In a sea of sales upside, a dose of economic reality (and inequity) was brought to light from CitiTrends. While certainly not a bellwether name like Wal-Mart, these comments are hard to ignore given the shear amount of consumers receiving some sort of government aid as a primary or supplemental source of income.
CitiTrends press release stated:
“The decline in December was due largely to a delay of the government's distribution of extended unemployment benefits until just before Christmas, a significant shortfall in sales of long denim, and a heavy promotional environment that included going-out-of-business sale events by a competitor.”
The company further articulates:
“Similar to fiscal 2008 and 2009, January sales were negatively impacted by a continued shift of income tax refunds due to a lack of refund anticipation loan availability for the Company’s customers. Comparable store sales began to decline 40% to 50% in the third week of January and continued at that pace until the Internal Revenue Service began sending refunds on January 28, 2011. Since that date, customers have begun shopping CitiTrends’ stores with their refund money and we anticipate an improvement in the sales trend in February.”
Call it a perfect storm of negative events, but this is the first example that we can remember in some time where government benefits (or lack thereof) have materially impacted a retailer’s topline. Yes, this is the same company that benefited materially from post-Katrina government relief in 05/06. Without question, the company’s core customer has been and clearly remains under pressure. With extended benefits beginning to roll off at an accelerated rate, this may not be the last time we hear from retailers with a heavy reliance on transfer payments.