Citi Trends, Inc. (CTRN) Q3 2021 Earnings Report, Transcript and Summary

Greetings, and welcome to the Citi Trends 3Q '21 Earnings 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 Tuesday, November 30, 2021. I would now like to turn the conference over to Nitza McKee, Senior Associate. Please go ahead.

Thank you, Jason, and thank you all for joining us on Citi Trends' third quarter 2021 earnings call. On our call today is our Chief Executive Officer, David Makuen; Chief Financial Officer, Pam Edwards; and Vice President of Finance, Jason Moschner. Our earnings release was sent out this morning, at 6:45 am Eastern Time. If you have not received a copy of the release, it's available on the company's Web site under the Investor Relations section at www.cititrends.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 Makuen. David?

Thank you, Nitza. Good morning, everyone, and thanks for joining us today in our third quarter fiscal 2021 earnings call. This morning, I will begin by reviewing the continued transformation of our business, and highlight our strong financial and operational results for the third quarter, before updating you on our progress related to the evolution of our Citi master plan and the activity in support of our strategic growth priorities. Then, Pam Edwards, our CFO, will elaborate on our stellar financial results, and provide details of our upwardly revised guidance for the year as we close in on a record 1 billion in sales and record operating results. I want to take a moment to express my sincere gratitude to our high-performance teams across our organization. The superb execution by the entire Citi Trends crew was simply amazing. From securing merchandize to successfully managing the significant supply chain disruptions impacting our industry, to appropriately staffing our highly differentiated specialty value stores, all of these efforts enabled us to meet the strong broad-based demand for apparel, accessories, and home trends for way less spend, resulting in an excellent third quarter. Our continued focus on elevating the Citi Trends in-store experience and expanding our brand to many more underserved African American and Latinx communities has never been stronger. Our people are the heart and soul of the Citi Trends culture, and we are aligned to servicing our customers' unique needs each and every day. Supporting our efforts are our ever-expanding vendor partners. From big to small, our vendor partners work closely with our agile merchant teams, and enabled us to keep it fresh and fun for the entire family, consistently delivering new and exciting products at extraordinary price points that don't break the bank. While we are still in the early innings of our transformation, we have made great progress and are confident that the execution of our strategic priorities will enable us to capture additional sales and leverage expenses to sustain our top and bottom line growth. Citi Trends' future is bright, and the runway for growth is exceedingly strong. Turning to our results, we are thrilled to report excellent third quarter results that exceeded our internal expectations, and continued the positive momentum from the first-half of the year. Key highlights of our third quarter performance include the following, total sales of $228 million, increased 14.5% compared to Q3 of 2020, and 24.5% compared to Q3 2019. This growth was supported by a terrific comparable store sales increase of 13.1% versus Q3 of 2020, and that was on top of a positive 6.3% from last year. This is the ninth consecutive quarter of positive open-only comparable store sales for Citi Trends. On top of outstanding sales results, continued many positive KPI trends in the city when comparing to 2019. These hot KPI trends include expanding gross margin, reducing average stores inventories, leveraging SG&A, and producing astounding increases in operating income and margin. More details from Pam in just a few minutes. Lastly, we opened 11 new stores during the quarter, including a brand new city, in Wichita, Kansas. We quickly remodeled three stores that were severely damaged by Hurricane Ida. That leaves our store count at the end of the quarter at 600 stores. And better yet, we'll end the year with approximately 611 stores. Moving on [technical difficulty], once again, we saw strength across our cities or categories, as we continue to enhance the shopping experience in our unique specialty value stores by placing our customer at the center of how we curate trends, fashion, and basics across an increasingly wider variety of apparel, non-apparel, and even consumables. We registered another quarter of strong double-digit growth versus '19 across five of our six cities, and they are women's, men's, kids, beauty and accessories, and home and lifestyle. Before I pass to Pam, I would like to highlight a handful of [progress] [Ph] updates across our buy, move, sell, and support operational pillars that continue to evolve as we scale the business. For buy, it is without question the team's successful navigation of the fluid dynamics of the marketplace we draw from. They are masters of delivering trend, quality, value, and brand. And we often the only destination in our neighborhoods that does what we do, and combining art with science, to deliver a highly differentiated assortment day in, and day out is how we shine. This differentiation manifests itself in our strong back-to-school and back-to-dorm seasons, followed by a brisk start to holiday self-purchasing and early gift shopping. For move, or our supply chain team, we embarked on multiple projects to improve throughput and productivity. It's really a combination of quick wins and longer-term projects designed to move goods through the pipe at a faster rate, while optimizing processes and labor all the time. This showed up in meaningful ways at the onset of the quarter as we fueled stores with fresh goods from either RDCs or via drop-ship deliveries direct from our most flexible vendor partners, all the while managing freight costs to a smaller then expected headwind. For sell, or our real estate and stores divisions, we are most excited about at the results of our lab stores, or CTX store upgrade. Some really big news, we've decided to green-light this top to bottom revolution in our store experience to all new stores and remodels. Brand differentiation is everything to us, and being able to impact so many stores in our journey from 600 today, to a thousand in the future, combined with higher productivity remodels is a major new development in our transformation journey. Lastly, our support pillar is made up of finance, HR, IT, and legal. While sometimes the unsung heroes, these teams are changing the way we work. From our recently launched POS system to our cloud-based analytics platform to our Citi Cares Council, we are chipping away at countless opportunities to improve internal productivity, unearth back-based insights, establish new cultural norms, retain and attract the best talent to grow the Citi Trends experience and make a difference in the neighborhoods we serve one city at a time. As we look to the remainder of the year, we feel really good about our positioning for the holiday season and are excited about our Give Get Gather holiday campaign punctuated by plenty of amazing gifts, stocking stuffers and trend right looks for the entire family. To that end, we expect to close the year strong and are raising our full-year 2021 guidance for both sales and EPS. With that, I'll turn it over to Pam Edwards, our CFO to discuss our third quarter results as well as our outlook in more detail, Pam?

Thanks, David, and good morning everyone. Our impressive third quarter performance is a testament to our entire team, continued agility and disciplined operational execution. The transformation of Citi Trends is well underway. And as David mentioned, this is our ninth consecutive quarter of open only comp store sales growth. In addition, we continue to improve our bottom line despite widely discussed macro supply chain headwinds. Now let's turn to the specifics of our Q3 financial results. As mentioned in our earnings press release, we are reporting operating results for Q3 2021, relative to Q3 2019 to provide a more normalized comparison of performance due to the uniquely challenging operating environment in Q3 of 2020. As with our second quarter call, I want to first address the top of mind topic, which is supply chain. We continue to successfully navigate the supply side environment which remained fluid. We have strategically leveraged opportunistic inventory buys from last season, and we have more effectively procured goods in seasons in response to customer demand. Therefore, we're in really good shape with the inventory that we need to deliver a strong holiday season. In addition, while transportation costs are up, we have diligently worked through what we can control by streamlining and increasing the efficiency of our internal operations and processes. This discipline has allowed us to reduce our reliance on third-party providers and manage the supply chain impact to the low end of the 120 to 150 basis points we talked about in Q2, we will continue to monitor as the environment is expected to stay fluid through at least mid next year. Now let me turn to the review of our third quarter results. Total sales of $228 million in the third quarter grew by 14.5% compared to Q3 of 2020 and 24.5% compared to Q3 2019. Comp sales grew 13.1% on top of 6.3% positive comps in Q3 2020. Growth in the quarter versus Q3 of 2019 was driven primarily by an increase in the average basket size, the results of a healthy balance of growth in both unit retail selling price and higher units per transaction. We achieved gross margin in the quarter of 40.3%, an increase of 290 basis points compared to 37.4% in the third quarter of 2019. The strong increase in our quarterly gross margin rate continues to be primarily the result of strong full price selling and fewer markdowns offset partially by increased freight expense. SG&A leveraged 300 basis points versus 2019 to 32.8% due to strong sales growth and disciplined expense management. Operating income of $11.6 million grew by $2.2 million versus Q3 of 2020 compared to Q3 of 2019, this is a $13.2 million increase. This improvement in our results is reflective of the transformation of our operating model, which is showing as improved flow through to the bottom line, thanks to the tremendous efforts of our buy, move sell and support team, we believe more opportunity lies ahead. Net income of $9 million compared to $7 million in Q3 of 2020 and an operating loss of $1.1 million in Q3 of 2019. Earnings per diluted share were $1.03. This is up over 50%, compared to the $0.67 achieved in Q3 of 2020, and compared to a loss of $0.09 in Q3 of 2019. Turning to inventories, quarter-end inventory is on plan, increasing 10.9% compared to the end of Q3 2020, and decreased 6.3% compared to Q3 of 2019. The inventory increase to last year is largely a factor of the depleted inventory levels experience at the end of Q3 last year, combined with opportunistic buy we made during the third quarter of this year. We continue to experience record turn as our inventory management has improved marketly year-on-year. This buying muscle we are creating is really kicking in buying less upfront and chasing into sales demand, which gives us the agility and results in a record level of product freshness. Lastly, the company repurchased approximately 521,000 shares of its common stock at an aggregate cost of approximately $42.8 million in the third quarter. In total, for the first nine months of this year, we have repurchased 1,273,000 shares at an aggregate cost of $107.2 million. We ended the third quarter with approximately $8.1 million remaining on existing buyback authorization. In addition, we announced today that our Board of Directors has authorized another 30 million share repurchase program. Turning to our fiscal 2021 outlook, following our strong performance in Q3 and the strong start to Q4, we expect an increase in comparable store sales in the high teen in the fourth quarter of 2021, compared to the fourth quarter of 2019. And we expect the gross margin to be in the high 30s to low 40s. Translating that to the fiscal year guidance, we are raising our full-year 2021 sales outlook to a range of $1 billion to $1.15, and EPS guidance to a range of $6.95 to $7.10, compared to our prior EPS range of 630 to 650. This represents an increase of nearly 400% at the EPS midpoint when compared to fiscal 2019. I'll turn the call back to David for closing comments. David?

Thanks Pam. You know, when I take a step back and look at how we've manage the business through an incredibly challenging period. What I'm most proud of is the way this team is successfully reshaping and retooling a brand in its 75th year of operation. In fact, how we think about it is today's Citi Trends should be thought of like a 75-year-old startup. You don't hear that too often. Do you? The modernizing of why we do what we do and how we do what we do is just getting underway. I'm humbled to be a member of a team that shares my passion for growing and building something really special for the customers and crew members that care deeply about the success of Citi Trends. Looking forward to fiscal 2022, I thought I would share some of our preliminary views on how we are positioning the business. As you've heard before, we are primarily focused on four strategic priorities. Number one, growing our fleet and expanding our customer base; number two, optimizing our product mix; number three, reinvesting in our interest; number four, making a difference within the communities we serve. We have added talent and systems and created new processes to kick start momentum across these priorities. Some really compelling themes are emerging, including, but not limited to opportunities to drive further customer engagement, build incrementality within our boxes, leverage expenses and develop cohesive neighborhood connections. We are on track with our transformation and continent in the trajectory of the business. As we continue our journey to a thousand stores, we plan to open approximately 40 new stores in fiscal 2022, coupled with remodeling approximately 40 stores, all reflecting our elevated CTX store upgrade. At a high level, we believe we are positioned to deliver fiscal 2022 total sales growth of low to mid-single digits, coupled with at least low double-digit EPS growth. You will hear additional details via our new Citi Master Plan, at ICR, in early January. Before I wrap up, I also wanted to mention two new additions to our Board of Directors. During the quarter, we announced the appointment of two new independent directors, Christina Francis, President of Magic Johnson Enterprises, and Cara Sabin, CEO of Sundial Brands has joined our board. We are thrilled to add two highly accomplished executives to our board, and the expansion of the Board reflects Citi Trends' heightened commitment to diversity, equity, and inclusion. In summary, we are so pleased with our third quarter financial and operational results, which reflect the agility and disciplined execution of our teams' efforts within a dynamic operating environment. Our transformation remains on track, and our updated guidance is reflective of our confidence in the underlying momentum of the business, including expectations for a strong holiday season. We are excited about the significant growth runway we see for the Citi Trends brand, and believe we are poised to continue capitalizing on the tremendous opportunity ahead, as we focus on delivering long-term sustainable growth. I want to reiterate my gratitude to the entire Citi Trends crew for their commitment to our loyal and growing customer base. We appreciate your interest in this exciting growth story, and wish you all a happy holiday season as you give, get, and gather. Operator, we are now ready to take questions.

Thank you. [Operator Instructions] And our first question comes from the line of Jeremy Hamblin with Craig-Hallum Capital Group. Please proceed with your question.

Thank you and congratulations on a really impressive update. I wanted to start first by just getting a little bit more color around Q4. You called out, I think, five of the six cities is really strong. I think footwear sounds like it's a little bit of a lag, and I think that might be the most impacted by supply chain disruption, maybe, with some vendors a little behind on shipments. But just want to get a sense in terms of what you are seeing thus far in the quarter? The two-year stacked same-store sales up high teens, that would suggest, I think, comps roughly flat or so on top of the really impressive 16.7% last year. But just wanted to get a sense for the category performance that you are seeing kind of quarter-to-date results, and if there is any of your categories that are either outperforming significantly or maybe underperforming? Thanks.

Hey, Jeremy, it's David. Thanks so much for joining. Thanks for your kind words and good questions. Here's how I'd frame that, we got ahead of everything first and foremost. And since we started understanding the supply headwinds earlier this year, we were able to get a leg up on understanding what goods we could get to our stores to be able to start the gifts and holiday self-purchase needs off to a good start, and that's exactly what the team did. So, we really kicked off a lot of our gift and self-purchase for the fall-winter months off really early. We were set up in stores late October-early November, which is perfect for us, and the customer really responded. So, that's been, from a setup standpoint, really beneficial to the start of a strong quarter. In terms of city performance, it's really broad-based, it's [strong against] [Ph] all the apparel categories, and we're seeing some really great traction in our consumables business, which as you know, [technical difficulty] and continued traction across our non-apparel and home business. You nailed it, footwear is the one that's kind of taking a little slower to catch up, although we're seeing some really good momentum in that business as some of the supply chain issues abate. But, overall, it's really the whole family shopping our stores. The month of November was mainly around self-purchasing and start of gifting. And our layaway program has been strong for us, and that's really when a customer decides to go, "Oh, I don't want to lose out on that great set of gifts, so I'm going to put 10 items in the backroom," and it's our version of buy now pay later. And we do a nice business in that area as well. So, all of that combined is giving us good confidence that the customer is really excited to be out there. And like you see in the general news, she, and he, and the kids are shopping.

[Multiple speakers]…

Yes, I just want to add to that too, Jeremy, for the comps too. Last year, our comps were -- had a wide range performance for the three months. So, November of last year, if you recall, was down 1%, December was up 17%, and January was up 44%. So, as you mentioned, it was 17% on the quarter. So, just in terms of where we're projecting, it's the high teens versus the 2019 number, but implied is flat to low-single versus last year.

Great, thank you for that clarification. The other thing I wanted to ask about was staffing. You've had some retailers that have had a challenge in terms of getting -- how are they staffing employees and getting people to show up. Some have had to pay a bit of a higher wages. I wonder if you -- Pam, if you could give us any color in terms of what you're seeing on staffing trends here for holiday. Can you give us any color in terms of the types of hourly wage increases that you're seeing year-over-year?

Yes, again, similar to what others are reporting, we are seeing a tougher labor market, particularly for stores, not so much in the [DC] [Ph]. And we're addressing on a store-by-store basis, and that includes increasing wage rates in markets if it calls for that, and adjusting operating hours if it makes sense. But just from a preview from this past weekend, we had little to no issues with labor and people showing up. So, we're feeling good, but we know that it's not over until -- till we get through the quarter. So, we continue just to monitor on a case-by-case basis for the rest of the season, and going forward.

Great. Last one from me, and then I'll hop back in the queue. In terms of -- you really surprised me with the commentary around FY'22. It sounds really incredible to expect both top line growth next year, but then low double-digit EPS growth next year on top of the extraordinary results this year would be incredible. Is that a reflection of confidence in the CTX experience stores that's being reflected in there? But, David, anything you could share in terms of why you're kind of putting that out there today?

Sure, Jeremy, yes, let me add a little bit of color, and maybe we'll wrap here, and catch you later, of course. The -- it's really a combination of a bunch of factors. It's confidence in our base underlying business, in our regular good old comp stores, we believe we have opportunities to lap the headwinds and continue to post up strong productivity numbers within our four-wall boxes. And then coupling that with really good expense leverage, as you can tell from the EPS gain that we are sharing at a high level, and then certainly the -- I would say, in 2022, it's more icing, but it's good icing, the impact of CTX. If you think about it, it'll hit roughly around 80 projects, 40 new and 40 remodels. So, it definitely contributes. But it's a [technical difficulty] of the bulk of our comp stores, us feeling good about how they're performing today, and what we have in store for next year, coupled with no questions, some upside from the CTX coming into play, and that of course will have a bigger role as you get into three and 24, and so forth. Does that make sense? Q – Jeremy Hamblin: Absolutely. Congratulations, and thanks for taking the questions.

Thanks, Jeremy.

Our next question comes from the line of Dana Telsey with Telsey Advisory Group. Please proceed.

Congratulations, David and team; terrific results. Can you expand a little bit on CTX and what you're seeing there, how those boxes differ in terms of performance versus the base boxes, and given the expansion to 40 new, 40 remodel, what the CapEx implications are for this, then I just have a follow-up?

Sure. Hi, Dana. Thanks for your kind words, I'll take first-half and then Pam will take the second-half. So, first-half, let me quickly frame for everybody on the call what CTX is, we have a frame of reference, really, it's our reimagination of the Citi Trends experience in our four walls, it's a top to bottom front door to back door, really revolution in our experience, from the flooring to the ceiling, to the lighting to the fixturing, to the layout, to the adjacencies, and so forth. And why we're so pleased by it is, we have seen continued lift and traction by not changing a thing about our product, literally arraying the same product we have in all of our other stores. But just to ring it differently in this kind of version of the Citi Trends, so different than you've seen in the past 10 to 20 years. And just seeing the adoption by the customer of the same product in a different experience at the rate we're seeing has made us really excited and obviously bullish on rolling it out. And I think what's most important to understand, and we can share all the details, but at a high level is we're seeing conversion lifts. So, once he and she come in, they're basically walking out at a more frequent basis and we're seeing nice conversion changes. So, the baskets very similar to our control groups and our UPTs are very similar, but it's conversion that's zooming, which is kind of exactly what we'd hoped to be the case, but we're liking what we're seeing. And we're excited to roll it out. Pam will comment a little bit on the CapEx implications which are small, but she can highlight those.

Yes, so Dana, the current news stores that we have, speaking in the old model, the CapEx is about 350 net and a remodel is roughly about 150 to 175 net. So, the cost of the new and the remodel CTX format is slightly higher. And it's driven mainly by the expanded scope. So, different types of flooring, LED lighting fixtures, so it is a slight increase however, what we're seeing is that we're getting the sales increase associated with those changes, which is largely experiential. So, from a total CapEx standpoint, we'll provide that context in January, when we present our long range plan, because that way, you can see how it all comes together with our strategies and see the financial and operational implications, including the CapEx and total capital allocation strategy from there.

Great. And then any update on pricing and how you're positioning on pricing in this new environment with supply chain? And David, I like what you said about the themes with building incrementality in the box, can you expand on that? Thank you, guys.

Sure, Dana. Yes, I'm happy to do that. Yes, I think pricing we've taken really seriously at Citi Trends. And I would say and I mentioned this a little bit in the call, this idea of combining quality trend value and brand wherever we can, making for a really interesting optimization of how we not only sourcing design goods, often proprietary to our box into our customer, but also how we pack value and benefits and features into the product, therefore allowing us to perhaps in certain cases, charge a bit of a higher retail than we normally would have experienced for similar products. So, it's a way of saying we're looking at every SKU, every hanger and understanding hey, what is this worth to our consumer and what does the consumer expect from us via this SKU whether it's a really cool piece of distressed torn and frayed denim or a really high quality down vest and we look at those items and basically are starting to look at pricing in a totally different way than we ever have in Citi Trends. And what that's done is it's A, it's shown that we can definitely offer a bit of a higher price point as long as we pack that item with a bit more value features and benefits, et cetera, and making sure the qualities as good as ever. And then secondly, we're experimenting with different pack sizes and different ways to even offer, like, I'll call it the bulk purchase if you will certain basics and so forth. So, we're looking across trend, fashion basics. We're looking at price points within all those buckets and understanding what is that if there is any resistance at all, but most importantly determining what's that take rate and adoption rate. And we continue to do a lot of testing and learning as you've heard me speak about before, and we probably don't make a move on any of this. And so, we tested and see a quick read, and then we jump on it if it's showing the right indicators. And then we move and go. And so, as Pam mentioned our sales results were definitely driven by continued basket health. And within that basket, the AUR is really showing a nice rate of increase. But again, I want to stress not for like for like product meaning today versus the past the same stuff for a higher price. It's really better stuff at a slightly higher price. And it's translating across a lot of our cities or categories.

Great. Thank you.

Thank you, Dana. Have a great one. See you soon.

Our next question comes from the line of John Lawrence with Benchmark. Please proceed with your question.

Thank you. Good morning, David and team

Good Morning, John.

Good morning.

Congratulations. I just want to start, David, could you give us a sense of obviously the 80 projects for next year that you talk about? What do you think as these remodels and the new stores developed during the course of the summer and the fall. Can you give a sense of when you started the project, where did -- how many projects did you think would maybe be for next year and is this really an expansion of that program?

I think I understand your question, John, in terms of our outlook on how many projects we felt made sense for fiscal 2022. I would tell you that this is in line with what we have previously shared in terms of our anticipated new store and remodel target counts over the course of multiple years. We had not been as specific as we were today, but we're feeling good about announcing the approximately [technical difficulty] remodels. And we hope to get a lot of those done a bit earlier in the year versus all in the later portion. We tended to be a bit weightier this year because of the impact of pandemic and such. We were a little later in the year than we like to be. So, we're doing our best to plan in those a little earlier. And if there're opportunities to go up, we'll certainly look at those, but we like the number of 80, our team can handle it. We're really good at deploying these remodels. We never close our stores during a remodel, and we're shortening the time to open our new stores by significant amounts. So, we can get out into the marketplaces that want a Citi Trends. So, we're pretty bullish on not only doing the number, but also making sure there are big hits around the country, which is obviously the end goal.

Yes. Thanks. And just one follow-up, when you talk about some of the things that we're doing in the new CTx stores, what have you learned and can you give examples of where you've taken some of those low cost, maybe practices or policies back to the base chain and how that learning has helped the base group of stores?

Yes, I think it's a good question, John. I would tell you, we are doing some of that. It's good conclusion. You're making, we're seeing what's working in the lab stores, CTx stores, and there are a couple things we're taken back to the chain. Sometimes slowly, sometimes quicker, but probably my favorite example is our Q line. Three and four years ago, Citi Trends didn't really have an official queue. If it was, it was a little bit of a cobble together piece of sort of impulse HBA stuff at the last portion of your checkout experience. We really turn it on its head. And especially within our CTx stores, we took an opportunity to formalize a Q line and really enable the customer to kind of snake through it and get some last minute stuff in a way they go. Well, we've taken that to probably half if not two-thirds of the chain, because we were so excited about what we saw in our lab store. So, I think that answers your question. And then, there're other aspects of what we're learning. We're learning adjacencies, and that matter in a big way, meaning, we didn't think too much about them in the past. And now we think about them almost every time we launch a new business within one of our cities and we make sure that we're putting fixturing in the right spot. We're signing it in the right way. And the customer by and large is responding to those decisions. It was only this year we added a visual merchandising function to the company. We had never had one. The woman, Kelly, who leads that effort is doing a fantastic job kind of training our field, training the stores on how to be proud about your merchandising and your adjacencies and outfits that you're setting up on our four way presentations and at line, the race track of our stores and so forth. And all of this matters so much because what I'll underline is our unique differentiated specialty store like environment is really what's winning, our customer respects the fact that we are respecting them by serving up and merchandising our goods and attract active, helpful ways. So, we can take a little of thinking out of their head and give them to suggestions and pair this with that suggestions. And it's starting to work and show up on our results so you can tell I'm pretty excited about it.

Thanks a lot. Congratulations again, and good luck with the holidays.

Thanks, John. Good luck to you and happy holidays.

[Operator Instructions] Our next question comes from the line of Chuck Grom with Gordon Haskett. Please proceed.

Okay. Thank you. Good quarter. I just wanted you guys to speak to the health of your customer today. There is a lot of puts and takes out there. And we're about the cycle the stimulus from last January. I was wondering if you're seeing any regional performance differentiation in states where some of those unemployment benefits expired in September, just your overall view on that front.

Hey Chuck, thanks for joining. Sure, no problem. Yes, I think -- I'll tell maybe the geography question first. We're not really seeing anything that we can statistically or analytically tie to the change in the unemployment benefits or any other of movements, whether it was the change in the eviction moratorium and so forth. We tried. But I think in a good way our customer has been remained pretty resilient even despite those changes. And I think from an overall health of our customer, what we continue to derive from some of our own data, and combine that with some of the macro data is that they're still in a really good healthy financial position. And we expect that to run forward. I think as we look at 2022, we're pretty bullish on the health of our consumer his and her liquidity to be able to continue shopping at Citi Trends stores. And I think there is an opportunity for us as we build more incremental categories within our boxes. There is an ability to capture more wallet share as we move forward. The other thing I'd share with you is we've seen a really interesting shift from cash to debit and credit, which I know has been happening at a lot of brands. But for us, it's sticking around, and it's the trends we're seeing really give us a lot of confidence in that our cut customer has a little more credit than they used to. And we believe that will continue into 2022. So, I think you're hearing from me generally a good picture of how he and she will be set up for early part of next year and going forward.

Okay. That's helpful. And then you spoke to how November was off to a strong start. Obviously the compare was pretty easy. Just wondering if you could just maybe unpack that for us a little bit, how it was relative to expectations. Do you think you saw some pull forward in the beginning of the month, and the end of the month was a little bit softer? Was it consistent throughout, just I think you're probably one of the first companies to report after the Black Friday weekend. So, just if you can amplify on that front force.

Yes, no great question. I think overall, I leave you with -- it was very consistent. So, it really wasn't a lot of seas sign in the month. Once the weather turned cold and late October, we saw a nice spike in our fall cold weather goods. That's continued given weather trends, but it's been, yes, pretty nonstop every week, which is great. And I think from an overall comparison to last year, the big difference, Chuck is that we had more inventory. And that's definitely helped and the securing of opportunistic forward buys back last January and February was some really great stuff, as you know, that was a bit of disruption as well. And that disrupted inventory, if you will, has served us well. So, that's flowed into stores starting in October providing some unbelievable values, and brands that with great quality and recognition. And then a lot of our, if you will private label goods, particularly in the gift area, as I mentioned earlier in the call hit early November, and that gave us some traction. So, to us the consistency was a great indicator of just some underlying strengths from both our customer and our assortment. Q – Chuck Grom: Okay, that's great. And then just bigger picture last question for me would be, your sales per square foot up roughly $25 over the past couple of years, and I'm just wondering if you could maybe look at your best stores and speak to what their productivity is. And then I guess, that dovetail on the earlier questions on CTX, I guess what are those stores doing in productivity because clearly, the opportunity that are relative to some of your peers is pretty sizable, and can drive the needle here over the next several years?

Yes, good question. I'm not at liberty to share exact productivity differences by cohort, if you will. But what I can share is A, we're studying the cohorts. And as you can imagine meaningful variations between I'll call it the top, the mid and the low. And I think what we're doing Chuck is as we look at the remodel opportunity in particular, we're being very strategic and surgical about what is the potential of the store to achieve more market share, higher version, maybe higher traffic within the marketplace. So, we're taking that CTX learning. And then we're taking our pre-sophisticated modeling of our entire chain with a third-party that says, hey, here are 50 stores, or I'll use the number 40 as our number here, here are 40 stores that you're owed, if you will, X amount of business. And they fall into each of those cohorts. Some of them are currently really good productivity stars, some of them are fine average, and some of them are below average. And so, we're going in it with a totally different mindset, like let's attack the 40 pick, maybe 10,10,10 and there is a wildcard of 10, based on some other criteria, and that's what we go after versus the old days would be, it hasn't been touched in 27 years, you should really remodel that store. And that's not necessarily, (a), a database argument to do it and (b), it doesn't necessarily yield or have any projectability to it, it's more of a feel good. So, I would tell you, we're using a lot of analytics derived from CTX combined with another third-party that we use to model, hey, if we go and attack one of our orange and black stores, built in 2012, and the model based on the company -- excuse me, based on the population around the store says we should be doing 500K more per year, let's go remodel that. And then, we'll start to what's really needed is we'll start to measure that and see how close we get to that modeling projectability number that came from the third-party and so on and so forth. So, I hope that answers your question, we're really taking a whole new look at it. And using those takeaways from CTX, and that other party to kind of triangulate, I think a way better approach and answer than we used to in the past. Q – Chuck Grom: Okay, that is good to hear, and then just one more if I could, just on the '22, I wanted to just ask that you do expect to achieve that, that's sort of like your initial view for next year in terms of low to mid single digit sales growth and then translating into earnings growth in the low double-digits?

At a high level, we're positioning the business to deliver those numbers. I think there remains, I guess the caveat, I'd add Chuck is there remains as you know, a lot of fluidity out there on the marketplace. I think, we're looking at a full-year perspective, it's going to be wonky throughout the years, we know first-half tougher compares than the second-half, but overall, that's how we're approaching the business. And as you know in this business, we're approaching our buyers in that way, we are approaching our supply chain on how to solve for that and so forth and so on. So, that's what we're planning but we'll hear more in January at ICR. We're going to be looking to share more details. So, you and others can get a better handle on the color behind that positioning.

Got it, thanks a lot.

Thanks, Chuck. Take care.

Take care.

Mr. Makuen, there are no further questions at this time. I will turn the call back to you for closing remarks.

Perfect. Thanks, Jason. Thanks everybody for joining. Have a great holiday. See you in January at ICR. Bye-bye.

That does conclude the conference call for today. We thank you for your participation, and ask that you please disconnect your line.