Tripp Sullivan Bruce D. Smith - Chief Financial Officer, Principal Accounting Officer, Executive Vice President and Secretary R. Edward Anderson - Executive Chairman and Chief Executive Officer Jason T. Mazzola - Chief Merchandising Officer and Executive Vice President

James Fronda - Sidoti & Company, LLC Evren Dogan Kopelman - Wells Fargo Securities, LLC, Research Division Steven Zaccone - Oppenheimer & Co. Inc., Research Division Patrick McKeever - MKM Partners LLC, Research Division

Ladies and gentlemen, thank you for standing by. Welcome to the Citi Trends' Third Quarter 2013 Conference Call. [Operator Instructions] As a reminder, this conference is being recorded, Tuesday, November 26, 2013. I would now like to turn the conference over to Mr. Tripp Sullivan of Corporate Communications. Please go ahead, sir.

Thank you. Our earnings release was sent out this morning at 6:45 a.m. Eastern. If you have not received a copy of the release, it's available on the company website under the Investor Relations section at www.cititrends.com. You should be aware that the 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, undue reliance should not be placed on them. 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, Chief Financial Officer. Bruce, please go ahead. Bruce D. Smith: Thanks, Tripp. Good morning, everybody, and thank you for joining us today. Also on the call are Ed Anderson, Chairman and CEO; and Jason Mazzola, Executive Vice President and Chief Merchandising Officer. First, I will provide you with details related to the third quarter and year-to-date 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 third quarter decreased 2% to $145 million,, while comparable store sales increased 0.6% on a comparable weeks basis. The higher comp store sales were reflected in 6% more customer transactions and a slight increase in the average number of items per transaction, partially offset by a decline in the averaging unit retail of more than 5%. As we have entered November comp store sales were up about 3.5% for the first 2 weeks. The 3rd week of November is not comparable between years since it included Thanksgiving last year. Therefore it would not be meaningful to evaluate sales results for that week until we get past the current week. Our merchandise category, sales in the third quarter and comp stores were as follows: the Home division was up 15% in this year's third quarter after being up 4% in 2012 third quarter. Accessories were up 13% on top of a 12% increase last year. Children's sales were down 1% this year and down 4% last year. Men's sales were down 2%, after increasing 1% in the third quarter of last year and the Ladies' division was down 9% this year and down 12% in last year's third quarter. Sales of nationally-recognized urban brands represented 32% of total sales in the quarter compared with 42% last year. Comp store sales by month in the third quarter were up 2% in August, down 3% in September and up 3% in October. For the 9-month year-to-date period, total sales were down 3%, including a 1% decline in comparable store sales. Gross margin was up 230 basis points for the second straight quarter, 36.7% in the third quarter this year and 34.4% last year with strong inventory control measures and improved sales results once again resulting in fewer markdowns. For the year-to-date, gross margin is up to 36.6% compared with 35.5% in 2012's first 3 quarters. For the quarter, expense dollars increased 2% to $52 million from $51 million last year, while for the year-to-date, expense dollars increased 0.8% to $156 million. Year-to-date SG&A expenses as a percent of sales have increased to 33.5% from 32.3% due primarily to the deleveraging effect on expense ratio related to the 3% decrease in total sales. On the third quarter P&L, you will note a separate line, it reflects $1.5 million gain from the sale of our former distribution center in Savannah. This gain had a positive impact on 2013's loss per share of $0.06. The third quarter net loss was $1.7 million, or $0.11 per share this year, down from a loss of $3.7 million, or $0.25 per share last year. Year-to-date, the company has a net loss of $1 million, or $0.07 per share compared with the loss of $1.5 million, or $0.10 per share in last year's first 3 quarters. Our balance sheet position remained strong. Cash together with short-term and long-term investment securities totaled $86 million at the end of the quarter, a $30 million increase from the same time last year. Inventory was down 16% from the third quarter of 2012 and we continue to have no debt. In looking toward the fourth quarter, it is important to remember that last year's fourth quarter had 14 weeks and 2013's fourth quarter will have the traditional 13 weeks. Sales during the extra week last year were slightly over $12 million. Now I'll turn the call over to Ed. R. Edward Anderson: Good morning, everyone. The third quarter results reflect a solid, consistent progress we're making in the turnaround of Citi Trends. Again, as in the second quarter, we reported positive comparable store sales, significant gross margin improvement, well-controlled expenses, better managed inventory and a stronger cash position. Our strategy is working. We're all encouraged by the positive comparable store sales for the quarter. Last year's third quarter was positive as well, so the comparisons were not as easy as they had been. 6 of the last 7 months have been positive. After a 3% comp store sales increase in October, as Bruce said earlier, we have started the fourth quarter with 2 weeks of positive comparable store sales. The ladies' business continues to improve but it remains our biggest sales challenge. As reported previously, we have pivoted to nonbranded fashion versus urban brands that no longer resonate with our ladies' customer. The nonbranded fashion has continued to increase as the urban brands continue to decrease. Importantly, nonbranded fashions now represents 85% of our ladies' business. Again, our strategies here are working and we believe they will result in positive comps in the not-too-distant future. Our Home business increased 15% in the quarter and the accessories business increased 13%, another double-digit increase on top of a double-digit increase in last year's third quarter. The Accessories business, driven largely by increases in footwear, was 27% of our business in the quarter. Strong fashion bays across Ladies', Men's and Children's footwear have driven sales and gross margin in this area. We believe we have more growth ahead of us in the footwear business. Another highlight of the quarter was continued reduction in inventory. We have consciously reduced inventory with the belief that we can produce comp sales increases with less inventory. This strategy has worked and has been the driver in improved gross margin. We will continue this strategy in the fourth quarter. We continue to be conservative with capital and expenses. In 2013, we've opened just one store, expanded or relocated 6 stores and remodeled 24 stores. We are cautiously optimistic about the fourth quarter. As was the case last year, we ended the quarter with a lower layaway balance, which will convert to sales in the fourth quarter. Additionally, we expect to lose some sales the last 2 days of the quarter due to later tax refunds, again this year. As announced public, the IRS likely would accept tax returns even later than last year. We expect the impact of layaways and tax returns to negatively impact the quarter 1% to 2%. However, despite these 2 issues, we still expect to deliver positive comparable store sales, improved gross margin and improved profits in the fourth quarter. We are confident that our strategies are working and this turnaround is going to be successful. Now operator, we'll take any questions.

[Operator Instructions] And our first question comes from the line of James Fronda with Sidoti & Company. James Fronda - Sidoti & Company, LLC: I was just curious, is there, I guess, any opportunity to bring out any of the fixed cost out of the business going forward? R. Edward Anderson: I'd probably say, in answer to that question James, that we've attacked expenses pretty aggressively here, during this turnaround, and we just don't see a lot of immaterial amount of additional expense savings in our near-term future. James Fronda - Sidoti & Company, LLC: Okay. And, I guess, with the cash, any thoughts on the dividends? Bruce D. Smith: Not at this time, James. R. Edward Anderson: We've talked about in the past the fact that this is an issue that we look at all the time with our board. Every quarter, we discuss this and bottom line is we feel like we're still on the turnaround and therefore, we are being conservative with our cash. And so until we are able to consistently deliver predictable positive sales results, we are probably not going to do anything in the form of dividend or stock repurchase.

Our next question comes from the line of Evren Kopelman with Wells Fargo. Evren Dogan Kopelman - Wells Fargo Securities, LLC, Research Division: So first, a question on the average unit retail. Markdowns are lower, which should be obviously a positive for where you are. So can you talk about what's driving, maybe how much of the about 5 points of AUR decline -- maybe the drivers behind it? And when we should we start to see some less pressure on the AUR? Bruce D. Smith: Sure, I can answer that question for you. Overall, as we talked about you just mentioned, the AUR was down 5% in the third quarter and that compares to a down 12% in the first quarter and a down 5% in the second quarter. It was good to see again, small single-digit decreases versus double digit ones that we actually saw from the first quarter. As we move through the fourth quarter and the balance of 2013, the AUR should continue to stabilize as we anniversary both lower sales of branded merchandise and the steps we took to improve the value equations. So those 2 things are really been the driver of the AUR decrease and we are starting to come into the anniversary of both of those 2 things. So I see that getting better in the future. Evren Dogan Kopelman - Wells Fargo Securities, LLC, Research Division: Okay. Then the Women's business, so you said comps were down 9 and then branded fell to now 15% of Women's. Maybe talk about what is it, is that 15% of the business still a drag? Maybe talk about how our comps in the parts of the business you've read on with the unbranded and the fashion part? Bruce D. Smith: Sure, sure, I can address that. We're definitely happy, as Ed mentioned, with the progress we're making with ladies and a strategic shift from brands to fashion. The shift is clearly working and we are driving strong double-digit comps in all of the fashion area and improved gross margin. Our increases in fashion are still not enough to overcome the decreases in brands for the quarter but we continue to make good, good progress there. And that branded penetration in ladies' sportswear was 15% this quarter versus, I think, 34% last year at this time. And with ladies', unlike some of our other business, is we do not see any emerging brands in ladies' that would resonate with our customer and we therefore, continue to move more dollars into fashion. Evren Dogan Kopelman - Wells Fargo Securities, LLC, Research Division: Great. In the fourth quarter, I think you said, I just want to clarify, you said 1% to 2% impact from, I think you said, later tax return layaway. You mean to comp, is that 1% to 2% to comp? R. Edward Anderson: Yes. Yes. Yes. Evren Dogan Kopelman - Wells Fargo Securities, LLC, Research Division: And you said to expect positive comp despite that? R. Edward Anderson: Yes I did. Yes we would. Yes, yes. Just to reiterate, what I said was, there's going to be a drag going into quarter of 2 things that we know about, one is, we opened the quarter, like last year, with an even lower layaway balance than last year. So that's a bit of a drag, as we have less layaways to convert to financial sales in the quarter. And the second is, while tax returns were very, very late last year, it looks like they're going to be even later this year. Last year, we didn't see any tax return laid money until actually the last 2 days of last year's fiscal year. It looks like with the announcement by the IRS, that they will not be accepting returns until January 28 to February 3, those days we won't receive any tax money either. So and looking at the impacts last year, we're sort of guessing, at 1% to 2% negative impact. But despite those 2 things, because we feel good about where we are inventory wise, we feel good about the momentum in our business, coming out of October into the beginning of November, we still think we have a positive comp. Evren Dogan Kopelman - Wells Fargo Securities, LLC, Research Division: Okay. Do you think Women's could turn positive in Q4? Bruce D. Smith: No. I don't -- I do not foresee us driving a comp store sales increase in the ladies' business for the balance of 2013 or in the fourth quarter. I do feel good about it in 2014. I think we'll face similar hurdles in 2014 as we move away from branded products. But then as we move through the balance of 2014, our fashion content and emergence ability to deliver great fashion is going to get better, and we'll be up against much smaller branded comps. So I do see us returning positive in the ladies' business in 2014, but definitely not in the fourth quarter. Evren Dogan Kopelman - Wells Fargo Securities, LLC, Research Division: Okay. Okay. How about the expiration of the food stamps on November 1, do you -- have you seen or do you expect to see a negative impact from that? If some of the discretionary dollars shift to food? R. Edward Anderson: We have measured the impact but we expect that that's going to have a drag on our customers because, as you know, our customers are low to lower-mid income customers, and food stamps are part of their life. So this 5% decrease in food stamps, on a family of 4 is about a $30 a month impact. And $30 a month is not a lot to most people but it is to people in this income level, and so there will definitely be some transfers, and so I think it's -- while it's not a huge impact, I think, it will be an impact. Yes. Evren Dogan Kopelman - Wells Fargo Securities, LLC, Research Division: Okay. And then lastly, as you think about next year, should we think about any store openings? Have you signed any leases? R. Edward Anderson: In 2014, we will crank up the expansion a bit. We're going to be opening somewhere we think between 5 and 10 stores next year. We have, I guess, we finalized only one lease, I think I have tentatively okayed 3 deals, so we're in the mix for next year and we expect open again 5 to 10 stores. We would expect to expand and relocate another 5 or 6 stores. We expect to remodel 20 to 25 stores. So, yes. Evren Dogan Kopelman - Wells Fargo Securities, LLC, Research Division: Okay. And I know you're not prepared to give any CapEx guidance but with the remodels are? R. Edward Anderson: Bruce, we addressed that. Bruce D. Smith: Yes, Evren, we think that although we are still in the middle of the budgeting process. It will be somewhere between $10 million to $15 million next year, it will be around $10 million for the year that we're in right now.

[Operator Instructions] And our next question comes from the line of Anna Andreeva with Oppenheimer. Steven Zaccone - Oppenheimer & Co. Inc., Research Division: This is actually Steven Zaccone on for Anna. Just a quick question regarding inventory, it's very impressive there, down 16%. How should we think about them ending the year? And then as we look into 2014, do you think there's opportunity for them to be down? R. Edward Anderson: Sure, I can address that one for you. We are very happy with our inventory position and believe we have the right amount right now. In hindsight, I would say, probably to that last year, we had too much. That being said, we are taking the proper steps to rightsize our inventory, turn faster and increase fresh merchandise flow. We want to deliver fresh, exciting products to the stores each and every week. We enter inventories allow us to turn faster and chase on trend merchandise throughout the season. As we move forward, we think we can continue to run our business with less inventory, therefore, making quick returns and fewer markdowns. So I do see opportunity in 2014 to continue to reduce our inventory somewhat. Bruce D. Smith: To be specific about dollars, if you may be asking about the year in the balance, after being down 16%, which was probably a little bit of an anomaly at the end of third quarter, we would expect us, as we work our way through the fourth quarter to run with about 10% less inventory through the quarter and in the year end. Steven Zaccone - Oppenheimer & Co. Inc., Research Division: You said 2%, correct? Bruce D. Smith: 10%. Steven Zaccone - Oppenheimer & Co. Inc., Research Division: Oh, 10% I'm sorry. That's great. That's great. And then picking back up of the last question before, it’s a difficult environment out there but you guys continue to comp positively. What do you think about the status of your consumer? Also that's very helpful color there on the expiration of the food stamps, but just in general, how do you think about the consumer heading into the holiday season? Bruce D. Smith: I think it is difficult for our consumers, but I would say versus last year, maybe about the same. This year has been another tough year for our consumer with the 2% payroll tax at the beginning of the year and now the food stamp, 5% decrease taking effect. But the small things were positive, the unemployment is less, employment is up. Things like food and gas prices seem to have abated the bit. So I think things are about the same as they were at last year. Steven Zaccone - Oppenheimer & Co. Inc., Research Division: Okay, great. Great. And then lastly, looking at this business, you guys have done a good job turning around the business. But looking out a couple of years, what do you think is potential operating margin of this business? Bruce D. Smith: Well, I mean, I guess, you could kind of structure a range. We were as high as 7% several years ago, probably 5 or 6 years ago. Currently, we're around breakeven. And so the key, there are really 2 keys, when you look at the operating margin. One is getting the gross margin back to historical levels. We're running 36.5%-or-so year-to-date, but if you go back 3 or 4 years, we were in the 38% to 38.5% range. And so to the extent we can make up some of that gap, we'll start to improve the operating margin. And then on the other side, on the expense side, the key there is really the top line, more so than the expense line because the expense ratio, as Ed mentioned earlier, we've taken a lot of fixed cost out of the business over the last couple of years, including a reduction-in-force that we did 2 years ago. And the key now is to get the top line moving and lever the fixed expenses that we have, if we can get north of 2% to 2.5% comp store sales, we will start to lever the expense line and work our way back towards historical operating margins but it's a pretty big gap right now, when you look at where we’re at one point in our history. So there's a lot of makeup to be done.

And our next question comes from the line of Patrick McKeever with MKM Partners. Patrick McKeever - MKM Partners LLC, Research Division: A question on your gifting strategy for the holidays. I was in some stores over the weekend and it looks, I mean, it certainly looks better than last year, pushing into and I guess, it's a lot of the same categories but just a little more brands I guess, I noticed some brands and toys that I don't think I noticed last year. Nice assortment and in watches and that sort of thing. So the question is, what are your thoughts around just gift-giving items for the holiday season? Do you feel like you're better positioned this year to capture more of that business than you did last year? Bruce D. Smith: Yes, Patrick. I do believe our holiday merchandise mix this year is more compelling than it was last year. I think last year, for both Black Friday, we tried to do some of the more door buster-type items with unique items at door buster-type pricing and really, the response was lackluster from that. Our customer told us that she just wanted extreme value on the products that she finds in Citi Trends every single day, as well as a really compelling gift assortments for gift-giving, so that is really what we're trying to deliver this year. We have highlighted sort of wild deals across the store with really fun holiday signage to point out those exciting buys so to get folks excited for Black Friday as they kick off the holiday season, but they're really not door buster-type items, they're just extreme value, they're great deals. The merchants did an excellent job this year finding terrific deals at compelling values. In addition, we have tabled, the gift bars this year. Gifts for men, ladies and kids, really ranging in price from 3 9 to 9 9 on each table. So I think our merchandise mix is poised for success on Black Friday and the entire holiday season and we're excited about our holiday game plan and the overall prospects for the holiday season, as Ed mentioned. Patrick McKeever - MKM Partners LLC, Research Division: Okay, great. And then a question on just brands. A pretty big drop year-over-year in the penetration of national brands but there are some brands that I'm assuming are working pretty well. I was just wondering if you could perhaps name a few of those and you think this is kind of the low watermark for the brand penetration. Or do you think it will continue to come down? Jason T. Mazzola: Well, let me give you a sort of an overall point-of-view on brands. We do see a continued decline in the traditional urban brands. And I would say specific, ladies' urban brands. But landscape for ladies' urban brands is poor and rapidly declining. We don't see them as a major part of the merchandise mix in 2014, which is why we're really building our fashion muscle there. The landscape in Men's urban brands is actually fairly healthy. While they are not growing like they used too, they're also not rapidly declining like ladies'. And this definitely flows directly into the Kids' area. Traditional urban brands in Boys' are healthy, while traditional urban brands in Girls' are following a similar path to ladies. However, in a positive note for both Girls' or Kids' overall, Girls' and Boys', as well as in Men's, we have found brands other than the traditional urban brands that are resonating very nicely with our customer. I really can't mention those brands because that's part of some of the relationships we have with them. We don't, we sort of don't talk about those, but if you walk into the stores, you can definitely see what those are. Patrick McKeever - MKM Partners LLC, Research Division: Okay. And then the last quick one. Could you just talk about your social media strategy here? And what kind of an impact you think it's having on your business and what the opportunity might be? Jason T. Mazzola: Yes. We know our customer engages in social media. We have a nice Facebook following, we have a very good text messaging. So the group of phone numbers and our customer is very engaged, you can see the posts on Facebook and things like that. It's difficult to measure the complete efficacy of it, but we do plan on using social media to really attract customers and to get the word about what's going on. So really, our media includes telling folks on Facebook exactly what we're doing. It could include sort of a text-to-win type contest. Engage our customer in something fun, so that they can opt in to text messages, so we can tell them about exciting extreme value deals that are in the stores on a weekly basis. So overall, we like this channel. We see continued growth in this channel and that is where we're spending some of our marketing dollars, in that social media area.

Mr. Anderson, there are no further questions at this time. I'll turn the call back to you. Please continue with your presentation or closing remarks. R. Edward Anderson: Okay. Thank you, everyone for joining the call today and happy Thanksgiving, everyone. Good bye.

Ladies and gentlemen, that does conclude the conference call for today. We thank you for your participation and ask that you please disconnect your lines.