Citi Trends Inc (CTRN) Business

ITEM 1.BUSINESS

Overview

Citi Trends, Inc. (“CITITRENDS” or the “Company”) is a highly differentiated off-price value retailer known for trendy fashions, great brands and amazing prices. We are the leading off-price retailer specifically focused on Black customers, delivering the styles, brands, and trends at amazing prices that resonate with our primary and secondary customers. Our product offering is Women’s, Men’s and Children’s apparel, family footwear, accessories and products for the home, with a three-tiered mix of product. At the opening price point, we offer value-focused basics for our most budget-conscious customers. The core of our business is our ‘better’ tier- quality products with breadth of selection and fresh styles. At the top end, we’re expanding our ‘best’ tier with two distinct approaches. First, we’re adding more trend-relevant product at prices well below specialty retail. Second, we’re building our extreme value capabilities, offering well-known branded product at 50% to 75% off MSRP. Our research shows this treasure hunt element resonates particularly well with our core customer, who views shopping as both a practical necessity and an enjoyable activity, fostering deep customer loyalty and high shopping frequency in the communities in which we operate.

Our customers are discerning. They understand that value is more than price and are willing to spend more when the style is for them, the fashion is on trend and the quality is right. In short, value is not just price. Our brand promise is clear: Styles that see you, prices that amaze you and trends that tell your story.

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Our stores are strategically located in vibrant Black communities with product offerings for the entire family. Our stores average approximately 11,000 square feet of selling space and are typically found in outdoor community shopping centers across a variety of urban, suburban and rural markets. As of January 31, 2026, we operated 590 stores in 33 states.

We believe the combination of product curated for the Black consumer at amazing prices, and the large scale of our 590 community stores is extremely hard to duplicate which gives us a defensible moat against competition.

Competitive Strengths and Strategies

CITITRENDS is the leading off-price retailer specifically focused on Black customers. With 590 stores located in the communities we serve, our customers rely on us as their off-price value retailer of apparel, accessories and home trends. Because of our long-term presence in the Black community, our customers are highly engaged and loyal to CITITRENDS. We strive to provide an engaging and exciting shopping experience supported by fresh product and a friendly, welcoming staff. We believe the following business strengths differentiate us from our competitors and are important to our success.

Community Store Locations are a key point of differentiation. We locate our stores in high-traffic outdoor community shopping centers that are convenient to Black families. Our location strategy allows us to be an integral part of the communities we serve while providing convenience for our customers. We believe that these community locations are difficult to duplicate, creating a competitive moat for our brand. We generally utilize previously occupied store sites in locations where we are often the brightest and cleanest store in the shopping center, which enables us to obtain attractive rents while establishing ourselves as community cornerstones. When opening new stores, we seek to partner with landlords that contribute to buildout costs, which helps maintain lower startup and fixturing investment.

Focus on Fashion and Trend Mix. We curate our merchandise assortment to be trend right styles at amazing prices, recognizing that our customers use style as a form of personal expression. Our creative department is focused on identifying emerging trends and ensuring that our wide assortment of apparel and non-apparel merchandise is curated to appeal to the preferences of Black customers. Our buying team actively manages a dynamic blend of essentials, fashion-forward pieces, trending items and recognized brands, all at strong value prices to keep the assortment fresh, relevant and culturally attuned.

Superior Value Proposition. We seek to offer high quality, fashionable merchandise. Value is more than price. We know that our customers are willing to spend more when the fashion is on trend, the brand is right, and the price-value proposition is strong. The majority of our product is sold at ticketed price with compare at pricing to demonstrate our pricing superiority against competition. We do not employ high-low or point of sale discounting pricing strategies; instead, our everyday ticketed low price points offer superior value, enabling our customers to purchase multiple items per visit. We focus on a balanced three-tiered assortment along with an increasing selection of off-price ‘treasures’ – nationally known brands at incredible values. We rely on regular in-store deliveries of the latest trends at great prices which drives word-of-mouth awareness and excitement in the communities we serve, which in turn creates customer visit frequency.

Fashions for the Entire Family. We offer Women’s, Men’s and Children’s apparel, family footwear, accessories and products for the home which makes us a family destination in our communities. We offer a trendy assortment of culturally relevant fashions, core products and opening price products, making us appealing to wide range of income and style taste levels. We believe that our approximately 11,000 square feet store formats, combined with a neat, clean and organized in-store experience, friendly customer service where we often know our customers’ names, and breadth of merchandise, distinguishes our stores from many competitors and creates an exciting and welcoming environment that encourages high frequency repeat visits from the local community.

Strong and Flexible Sourcing Relationships. We maintain strong, long-standing sourcing relationships with a large group of suppliers while continually opening new relationships with both well-known and up-and-coming brands. We believe that our access to the Black customer drives vendor interest. Our buying team plans, develops and creates curated assortments by (i) purchasing goods developed specifically for our customer, (ii) selecting products for our customers from vendor product lines, (iii) buying opportunistically available excess inventory from reliable vendors, with the majority of our merchandise purchased for the current season and a lesser quantity held for sale in future seasons and (iv) buying extreme value, off-price deals to offer exciting national brands at significantly reduced prices. Our vendor partnerships enable us to deliver fresh items weekly to our stores. This fresh assortment, coupled with exciting and surprising off-price deals, creates a shopping experience that can’t be easily replicated in an on-line environment, positioning us as an “instant gratification store”, allowing our customers to “buy now, wear now”, avoiding shipping fees and the wait for their potential online orders. This approach allows us to offer exceptional value that goes beyond mere price – it’s the thrill of discovering fresh styles that fosters a deep, in-person connection with our customers.

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Dynamic Experience in a Friendly, Neat, Clean and Organized Environment. We seek to provide a fashion-focused shopping environment that is easy to navigate, encouraging shopping across divisions with a well-laid-out floor plan and exciting product displays throughout the space. We use a combination of style groupings, outfit suggestions and by-size displays to balance ease of shopping with suggestive selling. In each department, we showcase opening price-point offerings to enhance our strong value statement. Our stores are neat, clean and organized, offering a friendly environment where customers are encouraged to linger, explore and visit often. We are focused on refreshing and remodeling our store base to keep our stores current and continually refine our store format to ensure that we meet the needs of our customers and our store associates.

Friendly and Helpful Store Associates. Our store associates are trained to provide friendly and helpful customer service to deliver a positive shopping experience. Many of our store associates live in the communities where our stores are located and frequently shop our stores themselves. We have a long heritage of a diverse and inclusive workplace; 74% of our store associates are Black, and more than 90% of our store management positions are filled by women. As a result, our store associates cultivate a unique culture in our stores that creates a high level of connectivity with our customers. We strive to make our stores a destination where everyone is welcome, and our store associates foster that vision every day through enriched customer engagement.

Highly Talented and Motivated Leadership Team. Our senior management team, led by Ken Seipel, our Chief Executive Officer, has extensive retail experience across a broad range of disciplines, including merchandising, real estate, finance, store operations, supply chain management, human resources and information technology. Our management team plans and drives our growth strategy, which is based on our constant focus on providing trend-driven merchandise anchored in value to the Black customer. We believe our management team is integral to our success and positions us well for long-term growth.

Business Strategy

With our focus on culturally-relevant fashion, exciting brands, and accessible pricing in each of our community locations, we believe that CITITRENDS is in a unique position to serve our loyal customer base, with a long runway for comp sales growth, store unit growth, profit margin expansion and a strong leadership team supported by a healthy, debt free balance sheet.

We have identified the following areas of focus to continue to improve the Company’s financial performance and to maximize long-term growth:

Offer Compelling Value Proposition. Our customers understand that value is more than price and are willing to spend more when the style is for them, the fashion is on trend and the quality is right. Our brand promise is clear: Styles that see you, prices that amaze you and trends that tell your story. We offer a balanced assortment of good, better, and best products that resonates with our customer base across income levels, all focused on the wants and needs of our Black customers. This approach differentiates our model while driving customer loyalty and repeat visits. We are known for delivering newness and freshness, resulting in high customer frequency. We highlight our opening price point offerings consistently across departments, ensuring our budget-conscious customers can easily identify these options. Our core value product is the bedrock of our business, and we are focused on ensuring quality-for-price in this important tier. Our research confirms that our customers have good disposable income and respond positively to recognizable brands with a willingness to trade up. This insight has guided our branded merchandise strategy which will become a larger part of our product assortment. We are expanding our offering of “treasures,” or extreme value product offerings, enabling us to offer well-known brands at a significant discount to the market. Our product strategy is supported by our open-to-buy process which allows us to be flexible and responsive to emerging trends. We practice rigorous inventory management, prioritizing choice and breadth over depth, improving our speed to market and driving faster turns.

Focus on the Black Customer. We are one of the largest national retailers focused on Black customers. Our customers are at the core of what we do, central to our business and critical to our success. Our customers are fashion conscious and prioritize style as an expression of self. Recent extensive customer research revealed that about one third of our customers visit our stores weekly or bi-weekly and have incomes in the $75k to $150k range. The next largest tier visits monthly with incomes in the range of $50k to $75k. We also serve a base of less frequent, lower income customers who are more budget conscious. We are serving customers across all income levels with our three-tiered product strategy.

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Consistent Operational Excellence. Our objective is to be fast, consistent and efficient. We believe that our ability to produce strong, consistent and sustainable financial results depends on the development of fundamental retail practices and consistent execution. We have taken fast action to improve access to information and to develop consistent key performance indicators to drive business results. We have refined our product allocation methodology and are investing in artificial intelligence (“AI”)-based technology to drive more effective and efficient product allocation processes. We have made improvements to our supply chain speed and we are driving additional improvements to further improve product speed to store as well as to reduce our working capital needs. We have implemented improved product planning practices focused on pre-season strategy and open-to-buy to support growing categories. Each of these improvements is supported by having the right talent in place. We believe that these foundational improvements will drive near-term financial results while positioning us for future, accelerated growth.

Growth. We believe that our 590 stores located in the heart of Black communities is a key differentiator of our business that gives us a defensible moat around our business and store base. To improve the financial performance of the company, we are focused on improving productivity in our existing stores by sharpening our focus on our Black customers and strategically investing in product categories identified for intensification through our customer insights studies, both with a goal of driving increased foot traffic and basket. Finally, we believe that an integral part of our sales growth is the continued refinement of our store format, incorporating customer feedback and insights from operational results to improve the in-store experience and enhance profitability. We are remodeling existing stores to the updated format, and all new stores will open in the revised format.

Looking forward, we are positioning CITITRENDS for strategic new store growth, including through potential assumptions of leases or subleases. Our expansion strategy focuses on backfilling existing markets where we have brand awareness and proven performance and selectively entering new markets with strong demographic alignment to our customer base. This new store expansion is guided by a disciplined approach leveraging AI tools and extensive data analysis designed to predict sales with approximately 90% accuracy. We are also applying financial criteria to every new store decision and rely on local-market expertise from our real estate team. We believe this approach positions us to expand intelligently while maximizing return on investments.

People. We believe that our people are a key differentiator for our business and are key to the continued transformation of our company. Our buying team is trained to understand our customers, what motivates them to shop at CITITRENDS and what creates an emotional connection to the brand. Our buyers also cultivate strong relationships with the vendor community to gain access to the exciting, trend-right product that our customers rely on us to provide. We believe that our store associates, many of whom come from the communities we serve, are another key component of the in-store experience. They create an exciting and welcoming shopping experience for our customers and serve as a valuable source of insights on our core customers’ needs and preferences. Our leadership team is made up of functional experts who are adept at leading through change. Under the direction of Ken Seipel, our Chief Executive Officer, we believe that our people are key to the Company’s success.

We strongly believe that our business strategy centered around these five areas will restore our financial performance and accelerate our long-term sales and earnings growth.

Product and Value

Our merchandising strategy focuses on delivering fresh, fashionable and trend-right apparel, accessories and home products at exceptional value for Black families. As the go-to family store in the community, we are committed to maintaining a diverse, seasonally relevant assortment that reflects the bold style and preferences of our customers. Our product offerings include a balanced mix of privately developed brands and nationally recognized labels, ensuring both quality and affordability.

Our merchandise is represented by six distinct divisions within the store:

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The following table provides the percentage of net sales for each Division within the store:

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Our goal is to deliver outstanding value every day. We do this by offering access to fashion and trends at affordable prices that are desirable for Black families. As a normal course, we do not engage in promotional activity such as high-low pricing, coupons or sales other than our regularly scheduled markdowns. Our assortment balances tiers of good, better, best products, ensuring a broad appeal across diverse income levels. The flexibility of our model allows our pricing structure to fluctuate in response to marketplace changes while maintaining our merchandise margins. Both branded and non-branded offerings validate our fashion and value to our customers.

Sourcing and Allocation

We believe that our flexible, value-conscious business model and ever-changing assortment that results from our fresh flow of inventory differentiates us from traditional retailers. We source our merchandise from thousands of domestic manufacturers and importers. Our merchandising division consists of a buying team, a planning team and an allocation team.

Our buyers have extensive experience and have developed long-standing relationships with many of our vendors. Our buying office is located in New York City, and the team travels regularly to the major United States markets, visiting manufacturers and attending national and regional trade shows. The buying team is supported by our Trend Director who identifies and translates relevant current and emerging trends into actionable merchandising strategies.

Our buying team sources merchandise through multiple channels to ensure a fresh and trendy assortment. First, we work with a continuously evolving network of vendors that manufacture products exclusively for CITITRENDS’ core customers. Our buyers collaborate with these vendors who specialize in trend identification and product development to design and manufacture exclusive products for CITITRENDS, providing our fashion-savvy customers with unique standout styles they won’t find anywhere else. Second, we maintain partnerships with nationally recognized brands and labels, collaborating to customize products in size, color and style to align with the specific needs and preferences of our customers. Third, we leverage our vendor relationships to opportunistically buy close-out product at incredible value. Fourth, we buy extreme value, off-price deals from a wide variety of sources, allowing us to offer our customers exciting national brands at significantly reduced prices.

While almost all of our merchandise is first-quality and delivered in-season, we also purchase high-quality excess inventory at advantageous pricing with the intent of selling later in the same season or the following season. This allows us to deliver extreme value on select highly desirable goods.

Our staff utilizes a centralized management system to monitor merchandise purchasing, planning and allocation to manage inventory turnover, identify and respond to changing customer demands and determine the timing of markdowns. Our buyers also regularly review the age and performance of merchandise and manage both the reordering and markdown processes. In fiscal 2025 we finalized the implementation of an AI-based allocation system across all merchandise categories. This system is designed to drive more accurate by-store product allocation, improve sales, reduce markdowns and reduce working capital through improved inventory efficiency.

Store Operations

Our stores are located in the heart of the communities we serve. We hire a diverse staff of women and men from the local area surrounding our stores. As of January 31, 2026, 74% of our store associates are Black, and 90% of our store management positions are filled by women. We cater to entire families and offer a compelling shopping experience in the communities in which we operate. We welcome everyone with “Hi, welcome to CITITRENDS,” and we develop a longstanding rapport with many of our customers, many of whom we know by name. Every CITITRENDS store presents an inviting shopping environment with a wide array of product offerings.

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The average selling space of our 590 stores is approximately 11,000 square feet, which allows us the space and flexibility to organize our six product divisions in exciting and appealing ways. The unobstructed floor plan allows the customer to see almost all of the different product areas from the store entrance and provides us the flexibility to easily expand and contract departments in response to customer demand, seasonality and merchandise availability. Nearly all of our inventory is displayed on the selling floor. Our mission is to curate culturally relevant fashion, great brands and compelling price points for our core customers in an exciting shopping environment. A critical component of our success is to maintain an environment that is neat, clean and organized, where everyone is welcome.

The typical store is staffed with a Store Manager and multiple Assistant Managers, along with five to eight part-time Sales associates, all of whom rotate work days on a shift basis. Our associates are critical to achieving our goals, and we strive to hire highly qualified, motivated associates from the local community. We have well-established store operating policies and procedures and an extensive in-store training program for new Store Managers and Assistant Managers. Sales associates also participate in a customer service and store procedures training program, which is designed to enable them to assist customers in a friendly and helpful manner and maintain neat, clean and organized stores.

We offer a layaway program, allowing customers to purchase merchandise by initially paying a 20% deposit and a $2 service charge. The customer then makes additional payments every two weeks and has 60 days to complete the purchase. If the purchase is not completed, the customer receives a CITITRENDS gift card for amounts paid less a re-stocking and layaway service fee. In addition, we offer a buy-now-pay-later program through an external vendor that allows customers to split purchases into four installments over six weeks.

Our unique focus on Black families offers us the opportunity to pinpoint highly targeted and highly visible store locations. Cost-effective store locations are an important part of our store profitability model. Accordingly, we look for locations in high-traffic outdoor community shopping centers that offer attractive rents and meet our demographic and economic criteria. Our new store expansion is guided by a disciplined approach leveraging AI tools and extensive data analysis designed to predict sales with approximately 90% accuracy. We have a dedicated real estate management team responsible for new store site selection, coupling the data analysis with in-depth market knowledge, and we employ rigorous financial analysis to approve final store selection decisions. In selecting a location, we target urban, suburban and rural markets, and our strategy includes both further densification of existing markets and entering new markets over time. In addition, we require convenient site accessibility, as well as strong co-tenants, such as grocery stores, dollar stores, beauty stores and other value stores. We aim to be an integral part of our customers’ community by providing a compelling shopping destination and career opportunities.

Marketing

Our marketing goals are to build awareness of the CITITRENDS brand, promote customers’ association of the CITITRENDS brand with our brand promise: Styles that see you, prices that amaze you, and trends that tell your story, engage our customers in meaningful ways, and drive traffic into our stores. In fiscal 2025 we launched our Joy Looks Good on You marketing campaign, highlighting and celebrating moments of joy in the Black community. We also refreshed our social media presence under @wearecititrends. Our website, cititrends.com, showcases our marketing collateral and provides information about our business, our store locations, and more. Information on our website or social media pages is not part of this or any other report we file or furnish to the SEC.

Distribution

The majority of merchandise sold in our stores is shipped directly from our company-operated distribution centers in Darlington, South Carolina and Roland, Oklahoma, utilizing third-party delivery partners. Our stores receive multiple shipments of merchandise each week from our distribution centers. In addition, we utilize a vendor direct-to-store shipping program that enables us to expedite the delivery of select merchandise to our stores by shipping directly from our vendors.

The Darlington distribution center has 550,000 square feet of space, and the Roland distribution center has 565,000 square feet of space. The distribution centers’ value-added services include, but are not limited to, receiving, price ticketing, packing and shipping specific store-allocated quantities. We continue to evaluate distribution, transportation and supply chain alternatives to accelerate the movement of merchandise from our vendor origin points to our stores as optimally as possible.

Information Technology and Systems

We have information systems in place to support our core business functions, using a combination of industry-standard third-party products and internally developed applications. These systems support purchase order management, price and markdown management, merchandise planning and allocation, general ledger, accounts payable, sales audit, loss prevention, store operations and supply chain functions.

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In fiscal 2025, we continued to advance our technology ecosystem by leveraging AI capabilities in key areas such as merchandise allocation, loss prevention, and store operations. In fiscal 2026, we expect to add an AI-based merchandise planning system and complete the implementation of upgraded camera systems, including AI-based facial recognition capabilities. Moving forward, we will continue to explore AI capabilities in our systems as we expect them to improve our operational and execution capabilities.

Competition

The markets we serve are highly competitive. We compete with a broad range of retailers, including national chains, mass merchants, discount stores and specialty stores with both physical locations and online stores. We believe we have a competitive advantage in our offering of culturally relevant fashion and trends at everyday low prices, and that our strategy of focusing on Black customers puts us in a unique competitive position. We also believe we offer a more inviting store format than the traditional retailers, including our assortment and layout of merchandise, navigational signage, and use of fixtures that are easy to shop. Our competitors generally focus less on trend-driven apparel and, within their apparel offering, lack the styles that appeal to our core customers. As a result, we believe there is significant demand for an off-price value retailer that addresses the market of Black customers who seek value and trend in fashion apparel, accessories and home goods. See Item 1A. Risk Factors in this Report for additional information regarding competition in our markets.

Intellectual Property

Our trademarks and service marks have significant value and are important to our marketing efforts. Our marks registered with the U.S. Patent and Trademark Office include “Citi Trends,” “Citi Steps,” “Citi Trends Fashion for Less,” “CitiHome,” “CITIcares,” “MCMXXXIII,” “Lil Ms Hollywood,” “Red Ape,” and “Vintage Harlem.” Our policy is to pursue registration of our marks and to vigorously protect them.

Seasonality

The nature of our business is seasonal. Historically, sales in the first and fourth quarters have been higher than sales achieved in the second and third quarters of the fiscal year. Expenses and, to a greater extent, operating income, vary by quarter. Results may fluctuate due to changes in our business, consumer spending patterns and the macroeconomic environment. Furthermore, the seasonal nature of our business may affect comparisons between periods.

Human Capital Management

The success of CITITRENDS is directly attributable to our people and their passion to achieve our performance goals. We recognize the importance of attracting and retaining top talent in our workforce that reflects the communities we serve. We strive to make CITITRENDS a diverse, inclusive and safe workplace, with opportunities for our associates to grow and develop in their careers, supported by competitive compensation, benefits and health and wellness programs, and by programs that build connections between our associates and their communities.

Associates. As of January 31, 2026, we had approximately 2,500 full-time and approximately 2,200 part-time associates. Of these associates, approximately 3,900 are employed in our stores and the remainder are employed in our distribution centers, buying offices and corporate office. We are not a party to any collective bargaining agreements, and none of our associates are represented by a labor union.

Diversity and Inclusion. Our objective is to ensure that our workforce reflects the ethnicity and cultural sensibilities of our customer base, with a particular focus on the Black community. We believe that a diverse and inclusive team is critical to our success. We strive to foster an inclusive, diverse and productive working environment where our associates are valued and respected. We continue to focus on attracting, developing and retaining team members that reflect the diverse communities we serve. Company-wide, as of January 31, 2026, 69% of our team members are Black and 80% are female. In addition, our eight-member board includes three Black women and one Asian man.

Health, Safety and Wellness. The success of our business is fundamentally connected to the well-being of our people. Accordingly, we are committed to the health, safety and wellness of our associates. We follow guidance released by state and federal health officials to create a safe environment for our associates to work and our customers to shop.

Compensation and Benefits. We provide competitive compensation and comprehensive benefits programs to help meet the needs of our associates. In addition to salaries, these programs (which vary by position) include annual bonuses, stock awards, a 401(k) match, healthcare and insurance benefits, paid time off and personal/family leave.

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Training and Development. Our associates are critical to achieving our goals, and we strive to hire high-energy and motivated associates. We have well-established store operating policies and procedures and an extensive in-store training program for new store management members. Sales associates also participate in a customer service and store procedures training program, which is designed to enable them to assist customers in a friendly and helpful manner. Our Citi CRED program is designed to help associates build successful career paths by providing mentorship, exposure to diverse areas of the business, opportunities to cultivate cross-functional relationships, and access to educational and professional development resources. In addition, we continue to invest in leadership development, training initiatives, succession planning, and career growth opportunities across the organization.

Community Involvement. We are committed to giving back to the local communities we serve. In 2026, we are launching a refined focus on “youth empowerment”, a strategic, multi-phase community impact plan designed to invest in children, teens, and young adults across the communities CITITRENDS serves. The initiative integrates education, sports, mentorship, and career readiness, reinforcing our commitment to youth development and sustainable community reinvestment.

Available Information

Our Annual Report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, proxy statements, and amendments to those reports, as well as other information that we file or furnish with the Securities and Exchange Commission (“SEC”) are available free of charge at https://ir.cititrends.com as soon as reasonably practicable after we file or furnish such material to the SEC. In addition, the SEC maintains a website at http://www.sec.gov that contains information we electronically file or furnish to the SEC. Our Corporate Governance Guidelines, Code of Ethics and the charters for the committees of our board of directors are also available free of charge at https://ir.cititrends.com or in print upon request. Information on our website is not part of this or any other report we file with or furnish to the SEC.