Citi Trends, Inc.

Greetings and welcome to the City Trends 4Q21 Earnings Conference Call. During the presentation, all participants will be in a listen-only mode. Afterwards, we'll 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, March 15, 2022. I would now like to turn the conference over to Nitza Miki, Senior Associate. Please go ahead.

Thank you, and good morning, everyone. Thank you for joining us on CityTrend's fourth quarter 2021 earnings call. On our call today is 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 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 to 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, Nita. Good morning, everyone, and thanks for joining us today for our fourth quarter and fiscal 2021 earnings call. This morning, I will begin by reviewing the continued transformation and highlight our financial and operational results for the first quarter in fiscal 2021 before updating you on our progress related to the evolution of our city master plan and efforts in support of our strategic growth priorities. Then, Dan Edwards, our CFO, will elaborate on our financial results and a few other items related to our outlook. Fiscal 2021 was a productive year for CityTrends with meaningful progress against our transformation strategies as we remain focused on our underlying goals of expanding the CityTrends brand to many more underserved African American and Latinx communities. We achieved strong 2021 financial results of our highly differentiated specialty value store experience and continued discipline and focus on the execution of our strategic priorities. For the year, We grew our top line 26.8%, comparable stores plus 22%, and increased our earnings per share by nearly 400%. All of these data points are compared to 2019. Highlights of our accomplishments for the year are we launched and market tested our revolutionized CTX new store format. We opened 27 new stores and remodeled 25 during the year. We navigated and managed this challenging supply chain backdrop while maintaining healthy in stocks and a high level of inventory freshness. We successfully managed store and distribution labor headwinds with prudent leadership and effective staffing solutions. We kicked off investments in infrastructure, that includes system enhancements for our buy team and capacity upgrades for our move team. We strengthened our diversity and leadership with two new additions to our board of directors. And we return value to shareholders through our share repurchase program. And finally, and something that I'm probably most excited about, is we launched City Life, which encapsulates our brand purpose and values and represents the emotional connection that our customers and associates have with City Trends. Our purpose and true north is life is best when you live bold, live proud, respect all. Dedicated to our neighborhoods, City Trends welcomes you like a friend and helps you show up for whatever comes your way, empowering you to bring opportunities to life. We make it fresh and fun for the entire family at prices that don't break the bank. I'm delighted to begin our journey as a purpose-led brand, and I am so proud of our buy, move, sell, and support teams that executed at such a high level in 2021 in the face of what remained a dynamic operating environment. With our current transformation still in the early innings, It is clear that we are really driving positive change across the business. In addition, we feel really good about the underlying health of our business. After a soft January stemming largely from a decline in traffic felt across retail attributed to the sharp spike in COVID-19 cases from the Omicron variant, February and early March recovered nicely. fueled by compelling product content and a continuously improving store experience across our fleet. Our conversion remains high, and the average customer spend per visit continues at levels on par with 2021 and well above 2019. As 22 unfolds, this team is operating like a 75-year-old startup with a modern and agile approach to executing the plan And along the way, becoming excellent operators. This means we are continuing exactly what I have consistently shared with you during every quarter, following the plan in accordance with four strategic priorities. 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. I'll take a few moments and share some high-level updates. First, growing our fleet and expanding our customer base is well underway. The rollout of our new CTX store format is happening as we speak, with eight comp remodel stores going live this week. We expect to open approximately 14 new CTX format stores during the first half of the year. and approximately 35 remodels during the first half. Why is this important? Well, it's a major driver of attracting a diverse, multicultural customer by offering an upgraded experience that brings our purpose to life while improving conversion. To quote a portion of our new purpose, we welcome you like a friend to help you show up for whatever comes your way. Customers really do depend on us, and appreciate a better experience, one that, quote, gets me, feels welcoming, and respects me for who I am. After all, 70% of our stores represent the primary neighborhood destination for apparel, non-apparel, and home needs for our customers. As we've always stated, we intend to be the bright retail light in our strip center. positively affecting so many families on our journey to grow from 600 to 1,000 stores, combined with at least 150 remodels in the next three years. Our second area of focus, optimizing our product mix, is contributing directly to our 2022 plan and long-term growth. The mayors of our cities or product categories are diligently developing and expanding curated assortments at values that don't break the bank. Examples include offering Missy sizing for the first time in a decade, building an expanded assortment of dresses after years of slow growth, developing new style choices for our expanding multicultural base in our melting pot markets, and so much more. Lastly, We are in the process of completing an upgrade of our buying, planning, and allocation systems, something we haven't done in a decade. With rich analytics and easy-to-use tools, this system will really advance our capabilities, target specific products to specific store clusters and customers. We can't wait. Our third area of focus is investing in infrastructure will play an important role in the scaling of our operations and we are taking more seriously. To this point, I'm happy to announce after many years of consideration today, we announced that we will begin to monetize our owned distribution centers by completing a sale lease back for one of our facilities with an option on the second pending additional diligence. More to come from Pam. but the proceeds generated will provide for additional liquidity as part of our ongoing capital allocation decisions, including share repurchases. We are also on the way to completing upgrades to both of our distribution facilities that will improve the speed of moving goods to stores and increase overall labor productivity. Lastly, making a difference. It's how we bring opportunities to life within our neighborhoods. An example of our commitment is our celebration of Black History Month, which was punctuated by our second Black History Month program, during which we received for a chance to receive one of 10 grants designated for Black entrepreneurs. This year's program garnered over 15,000 applicants, double the amount from last year. Just amazing. I cannot wait. to reward the recipients and hear about their businesses. Looking forward, we recognize that it is difficult to predict the first quarter in the full year of 2022, as we are up against last year's largest government stimulus in March and the lifting of COVID-19 restrictions that led to a surge in consumer demand, particularly in the first quarter of fiscal 2021. Keep in mind, that during Q1 2021, we posted our best quarter of a very strong year with a positive 35% comparable store sales increase versus Q1 2019. It's also important to note that the country is currently experiencing unprecedented inflationary pressures that are especially impactful to our core customers in neighborhoods they live in. Recognizing that these macro factors will create uncertainties regarding consumer demand, we are issuing revised guidance that best reflects the tough lap of Q1 21 combined with an anticipated material acceleration in sales in the second through fourth quarters of the year. Driven by our model program, the addition of 35 new stores and the launch of expanded and new product that will engage customers and drive comp store conversion. With that, I'll turn the call over to Pam to discuss our fourth quarter and four-year results, as well as a few details around our outlook. Pam?