Citi Trends, Inc (NASDAQ:CTRN) Q1 2023 Earnings Call dated May. 23, 2023
Corporate Participants:
Nitza McKee — Senior Associate
David Makuen — Chief Executive Officer
Heather Plutino — Chief Financial Officer
Analysts:
Jeremy Hamblin — Craig-Hallum Capital Group — Analyst
Dana Telsey — Telsey Advisory Group — Analyst
John Lawrence — Benchmark Co. — Analyst
Presentation:
Operator
Greetings and welcome to the Citi Trends First Quarter 2023 Earnings Conference Call. [Operator Instructions]
I would now like to turn the conference over to Nitza McKee Senior Associate. Please go ahead.
Nitza McKee — Senior Associate
Thank you, and good morning, everyone. Thank you for joining us on Citi Trends first quarter 2023 earnings call. On our call today is our Chief Executive Officer, David Makuen; and Chief Financial Officer, Heather Plutino. Our earnings release was sent out this morning at 6:45 a.m. Eastern Time. If you have not received a copy of the release, it’s available on the company’s website 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?
David Makuen — Chief Executive Officer
Thank you, Nitza. Good morning, everyone and thanks for joining us today on the Citi Trends first quarter fiscal 2023 earnings call. I will begin our call with highlights of our first quarter financial and operational performance. Heather Plutino, our Chief Financial Officer will then elaborate on our detailed financial results and a few other items related to our outlook, then we’ll open up the call for your questions. Against what remained a challenging macro backdrop for the low-income families that we serve in African-American and multicultural neighborhoods, our first quarter results were in line with our previously-stated guidance, our team’s execution of the initiatives I shared during our fourth quarter call, improved throughout the quarter and our customers remained remarkably resilient. I will elaborate a bit more in a few minutes.
As the first quarter unfolded, we doubled down on offering extreme value basics, fashion, and trends by stocking our stores with more entry price points, which translated to approximately 70% of our units for sale in stores priced $9.99 and under. Additionally, we have great momentum behind continuously improving our store experience from appealing visual merchandising and fresh head-to-toe looks, to welcoming customers we know by name like a friend. Having visited dozens of stores during the quarter, I can tell you that our experience is getting better and better. During our last call, we mentioned sharpening our focus on trend development as a key lever for the year. I am pleased with our efforts thus far. We have more work to do, but early efforts are providing some strong success indicators across apparel, footwear, beauty and accessories, home, and impulsive snacks, candy, and HBA essentials.
Lastly, we’ve seen solid response to our spring and early summer newness, thanks to our buy team being really on top of our customers’ wants and needs. Having said this, the macro pressures we are all keenly aware of have resulted in our customers visiting less and being more selective about what they put in that basket, as they are still resetting their discretionary spending habits, prioritizing family and everyday life needs, including rent, food, utilities and more.
Now, for a little detail on the cadence of the quarter. As you have heard from other retailers, spring season traffic trends were choppy. From a monthly perspective, February and April sales compared to last year were very similar in trend, while March was much weaker, primarily driven by persistent inflation, lower tax refunds, and the elimination of SNAP benefits. It’s important to mention that we continue to see strong shopper conversion throughout the quarter, a clear signal our assortments are resonating and the Citi Trends brand positioning remains strong.
As we manage the quarter, I’m pleased to report that our financial position remains strong, as we ended the first quarter with liquidity of approximately $164 million, inclusive of $89 million in cash and no borrowings on our $75 million asset-based lending facility. We are leveraging our strong balance sheet to procure advantageous products to set us up for successful back-to-school and fall selling seasons while remaining laser-focused on controlling what we can control.
Now, let me take a moment to update you on our progress in support of our four strategic priorities, which are: number one, driving comp store productivity; number two, managing inventory and maximizing margin; number three, controlling SG&A expenses and leveraging our balance sheet; and number four, executing technology enhancements.
First up, driving comp stores productivity. Despite our negative first quarter trend, our buy, move, and sell teams took action to capture targeted demand opportunities. Some important highlights are, our customers really came out for their kids during the quarter. Our Citi mini business was extremely strong. Easter was hopping with sweet casual dresses for girls and short sets for boys, and the older kids opted for active-inspired brands. Wonky weather patterns drove unexpected but strong momentum in ladies’ long denim, lightweight outerwear, and fashion fleece. As the weather normalized, our ladies scooped up casual looks from trendy tees to woven tops, while our guys gravitated to new curated urban looks. Strong results in commodities, scrubs, basics, and replenishment items for the home, as well as health and beauty, where we offer value and convenience, were definite bright spots.
Our customers are definitely choosing how to spend their money carefully, leaning into their needs for work, the household, and sharp price point fashion and fun. Lastly, the rebuild of our footwear business is gaining traction, and new businesses show a promising feature with an expanded missy size assortment, strength from our Just One More queue line and our expanded assortments that target Latinx men and women. Our Citi Trends text club adds another tool to our arsenal in order to broaden our reach with existing customers to drive comp sales. While still early stages of this program, we are pleased with the initial results, and we captured more than 20,000 new members during the quarter.
Our second priority is managing inventory and maximizing margin. In controlling what we can control, our buy team effectively managed inventories across all of our product cities, or categories, with total inventory dollars down nearly 12% to last year. However, as we discussed during last quarter, our in-store inventory levels were on the low side, and we suffered from too many out of stocks. Therefore, we intentionally built our in-store inventories during April across targeted year-round, seasonal, zip codes or departments within our cities, ending the quarter with 8% more in-store inventory than last year.
In total, I feel we are well positioned to recoup market share and to capitalize on future demand. Rest assured, though, our inventory philosophy remains anchored on ending each season clean and consistently delighting our customers with fresh, exciting products at compelling value prices. Our third priority is controlling SG&A expenses and leveraging our balance sheet. The headline here is all about being prudent in our decision-making. Our expense management discipline is consistent and steadfast as we look around every corner to identify cost efficiencies while operating the business in a lean and disciplined manner. As macro headwinds persist, we have ample liquidity to refine assortment as the demand environment evolves.
Lastly, our fourth priority is executing technology enhancements. We have numerous good developments on this front. We are making great progress toward the launch of our new ERP platform later this summer, which, as a reminder, will significantly improve our core operational abilities. We are also making considerable progress on improvements in our distribution centers and in our stores. In summary, we have delivered first quarter results in line with our previously stated guidance, but we aren’t satisfied. To be clear, we aren’t hunkered down per se. Rather, we are running really fast and are deeply committed to improving our operating results. At the center of our efforts is bringing our brand purpose to life as we do everything in our power to improve our trends.
Remember our purpose, live bold, live proud, respect all. We call it Citi Life. It defines the behaviors we must uphold to ensure our customers find apparel and non-apparel that helps them be ready for whatever comes their way. Our buy team is making bold decisions using analytics and customer feedback. Our move team is shipping proud, realizing they can really make a difference by getting fresh products to our stores multiple times per week. Our sell team respects all by creating a customer experience that is welcoming and engaging.
Keep in mind, we are the rare brand that serves the entire family within a tight household income range of USD15,000 to USD50,000 with 50% of our customers earning $25,000 or less per year. Our job is to roll with their ups and downs and help bring opportunities to life for them each and every day. We know our customers really well, and we know they are under immense financial pressure, which is showing up in lower traffic and spending levels. We also know that the macro environment remains uncertain. Therefore, we are prudently adjusting our outlook for the fiscal year, incorporating a continued challenging backdrop through the first half, followed by forecasting a modest improvement in the second half.
With that, I’ll turn the call over to Heather. She will discuss our first quarter results in detail, as well as a few items related to our outlook. Heather?
Heather Plutino — Chief Financial Officer
Thanks, David, and good morning, everyone. As David mentioned in his opening remarks, our first quarter results were in line with our previously stated guidance. While the sales environment is uncertain and the low-income consumer, the bulk of our customer base remains under pressure, our teams continue to make significant progress against the strategic priorities David outlined, all while controlling the controllable. Our strong balance sheet, with $89 million of cash, well-controlled inventory, an undrawn $75 million revolving line of credit and no debt allow us to manage this environment with agility and flexibility.
Turning to the specifics of our Q1 financial results. Total sales for the first quarter were $179.7 million, a decrease of 13.7% versus Q1 2022. While our results were at the low end of previously stated guidance, shopper conversion remained strong throughout the quarter as our assortments resonated well. We did experience pressure on both traffic and basket as our customers are being very selective about their discretionary purchases.
First quarter comp sales decreased 14.1% compared to Q1 2022. Gross margin was 36.7%, or 37.0% as adjusted for cyber incident expenses, versus 39.0% in Q1 2022. The year-over-year contraction in gross margin was primarily due to higher markdowns and higher freight expense as we strategically cleared aged inventory and shifted our focus to building our inventory position, building our inventory position in key categories. These actions allowed us to enter Q2 with a healthy inventory position.
SG&A expense dollars totaled approximately $71 million for the quarter, or $70 million when adjusted for cyber incident expenses, representing a 1.8% decline to Q1 2022. Lower sales in the quarter drove adjusted SG&A deleverage of 470 basis points versus prior year to a rate of 38.8% of total sales. We continue to manage the business with disciplined expense control while driving additional cost efficiencies across the organization.
Operating loss was $9.5 million in the quarter, or $7.9 million as adjusted, compared to operating income of $39.7 million or $4.7 million as adjusted in Q1 2022. Net loss per share was $0.81 or $0.66 as adjusted, versus diluted earnings per share of $3.59 in Q1 2022, or $0.42 as adjusted.
Now, turning to the balance sheet. Total inventory dollars at quarter end decreased 12% in Q1 2022. Total in-store inventory was up 8% compared to Q1 2022, reflecting our work to rebuild inventory levels in key categories where we believe we have an opportunity to recoup market share. We entered the second quarter comfortable with the level and makeup of our inventory and will continue to apply a disciplined approach to inventory management while investing appropriately to meet demand, all aligned with the key priorities David walked us through earlier.
Now, turning to our outlook. We continue to expect the first half of fiscal 2023 to remain challenging for low-income families. Recall that we serve African-American and multicultural families within a tight household income range of USD15,000 to USD50,000 per year, with 50% of our customers earning $25,000 or less per year. We now expect the cadence of economic relief for our customers to be more muted than we first thought. And therefore, we believe it is prudent to update our fiscal 2023 outlook.
Our revised guidance is as follows. Total sales for fiscal 2023 are expected to be in the range of negative mid-single digits to negative low-single digits as compared to fiscal 2022. Full-year EBITDA is expected to be in the range of USD5 million to USD20 million and expanded range that reflects the level of uncertainty we’re experiencing in the market. We now expect to open five new stores and to remodel 10 stores to 20 stores in the year. As a result, full year capital expenditures are now expected to be in the range of USD15 million to USD20 million. Year-end cash balance is expected to be in the range of USD85 million to USD105 million. All other aspects of the prior guidance remain unchanged, with full year growth margin expected to be in the high-30s and the closure of 10 to 15 underperforming stores.
To recap, amidst a difficult backdrop, we delivered first quarter results in line with our previously stated guidance. Make no mistake, our first quarter results do not represent where we want to be, nor do we believe they represent the full earnings potential of this brand. The Citi Trends team is pulling all possible levers to drive improvement. We continue to focus on controlling what we can control by executing against our strategic priorities and operating the business with discipline from both an expense and a capital standpoint. Importantly, I’m confident that the progress we are making on our strategic initiatives will serve us well over the near and the long term.
With that, I’ll turn the call back to David for closing comments. David?
David Makuen — Chief Executive Officer
Thank you, Heather. Before we wrap up, as you know, we take our connection to our neighborhoods very seriously and during the quarter, we celebrated two milestones from a corporate social responsibility perspective. First up, we are pleased to announce that our CITIcares Council that’s formally partnered with Goodwill International to create the Citi Cycle program. Citi Cycle is designed to move end-of-season goods that have reached the end of their markdown life to a new usage opportunity in Goodwill stores, helping to reduce environmental waste. The Citi Cycle partnership is aligned with Goodwill’s goal of keeping 150 million pounds of materials out of landfills.
Proceeds from the sales of our goods in Goodwill stores are then used to support community programs, such as Project SEARCH in Milwaukee, a transition program for young adults with disabilities that moves individuals into jobs that match their personalized interests and needs. The Citi Cycle program is currently available in eight markets, and we plan to continue to roll out to more markets in the future.
Secondly, we are very proud that this year marks the third year of our Black History Makers program, also managed by our Citi Trends CITIcares Council. The Black History Makers Program increases awareness of Black-owned businesses and community organizations, recognizing entrepreneurs who are positively impacting their communities. After considering thousands of inspiring applicants, the program awarded 10 $5,000 grants to Black business owners doing exceptional work. We have now played a role in furthering the success of 30 Black-owned businesses across the United States in the last three years. I’m so proud of our CITIcares team that operates at such a high level to make multiple impacts in our African-American neighborhoods.
Before I turn the call over to the operator, I want to take a moment to thank the entire Citi Trends team for their commitment and resilience as we continue to navigate the current environment. We are truly grateful for their dedication to our customers and their unwavering desire to improve the business.
We are now ready to take your questions. Kelly?
Questions and Answers:
Operator
Thank you. [Operator instructions] Our first question comes from Jeremy Hamblin with Craig-Hallum Capital Group. You may proceed with your question.
Jeremy Hamblin — Craig-Hallum Capital Group — Analyst
Good morning, and thanks for taking the questions. I wanted to start with the commentary around the quarter-to-date trends. So, sounds like some cross currents in here. You noted good response to spring and early summer assortment, but you noted that there are customers that are being selective about what they put in their basket. So, I would assume that that means, conversions continue to be pretty good and your — maybe your units per transaction is down. But I wanted to see if you could give us a sense for, what you’ve seen quarter to date, if the trends have improved on a comp basis from what you saw in Q1. And then, just a little bit more color around the dynamics on your units per transaction versus transactions overall?
Heather Plutino — Chief Financial Officer
Hey, Jeremy. It’s Heather. Thanks for the question, appreciate it. Couple of things. So, when we look at the way we exited Q1, David mentioned the construct of the quarter in his prepared remarks, right? Feb and April were performed similarly to each other, March was softer. So, April was certainly in the pocket of what we expected when we did our prior guide, but it was on the lower end of that guide, right, and not where we hoped it would be. That trend continued into May. Obviously, May is still underway, but we’ve seen that trend continue into May.
You are correct. We are seeing some green shoots. Spring and summer is being received well with our customer, and that is translating in continued strong conversion. But traffic remains under pressure and basket is under pressure. We said it multiple times in prepared remarks that our customer is being very, very selective about what he and she are putting in their basket. And we see that as a reflection of the amount of economic pressure that they’re under. So, we’re seeing some green shoots, but it is very much a story of selectivity of our customer on what makes it into the basket.
Jeremy Hamblin — Craig-Hallum Capital Group — Analyst
Got it, that’s helpful. And then, you guys have done a great job of controlling inventory here. You noted that it might have even been a little bit lower than where you wanted it to be. Maybe there were some opportunities missed because of that, but you feel good about where it is now. You did see gross margins — adjusted gross margins down about 200 basis points in Q1, but still expecting high-30s for the year. I wanted to get a sense of how you expected that dynamic kind of year over year to play out. And if in conjunction with that, if you could discuss it all, freight and the impact they expect freight to have. I know it had been a headwind last year, expected to be a little bit of a tailwind, I believe this year, but wanted to see if you could provide with some more color on that.
David Makuen — Chief Executive Officer
Hey, Jeremy, it’s David. Thanks, good question. We’ll do a two-parter and I’ll hand it over to Heather for freight. But on your questions about inventories, I think you’re remembering right. At the fourth quarter call, we definitely weren’t pleased with our in-stock levels across certain targeted zip codes within our store that we knew would be generally good sellers during these tougher times, meaning things that are in the essentials bucket, health and beauty, some non-apparel categories that we could see in the tea leaves, we’re going to be better sellers than not.
And so, when you heard us talk about the plus 8% in stores, primarily driven by filling more inventory in April to set us up for Q2, we really addressed those categories. So, it wasn’t storewide. It was very targeted, very planful, and meant to satisfy the upcoming Q2 demand, even a little bit of late Q2, early Q3 as we flow it. So, we’re feeling good about that decision-making and we’re seeing some good indicators, call them green shoots, of when we increased inventory, sales responded. So, I think that validates our thinking back from mid-March that we knew we needed to do some rebuilding.
I’ll hand it over to Heather for the freight question.
Heather Plutino — Chief Financial Officer
Yeah, I think you had a margin question in there, too, Jeremy. Let me address margin in the quarter. Adjusted margin, we did see a decrease to prior year by 200 basis points and that’s call it 60% freight, 40% markdown. We took action in the quarter on both of those fronts. One, on the freight side to make sure that we got that exciting product that David just described into the stores in a timely manner, which, in some cases meant that we purposely chose a higher-cost mode of transportation. On the markdown side, we made the decision to take a higher level of markdowns than we had originally anticipated in order to go into the quarter clean, Q2 clean. So, we feel good about those decisions.
Certainly, it showed up in the margin, understand that, but we feel good about the decisions because we feel like that plus the inventory comments that David just made have really set us up well for the balance of the year and the key selling seasons that are in front of us. Freight, specifically, let me do a shoutout to our move team who are working very hard to control expenses in both inbound and outbound modes of transportation. Recall, Jeremy, we are 100% domestic freight, right? So, we are not seeing the benefit directly in our margin line on container costs coming down. So, they are working hard with existing and with new business partners to bring those rates down and to give us flexibility within our supply chain.
So, shoutout to them. And that will mean that freight expense will moderate throughout the year, allowing us to continue to hold our guidance on margin in the high-30s.
Jeremy Hamblin — Craig-Hallum Capital Group — Analyst
Got it. And then, in terms of the cyberattack earlier this year, which had clearly some impact on the profitability in Q1, have you seen any lasting impact to that? Has there been any reputational damage at all? I just wanted to see if that’s something that you think could linger on a go-forward basis.
David Makuen — Chief Executive Officer
Thanks, Jeremy. I’ll take that one. The quick answer is absolutely not, no reputational damage. It’s really — if you recall, it was 100% internally focused that had no impact in our stores or to our customers. And so, it’s something that we’ve largely put in the rearview mirror. The team did a great job conducting all the right recovery exercises, and we’re set up well going forward from a security standpoint. So, we’ve moved on is the best way to say it.
Jeremy Hamblin — Craig-Hallum Capital Group — Analyst
Got it. Last one for me. Your cash balance, you project it based on current share count, I think it translates to about $10 to $13 a share. You have additional liquidity on top of that, but really strong. In terms of mentality on how you can deploy capital, obviously, you have not done buybacks for a number of quarters here, I think that’s probably prudent. But just wanted to understand in terms of thinking about that down the road. Is the mindset of we need to get kind of through this uncertain macro environment before we think about doing anything else.
I noted that you took your capex guidance down by about $5 million as well. But thinking about it in terms of that the buyback you still have out there for $50 million, but then, also, as it relates to remodels are potentially opening up stores on a go-forward basis.
Heather Plutino — Chief Financial Officer
Yeah, I’ll take this one, Jeremy. Thanks for the question. Yeah, so the decision to bring down the capex guidance for the year, in my opinion, it just makes sense, right? I mean, our top line is a bit too choppy right now to feel good about going big and bold on capital spend. And so, we’re making the decision to ratchet back on the number of new stores and the number of remodels. It also signals the amount of focus this team has on the strategic initiatives that David laid out, right? So, we’re looking at no distractions. And the fact that we’re also preserving cash is important.
The question about share repurchase, I’ve said this for several quarters now, so forgive the repeat, but not off the table. It’s just a not now because we really are in preservation of cash mode and investing in the business. So, the inventory investments that we talked about in the first quarter are really, first and foremost, a top of mind, right, because that’s going to drive the top line, which is what we’re looking to, to be the signal of when we are feeling a bit more stable and we’ll start to think differently about capital allocation.
I’ll also remind you that I’m saying this as one person, but there is an active conversation with board of directors about capital allocation. So it is a continuous discussion. We just want to make sure we’re doing what’s right for the business in the long term and so, we’re preserving right now.
Jeremy Hamblin — Craig-Hallum Capital Group — Analyst
Got it, seems prudent. Thanks so much for taking the questions, and best wishes here.
Heather Plutino — Chief Financial Officer
Thanks so much, Jeremy.
David Makuen — Chief Executive Officer
Thanks, Jeremy.
Operator
Our next question comes from Dana Telsey with Telsey Advisory Group. You may proceed with your question.
Dana Telsey — Telsey Advisory Group — Analyst
Good morning, everyone. As you think about the CTx stores, how are those performance versus the base? Is there any difference between the remodeled stores? And then, David, you mentioned that 70% of the units are now at $9.99 and under. Does that differ by category at all? Does it differ by newness? And how are you planning pricing going forward? And just lastly, with the trend development being effective, and you mentioned sharpening the focus, what are the next levers as we move through this trend development time period? Thank you.
David Makuen — Chief Executive Officer
Good morning, Dana. Thanks for those good questions. I’ll check [Phonetic] through those. From a CTx standpoint for our existing base of CTx stores, which is nearing 100 of the fleet, we are still seeing a nice separation between them and the rest of the chain. They’re a little longer in their history, as you know, since we did a number of them in ’21 and ’22, and less so in ’23. But we’re seeing mid to high-single digit differentials between them and the rest of the chain. So, we’re pleased with them and they’re starting to show up regularly in our top 100 stores and all that good stuff. So, we’re still thrilled about the performance of those.
Secondly, on your pricing question, that’s a good one. I would tell you it does differ by category, for example, in beauty, almost probably 85% is under $10. But in apparel, it’s more like 60% — 55% to 60%. So, it depends on the category. But I would tell you that we’ve been really thoughtful about it because in a way, our customer votes when we test this stuff, and we typically test before we roll the chain. And we see some really — excuse me, we’ve seen some really good voting results dating back to January, when we started dabbling in a more kind of entry price point mindset, given the nature and the state of the economy. And we’re seeing some great pickup by the customer and, frankly, a thank you from the customer, right, for voting for these lower price points.
So, we’re monitoring it carefully. I do want to send a message that above $10 is working really well too. It’s not as if we’re not seeing any AURs that are higher, we’re seeing plenty that work as well. But we really wanted to be mindful. And as I mentioned in the call, we really know our customer. And while they didn’t say bring in more $6 stuff, we could tell and we know, based on their situation, that it will only help and it will be our top line. So, that’s been a good development.
Thirdly, on trend development itself, I would tell you similar refrain from last call. When we think about the moments in the year that are most important to our customer, that’s where we really zero in on which trends will deliver a great moment so to speak. So, I’ll use back-to-school as the next one, certainly holiday. In fact, one, before back-to-school, obviously, would be the hardy summer starting with this week in Memorial Day and culminating with July 4th. And our team’s done a great job at recognizing what we missed last year and what we can do better this year, both from a trend standpoint, but, also, importantly, the timing of trends.
Last year, we were a little late on some trend deliveries and this year we’re well ahead of those right pockets of time that the customer is likely to respond to. For example, a cool new short or a great new woven top or a great summer dress. So, the team has done a better job, not only sharpening the trends themselves, but also sharpening when we bring it in and how we exit it as well. So, I would tell you, we’re checking in with some better scores on that as well.
Dana Telsey — Telsey Advisory Group — Analyst
Thank you. And then, one other follow-up. Heather, when you think about the shaping of the year, and, obviously, last quarter, we heard about the meaningful improvement in the second half of the year that now it’s moderate given the pressures on the consumer. Any puts and takes that you think about, whether it’s second, third, and fourth quarter, to be mindful of as we go through the year?
Heather Plutino — Chief Financial Officer
Hey, Dana, thanks for the question. What I would say is that the conversation that we had last quarter holds, just coming down a bit, right? So, the idea of sequential quarterly improvement in the top line holds. It’s just a more moderate sequential improvement throughout the year. SG&A will remain constant throughout — will remain constant throughout the year, margin will start to see improvement throughout the year as well. So, consistent with last quarter conversation, just, unfortunately, given the top line environment, we felt it was prudent to bring our guidance down.
Dana Telsey — Telsey Advisory Group — Analyst
Just one last thing. We’re hearing about shrink all over the place with retail. Is your price point too low to be impacted? Is it an impact? What are you saying there?
Heather Plutino — Chief Financial Officer
Yeah, David, I’ll take that one as well. So, shrink is a hot topic within the Citi Trends four walls as well. It is something that we are monitoring and working to manage in a cross-functional way. It gets senior leadership attention. I think it’s not too extreme to say on a daily basis. I will tell you, it saddens me to tell you that the number of instances of scary events has increased. Not unusual in this economic environment, but still disappointing and I will say the number one concern — certainly, we worry about the margin impacts. But our number one concern is the safety and security of our associates and our customers. So, we take that very seriously and are monitoring it.
We are putting some new processes in place, more to come on that, that we think will help us be able to manage and monitor more closely and more efficiently. But in total, it’s up a smidge, technical term, it’s up a smidge, but we’re watching it very, very closely.
Dana Telsey — Telsey Advisory Group — Analyst
Thank you.
Heather Plutino — Chief Financial Officer
Thanks for the question.
David Makuen — Chief Executive Officer
Thanks, Dana.
Operator
Our final question comes from John Lawrence with Benchmark. You may proceed with your question.
John Lawrence — Benchmark Co. — Analyst
Great, thanks. Good morning, guys.
Heather Plutino — Chief Financial Officer
Hey, John.
John Lawrence — Benchmark Co. — Analyst
So, David, would you comment a little bit about, if you look at just the inventory situation across the vendor base, what are you seeing out there as you go try to be sharper in certain categories, just that discipline of trying to find newer and fresher product? And how does that work? You mentioned the idea of getting something in faster. Can you just talk about that environment? And with other people having trouble with apparel, what are you seeing out there in the marketplace?
David Makuen — Chief Executive Officer
Sure. Hey, John. Good question. First of all, I’ll give a shoutout to our vendor partners because I would tell you, our tried and true partners have stuck by our side through thick and thin. And we continue to do business with them in really healthy ways, and they’ve got terrific offerings as we go through these difficult times. And you’re right, they’re feeling it, too, right? Their retail base since [Indecipherable] is causing them to feel it as well. But they’ve been terrific partners. And then, secondly, we’ve added an incredible amount of new vendors.
So, I would tell you, we’re playing big time offense and we’re constantly in the marketplace looking for new resources that can actually deliver the trends that we’ve talked about in the — at the right cost, excuse me, and also in the right time window. And so, we’re being really creative. We’re working with more and more vendors out in L.A. Certainly sticking with plenty we can do in business within New York and even in between the two coasts for certain categories that are outside of apparel.
So, we’re fast at it. We’re on top of it. I think the opportunity remains and you can kind of hit on it, how can we just stay on that current sort of modern relevant fashion and trend plane, so to speak, and just keep on bringing it. And that’s our job. And it’s our job to write those orders in the right quantities so we’re not over our skis and right in a way where we want to celebrate selling out. So, we’re all over it and we see plenty of advantageous product in the marketplace, we’re well ahead of things in terms of back to school.
We start shipping that in actually about four weeks, and we’re all over holiday. Like I mentioned earlier, two really big moments that you know are extremely important to our customer and to our sales line. So, I think we are acutely aware of all the peaks and how to manage them. And we trust, as Heather mentioned, that the customer will come along, and it’s our job to read the tea leaves as they present themselves and adjust accordingly. But I think we’ve got the right team to do so and the right vendor partners to join us in that.
John Lawrence — Benchmark Co. — Analyst
Great, thanks. And just a quick follow-up. Obviously, remind us again a little bit about the ERP system, sort of 90 days to 100 days behind there. Obviously, a lot of that benefit goes to ’24. Can you just remind us a little detail there? And I assume there’s no sort of diminished outlook as far as what that system is going to provide for your productivity bus.
David Makuen — Chief Executive Officer
Sure, happy to do that. Yeah, at a high level, we are on track after a temporary delay from the cyber incident. We are on track to deliver the new platform at the end of the summer. And what it will bring us really is a brand new way of planning and allocating our inventory and then a much different way in the back of house, running our finance operations. Those are kind of the two teams, the buy team and the support finance team, that will really benefit from this.
And then, a third benefit, organizationally speaking, is the power of data and analytics that this new platform will bring to the entire organization, spanning stores, HR, you name it. So, we’re really excited about it. And we got a team that marshal against the new timeline, bringing it home at the end of summer. And it basically will replace, literally a green screen antiquated system that has served us well, but we are ready to graduate to the cloud literally and take advantage of this new, easy-to-use interface that’ll offer new sophisticated algorithms and methodologies to, most importantly, send the right goods to the right store at the right time. And I can’t underline that enough. That little — that simple line, we will see great benefits from. You’re right, it won’t be as big a benefit in ’23. But we’ll get a little bit out of it for sure, and then we will absolutely count on it to impact ’24 and ’25.
John Lawrence — Benchmark Co. — Analyst
Great, thanks. Good luck.
David Makuen — Chief Executive Officer
You’re welcome. Thanks, John. Good hearing from you.
Operator
There are no further phone questions at this time. Mr. Makuen, I will now turn the call back over to you for your closing remarks.
David Makuen — Chief Executive Officer
Thanks, Kelly. Thanks, everybody, for joining today. Have a great Memorial Day weekend upcoming. Take care.
Operator
[Operator Closing Remarks]