Citi Trends (NASDAQ: CTRN) reported fiscal Q2 2026 sales of $211.6 million, up 10.9% from $190.8 million, while diluted GAAP EPS swung to a loss of $0.11 from earnings of $0.46. Comparable-store sales increased 10.5%, and adjusted EBITDA improved to $5.5 million from a $1.1 million loss as gross margin expanded and adjusted SG&A leveraged. The GAAP comparison was affected by an $11.0 million building-sale gain recorded in Q2 2025.
Core Earnings Data
Sales growth came primarily from existing stores, with both average basket size and transaction count contributing to the 10.5% comparable-store sales increase. Gross margin rose 60 basis points, while adjusted SG&A declined as a percentage of sales despite an increase in expense dollars.
GAAP profitability weakened against a prior-year quarter that included the building-sale gain. On the company’s adjusted basis, however, net income and EBITDA both moved from losses to profits.
| Metric | Q2 Fiscal 2026 | Q2 Fiscal 2025 | Year-over-Year Change |
|---|---|---|---|
| Total sales | $211.6 million | $190.8 million | +10.9% |
| Gross margin | 40.6% | About 40.0% | +60 bps |
| Operating income (loss) | $(1.7) million | $3.5 million | Swung to loss |
| GAAP net income (loss) | $(0.9) million | $3.8 million | Swung to loss |
| Diluted GAAP EPS | $(0.11) | $0.46 | Swung to loss |
| Adjusted net income (loss) | $0.4 million | $(5.4) million | Swung to profit |
| Adjusted EBITDA | $5.5 million | $(1.1) million | Improved by $6.6 million |
| Adjusted SG&A as a percentage of sales | 38.0% | 40.6% | Improved by 260 bps |
Comparable Sales and Store Activity
Comparable-store sales rose 10.5% year over year and 19.7% on a two-year basis. Management attributed the quarterly increase to growth in both transaction count and average basket size. It was Citi Trends’ eighth consecutive quarter of comparable-store sales growth.
The company opened four stores and closed one during the quarter, ending with 594 locations. It also remodeled 26 stores in Q2, bringing the fiscal year-to-date total to 51.
Profitability and Balance Sheet
Gross margin reached 40.6%, up 60 basis points. Improved merchandise margin and investments intended to reduce inventory shrink supported the increase, while higher freight expense related to fuel surcharges provided a partial offset.
Adjusted SG&A increased in dollars to $80.4 million from $77.4 million, but sales grew faster, lowering the expense ratio to 38.0% from 40.6%. GAAP SG&A was $82.3 million, compared with $78.9 million a year earlier.
Citi Trends ended the quarter with $55.9 million in cash, no debt and no borrowings under its $75 million credit facility. Merchandise inventory was $126.4 million, up 7.5% year over year, compared with the quarter’s 10.9% sales growth.
Prior-Year Building Sale Masks the Underlying Profit Improvement
The direction of GAAP net income does not reflect the same trend as Citi Trends’ adjusted results. Q2 2025 GAAP net income included an $11.0 million gain from selling the company’s Savannah office building. After removing that gain and other adjustments, the prior-year quarter had an adjusted net loss of $5.4 million rather than a profit.
In Q2 2026, adjusted net income reached $0.4 million and adjusted EBITDA was $5.5 million. The adjusted figures therefore indicate better operating profitability even though GAAP net income moved to a $0.9 million loss.
Beginning in fiscal 2026, Citi Trends also revised its definitions of adjusted net income, adjusted EBITDA and adjusted SG&A to exclude equity-based compensation. Prior-period figures were revised to use the same methodology.
Fiscal 2026 Outlook
Citi Trends raised its full-year sales and adjusted EBITDA outlook after incorporating Q2 results while maintaining its assumptions for the second half. The company also increased its expected SG&A leverage, although it reduced the planned number of new stores.
| Metric | Latest Fiscal 2026 Outlook | Previous Outlook | Change |
|---|---|---|---|
| Comparable-store sales growth | 9% to 11% | 8% to 10% | Raised |
| Total sales growth | 10% to 12% | 9% to 11% | Raised |
| Gross margin expansion | 50 to 70 bps | 50 to 70 bps | Unchanged |
| Adjusted SG&A leverage | 160 to 180 bps | 130 to 160 bps | Raised |
| Adjusted EBITDA | $38 million to $42 million | $35 million to $40 million | Raised |
| Adjusted EBITDA margin expansion at midpoint | About 230 bps | About 200 bps | Raised |
| New stores | 20 | 25 | Reduced |
| Remodels | 60 to 65 implied | 50 | Increased by 10 to 15 |
| Capital expenditures | $35 million to $40 million | $35 million to $40 million | Unchanged |
Most capital spending will remain focused on new stores and remodels.
Management’s View
Chairman and CEO Ken Seipel emphasized the conversion of sales momentum into adjusted profitability. For the first 26 weeks of fiscal 2026, adjusted EBITDA reached $19.4 million, up from $5.3 million, while adjusted net income was $10.1 million versus a $3.0 million adjusted loss in the prior-year period.
Management identified its merchandise strategy, the launch of the Insiders Club customer relationship platform, the new-store pipeline and the debt-free balance sheet as priorities supporting its growth plans.
Recent Insider Transactions
The supplied six-month insider data show 17 reported purchase transactions totaling 17,068 shares and three sales totaling 752,126 shares, resulting in net reported sales of 735,058 shares. The largest disclosed transaction was a sale by beneficial owner Fund 1 Investments, LLC; most other recent entries were zero-price stock awards to officers and directors.
| Date | Insider | Role | Transaction | Reported Value |
|---|---|---|---|---|
| July 8, 2026 | Katrina George | Officer | Sale at $56.42 per share | $7,109 |
| June 24, 2026 | Fund 1 Investments, LLC | Beneficial owner | Sale at $56.50 per share | $42.4 million |
These reported transactions do not, by themselves, establish insiders’ views about Citi Trends’ future performance.
Risks Investors Should Monitor
- Comparable-sales momentum: The raised full-year outlook calls for comparable-store sales growth of 9% to 11%. Because second-half expectations were maintained rather than increased, investors should monitor whether gains in transactions and basket size persist.
- Freight and margin pressure: Higher freight costs tied to fuel surcharges already offset part of the benefit from improved merchandise margin and shrink-related investments. Further pressure could make the projected 50-to-70-basis-point gross margin expansion harder to achieve.
- Slower new-store expansion: Citi Trends reduced its fiscal 2026 new-store target from 25 to 20, placing more emphasis on comparable sales and remodel productivity to support overall growth.
- Workforce transition costs: The company’s shift toward an office-based workforce involves severance, relocation and recruiting expenses and is expected to continue through Q1 fiscal 2027.
Summary
Citi Trends’ fiscal Q2 2026 results showed double-digit sales and comparable-store growth, wider gross margin and a return to positive adjusted EBITDA. GAAP earnings declined because the prior-year comparison included a large property-sale gain, making adjusted performance more informative about the operating trend. The raised sales and EBITDA outlook reflects first-half progress, while second-half comparable sales, freight costs, margin execution and the slower new-store rollout remain the main items to monitor.
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