Citi Trends, Inc.

Greetings and welcome to the CityTrends first quarter 2021 earnings conference call. During the presentation, all participants will be in a listen-only mode. Afterwards, we will conduct a question and answer session. At that time, if you have a question, please press the 1 followed by the 4 on your telephone. If at any time during the conference you need to reach an operator, please press star 0. As a reminder, this conference is being recorded Tuesday, May 25, 2021. I would now like to turn the conference over to Nitsa McKee, Senior Associate. Please go ahead.

Thank you, and good morning, everyone. Thank you for joining us on CityTrend's first quarter 2021 earnings call. On our call today is our Chief Executive Officer, David McEwen, Chief Financial Officer, Pam Edwards, and Vice President of Finance, Jason Moschner. Our earnings release was sent out this morning at 645 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 filings 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, Nitsa. And good morning, everyone. And thanks for joining us today on our first quarter fiscal 2021 earnings call. This morning, I will review our stellar financial and operating results for the first quarter. Then I will update you on our progress and go forward plans related to our strategic initiatives. Pam Edwards. our CFO will then elaborate on our financial results and provide details of our guidance for the remainder of the year. I want to take a moment to express my heartfelt gratitude for the unwavering support and dedication across our stores, distribution centers, buying teams, and leadership teams who collectively with great pride and dedication have continued to service our loyal and growing African-American and Latinx families' apparel, accessories, and home lifestyle needs and value prices. Our first quarter results are a true testament to our team's dedication to our customers and the CityTrends brand. In fact, this was the first quarter in which we surpassed our record fiscal 2020 fourth quarter sales by more than 30 million, a feat that clearly indicates that our strategies are working Our teams are performing with excellence and our customers are loving the CityTrends experience. Now let me discuss the key highlights of our first quarter performance. Total sales increased 146% versus Q1 2020 and increased 39% compared to the first quarter of 2019. This is a record first quarter in which we saw new records for sales, gross margin, Operating income, both dollars and margin, and EPS. Comparable store sales increased 142% versus 2020, the seventh consecutive quarter of positive growth. Compared to the first quarter of 2019, comparable store sales increased 35%. Our positive momentum was once again driven primarily by frequent trips and spending. by longtime loyalists, laxed comebacks, and many newbies. Lastly, the federal government stimulus that started during the third week of March contributed to our momentum. We are very encouraged by the broad-based strength across our six cities or categories. They are women's, men's, kids', beauty and accessories, home and lifestyle, and footwear. Our customers' excitement when shopping our cities can be attributed to the outstanding efforts of our buying, planning, and allocation teams. Our strong top line results were combined with meaningful margin expansion and disciplined expense management across our operational disciplines. Earnings per share of $3.23 far exceeded our beginning of period expectations and the guidance range we provided with our business back in mid-April. This was another well-executed, high-performance quarter for CityTrends. Our transformation is well underway, and not only do we have strong momentum in the business, we are reading and reacting to the environment with great agility while uncovering new ways to elevate and amplify our unique specialty value brand positions. Let me now update you on the progress we are making on our four strategic initiatives that will drive accelerated sales and earnings growth. As a reminder, they are number one, growing our fleet and expanding our customer base. Number two, optimizing our product mix. Number three, reinvesting in our infrastructure. And number four, making a difference within the communities we serve. Up first is our opportunity to grow our fleet and expand our customer base. We are on track to open at least 30 new stores this year, coupled with approximately 20 remodels. We remain extremely bullish about growing our footprint with our long-term site set on a fleet potential of 1,000 locations, over 70% growth from where we are today. our growth will remain focused on three distinct types of neighborhoods. Number one, African-American-centric. Number two, melting pot for a mix of African-American and Latinx populations. And number three, Latinx-centric. As I've mentioned in the past, the role of the physical store is more important than ever as we develop relationships with customers in the heart of their communities, often literally a stone's throw from where they live. And the experience of shopping in our stores is highly unique with the community culture vibe that is unparalleled in retail today. Also during the first quarter, we are thrilled to announce the launch of a CityTrend lab store, along with a second lab store opening this week. These labs represent a testing ground that amplifies and takes our intimate specialty store experience to the next level. We will take a methodical test, read, and react approach to this initiative. And like others we've embarked on, we will anchor our go-forward rollout decisions utilizing fact-based rigor. We anticipate using these learnings to inform the new CTX, which stands for City Trends Experience. and we'll plan on rolling out CTX in 2022. I'm so very excited because this initiative will truly bring to life in more compelling ways than ever before our exclusive trends, sought-after brands, and head-to-toe looks combined with a renewed focus on what we call customer care or enhanced customer service in our stores. I look forward to updating you on our learnings and progress on future calls. Now for an update on our second strategic initiative, optimizing our product mix. This is an area that is really starting to hum, yet it's still in the early innings. Our teams are embracing the concept of operating within the construct of six cities or categories, and each lead buyer is assuming the role of mayor of their respective city, with responsibility for bringing that city to life. Within each city, there are multiple zip codes that keep our cities vibrant and fresh. For the first quarter, although our performance was exceptional across the board, we were particularly pleased with the continued strength of our women's and men's apparel cities, coupled with outsized growth in our home lifestyle city. The quality of our assortment is stronger than ever before and gets better and better every quarter. We are uniquely qualified to meet the needs of under-resourced African-American and Latinx families. Fashion and trends matter so much to our heroes, our customers. And I can assure you that our dedicated vendor and supplier ecosystem is delivering at a very high level to ensure we execute the right tie-dye, the right bold graphics, the right all-over pattern, and perhaps most importantly, determining the right time to pivot to the next trend. My favorite example of trend evolution is found in our men's city, of which I'm a shopper. Early in the year, it was all about the paint splatter as an exclusive treatment on tops and bottoms. And as the quarter progressed, it became more about a paint smear. And then it became rhinestones and patch-ins. The attention to these small but important details is what makes a trend brand a great trend brand. We're so excited to deliver the trends in City Trends, filled with freshness and excitement for our customers, resulting in improved inventory terms and healthy gross margins. Moving to our third strategic focus, reinvesting in our infrastructure. It's all about taking a strategic approach to reinvesting free cash flow from our strong and consistent operational results to make systems and infrastructure improvements across our buy, move, and sell pillars of our operation. I will first focus on the move or the supply chain pillar of our operations. With our outsized performance, We have candidly run into some bottlenecks getting plenty of available products through our DCs and into our stores fast enough to meet consumer demand. We quickly evaluated the situation and have engaged external partners and amped up our dropship capabilities to meaningfully expand our ability to move goods to stores. We are also actively reimagining our move work processes, sparked in part by current labor and freight cost headwinds that you've all heard from across our and other industries these macro headwinds are similar in some ways to those we experienced throughout the pandemic as they have forced us to take a hard look at how we currently operate and how we find new ways to operate more effectively and efficiently our culture is built on the premise of agility and working not only hard but smart but let me assure you we are in the midst of attacking these opportunities Head-on. Investment in our buy and sell pillars continues as well. In buying, power users of our cloud-based systems are emerging, giving us confidence that applying data and analytics to our inventory planning, buying, and allocation decisions will reap many successes down the road. And in sell, in addition to new store growth, our teams are getting traction around using cloud-based workflow tools as well as successfully rolling out a new POS system that will speed up checkout and eventually enable customer data capture. And lastly, our fourth strategic focus, making a difference within the communities we serve. As I mentioned on our last call, our board of directors formed the Corporate Social Responsibility Committee. The committee is overseeing our initiatives around ESG and social responsibilities. Anchored by our City Cares Council, Our future efforts will not only make CityTrends a better company, but will also help serve our melting pot of diverse employees and loyal customers. Furthermore, we believe that a diverse and inclusive team is critical to our success. We strive to foster an intentionally inclusive, diverse, and productive working environment where our employees are valued and respected. We continue to focus on attracting, developing, and retaining team members that reflect the diverse communities we serve. I am proud to say that nearly 80% of our employees are African American or Latinx, and 83% of our employees are female, and that more than 90% of our store management positions are filled by women. Along these lines, as we announced today in our press release, I have pledged on behalf of CityTrends to advance diversity and inclusion within the workplace by signing the CEO Action for Diversity and Inclusion Pledge. joining many other CEOs. Joining this group will help us accelerate our continued dialogue on these matters. And now, I'd like to turn the call over to Pam Edwards, our CFO, to discuss the first quarter results and our thoughts around the balance of fiscal 2021 in greater detail. Pam?