Citi Trends, Inc.

Greetings and welcome to the CityTrends second quarter 2025 earnings conference call. At this time, all participants are on a listen-only mode. A question and answer session will follow the formal presentation. If anyone requires operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Nisa McKee, Senior Associate at ICR. Thank you. Please go ahead.

Thank you and good morning, everyone. Thank you for joining us on CityTrend's second quarter 2025 earnings call. On our call today is Chief Executive Officer Ken Stifel and Chief Financial Officer Heather Platino. Our earnings release is 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 filings within the Securities and Exchange Commission for more detailed discussion of the factors that can cause actual results to differ materially from those described in the forward-looking statement. I will now turn the call over to our Chief Executive Officer, Ken Seiple. Ken?

Thank you. Well, good morning, everyone, and thank you for joining us today on our second quarter earnings call. I'm pleased to report another quarter of consistent performance, demonstrating discipline execution and progress across every area of our business our transformation remains guided by a clear three-phase framework designed to deliver sustainable profitable growth first phase one is repair that's restoring our fundamentals and establishing a strong foundation phase two is our execute phase embedding consistent best practices and driving reliable performance And we're going to be entering in the future phase three, which is optimized, leveraging new systems and expansion capabilities to accelerate our growth. These three phases create the foundation for a disciplined approach to capture the near-term and long-term opportunity of growth for CityTrans. Now turning to our results. In the second quarter, we generated strong comparable sales growth of 9.2%, marking our fourth consecutive quarter of mid- to high single-digit comp sales growth. Year-to-date, we've delivered year-over-year comp growth of 9.6%. And I'm happy to report that sales momentum, consistent with our first-half top-line trends, has continued into the back-to-school season. This August, we'll be representing 13 consecutive months of comparable store sales growth. Gross margin dollars have increased meaningfully, achieving our highest rate performance in the last several years. As our buying teams have fine-tuned assortments for our core customers, we've experienced faster sell-throughs of regular-priced product, reduced markdowns, and improved operational controls for shrinkage in transportation rates. Our SG&A was slightly deleveraged in the quarter due to the inclusion of incentive compensation for the consistent financial performance of our employees. It's been quite a few years since the company achieved its bonus targets. so I'm excited to add performance-based bonus back to our financial profile. Excluding the new performance bonus incentive compensation, our SG&A leveraged in the quarter and leveraged year-to-date consistent with our guidance. Our top line continues to grow to be broad-based and healthy. Transaction growth has consistently accounted for the majority of our sales gain, which validates the strategic advantage of our neighborhood locations. And additionally, we saw growth in units for transaction while maintaining stable average unit retails. Also, our performance was consistent across climate zones, regions, and store volume deciles, which underscores the breadth of improvement across the business. Our turnaround is rooted in a clear and unwavering focus on the needs of our African American customer, who is at the center of everything we do. Neighborhood-based locations remain a differentiated advantage, with proximity and word of mouth serving as powerful traffic drivers. We continue to strengthen this connection by elevating the cultural relevance of our assortments, refreshing the shopping experience to better align with our brand voice, and investing in customer engagement. Work is underway to design and implement a CRM and loyalty platform that will deepen interaction with our most frequent shoppers, thus enhancing long-term customer value. Our product performance in Q2 was broad-based and balanced across apparel, non-apparel, family basics, home, and lifestyle and children's categories. In all categories, customers responded well to elevated fashions and expansion of brand name apparel. Women's Plus and Big Men's apparel had strong performance and both remain early stage businesses with significant runway ahead. Men's delivered improved results as trend-relevant assortments and improved in-stocks on basics resonated with customers. And children's, a cornerstone of our business, has continued strong year-over-year performance. And our customers continue to respond to extreme value deals on well-known brands at exceptional prices as we continue to build capabilities to expand this important segment of our strategy. Looking ahead in product, we've made good progress in improving our three-tiered good, better, and best product assortments, but we are still in early stages. The majority of our initial initiatives, which include better in stocks on basic product, accelerated growth of women's plus and big men's sizes, expansion of the consumables category, and the addition of extreme value products have had good early success. We see significant growth runway ahead, though, as we continue to fulfill consumer demand in all of these categories. In addition, our merchants have identified several growth opportunities through assortment refinement as we learn more about our customers. For example, our men's team is working to develop an expanded and more refined assortment for young men. We believe we are underserving this trendy value-oriented consumer. Young men's will complement the already strong men's classic and core business. In our women's apparel, customers are responding to the increased offering of trendy, misty-sized product. Misty product broadens the availability of style and size for women and complements the strong offering of junior product. Customer reaction to our best trendy product has been strong, giving us confidence there's more demand to address. This has led us to add a trend director to identify emerging trends and guide curation of product assortment. We were fortunate to find an accomplished trend director with a successful track record of trend curation at well-known brands in the industry. I believe the elevation of trend in our men's and women's assortments will be additive and supportive to our merchant teams and resonate strongly with our customers. From an operational standpoint, we made continued progress in our initiatives in the second quarter. Foundational improvements in preseason product planning, in-season allocation execution, and supply chain speed have enabled us to support a 9.2 comp growth while operating with 5.7% less in-store inventory than last year. Working capital optimization provides liquidity and flexibility to react quickly to emerging trends and deal opportunities while also enhancing gross margin. Our stores continue to make strides in improving neat, clean, and organized shopping experiences for customers. We've implemented improved in-store navigation signing and updated presentation standards to make shopping experience easier. Our supply chain remains stable with progress against productivity and speed goals. And looking ahead, we're in the process of implementing improved work processes throughout the DCs and implementing special handling areas to assist us in overall processing speed and capacity to grow extreme value product and family footwear. I look forward to sharing more on this initiative on future calls. Looking ahead in operations, test results for our new AI-based allocation system have been well above expectations, allowing us to more accurately allocate products based on individual store demand, which has in turn increased sales and improved inventory turns. We are in the process of implementing AI-based allocations to all categories with expected completion in mid-September, in time to impact holiday. And currently, we're in the early stages of developing a complementary AI-based merchandise planning system that we hope to have ready for early 2026. Here again, we'll keep you updated on our progress. As we all know, retail is detail and execution without measurement is just simply guesswork, which is why our use of KPIs and dashboards for all key functions is critical. The visibility provided helps our team stay on track, identifying where we're hitting the plans and where we need more attention. The combination of simple, repeatable processes supported by operating procedures plus KPIs makes us confident that we'll be able to drive continual operational improvement for years to come. And a few comments on tariffs. As evidenced in our results, we are successfully navigating the ever-changing tariff landscape. In fact, we've actually found the off-price product deal-making environment to be very robust and advantageous. My direction to the team is be aggressive, remain flexible with ample liquidity. Our strategy is working. We intend to play our game and win at our game. Now I'll turn the call over to Heather to discuss the financial performance. Heather?