Citi Trends, Inc.

Greetings and welcome to the CityTrends 3Q20 Earnings Conference Call. During the presentation, our participants will be in a listen-only mode. Afterwards, we'll conduct a question-and-answer session. At the time, if you have a question, please press the 1 followed by the 4 on your telephone. If at any time the conference needs to reach an operator, you may press the star followed by the 0. As a reminder, this conference is being recorded today, Tuesday, December 1, 2020. Now, I would like to turn the conference over to Nisamakee Senior Associate. Please go right ahead.

Thank you, and good morning, everyone. Thank you for joining us on CityTrend's third quarter 2020 earnings call. On our call today is our Chief Executive Officer, David McEwen, and Vice President of Finance, Jason Moschner. Our earnings release was sent out this morning at 6.45 a.m. Eastern Time. If you have not received a copy of the release, it's available on the company's website under the Investor Relations section at www.citytrends.com. You should be aware that prepared remarks today made during this call may contain forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Management may make additional forward looking statements in response to your questions. These statements do not guarantee future performance. Therefore, you should not place undue reliance on these statements. We refer you to the company's most recent report on Form 10-K and other subsequent violence with the Securities and Exchange Commission for a more detailed discussion of the factors that can cause actual results to differ materially from those described in the forward-looking statements. I will now turn the call over to our Chief Executive Officer, David McEwen. David?

Thank you, Nitza. And good morning, everyone. And thanks for joining us today on our third quarter of 2020. earnings call. I hope that you are all safe and well. Despite the uncertain environment, for City Trends, the third quarter was one with many high points. We registered stellar operating results. We fully repaid our outstanding borrowings under our revolving credit facility. We reinstated our $30 million share repurchase program, and we repurchased 545,000 shares under that program through November 20th. And we appointed a seasoned retail executive, Pam Edwards, as our chief financial officer effective in January. Now on to the topics to be discussed during today's call. I will first provide a review of our spectacular third quarter operating performance and accomplishments. I will then discuss our merchandising and marketing initiatives for the holiday season including our FAB Festive Finds holiday campaign. I will review notable expanded capabilities and critical business functions that provide us confidence in our model to deliver strong results in the months ahead. Next, I will turn it over to Jason Moschner, our VP of Finance, who will review our third quarter results and financial position in more detail. Lastly, before opening the call to your questions, I will close out with a few high-level comments showcasing our confidence in our unique and scalable model. To begin, across the board, from our distribution centers to Savannah to New York and in 585 stores, I could not be more thankful for everyone's tireless efforts in contributing to the ongoing transformation of City Trends. I will reiterate what I stated on our second quarter call. We have a unique and powerful winning culture at City Trends, and I continue to be impressed with our entire organization as we are not only successfully navigating this unprecedented period in our history, but through thoughtful innovation, the use of data analytics, and ingenuity, we are truly transforming our operating model, positioning City Trends for many years of profitable growth. Importantly, from an operations and store perspective, we continue to prioritize the safety and well-being of our associates, our customers, and the communities we serve. As we enter the critical holiday shopping season, which typically garners meaningfully higher levels of traffic during peak days and weeks, we are doubling down on building associate awareness of our social distancing and safety protocols, as well as our cleaning regimen. The dynamics of the third quarter were unique as we, like many others, experienced a slow start to the back-to-school season, which resulted in soft sales performance in the month of August. That was followed by a meaningful acceleration in our September business as families better understood how their children would return to school. We ended the quarter with October registering positive mid-single-digit comparable store sales growth. resulting in a strong third quarter comparable store sales increase of positive 6.3% and a total sales gain just shy of 9%. We again achieved substantial growth in our gross margin, which was up 440 basis points compared to last year's third quarter, building on the momentum from the second quarter, which was up 390 basis points compared to last year. All of this driven by healthy full-price selling and well-managed inventories. In fact, we achieved a positive 6.3 comp on 33% less comparable store inventory, resulting in an impressive 55% increase in terms for the third quarter. These inventory and terms accomplishments dovetail extremely well with our long-term plan. So we are very encouraged by the momentum we are experiencing. We entered the holiday season with clean and current inventories, chock full of next season buys that we had purchased during the first half of this year, coupled with opportunities based on learnings from last year to capture more market share in important wear now apparel categories. Additionally, at the end of Q3, Our stockpile of next season buys, items meant for selling in the first and second quarter of 2021, were up 37% versus the end of Q3 last year, as our buying team adeptly scoured the market for the right products at extreme values. During the quarter, we continued to support our store growth agenda by opening eight stores new CityTrend stores, expanding our reach into Southeast Texas, while also returning to meet the needs of our loyal customers in the diverse and important Minneapolis community. Recognizing the importance of offering a well-rounded and curated assortment of home trends, we rolled out our expanded home assortment to an additional 100 stores, bringing the total to 200 locations with expanded home sections. Moving down the P&L, we combined rigorous expense control with prudent investments in the business and delivered healthy expense leverage in the quarter. Coupled with our record third quarter gross margin, operating margin expanded 560 basis points to 4.7% of sales. These strong results demonstrate the strength of our brand our on-trend apparel assortment, and outsized growth in home, all of which continue to resonate with our loyal and expanding customer base. Our third quarter high points were not limited to operational excellence, as we also announced the appointment of our new CFO, Pam Edwards, effective January 4th. Pam brings extensive experience in finance, strategy, and operations, across a variety of retail brands and sectors. Most recently, Pam spent 15 years at L Brands as Chief Financial Officer for various divisions of the company, including Mast Global, Victoria's Secret, and Express. Pam is a true leader with a proven track record of success. I'm confident she is the right leader for the business, and we look forward to benefiting from her experience and expertise in just a few weeks. I want to take a moment to thank Jason Moschner, who's been my go-to trusted finance partner and will continue as the Vice President of Finance and Principal Accounting Officer of CityTrends. Let me spend a little time on our third quarter merchandising performance, as well as our positioning for the holiday season, including exciting new marketing strategies. Our third quarter performance was broad-based, with positive comps in all five categories, led by home, men's, and women's. In line with how many of our customers are living and shopping these days, we captured significant market share in bedding, home decor, casual coordinating tops and bottoms for him, active wear and sleepwear for her, and statement tees that allowed our customers to express their passion. Lastly, our continued relationship building was leading brands gave us the ability to provide an expanded assortment of current trends to the underserved communities that deserve access to these brands at affordable prices. We entered the holiday season with an elevated focus on gifting, anchored by our Fab Festive Finds marketing campaign. The assortment runs the gamut of extreme value giftables, such as trendy toys, jewelry sets, plush robes, girls' cosmetic sets, and a wide range of Bluetooth tech stuff, just to mention a few. These fab gifts are proudly displayed on gift tables located at the front of our stores, creating a festive holiday spirit in our inviting store experience. Since joining in March of 2020, I have studied most facets of our business, and I can tell you that we have been able to spark some really meaningful transformative actions and results across many functions of the business. While I refer to the evolution in our business as a reset during our Q2 call, I am more convinced that what we are experiencing is a transformation. We're experiencing a true transformation in the beginnings of a sustainable growth strategy. Central to our growth strategy is the innate understanding of our customers. Coupled with the right tools of the trade, provide them with the right product at the right time, at the right price, and in the right store. We are in early innings. I am delighted at what I'm seeing in the form of demonstrable progress due in no small part to the quality of our people and the passion they're applying to our strategic initiatives. At the forefront of our progress is our ability to leverage data-driven insights across our business functions. to inform what we ultimately do for the only thing that matters, our customers. For example, we are for the first time rolling out data tools and a communication technology platform to our stores organization to transform from an operational-only focus to a sales-driven culture, one that is actively managing the dynamics of a fluid and fresh store assortment. For the buying team, we are implementing cloud-based solutions that enable advanced seasonal planning and robust inventory rationalization that greatly improve our craft at putting the right stuff in front of the right customers. In our supply chain, we ramped up new capabilities, including drop shipments from vendor to the floor for time-sensitive trends into targeted store clusters, which gets the hot trends into customers' hands much faster than in the past. I'm so excited about what's to come. I look forward to updating you on our progress on future calls. With that, I will now turn the call over to Jason Moschner, who will discuss our third quarter financial results. Jason?