on emerging fashion and home trends, including products, styles and materials that will appeal to our target consumers.
In addition, the southeastern United States, where the Darlington distribution center and many of our stores are located, is vulnerable to significant damage or destruction from hurricanes and tropical storms. Such weather events may become increasingly frequent or severe as a result of climate change.
In addition, the southeastern United States, where the Darlington distribution center and many of our stores are located, is vulnerable to significant damage or destruction from hurricanes and tropical storms. The midwestern United States, where the Roland distribution center and many stores are located, is vulnerable to significant damage or destruction from tornados and hail storms.
These safeguards include, but are not limited to, routine penetration and vulnerability testing, network segmentation, strong encryption protocols, virus and malware protection, email security scanning, simulation training, vendor assessments, and on-going monitoring and patching activities. There is no guarantee that these measures will be adequate to safeguard against all data security breaches, system compromises or misuses of data.
These safeguards include, but are not limited to, routine penetration 17 Table of Contents and vulnerability testing, network segmentation, strong encryption protocols, virus and malware protection, email security scanning, simulation training, vendor assessments, and on-going monitoring and patching activities.
If we are not able to accurately predict customers’ preferences for our fashion items, we may have too much inventory which may result in increased markdowns and, therefore, lower than planned margins.
Therefore, we are vulnerable to changes in consumer preference and demand between the time we design and order our merchandise and the season in which this merchandise will be sold. If we are not able to accurately predict customers’ preferences for our fashion items, we may have too much inventory which may result in increased markdowns and lower margins.
We may engage in strategic transactions that could negatively impact our liquidity, increase our expenses and present significant distractions to management. We may consider strategic transactions and business arrangements, including, but not limited to, acquisitions, asset purchases, partnerships, joint ventures, restructurings and investments.
We may consider strategic transactions and business arrangements, including, but not limited to, acquisitions, asset purchases, partnerships, joint ventures, restructurings and investments.
We resumed our share repurchase program in the third quarter of fiscal 2020, although the amount and continuation of repurchases will be influenced by the evolving economic environment. Additionally, there can be no assurance that our existing share repurchase authorizations will be completed or that our board of directors will approve additional repurchase programs in the future.
Additionally, there can be no assurance that our existing share repurchase authorizations will be completed or that our board of directors will approve additional repurchase programs in the future.
If our sales forecasts do not match customer demand, we may experience higher inventory levels and need to markdown excess or slow-moving inventory, leading to decreased profit margins, or we may have insufficient inventory to meet customer demand, leading to lost sales, either of which could adversely affect our financial performance. 13 Table of Contents We rely on numerous third parties in the supply chain to produce and deliver the products that we sell, and our business may be negatively impacted by their failure to comply with applicable law.
If our sales forecasts do not match customer demand, we may experience higher inventory levels and need to markdown excess or slow-moving inventory, leading to decreased profit margins, or we may have insufficient inventory to meet customer demand, leading to lost sales, either of which could adversely affect our financial performance.
Our sales, inventory levels and earnings fluctuate on a seasonal basis, which makes our business more susceptible to adverse events that occur during the first and fourth quarters.
The continued growth of online sales could have a negative impact on our sales, as our customers may decide to make purchases through online retailers. 11 Table of Contents Our sales, inventory levels and earnings fluctuate on a seasonal basis, which makes our business more susceptible to adverse events that occur during the first and fourth quarters.
In April 2021, we amended our revolving credit facility to modify terms and extend the maturity date to April 15, 2026. The amended facility provides a $75 million credit commitment and a $25 million uncommitted “accordion” feature that under certain circumstances could allow us to increase the size of the facility to $100 million.
We maintain a revolving credit facility with Bank of America through April 15, 2026 which provides for a $75 million credit commitment and a $25 million uncommitted “accordion” feature that under certain circumstances could allow us to increase the size of the facility to $100 million. As of January 28, 2023, we had no borrowings outstanding under this facility.
Internet sales have been obtaining an increasing percentage of retail sales over the past few years and this trend is 12 Table of Contents expected to continue. The continued growth of online sales could have a negative impact on our sales, as our customers may decide to make purchases through online retailers.
Internet sales have been obtaining an increasing percentage of retail sales over the past few years and this trend is expected to continue.
Our strategic growth plan depends in part on our ability to renew current leases and enter into new leases for future stores. We currently lease all of our store locations and are subject to the risks associated with leasing real estate.
We currently lease all of our store locations and distribution centers and are subject to the risks associated with leasing real estate.
These attacks can come in many forms, including computer hacking, acts of vandalism or theft, malware, computer viruses or other malicious codes, phishing, employee error or malfeasance, catastrophes, unforeseen events or other cyber-attacks. Additionally, a failure of a third party service provider to monitor and secure their environment could lead to unauthorized access of our private or confidential information.
Cyberattacks continue to evolve and there can be no assurance that a future attacker would be unable to gain access to the information we collect. These attacks can come in many forms, including computer hacking, acts of vandalism or theft, malware, ransomware, computer viruses or other malicious codes, phishing, employee error or malfeasance, catastrophes, unforeseen events or other cyber-attacks.
In addition, as the regulatory environment related to information security, data collection and use, and privacy becomes increasingly rigorous, with new and constantly changing requirements, compliance with those requirements could also result in additional costs. Cyberattacks continue to evolve and there can be no assurance that an attacker would be unable to gain access to the information we collect.
In addition, as the regulatory environment related to information security, data collection and use, and privacy becomes increasingly rigorous, with new and constantly changing requirements, compliance with those requirements could also result in additional costs. 18 Table of Contents Risks Relating to Ownership of our Common Stock Our stock price is subject to volatility.
We purchase a portion of our products from distributors and directly from large manufacturers who may deliver those products directly to our customers (“drop ship”). These drop ship delivery relationships enable us to make available to our customers a wide selection of products without having to maintain large amounts of inventory.
We purchase a portion of our products from suppliers that directly ship these products to our stores. These direct shipment relationships enable us to make available to our customers a wide selection of products without having to maintain large amounts of inventory. The termination or interruption of our relationships with any of these suppliers could materially adversely affect our business.
There may also be consequences that we do not anticipate at this time or that develop in unexpected ways. The impacts of the pandemic have had, and may continue to have, an adverse impact on our financial condition, results of operations and liquidity.
There may also be consequences that we do not anticipate at this time or that develop in unexpected ways.
If our access to capital is restricted or our borrowing costs increase, our operations and financial condition could be adversely impacted. We may be unable to negotiate future leases or renegotiate current leases on the same favorable terms as we had in the past.
We may be unable to negotiate future leases or renegotiate current leases on the same favorable terms as we had in the past. Our strategic growth plan depends in part on our ability to renew current leases and enter into new leases for future stores.
Our programs may not be or remain effective or could require increased expenditures, which could have a significant adverse effect on our revenue and results of operations. Risks Related to Regulatory, Legal and Cybersecurity Failure to comply with legal requirements could have an adverse effect on our financial condition and results of operations.
Further, we may not effectively implement strategies with respect to rapidly evolving Internet-based and other digital 16 Table of Contents or mobile communication channels, including social media. Our programs may not be or remain effective or could require increased expenditures, which could have a significant adverse effect on our revenue and results of operations.
Merchandise we sell in our stores is subject to regulatory standards set by various governmental authorities with respect to quality and safety. Regulations in this area may change from time to time.
We rely on numerous third parties in the supply chain to produce and deliver the products that we sell, and our business may be negatively impacted by their failure to comply with applicable law. Merchandise we sell in our stores is subject to quality and safety regulatory standards set by various governmental authorities.
If we fail to comply with these laws, rules and regulations, we may be subject to judgments, fines or other costs or penalties, which could have an adverse effect on our financial condition and results of operations . Changes in government regulations could have an adverse effect on our financial condition and results of operations.
Risks Related to Regulatory, Legal and Cybersecurity Changes in government regulations could have an adverse effect on our financial condition and results of operations. We are subject to numerous federal, state and local laws and regulations that govern numerous aspects of our business.
Changes in areas, such as workplace-regulation and other labor or employment benefits laws, supply chain, privacy and information security, or environmental regulation such as carbon emission standards and ESG performance, transparency and reporting may require extensive structural and organizational changes that could be difficult to implement, disrupt our business, cause reputational harm and materially adversely affect our operations and financial results.
Changes in, expanded enforcement of, or adoption of new federal, state or local laws and regulations governing areas such as minimum wage or living wage requirements, workplace-regulation and other labor or employment benefits laws, supply chain, taxes, including changes to corporate tax rates, privacy and information security, or environmental regulation such as carbon emission standards and environmental, social and governance (ESG) programs, transparency and reporting, could increase our costs of doing business or impact our sales, operations or profitability.
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The pandemic has adversely affected workforces, customers, consumer sentiment, economies and financial markets, and has impacted our financial results. In response to the pandemic, governmental authorities in certain jurisdictions have implemented numerous measures in an attempt to contain the virus, such as travel bans and restrictions, quarantines, shelter-in-place orders and business shutdowns.
Added
The pandemic adversely affected workforces, customers, consumer sentiment, economies and financial markets, and impacted our financial results. Future pandemics, epidemics or other public health emergencies could have a material adverse impact on our business, financial condition, and results of operations, which will depend on future developments that are highly uncertain and cannot be predicted.
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The nature and the scope of these actions, as well as decisions we have made to protect the health and safety of our employees, consumers and communities, vary from jurisdiction to jurisdiction, but have impacted our financial results and may continue to do so in the future.
Added
We also experience inventory shrinkage due to theft or damage. Higher rates of inventory shrinkage or increased security or other costs to combat inventory shrinkage could adversely affect our results of operations and financial condition, and our efforts to contain or reduce inventory shrinkage may not be successful.
Removed
In response to COVID-19, in the first quarter of fiscal 2020, we temporarily closed all of our retail stores and distribution centers and temporarily closed our corporate and buying offices with associates working remotely where possible.
Added
For example, a systemic failure of the banking system in the United States or globally could potentially result in a situation in which we lose our ability to draw down funds from our revolving credit facility, lose access to our deposits and are unable to obtain financing from other sources.
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As of July 18, 2020, we safely reopened all of our stores and distribution centers while following all applicable state and local health protocols, including providing personal protective equipment to employees and implementing social distancing practices as required.
Added
If our access to capital is restricted or our borrowing costs increase, our operations and financial condition could be adversely impacted. We maintain deposit balances with certain financial institutions that are above the federal insurance limit. A failure of these institutions could result in loss of these deposits.
Removed
We may face additional store closure requirements and other operational restrictions with respect to some or all of our physical locations for prolonged periods of time due to, among other factors, governmental restrictions, including public health directives, quarantine policies or social distancing measures.
Added
In recent years, a number of new laws and regulations have been adopted, there has been expanded enforcement of certain existing laws and regulations by federal, state and local agencies, and the interpretation of certain laws and regulations has become increasingly complex.
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During fiscal 2021, we saw improvement in our financial results and positive trends as governments eased restrictions and provided economic stimulus and vaccine distribution accelerated, leading to an increase in spending and increased customer demand.
Added
These laws and regulations, and related interpretations and enforcement activity, may change as a result of a variety of factors, including political, economic or social events.
Removed
However, the emergence of new variants of COVID-19 has led to, and for an unknown period of time may continue to lead to, disruptions in local, regional and national markets, including decreased customer foot traffic to our retail stores.
Added
For example, as previously disclosed in our Form 8-K filed with the SEC on February 23, 2023, we experienced a disruption of our back office and distribution center IT systems in January 2023 due to what is known as Hive ransomware.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeThe table below sets forth the number of stores in each of the 33 states in which we operated as of January 29, 2022: ​ ​ Alabama 34 Arkansas 15 California 8 Connecticut 5 Delaware 3 Florida 55 Georgia 65 Illinois 26 Indiana 18 Iowa 2 Kansas 2 Kentucky 7 Louisiana 33 Maryland 8 Massachusetts 4 Michigan 22 Minnesota 2 Mississippi 30 Missouri 8 Nebraska 1 Nevada 3 New Jersey 2 New York 11 North Carolina 50 Ohio 30 Oklahoma 7 Pennsylvania 10 Rhode Island 2 South Carolina 43 Tennessee 18 Texas 59 Virginia 20 Wisconsin 6 22 Table of Contents ​ Corporate Offices and Distribution Center Facilities We own a facility in Savannah, Georgia totaling approximately 70,000 square feet, which serves as our headquarters and, to a lesser extent, as a storage facility.
Biggest changeThe table below sets forth the number of stores in each of the 33 states in which we operated as of January 28, 2023: ​ ​ Alabama 35 Arkansas 15 California 7 Connecticut 5 Delaware 3 Florida 57 Georgia 63 Illinois 26 Indiana 18 Iowa 3 Kansas 2 Kentucky 6 Louisiana 33 Maryland 10 Massachusetts 5 Michigan 23 Minnesota 2 Mississippi 30 Missouri 8 Nebraska 1 Nevada 3 New Jersey 3 New York 12 North Carolina 49 Ohio 30 Oklahoma 6 Pennsylvania 10 Rhode Island 2 South Carolina 41 Tennessee 18 Texas 59 Virginia 20 Wisconsin 6 21 Table of Contents ​ Corporate Offices and Distribution Center Facilities We own a facility in Savannah, Georgia totaling approximately 70,000 square feet, which serves as our headquarters and, to a lesser extent, as a storage facility.
In addition, we currently lease a flexible office space in New York City. We also own a distribution center in Darlington, South Carolina totaling approximately 550,000 square feet and another distribution center in Roland, Oklahoma totaling approximately 565,000 square feet.
In addition, we currently lease a flexible office space in New York City. We also operate a distribution center in Darlington, South Carolina totaling approximately 550,000 square feet and another distribution center in Roland, Oklahoma totaling approximately 565,000 square feet.
All existing 609 stores, totaling 8.1 million total square feet and 6.7 million selling square feet, are leased under operating leases. The typical store lease is for five years with options to extend the lease term for three additional five-year periods.
All existing 611 stores, totaling 8.2 million total square feet and 6.7 million selling square feet, are leased under operating leases. The typical store lease is for five years with options to extend the lease term for three additional five-year periods.
ITEM 2. PROPERTIES Store Locations As of January 29, 2022, we operated 609 stores located in 33 states. Our stores average approximately 11,000 square feet of selling space and are typically located in outdoor community shopping centers that are convenient to low and moderate income customers. We have no franchising relationships, and all of the stores are company operated.
ITEM 2. PROPERTIES Store Locations As of January 28, 2023, we operated 611 stores located in 33 states. Our stores average approximately 11,000 square feet of selling space and are typically located in outdoor community shopping centers that are convenient to low and moderate income customers. We have no franchising relationships, and all of the stores are company operated.
Removed
On March 14, 2022, we entered into an agreement to consummate a sale and leaseback transaction of our distribution center in Darlington, South Carolina, and at our discretion, our distribution center in Roland, Oklahoma. The consummation of the transaction is subject to due diligence and other customary closing conditions.
Added
In April 2022, we completed a sale-leaseback of our Darlington distribution center resulting in a 20-year lease term with the option to extend for six additional periods of five years each.
Removed
We believe our facilities are suitable and adequate to meet our current business and operational needs. ​ 23 Table of Contents
Added
In September 2022, we completed a sale-leaseback of our Roland distribution center resulting in a 15-year lease term with the option to extend for six additional periods of five years each. We believe our facilities are suitable and adequate to meet our current business and operational needs .

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeWhile legal proceedings are subject to uncertainties and the outcome of any such matter is not predictable, we are not aware of any legal proceedings pending or threatened against us that we expect to have a material adverse effect on our financial condition, results of operations or liquidity. ITEM 4.
Biggest changeWhile legal proceedings are subject to uncertainties and the outcome of any such matter is not predictable, we are not aware of any legal proceedings pending or threatened against us that we expect to have a material adverse effect on our financial condition, results of operations or liquidity. ITEM 4. MINE SAFETY DISCLOSURES Not applicable. ​ PART II
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MINE SAFETY DISCLOSURES Not applicable. ​ 24 Table of Contents PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeDividends On April 28, 2020, the Company announced the suspension of future cash dividends due to the current economic uncertainty stemming from the COVID-19 pandemic. Any determination to declare and pay cash dividends in the future will be made by the Company’s board of directors. Purchases of Equity Securities by the Issuer and Affiliated Purchasers.
Biggest changeDividends On April 28, 2020, the Company announced it would suspend quarterly cash dividends. Any determination to declare and pay cash dividends in the future will be made by the Company’s board of directors. Purchases of Equity Securities by the Issuer and Affiliated Purchasers.
This graph assumes that $100 was invested on January 31, 2017 in our common stock and in each of the market index and the industry index, and that all cash distributions were reinvested.
This graph assumes that $100 was invested on January 31, 2018 in our common stock and in each of the market index and the industry indexes, and that all cash distributions were reinvested.
See Item 12 of this Report. 25 Table of Contents Stock Performance Graph Set forth below is a line graph comparing the last five years’ percentage change in the cumulative total stockholder return on shares of our common stock against the cumulative total returns of the Russell 2000 Index and the NASDAQ Retail Trade Index.
See Item 12 of this Report. 22 Table of Contents Stock Performance Graph Set forth below is a line graph comparing the last five years’ percentage change in the cumulative total stockholder return on shares of our common stock against the cumulative total returns of the Russell 2000 Index, the NASDAQ Retail Trade Index and the Dow Jones US Specialty Retailers Index.
ITEM 5. MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Our common stock is traded on The NASDAQ Stock Market under the symbol “CTRN.” On March 15, 2022, there were 35 holders of record and approximately 10,000 beneficial holders of our common stock.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Our common stock is traded on The NASDAQ Stock Market under the symbol “CTRN.” On March 15, 2023, there were 8 holders of record and approximately 7,000 beneficial holders of our common stock.
Removed
The number of shares of common stock that we repurchased during the fourth quarter of fiscal 2021 and the average price paid per share are as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total number of ​ Maximum number (or ​ ​ ​ ​ ​ ​ ​ shares purchased as ​ approximate dollar value) ​ ​ Total number ​ Average ​ part of publicly ​ of shares that may yet be ​ ​ of shares ​ price paid ​ announced plans or ​ purchased under the Period ​ purchased ​ per share (1) ​ programs (2) ​ plans or programs (2) November (10/31/21 - 11/27/21) 77,325 ​ $ 86.13 77,325 ​ $ 1,423,234 ​ December (11/28/21 - 1/1/21) 17,994 ​ $ 78.82 17,994 ​ $ 30,005,235 ​ January (1/2/22 - 1/29/22) — ​ $ — — ​ $ 30,005,235 ​ Total 95,319 ​ ​ ​ 95,319 ​ ​ ​ ​ (1) Includes commissions for the shares repurchased under the stock repurchase program.
Added
During fiscal 2022, we repurchased approximately 331,000 shares of our common stock at an aggregate purchase price of $10.0 million. We did not repurchase any shares of our common stock during the fourth quarter of fiscal 2022. As of January 28, 2023, approximately $50.0 million remained available under our previously announced share repurchase programs. Equity Compensation Plan Information.
Removed
(2) On November 30, 2021, the Company announced that its board of directors approved a $30 million stock repurchase program. On March 15, 2022, the Company announced that its board of directors approved an additional $30 million stock repurchase program. The stock repurchase programs do not have expiration dates. Equity Compensation Plan Information.
Added
We have elected to replace the NASDAQ Retail Trade Index with the Dow Jones US Specialty Retailers Index because the former is no longer deemed to be a widely recognized index.
Removed
Our common stock price performance shown on the graph is not indicative of future price performance. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total Return Analysis 1/17 ​ 1/18 ​ 1/19 ​ 1/20 ​ 1/21 ​ 1/22 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Citi Trends, Inc. 100.00 ​ 148.73 ​ 131.32 ​ 151.97 ​ 386.58 ​ 319.22 ​ Russell 2000 Index 100.00 ​ 117.18 ​ 113.05 ​ 123.47 ​ 160.72 ​ 158.78 ​ NASDAQ Retail Trade 100.00 ​ 152.24 ​ 161.79 ​ 187.53 ​ 298.48 ​ 281.88 ​ ​ ​ ​ ​
Added
Our common stock price performance shown on the graph is not indicative of future price performance. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total Return Analysis 1/18 ​ 1/19 ​ 1/20 ​ 1/21 ​ 1/22 ​ 1/23 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Citi Trends, Inc. 100.00 ​ 88.29 ​ 102.17 ​ 259.91 ​ 214.63 ​ 138.68 ​ Russell 2000 100.00 ​ 96.48 ​ 105.36 ​ 137.15 ​ 135.50 ​ 130.92 ​ NASDAQ Retail Trade 100.00 ​ 106.44 ​ 124.08 ​ 195.39 ​ 185.75 ​ 145.31 ​ Dow Jones US Specialty Retailers ​ 100.00 ​ 111.42 ​ 122.41 ​ 172.50 ​ 174.04 ​ 165.98 ​ ​ 23 Table of Contents ITEM 6.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeFurthermore, the seasonal nature of our business may affect comparisons between periods. 28 Table of Contents Net Sales and Additional Operating Data The following table provides selected consolidated statement of operations data expressed both in dollars and as a percentage of net sales: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fiscal Year ​ ​ 2021 ​ 2020 ​ 2019 ​ ​ (dollars in thousands) Statement of Operations Data ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net sales ​ $ 991,595 ​ 100.0 % $ 783,294 ​ 100.0 % $ 781,925 ​ 100.0 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Cost of sales (exclusive of depreciation) ​ (584,063) ​ (58.9) % (471,618) ​ (60.2) % (484,740) ​ (62.0) % Selling, general and administrative expenses ​ (307,622) ​ (31.0) % (260,198) ​ (33.2) % (259,629) ​ (33.2) % Depreciation ​ (20,393) ​ (2.0) % (19,259) ​ (2.4) % (18,535) ​ (2.3) % Asset impairment ​ — ​ 0.0 % (286) ​ (0.0) % (472) ​ (0.1) % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Income from operations ​ 79,517 ​ 8.0 % 31,933 ​ 4.1 % 18,549 ​ 2.4 % Interest income ​ 31 ​ 0.0 % 238 ​ 0.0 % 1,577 ​ 0.2 % Interest expense ​ (306) ​ (0.0) % (776) ​ (0.1) % (158) ​ (0.0) % Income before income taxes ​ 79,242 ​ 8.0 % 31,395 ​ 4.0 % 19,968 ​ 2.6 % Income tax expense ​ (17,002) ​ (1.7) % (7,417) ​ (1.0) % (3,465) ​ (0.5) % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net income ​ $ 62,240 ​ 6.3 % $ 23,978 ​ 3.1 % $ 16,503 ​ 2.1 % ​ The following table provides information about store activity and the change in comparable store sales for each fiscal year: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fiscal Year ​ ​ 2021 ​ 2020 ​ 2019 ​ ​ ​ ​ ​ ​ ​ ​ Total stores open, beginning of year 585 571 562 ​ New stores 27 18 16 ​ Closed stores (3) (4) (7) ​ Total stores open, end of year 609 585 571 ​ ​ ​ ​ ​ ​ ​ ​ ​ Comparable store sales (decrease) increase (1) (2.1) % (0.1) % 1.6 % (1) Stores included in the comparable store sales calculation for any year are those stores that were opened prior to the beginning of the preceding fiscal year and were still open at the end of such year.
Biggest changeNet Sales and Additional Operating Data The following table provides selected consolidated statement of operations data expressed both in dollars and as a percentage of net sales: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fiscal Year ​ ​ 2022 ​ 2021 ​ 2020 ​ ​ (dollars in thousands) Statement of Operations Data ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net sales ​ $ 795,011 ​ 100.0 % $ 991,595 ​ 100.0 % $ 783,294 ​ 100.0 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Cost of sales (exclusive of depreciation) ​ (484,022) ​ (60.9) % (584,063) ​ (58.9) % (471,618) ​ (60.2) % Selling, general and administrative expenses ​ (279,177) ​ (35.1) % (307,622) ​ (31.0) % (260,198) ​ (33.2) % Depreciation ​ (20,595) ​ (2.6) % (20,393) ​ (2.0) % (19,259) ​ (2.4) % Asset impairment ​ — ​ 0.0 % — ​ 0.0 % (286) ​ (0.0) % Gain on sale-leasebacks ​ ​ 64,088 ​ 8.1 % ​ — ​ 0.0 % ​ — ​ 0.0 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Income from operations ​ 75,305 ​ 9.5 % 79,517 ​ 8.0 % 31,933 ​ 4.1 % Interest income ​ 1,034 ​ 0.1 % 31 ​ 0.0 % 238 ​ 0.0 % Interest expense ​ (306) ​ (0.0) % (306) ​ (0.0) % (776) ​ (0.1) % Income before income taxes ​ 76,033 ​ 9.6 % 79,242 ​ 8.0 % 31,395 ​ 4.0 % Income tax expense ​ (17,141) ​ (2.2) % (17,002) ​ (1.7) % (7,417) ​ (1.0) % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net income ​ $ 58,892 ​ 7.4 % $ 62,240 ​ 6.3 % $ 23,978 ​ 3.1 % ​ The following table provides information about store activity and the change in comparable store sales for each fiscal year: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fiscal Year ​ ​ 2022 ​ 2021 ​ 2020 ​ ​ ​ ​ ​ ​ ​ ​ Total stores open, beginning of year 609 585 571 ​ New stores 12 27 18 ​ Closed stores (10) (3) (4) ​ Total stores open, end of year 611 609 585 ​ ​ ​ ​ ​ ​ ​ ​ ​ Comparable store sales (decrease) increase (1) (22.1) % 25.1 % (2.1) % (1) Stores included in the comparable store sales calculation for any year are those stores that were opened prior to the beginning of the preceding fiscal year and were still open at the end of such year.
We do not generally enter into such arrangements with our vendors. There were no material changes in the estimates or assumptions related to the valuation of inventory during fiscal 2021. Operating Leases We lease all of our retail store locations and certain office space and equipment. All leases are classified as operating leases.
We do not generally enter into such arrangements with our vendors. There were no material changes in the estimates or assumptions related to the valuation of inventory during fiscal 2022. Operating Leases We lease all of our retail store locations and certain office space and equipment. All leases are classified as operating leases.
As an example, stores opened in fiscal 2020 and fiscal 2021 were not considered comparable stores in fiscal 2021. Relocated and expanded stores are included in the comparable store sales results. Stores that are closed permanently or for an extended period are excluded from the comparable store sales results.
As an example, stores opened in fiscal 2021 and fiscal 2022 were not considered comparable stores in fiscal 2022. Relocated and expanded stores are included in the comparable store sales results. Stores that are closed permanently or for an extended period are excluded from the comparable store sales results.
Relocated stores and expanded stores are included in the comparable store sales results. Stores that are closed permanently or for an extended period are excluded from the comparable store sales results. 29 Table of Contents Key Operating Statistics We measure performance using key operating statistics. One of the main performance measures we use is comparable store sales growth.
Relocated stores and expanded stores are included in the comparable store sales results, while stores that are closed permanently or for an extended period are excluded from the comparable store sales results. 26 Table of Contents Key Operating Statistics We measure performance using key operating statistics. One of the main performance measures we use is comparable store sales growth.
Depreciation is not considered a component of cost of sales and is included as a separate line item in the consolidated statements of operations. Selling, general and administrative expenses are comprised of store costs, including payroll and occupancy costs, corporate and distribution center costs and advertising costs.
Depreciation is not considered a component of cost of sales and is included as a separate line 25 Table of Contents item in the consolidated statements of operations. Selling, general and administrative expenses are comprised of store costs, including payroll and occupancy costs, corporate and distribution center costs and advertising costs.
Executive Overview We are a growing specialty value retailer of apparel, accessories and home trends for way less spend primarily for African American and Latinx families in the United States. Our high-quality and trend-right merchandise offerings at everyday low prices are designed to appeal to the fashion and trend preferences of value-conscious customers.
Executive Overview We are a leading specialty value retailer of apparel, accessories and home trends for way less spend primarily for African American and multicultural families in the United States. Our high-quality and trend-right merchandise offerings at everyday low prices are designed to appeal to the fashion and trend preferences of value-conscious customers.
As a measure of sensitivity, a ten percent change in our estimated shrinkage rates as of January 29, 2022, would not have materially impacted our cost of goods sold in fiscal 2021. Many retailers have arrangements with vendors that provide for rebates and allowances under certain conditions, which ultimately affect the value of the inventory.
As a measure of sensitivity, a ten percent change in our estimated shrinkage rates as of January 28, 2023, would not have materially impacted our cost of goods sold in fiscal 2022. Many retailers have arrangements with vendors that provide for rebates and allowances under certain conditions, which ultimately affect the value of the inventory.
Uncertainties and Challenges COVID-19 The COVID-19 pandemic continues to evolve and has caused significant volatility and disruptions in our business during fiscal 2021 and 2020. We remain focused on providing a safe store environment for our customers and associates while delivering an engaging shopping experience.
Uncertainties and Challenges COVID-19 The COVID-19 pandemic caused significant volatility and disruptions in our business during fiscal 2020 and 2021. We remain focused on providing a safe store environment for our customers and associates while delivering an engaging shopping experience.
Liquidity and Capital Resources Capital Allocation Our capital allocation strategy is to prioritize investments in opportunities to profitably grow our business and maintain current operations, then to return excess cash to shareholders through our repurchase programs. Our year-end cash and cash equivalents balance was $49.8 million compared to $123.2 million at the end of last year.
Liquidity and Capital Resources Capital Allocation Our capital allocation strategy is to maintain adequate liquidity to prioritize investments in opportunities to profitably grow our business and maintain current operations, then to return excess cash to shareholders through our repurchase programs. Our year-end cash and cash equivalents balance was $103.5 million compared to $49.8 million at the end of last year.
The years ended January 29, 2022, January 30, 2021 and February 1, 2020 are referred to herein as fiscal 2021, 2020 and 2019, respectively. Results of Operations The following discussion of our financial performance is based on the consolidated financial statements set forth in the financial pages of this Report. The nature of our business is seasonal.
The years ended January 28, 2023, January 29, 2022 and January 30, 2021 are referred to herein as fiscal 2022, fiscal 2021 and fiscal 2020, respectively. Results of Operations The following discussion of our financial performance is based on the consolidated financial statements set forth in the financial pages of this Report. The nature of our business is seasonal.
Discussions of our results of operations for the year ended January 30, 2021 compared to the year ended February 1, 2020 that have been omitted under this item can be found in "Part II, Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Form 10-K for the year ended January 30, 2021, which was filed with the United States Securities and Exchange Commission on April 14, 2021.
Discussions of our results of operations for the year ended January 29, 2022 compared to the year ended January 30, 2021 that have been omitted under this item can be found in "Part II, Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the year ended January 29, 2022, which was filed with the United States Securities and Exchange Commission on April 14, 2022.
Our team is dedicated to our neighborhoods and committed to positively impacting the African American and Latinx communities that we serve. We strongly believe that our growth strategy centered around these four areas will accelerate our sales and earnings growth.
Our team is dedicated to our neighborhoods and committed to positively impacting the African American and multicultural communities that we serve. We strongly believe that our business strategy centered around these four areas will accelerate our long-term sales and earnings growth.
At the end of fiscal 2021, we had no borrowings under the credit facility and $0.6 million in letters of credit outstanding. Cash Flows Cash Flows From Operating Activities. Cash provided by operating activities was $74.3 million in fiscal 2021 compared with $110.9 million in fiscal 2020.
At the end of fiscal 2022, we had no borrowings under the credit facility and $0.6 million in letters of credit outstanding. Cash Flows Cash Flows From Operating Activities. Cash provided by operating activities was $5.8 million in fiscal 2022 compared with $74.3 million in fiscal 2021.
Significant uses of cash included: (1) a $53.2 million decrease in accrued expenses and other-long-term liabilities due primarily to payments of operating lease liabilities; (2) a $20.4 million increase in inventory due primarily to depleted inventory levels at the end of last year driven by outsized sales; and (3) an $8.6 million change in income tax receivable/payable.
Significant uses of cash included (1) a $53.2 million decrease in accrued expenses and other long-term liabilities due primarily to payments of operating lease liabilities; (2) a $20.4 million increase in inventory due primarily to depleted inventory levels at the end of the prior year; and (3) an $8.6 million change in income tax receivable/payable. Cash Flows From Investing Activities.
Critical Accounting Estimates Our consolidated financial statements are prepared in accordance with U.S. GAAP, which requires us to make estimates and apply judgments that affect the reported amounts. Actual results could differ from those estimates.
See Note 8 to the Financial Statements for more information regarding lease commitments. 28 Table of Contents Critical Accounting Estimates Our consolidated financial statements are prepared in accordance with U.S. GAAP, which requires us to make estimates and apply judgments that affect the reported amounts. Actual results could differ from those estimates.
We anticipate capital expenditures in fiscal 2022 of $40 million to $45 million, primarily for opening approximately 35 new stores and remodeling approximately 50 stores, combined with continued investments in our systems and distribution centers. Share Repurchases During fiscal 2021 and 2020, we returned $115.3 million and $32.9 million, respectively, to shareholders through share repurchases.
We anticipate capital expenditures in fiscal 2023 of $20 million to $25 million, primarily for opening approximately 8 new stores and remodeling approximately 28 stores, combined with continued investments in our systems and distribution centers. Share Repurchases During fiscal 2022 and 2021, we returned $10.0 million and $115.3 million, respectively, to shareholders through share repurchases.
As of January 29, 2022, we operated 609 stores in urban, suburban and rural markets in 33 states.
As of January 28, 2023, we operated 611 stores in urban, suburban and rural markets in 33 states.
In addition, we leverage consumer insights and analytics to add incremental assortments, and we employ pricing studies to expand margin. 27 Table of Contents Investing in Our Infrastructure .
In addition, we leverage consumer insights and analytics to 24 Table of Contents add incremental assortments, and we employ pricing studies to expand margin while ensuring a balanced “good, better, best” assortment. Investing in Our Infrastructure .
As a result, we believe the retail inventory method results in a more conservative inventory valuation than other accounting methods. We estimate and record an allowance for shrinkage for the period between the last physical count and the balance sheet date. The estimate of shrinkage can be affected by changes in actual shrinkage trends.
Merchandise markdowns are reflected in the inventory valuation when the price of an item is lowered in the stores. As a result, we believe the retail inventory method results in a more conservative inventory valuation than other accounting methods. We estimate and record an allowance for shrinkage for the period between the last physical count and the balance sheet date.
Our principal sources of liquidity consist of: (i) cash and cash equivalents on hand; (ii) short-term trade credit arising from customary payment terms and trade practices with our vendors; (iii) cash generated from operations on an ongoing basis; and (iv) a revolving credit facility with a $75 million credit commitment.
Our principal sources of liquidity consist of (i) cash and cash equivalents on hand; (ii) short-term trade credit arising from customary payment terms and trade practices with our vendors; (iii) cash generated from operations on an ongoing basis; and (iv) a revolving credit facility with a $75 million credit commitment. 27 Table of Contents In addition, in April 2022, we completed a sale-leaseback transaction of our distribution center in Darlington, South Carolina, for pretax proceeds of $45.5 million.
Inherent in the retail inventory calculation are certain management judgments and estimates, including, among others, merchandise markups, markdowns and shrinkage, which impact the ending inventory valuation at cost as well as resulting cost of sales. Merchandise markdowns are reflected in the inventory valuation when the price of an item is lowered in the stores.
Under the retail inventory method, the cost of inventory is determined by calculating a cost-to-retail ratio and applying it to the retail value of inventory. Inherent in the retail inventory calculation are certain management judgments and estimates, including, among others, merchandise markups, markdowns and shrinkage, which impact the ending inventory valuation at cost as well as resulting cost of sales.
Inventory shrinkage as a percentage of sales in fiscal 2021, 2020 and 2019 was 0.4%, 0.8% and 1.2%, respectively. The allowance for inventory shrinkage was $4.4 million as of January 29, 2022 and $5.2 million as of January 30, 2021.
The estimate of shrinkage can be affected by changes in actual shrinkage trends. Inventory shrinkage as a percentage of sales in fiscal 2022, fiscal 2021 and fiscal 2020 was 0.7%, 0.4% and 0.8%, respectively. The allowance for inventory shrinkage was $5.8 million as of January 28, 2023 and $4.4 million as of January 29, 2022.
As described in more detail in “Item 1 – Business,” we have identified four strategic areas of focus that we believe will accelerate our sales and earnings growth over the next few years: Growing Our Fleet . We believe that we have the potential to grow to more than 1,000 stores over time through both densification and new market entries.
As described in more detail in “Item 1 – Business,” we have identified four strategic areas of focus that we believe will accelerate our sales and earnings growth over the next few years: Driving Comparable Store Productivity .
Cash used in investing activities was $29.5 million in fiscal 2021 compared to cash provided of $26.7 million in fiscal 2020. Cash used in fiscal 2021 was primarily for capital expenditures in new and remodeled stores, along with investments in system upgrades and distribution center enhancements.
Cash used in fiscal 2021 was primarily for capital expenditures in new and remodeled stores, along with investments in system upgrades and distribution center enhancements. Cash Flows From Financing Activities. Cash used in financing activities was $12.2 million in fiscal 2022 compared with $118.2 million in fiscal 2021.
Repurchases of common stock totaled $115.3 million in fiscal 2021, while repurchases of common stock and dividend payments totaled $33.7 million in fiscal 2020. Cash Requirements and Commitments Our principal cash requirements consist of (1) inventory purchases; (2) capital expenditures to invest in our infrastructure; and (3) operational needs, including salaries, occupancy costs, taxes and other operating costs.
Cash used in each year was primarily for repurchases of our common stock. Cash Requirements and Commitments Our principal cash requirements consist of (1) inventory purchases; (2) capital expenditures to invest in our infrastructure; and (3) operational needs, including salaries, occupancy costs, taxes and other operating costs. We also use cash to repurchase stock under our stock repurchase programs.
We focus on overall store sales volume as the critical driver of profitability. Fiscal 2021 Compared to Fiscal 2020 Net Sales. Net sales increased $208.3 million, or 26.6%, to $991.6 million in fiscal 2021 from $783.3 million in fiscal 2020, primarily due to temporary store closures in fiscal 2020 related to the COVID-19 pandemic.
We focus on overall store sales volume as the critical driver of profitability. Fiscal 2022 Compared to Fiscal 2021 Net Sales. Net sales decreased $196.6 million, or 19.8%, to $795.0 million in fiscal 2022 from $991.6 million in fiscal 2021.
As a percentage of net sales, cost of sales leveraged 130 basis points to 58.9% in fiscal 2021 from 60.2% in fiscal 2020 due to an increase of 195 basis points in the core merchandise margin (initial mark-up, net of markdowns) primarily driven by fewer markdowns, along with an improvement of 40 basis points in shrinkage, partially offset by 105 basis points deleverage in freight costs.
As a percentage of net sales, cost of sales deleveraged 200 basis points to 60.9% in fiscal 2022 from 58.9% in fiscal 2021 due to a decrease of 145 basis points in the core merchandise margin (initial mark-up, net of markdowns) primarily driven by unusually low markdowns last year during outsized stimulus-driven demand, along with an increase of 35 basis points in shrinkage and an increase of 20 basis points in freight costs in the current year.
Results of a period shorter than a full year may not be indicative of results expected for the entire year due to changes in our business, consumer spending patterns, and the macroeconomic environment, including those resulting from the COVID-19 pandemic.
Results may fluctuate due to changes in our business, consumer spending patterns, and the macroeconomic environment, including those resulting from the COVID-19 pandemic. Furthermore, the seasonal nature of our business may affect comparisons between periods.
Inventory Inventory is stated at the lower of cost (first-in, first-out basis) or net realizable value as determined by the retail inventory method for store inventory and the average cost method for distribution center inventory. Under the retail inventory method, the cost of inventory is determined by calculating a cost-to-retail ratio and applying it to the retail value of inventory.
We believe the following critical accounting policies describe the more significant judgments and estimates used in the preparation of our consolidated financial statements. Inventory Inventory is stated at the lower of cost (first-in, first-out basis) or net realizable value as determined by the retail inventory method for store inventory and the average cost method for distribution center inventory.
Inflation In addition to COVID-19, we expect that our operations will continue to be influenced by general economic conditions, including the recent surge in prices for food, fuel and energy due to inflationary pressures, which are particularly impactful to the communities we serve.
Despite the recent improvement in trends, we cannot reasonably predict the extent to which our future business will be impacted by the pandemic. General Economic Conditions We expect that our operations in the short-term will continue to be influenced by general economic conditions, including the recent inflationary pressures, which are particularly impactful to the communities we serve.
Selling, General and Administrative Expenses (“SG&A”). SG&A expenses increased $47.4 million, or 18.2% to $307.6 million in fiscal 2021 from $260.2 million in fiscal 2020 driven primarily by reduced payroll and occupancy expenses in 2020 related to COVID-19 temporary store closures.
Selling, General and Administrative (“SG&A”) Expenses. SG&A expenses decreased $28.4 million, or 9.2%, to $279.2 million in fiscal 2022 from $307.6 million in fiscal 2021.
As a percentage of net sales, SG&A expenses leveraged 220 basis points to 31.0% from 33.2%. Depreciation. Depreciation expense increased $1.1 million to $20.4 million in fiscal 2021 from $19.3 million in fiscal 2020. Asset Impairment. There were no impairment charges related to underperforming stores in fiscal 2021.
As a percentage of sales, SG&A expenses deleveraged 410 basis points to 35.1% in fiscal 2022 from 31.0% in fiscal 2021, primarily due to the deleveraging effect of lower sales. Depreciation. Depreciation expense increased $0.2 million to $20.6 million in fiscal 2022 from $20.4 million in fiscal 2021. ​ Gain on Sale-leasebacks .
For fiscal 2020, significant sources of cash included: (1) $96.2 million from net income adjusted for non-cash expenses and insurance proceeds; (2) a $33.6 million decrease in inventory due to efforts to reduce inventory levels combined with outsized sales in the fourth quarter; (3) a $16.3 million increase in accrued compensation due primarily to higher incentive compensation earned relative to 2019; (4) a $5.8 million change in income tax payable; and (5) a $5.1 million increase in accounts payable.
For fiscal 2022, significant sources of cash included (1) $72.0 million from net income adjusted for non-cash expenses, insurance proceeds and gain on sale-leasebacks; (2) a $16.8 million decrease in inventory; and (3) a $3.4 million decrease in income tax receivable.
While we have greatly expanded our product offerings to become a one-stop-shop, traffic to our stores is still influenced by weather patterns to some extent. Basis of Presentation Net sales consist of store sales and layaway fees, net of returns by customers. Cost of sales consists of the cost of products we sell and associated freight costs.
We are unable to estimate the ultimate direct and indirect financial impacts of this cyber disruption. Basis of Presentation Net sales consist of store sales and layaway fees, net of returns by customers. Cost of sales consists of the cost of products we sell and associated freight costs.
In particular, our vendors have faced production delays and we have been impacted by industry-wide U.S. port and ground transportation delays. In response, we have taken various actions, including ordering merchandise earlier, leveraging our packaway merchandise stock and expanding the drop shipping program that we initiated in fiscal 2020.
In response, we took various actions, including ordering merchandise earlier, leveraging our packaway merchandise stock and expanding the vendor direct-to-store shipping program that we initiated in fiscal 2020. Seasonality and Weather Conditions The nature of our business is seasonal.
Cash provided in fiscal 2020 was the result of $43.3 million of net proceeds from the sale of investment securities, partially offset by $17.0 million of capital expenditures. Cash Flows From Financing Activities. Cash used in financing activities was $118.2 million in fiscal 2021 compared with $34.3 million in fiscal 2020.
Cash provided by investing activities was $60.2 million in fiscal 2022 compared to cash used of $29.5 million in fiscal 2021. Cash provided in fiscal 2022 consisted of $81.1 million net proceeds from the sale of buildings in the sale-leaseback transactions, partially offset by $22.3 million for purchases of property and equipment.
The decrease in the effective tax rate was primarily due to excess tax benefits from stock-based payment arrangements. Net Income. Net income increased $38.2 million to $62.2 million in fiscal 2021 compared to $24.0 million in fiscal 2020, due to the factors discussed above.
Net income decreased $3.3 million to $58.9 million in fiscal 2022 compared to $62.2 million in fiscal 2021, due to the factors discussed above.
Significant uses of cash included: (1) a $38.4 million decrease in accrued expenses and other long-term liabilities due primarily to payments of operating lease liabilities; and (2) a $7.7 million increase in prepaid and other current assets due to a credit under the CARES Act and increases in tenant improvement allowances and charge card receivables. Cash Flows From Investing Activities.
Significant uses of cash included (1) a $54.8 million decrease in accrued expenses and other-long-term liabilities due primarily to payments of operating lease liabilities; (2) an $18.3 million decrease in accounts payable due primarily to the decrease in inventory; and (3) a $15.1 million decrease in accrued compensation due to payment in the first quarter of incentive compensation accrued in the preceding fiscal year.
In addition, we are closely monitoring the impacts of higher unemployment, wage inflation and costs to source our merchandise. Supply Chain Disruptions We have encountered increasing supply chain disruptions that began in the second half of fiscal 2021 and have continued through the date of this Report.
Supply Chain Disruptions While the supply chain disruptions that began in the second half of fiscal 2021 have largely mitigated as of the date of this report, these disruptions resulted in decreased capacity and increased costs. These pressures persisted through the majority of fiscal 2022.
The increase in net sales was also driven by government stimulus payments and the lifting of COVID-19 restrictions that created a surge in demand, particularly in the first quarter of 2021. Cost of Sales (exclusive of depreciation). Cost of sales increased $112.5 million, or 23.8%, to $584.1 million in fiscal 2021 from $471.6 million in fiscal 2020.
The decrease in comparable store sales was due to unprecedented demand last year driven by government stimulus payments, combined with inflationary pressures in fiscal 2022 that were particularly impactful to our core customers. Cost of Sales (exclusive of depreciation). Cost of sales decreased $100.1 million, or 17.1%, to $484.0 million in fiscal 2022 from $584.1 million in fiscal 2021.
As of January 29, 2022, our contractual commitments for operating leases totaled $234.0 million (with $53.3 million due within 12 months) and our purchase obligations for open merchandise orders totaled $249.8 million due within 12 months. See Note 8 to the Financial Statements for more information regarding lease commitments.
Historically, we have met these cash requirements using cash flow from operations and short-term trade credit. As of January 28, 2023, our contractual commitments for operating leases totaled $347.1 million (with $63.9 million due within 12 months) and our purchase obligations for open merchandise orders totaled $123.1 million due within 12 months.
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Fiscal 2021 Business Highlights ● Launched and market tested our new “CTx” store formats, the first major overhaul to our store format in over 10 years ● Opened 27 new stores and remodeled 25 stores ● Navigated the supply chain challenges and disruptions while maintaining healthy inventory stock with high freshness ● Managed store and distribution labor headwinds with prudent leadership and effective staffing solutions ● Initiated investments in infrastructure, including system enhancements for our merchandising teams and capacity upgrades for our distribution centers ● Strengthened our diversity and leadership with two new additions to our board of directors ● Launched “Citi Life” which encapsulates our brand purpose values and represents the emotional connection that our customers and associates have with Citi Trends Fiscal 2021 Financial Highlights ● Total sales of $991.6 million ● Operating margin of 8.0% ● Earnings of $6.91 per diluted share ● Cash of $49.8 million at the end of the year with no debt ● Repurchased $115.3 million of shares For a further discussion of trends, uncertainties and other factors that could affect our future operating results related to the effects of the COVID-19 pandemic, see Item 1A.
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Fiscal 2022 Business Highlights ● Elevated our in-store experience with the expansion of queue line and the introduction of Missy and Tween girl lines ● Continued to expand our assortment reach with enhancements to our multicultural merchandise offering ● Delivered $10.0 million of cost savings in the second half of the year to streamline the organization and align expenses with revised sales expectations ● Opened 12 new stores, remodeled 35 stores and closed 10 stores; ended the year with 13% of the fleet upgraded to our CTx store format ● Completed sale-leaseback transactions on our two distribution centers ● Completed capacity upgrades in our distribution centers and made significant progress on our ERP upgrade Fiscal 2022 Financial Highlights ● Total sales of $795.0 million ● Operating margin of 9.5% ● Earnings of $7.17 per diluted share ● Cash of $103.5 million at the end of the year, with no debt ● Repurchased $10.0 million of shares Our Strategy We believe that Citi Trends is in a unique position to serve our loyal customer base, with a long runway for store growth and a motivated leadership team supported by a healthy balance sheet.
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Risk Factors in this Report. Our Strategy We believe that Citi Trends is in a unique position for growth. We have a loyal customer base, a long runway for store growth and a motivated leadership team, supported by a healthy balance sheet.
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We believe that we can drive sales productivity improvements by sharpening our focus on trend development and actively refining our assortment strategies, broadening the appeal of the brand and continuing to roll out the CTx store format.
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By the end of fiscal 2024, we expect about 50% of our stores will be in our compelling new CTx format. Optimizing the Assortment . We believe that our unique ability to curate assortments for our customers further differentiates our model.
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We continue to believe that we have the potential to grow to approximately 1,000 stores over time through both densification and new market entries. Managing Inventory and Maximizing Margin . We believe that our sourcing methodology further differentiates our model through a combination of products made exclusively for our core customers and highly recognized brands grounded in everyday value.
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We also prioritize the wellness and safety of our associates in our corporate offices and distribution centers. The communities we serve were severely impacted by the omicron variant at the end of fiscal 2021. Despite the recent improvement in trends, we cannot reasonably predict the extent to which our future business will be impacted by the pandemic.
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We are known for delivering newness and freshness, resulting in a high-repeat shopping rate, and our ample monthly liquidity will enable us to chase trends to excite our customer base.
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These supply chain disruptions have resulted in increased costs, and we expect supply chain pressures will persist through at least the first half of fiscal 2022. Seasonality and Weather Patterns The nature of our business is seasonal.
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Given the macro-economic environment, we expect low-income families to remain under pressure through the majority of fiscal 2023. In addition, we monitor the impacts of unemployment levels, wage inflation, interest rates, inflation rates, housing costs, energy costs, consumer confidence, consumer perception of economic conditions and costs to source our merchandise.
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Also contributing to the increase in SG&A expenses was $8.0 million higher incentive-based compensation expense resulting from improved operating results in relation to budget, as well as the impact on expenses of opening 27 new stores in fiscal 2021 and 18 new stores in fiscal 2020.
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While we have greatly expanded our product offerings to become a one-stop shop, traffic to our stores is still influenced by weather conditions to some extent. Cyber Disruption In January 2023, we experienced a disruption of our back office and distribution center IT systems, which was due to what is known as Hive ransomware.
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In fiscal 2020, impairment charges related to an underperforming store totaled $0.3 million, comprised of $0.1 million for leasehold improvements and fixtures and equipment, and $0.2 million for an operating lease right-of-use asset. Income Tax Expense.
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In connection with this incident, third party consultants and forensic experts were engaged to assist with the restoration and remediation of the Company’s systems and, with the assistance of law enforcement, to investigate the incident. The Company can confirm that sensitive customer data is not retained on its systems.
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Income tax expense increased $9.6 million to $17.0 million in fiscal 2021 from $7.4 million in fiscal 2020 due primarily to an increase of $47.8 million in pretax income. Our effective tax rate for fiscal 2021 was 21.5% compared to 23.6% in fiscal 2020.
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The impact of this disruption was not material to our fourth quarter fiscal 2022 financial results and, while our investigation and remediation efforts remain ongoing, it is not expected to be material to the Company’s full year fiscal 2023 financial results.
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In addition, on March 14, 2022, we entered into an agreement to consummate a sale and leaseback transaction of our distribution center in Darlington, South Carolina, and at our discretion, our distribution center in Roland, Oklahoma. The sale of the Darlington property is expected to provide net proceeds (after tax and transaction-related costs) of approximately $37 million.
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In fiscal 2022, cyber disruption related costs incurred totaled $0.1 million, primarily comprised of third-party consulting services and legal counsel. We do have cyber insurance, and we are working diligently with our insurance carriers on claims to recover costs incurred.
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The sale of the Roland property, if elected by the Company, is expected to provide net proceeds of approximately $32 million. The sale of the Roland property is subject to due diligence and other customary closing conditions. 30 Table of Contents Inventory Our year-end inventory balance was $123.8 million, compared with $103.8 million at the end of last year.
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We anticipate that our financial costs related to the cyber disruption will ultimately be covered by insurance, subject to a retention. We expect to incur ongoing costs related to the cyber disruption, including costs to enhance data security, and plan to take further steps to prevent unauthorized access to, or manipulation of, our systems and data.
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The increase was primarily due to depleted inventory levels at the end of last year driven by outsized sales, combined with opportunistic purchases of packaway inventory at the end of fiscal 2021.
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The decrease in sales was due to a 22.1% decrease in comparable store sales, partially offset by a $16.9 million increase from net store opening and closing activity.
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Capital Expenditures Capital expenditures in fiscal 2021 were $29.7 million, an increase of $12.7 million over the prior year as we invested in our strategic initiatives, including opening 27 new stores, remodeling 25 stores and investing in system upgrades and distribution center enhancements.
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The decrease was due to (1) a $21.4 million decrease in incentive-based compensation as a result of unfavorable operating results in relation to budget in fiscal 2022 (compared to overperformance last year) and an adjustment to compensation costs for certain performance-based awards that are no longer probable to vest, as well as higher costs last year related to the recognition of incremental compensation costs for the conversion of nonvested cash-settled units to nonvested shares; (2) a decrease of $6.3 million in payroll expenses related to reduced headcount (3) $2.9 million of one-time items consisting of an insurance gain, adjustments to accrued vacation expense and the capitalization of payroll related to a technology upgrade; and (4) decreases in fees for credit card processing, professional services and insurance.
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We also use cash to repurchase stock under our stock repurchase programs. Historically, we have met these cash requirements using cash flow from operations and short-term trade credit.
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These decreases were partially offset by a $4.8 million increase in rent related to the sale-leasebacks of our distribution centers, higher utility costs and the general impact to expenses from higher inflation.
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We believe the following critical 31 Table of Contents accounting policies describe the more significant judgments and estimates used in the preparation of our consolidated financial statements.
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In fiscal 2022, we completed sale-leaseback transactions for our distribution centers in Darlington, South Carolina and Roland, Oklahoma that resulted in a combined gain of $64.1 million. Income Tax Expense.
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Income tax expense increased $0.1 million to $17.1 million in fiscal 2022 from $17.0 million in fiscal 2021, due to a slightly higher effective tax rate after the prior year had a favorable tax impact from restricted stock vestings. Net Income.
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In September 2022, we completed a sale-leaseback transaction of our distribution center in Roland, Oklahoma, for pretax proceeds of $35.6 million. Inventory Our year-end inventory balance was $105.8 million, compared with $123.8 million at the end of fiscal 2021.
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The decrease was the result of disciplined inventory management and the deployment of packaway inventory that was opportunistically acquired at the end of fiscal 2021. Capital Expenditures Capital expenditures in fiscal 2022 were $22.3 million, a decrease of $7.4 million over the prior year, primarily due to opening fewer stores in fiscal 2022.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeWe have not entered into forward contracts to hedge against fluctuations in foreign currency prices. ​ 32 Table of Contents
Biggest changeWe have not entered into forward contracts to hedge against fluctuations in foreign currency prices. ​ 29 Table of Contents

Other CTRN 10-K year-over-year comparisons