With nothing else in retailing that quite compares to its format, off-price apparel retailer Citi Trends manages to effectively target the African-American shopper in a concept that merges the unlikely retail worlds of cool, trendy urban fashion and extreme value.
Though small at 236 stores in 14 states, Citi Trends made a lot of noise this past year with a May IPO and fiscal-year performance that stunned retail experts. Revenue grew 42.5% to $289.8 million while comparable-store sales rocketed up an unprecedented 16.1%.
"Our value-conscious customer has a strong appetite for current urban fashions at strong value prices," said ceo Ed Anderson during the chain's last quarterly conference call.
Citi Trends sells urban apparel and accessories for the family at prices 20% to 60% below that of department stores. About 70% of the chain's customer base is African-American, a ratio achieved through careful location of stores in neighborhoods with this demographic. Locations average 10,500 square feet in selling space.
Besides a focus on urban apparel, Citi Trends also offers a small home department with an emphasis on black cultural items, such as African tribal decor and books with African-American themes.
Edgy urban apparel and brands with high interest among African-American shoppers are the key sales driver, however, with signature national brands highlighted such as FUBU, Rocawear, Phat Farm, Baby Phat, Sean Jean, Apple Bottoms and Dickies. Citi Trends also sells apparel under its proprietary labels Citi Steps, Diva Blue and Urban Sophistication.
The outlook for urban and off-price apparel remains strong, making for a winning combination. A study by The NPD Group showed sales from 13 national urban apparel brands totaled $1.9 billion in 2004 (the most recent year reported), an increase of 46% from 2003. In the mainstream off-price apparel segment, sales grew about 15% that same year.
With fashion trends being so fickle, however, and the challenges of getting product to market quick enough to be effective in the off-price arena, one analyst posed a question during the conference call about what Citi Trends viewed as its secret to success. Anderson said it related to having an effective, trend-driven buying team with an ability to focus on key looks for the season rather than specific national labels.
"We view the look as more important than the brand. We know that's counter-intuitive to what a lot of people believe about urban fashions, but we really believe it's got to be the right look first and the brand second," Anderson said.
Citi Trends does face competition, but nothing that could be considered a direct similarity. Value-oriented retailers such as Dots and Rainbow also target African-American consumers, but mainly women, as opposed to Citi Trends' focus on family fashion. Most similar perhaps to the concept is AJ Wright, an urban fashion concept of TJX.
Founded in 1946 as Allied Department Stores, a family apparel chain, the company became Citi Trends when acquired in 1999 by a private equity firm. Since the acquisition, Citi Trends has grown from 85 stores to its current size of 236, increased sales per store from $800,000 to $1.1 million in fiscal 2004 and more than doubled annual sales.
Last year, Citi Trends opened 36 stores, while 42 to 45 are scheduled to debut this year, equating to a square-footage growth rate of 20%. Analyst Patrick McKeever of SunTrust Robinson Humphrey characterized the chain as an "early-stage growth retailer" in an initiation report, forecasting maximum potential growth of between 800 and 1,200 stores by the year 2014.