Ladies and gentlemen, thank you for standing by, and welcome to the Citi Trends' Fourth Quarter 2014 Conference Call. During the presentation all participants will be in a listen-only mode. Afterwards we will conduct a question-and-answer session. [Operator Instructions]. As a reminder this conference is being recorded, Friday, March 13, 2015. I would now like to turn the conference over to Pat Watson. Please go ahead, sir.

Thank you, Amanda. And I wanted to let everyone know that 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 is available on the company's website under the Investor Relations section at www.cititrends.com. You should be aware that prepared remarks made during the 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 filed 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'd now like to turn the call over to Bruce Smith. Please go ahead, Bruce.

Thanks, Pat. Good morning, everybody, and thank you for joining us today. Also on the call are Ed Anderson; and Jason Mazzola. First, I will provide you with details related to the fourth quarter and full year results, and then Ed will discuss further the results and our business outlook, after which we will address any questions you may have. Total sales in the fourth quarter increased more than 15%, to $181 million, with comparable store sales increasing nearly 14%. The higher comp store sales reflected an increase of more than 13% in the number of transactions and a 1% increase in the average unit sale while the average number of items per transaction was flat. By merchandise category, sales in the fourth quarter in comparable stores were as follows: Accessories were up 20% on top of a 12% increase in last year’s fourth quarter. The ladies division was up 16% this year, after being down 15% last year. Men’s sales were up 13% in the fourth quarter of this year, while they were down 6% in the fourth quarter of 2013. The home division was up 13% this year and up 9% last year. And children’s sales were up 11% in this year’s fourth quarter after being down 6% last year. The most encouraging part of these category trends was in all five divisions we were up double-digits in the fourth quarter. Sales of nationally recognized brands represented 27% of total sales in the quarter compared with 31% in the fourth quarter of 2013. Total sales for the full year increased almost 8% to $671 million compared with $622 million in 2013. Comparable store sales increased 7.5% in 2014 as reflected in a 9% increase in the customer transactions and a negligible increase in the average number of items…

Good morning, everyone. We are all very happy to report another strong quarter as well as a very solid 2014 full year. The highlight for the fourth quarter clearly was the 13.9% comparable store sales increase. That’s the best quarterly sales increase in over eight years. Importantly we had solid comparable store sales increases in all four quarters and the comparable store sales increase for the full year was a strong 7.5%. I should add a little color to the fourth quarter sales. As reported previously we did benefit from earlier tax refund driven sales of about $3 million at the very end of the quarter. And they had a positive impact of about 2% on the fourth quarter comps. And the comparisons to last year were relatively easy as last year’s comps were negative 3.5%. But even without those benefits our accounts were still very strong and up significantly across all merchandise divisions. Accessories including shoes continue to be the leading category with a 20% comp increase and our Ladies business continued its rebound with a 16% comp for the quarter. Sales of cold weather products were much better this year as we had made this an area of emphasis. We were able to leverage SG&A expenses in the quarter against a very difficult comparison. So we delivered on all fronts, very strong sales, good gross margin improvement, good control of expenses, all of which resulted in a very solid and profitable fourth quarter. Now I'll provide an update on sales to-date for the first quarter of 2015. Sales for the first weeks of 2015 in comparable stores have decreased 3%. We believe that our underlying businesses are healthy and the sales decreased for the first five weeks can be explained. First as I mentioned earlier there were $3…

Thank you. [Operator Instructions]. And our first question comes from the line of Thomas Filandro from SIG. Please go ahead.

Hey congratulations on tremendous turnaround and as well Jason and Bruce on the promotion and best of luck men, best of luck you're good guys. So a couple of questions, the first question I want to have is can you guys talk about the port issues. Obviously that has an impact on other retailers. Kind of help us understand if the port issues have impacted you guys in anyway and more importantly are you potentially going to be a beneficiary of the port issues? And then second question is I hear accessories being a big driver to the business -- this is a question for Jason. With the merchandizing adjustments that you've made in the business, are you beginning to see any change in the profile of the shopper you are seeing in the stores and then I had one more follow-up.

Okay. Well, let me address the port issue first. During the fourth quarter and throughout the first we did not see any meaningful negative impact on our floor merchandise to the west coast port slowdown. On the country, to your follow-up question we have actually seen some nice opportunities in the market as a results of late deliveries. As the spring unfold we think we will continue to see new deals as a results of port delays, even though it has been resolved it is still slow and there is still a bit of backup there but I think we are going to see some more deals as a results of that. To move on to your second question which regarded shoes and accessories and probably even home, and how we have seen a difference in the profile of the customers, I would say we haven’t specifically seen anything different. I think the customer is really responding to the breadth of product and the fact that we have a lot of repeat customers. Customers often shop at our stores three times a month and so having a more robust and a nice breadth of offering gives them something new to buy every time they walk into the store. So we really like where we are going with shoes, accessories and home.

Thank you. And one final one, could you guys just update us on what you are seeing in terms of the new e-com initiative and how should we think about the e-com going forward? Any kind of performance highlights would be great.

Sure, right now the e-com, we are very happy with it but we are still very much in the test phase, where we are kind of building the capability and seeing what the customer is liking and we do see growth in the product classification that we are going to offer in 2015. We really want to understand and create some engagement with the customer and understand what they want to buy. I would tell you the highlight right this minute is really high fashion ladies apparel that’s what they are responding to the most, but really we are still in the test phases.

All right. Congratulations again and best of luck to all of you.

Thank you.

Our next question comes from the line of Pam Quintiliano from SunTrust. Please go ahead.

Thanks so much and congratulations on a great quarter. Congratulations as well, Jason and Bruce and yes you will certainly be miss with your insight, Ed.

Thanks, Pam.

I had a few question for you guys. First off, can you just talk about the health of your consumer and how you think they are feeling right now with the recent macro trends and gas prices and if there is any benefit from that? And then second, just you broke out the branded component but can you give it to us for Men’s, Women’s and Kids and just where the evolution has been versus last year and then I have a few follow-ups.

Okay, Pam. I will take the first quarter on basically the macro environment for our customer and just the health of our customer. We get this question a lot. I actually happy to report today a different answer then I probably have given for the last several quarters and that is I think things are better finally. I believe the macro environment for us customers is now at least slightly positive. And we believe that because things that have been in place and then some of the things had not been in place. Clearly unemployment trends have been improving for African Americans and they are now the best they have been in some time. And also very importantly, low income employment is up. And one of the big biggest drivers has been of course is gas prices and gas prices were down more, still are down and that’s been a big up. Now the second question you asked is we reported overall brands penetration. You asked us to give you brands penetration by division. Do we have those numbers in front of us?

Well Women’s is really down to virtually zero and so…

I can give you some ball park color, like Bruce said we are really purchasing no traditional urban brands in ladies. They are fundamentally not even made any more. Yes, we still purchase some branded product but really it is a very small amount and we are only up against last year’s first quarter 6% whereas in 2013 it was actually 28% penetration. If you look I would tell you growth follows the same path as ladies and I think really kind of where we are maintaining that 25%-27% as a company is coming from boys predominantly, because we still have a healthy boys branded business and actually Men’s we’re seeing some uptick in some new brands that are happening in the Men’s area that we are excited about. I hope that gives a little bit color.

Just I will to add to that, the infants and toddler business is still a fairly significant branded business. So if you look at the toddler business being at about 50% branded with the boy’s being about 50% branded, men’s somewhat less and ladies zero, that’s how you get to 25% overall number.

Great. Thanks, fits with my assumptions absolutely, just wanted to sure the assumptions were correct on the women’s side of the business. So and then just two other questions. The first one any light you could shed on just women’s and what really has been working that’s accounting for that dramatic swing from either from a fashion perspective or if you working with some new vendors or just anything at all? And then lastly historically you guys have tended to be more of a two season business, just given your regional exposure. So with the slow start to February is it still safe to assume that your product tends to have a longer shelf life, so you don’t necessarily have to have the same type of kneejerk markdown reaction that others may need to do with the weather not cooperating?

Yeah, Pam I can tackle those. We’re actually, we’re real happy with the progress that we’ve made in ladies, especially in the fourth quarter delivering a 16% comp store sales increase. I would tell you there overall we did a much better job on our cold weather offering than last year. I would tell you both from a fashion and a value point of view the cold weather mix resonated very nicely with our customer in both offering a great value and fashion that she wanted. And we are optimistic about our ladies business as we head into 2015. We think we’re also well positioned in spring and we’re ready to drive business, as things warm up. And just talking about the warm up, again our stores are located in the South and so hopefully that South is going to get warm a little bit sooner. But we think our inventory is in terrific shape. We have a lot of liquidity to take advantage of deals for the second quarter. During the second quarter we’re more on deal based and chasing what’s working and trying to find those deals. So I think the inventory is poised to drive sales in the future.

Great, well best of luck, and congratulations again to all of you.

Thanks Pam.

And our next question comes from the line of Patrick McKeever from MKM Partners. Please go ahead.

Thank you. Good morning, guys.

Good morning.

And congrats to both of you. So can you just run through these incentive comp impact again. Bruce you said it was a $4 million swing factor versus last year, which is huge on a base of -- an operating profit base the size just over $5 million?

That’s correct. Last year we actually had negative incentive compensation expense in the fourth quarter due to the decline in profits related to the sales decreases. And I mentioned that this year the exact opposite occurred. We had a really good fourth quarter and with that increase in profits, the incentive compensation was much higher and compared to a negative you had this $4 million gap between the fourth quarter of this year and the fourth quarter of last year.

Got it. I’m not saying it’s not well deserved by the way. So the other question is just on the categories, footwear has been very strong. You’ve expanded the category quite a bit. My question is how much more opportunity is there in that area of the business? And then just my last question is on some of the impulse merchandising that you’ve been doing at the front end. I’m just wondering if you could give us an update on types of products you’re selling and customer response and so on?

Yeah, sure. I can give you some color on both of those. As far as sort of the shoes and accessories businesses and those businesses growing we do feel very good about those in shoes. We have penetrated the store nicely. So we see some of those double-digit comps tapering off a bit but we still have some run way there. In addition to that on the accessory piece we’re still underpenetrated in some of those accessories and as we add new ones or find ones that we really weren’t penetrated well and the customer’s responding well. So we do continue to see growth in both shoes and accessories moving forward. As far as the Queue line goes we’re very happy there. The Queue line has been what we’ve tried to do is add new products to the stores that they haven’t seen before like for example some of the beauty products in lip care or eye care or even some functional home products and we are testing and trying lots of different things. I would tell you beauty has been the best success, the customers responded very well to that product and we see those classifications growing and we are very happy about the results there too. So we see continued growth there.

Great, thank you very much.

Thanks Patrick.

And our next question comes from the line of Evren Kopelman from Wells Fargo. Please go ahead.

Good morning. Congratulations to everyone on your new roles.

Thank you.

A question along those lines, Jason, as you are going to spend a little more time in other areas of the business as the CEO, is someone else on the merchant’s team taking on a bigger leadership role. You guys didn’t announce the new Chief Merchant to take on some of the responsibilities?

Evren this is Ed, I am going to answer sort of organizationally what it’s going to look like and then I will put that merchandising question, people question back to Jason. But organizationally the idea is that Jason is still going to spend the vast, vast majority of his time overseeing merchandising and marketing for the company. That’s what he has been doing. He is very skilled in those areas and we really don’t want to dilute much at all his efforts in those areas. But he is going to become the CEO of the company and has responsibility for everything. Now Bruce Smith is being promoted to Chief Operating Officer and Bruce, his responsibilities already include finance and information systems as well as to operations. So Bruce will be picking up the HR function and the legal and admin functions as well. So Bruce will be running sort of the Savannah based functions and Jason the New York based marketing, merchandising and marketing functions. Again our idea is to promote these guys who well deserve these promotions and they had the capability to do these new jobs but the idea is not to dilute our merchandising efforts from Jason but Jason do you want to add some color to that.

One of the real nice things that has happened over the last three years, as Ed said at the very beginning in ‘12 that really what we had is a merchandising problem and a sales problem. The rest of the store was working pretty well and I still think that’s the case. The rest of the story is working well and really what we want to do is continue to offer exciting value to our customers through the product that we buy. And over the last three year we have built incredibly strong merchandising team in New York and in LA. So I have a very, very strong team of skilled merchants that have really developed nicely over the last three years. In addition to that we also have a very strong planning and allocation team that we have developed over the last three years that is very capable of helping us get the right product to the right stores at the right time. So I think at this point I have a lot more tools at my disposal right now and I am real happy with that. So I think we are in very good shape as we move forward.

But to answer your question more specifically the organization merchandising wise, the four merchandise managers will continue to report directly to Jason and that accounts just move there.

Got it, okay that helps. The other question is as I kind of look at what the opportunity is here for some earnings power perspective what are your views on where you can get that backfill in terms of sales per square foot and operating margin, what do you think is the sustainable level?

Evren, as far as operating margin goes we had a number of years in a row there where we were right around 5% to 5.5% and so that’s clearly the more immediate goal. Now at that time our gross margin was a little bit higher. We were running at gross margin somewhere between 38% and 38.5%. This year we were 37.6%. So we are hoping that we have a little bit of upside there but most of the rest of the recovery back to that 5% to 5.5% range would likely need to come from operating expense leverage and of course that comes from comp store sale increases. So that’s the goal in the near-term is to get back to that historical level.

And Mr. Anderson there are no further questions at this time. I will now turn the call back to you.

Okay great operator. Thank you. Thank you everyone for joining the call today and everybody have a great day. Thanks again.