Citi Trends, Inc.

Ladies and gentlemen, please stand by. The conference will begin momentarily. We thank you for your patience and ask that you please remain on the line. Thank you. Greetings and welcome to the City Trends 3Q 2022 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 one followed by the four on your telephone. If at any time during the conference you need to reach an operator, please press star zero. As a reminder, this conference is being recorded Tuesday, November 29, 2022. I would now like to turn the conference over to Nitza Miki. Senior Associate, please go ahead.

Thanks, Malika, and good morning, everyone. Thank you for joining us on CityTrend's third quarter 2022 earnings call. On our call today is our Chief Executive Officer, David McEwen, and Chief Financial Officer, Heather Patino. 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 that 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 on our third quarter fiscal 2022 earnings call. I will begin the call with a review of our third quarter results. as well as some fourth quarter to date insights. Heather Furtino, our chief financial officer, will then elaborate on our financial results and a few other items related to the rest of our year outlook. Then we'll open the call up for your questions. To begin, we delivered 192 million in top line sales, which equates to a three-year comp stack of 1.4%, both of which were in line with our expectations. Our buy, move, and sell teams work tirelessly to deliver compelling, value-driven trends coupled with an engaging in-store experience to post a 39.8% gross profit, our 10th consecutive quarter of expanding gross profit when compared to pre-pandemic 2019 levels. Additionally, we continue to manage inventories tightly with a high freshness factor, Total inventory at the end of the quarter was only 1% higher than 2021, an improvement from 26% higher at the end of the second quarter. Lastly, I'm pleased to share that we delivered positive operating income of $2.4 million. I want to spend a few minutes on how we got here. It all starts with people and our team's ability to be both scrappy and strategic when within a challenging macroeconomic backdrop. Our mantra is to remain laser focused on controlling what we can control from front of the house to the back of the house. At the end of the second quarter, we committed to lowering our expense structure while shoring up our foundational infrastructure, and most importantly, offering an exciting curated assortment that will never break the bank for our customers. We are right on track on the expense savings front, and Heather will provide more detail. What I will focus on is how we are driving the top line and margin. More specifically, we focused on four key areas to ensure we met expectations in the third quarter while preparing for a successful fourth quarter holiday season. They were, number one, We shipped record amounts of pack-away inventory, chock full of incredible values to excite our customers. Number two, we continued to roll out new zip codes in our product cities, including Q merchandise, Missy size ranges, and Tween girls offerings. Number three, we infused hot price points in key categories to capture market share from value shoppers. And number four, we successfully lapped last year's macro supply chain issues to deliver an on-time gift assortment for a strong start to the fourth quarter. It's important to recognize that the inflationary backdrop our core customers facing is truly unprecedented, particularly in the areas of rent, food, utilities, and transportations. Our core customer with an annual household income of about $40,000 and 50% of our customer base having an annual household income of $25,000 and below have been hardest hit from these extreme macro pressures. Having said that, the CityTrends customer is doing an admirable job adjusting his and her shopping patterns. What we saw in the third quarter is that our customer is shopping much closer to need employing a buy-now, wear-now strategy for important events and end-use needs in their lives. Like back to school, which I'm pleased to report was a solid performance for CityTrends this year. Throughout the third quarter, our traffic and conversion rates remain steady and strong, and our average dollar basket size continues to hold up very well against last year's results. Through it all, I can assure you, and consistent with my points in the past, The CityTrends customer relies on our presence in the heart of neighborhoods where we are the primary destination for their family apparel, accessories, home, and essential needs. Before I turn the call over to Heather, I want to highlight a few remainder of year points. First, we are set up really nicely for the remainder of fourth quarter. We generally excel during need-based events. and we are confident that our families will gift big and spend less at CityTrends this year. As we exit a strong Black Friday week, our stores are full of great values across gifts, stocking stuffers, and wonderful self-purchase outfits. Next, we are reiterating our second-half guidance provided at the end of the second quarter. And lastly, it's no secret that the marketplace is ripe for procurement of high-quality, high-value goods. Our flexible and agile operating model, combined with our strong balance sheet, allows us to be quite active for spring and fall of 2023. With that, I'll turn it over to Heather. She'll discuss our third quarter results in detail, as well as our outlook for the second half of the year. Heather?