Monday, February 20, 2012

The Trend Is Your Friend Stock Pick


This week I’ve got a low-risk high-reward short-sell on a small cap stock that’s in the USA retail apparel business call Citi Trends that’s been in an overall downtrend for some time now. I was looking for a SP500 stock pick but I didn’t find any that were low-risk high-reward either short or long at this time.

With global markets hitting over-bought major resistance points now, I suggest extreme caution on chasing prices on the buy long side, even if the market moves a little bit higher this week. If you want to trade, I suggest looking for short-sell candidates, or the forex, gold and oil markets always have plenty of liquidity and market moving events to profit from. I would be very aware of possible minor to major reversals in all markets at this point.

Zacks Investment Research reports that Citi Trends Inc. retailer of fashion apparel and accessories in U.S., continued its sluggish performance as it recently posted weak fourth-quarter comparable store sales.

Citi Trends witnessed a decrease of 6.2% in comparable store sales in the fourth quarter of 2011. Month wise, comparable store sales decreased 10.7% in November, 2.3% in December and 11.2% in January.

However, amid this gloom, total sales increased 3.7% year over year to $178.4 million during the reported period compared with $172 million in the prior-year period. The analysts’ considered by Zacks expected the company to report total sales of $181 million in fourth-quarter 2011.

For the fiscal, total sales marked an increase of 2.9% to $640.8 million compared with $622.5 million in last fiscal. Moreover, comparable store sales also decreased 8.3% for fiscal 2011.

Battered by the sluggish fourth-quarter sales results, the company now expects to report adjusted net loss of approximately 20 cents per share in the fourth quarter, in line with the current Zacks Consensus Estimate.

However, on a reported basis, including one time items, the company expects to report a loss of 40 cents per share.

Moreover, the company expects gross margins to be significantly down compared with the last year quarter, reflecting higher markdowns to reduce excess quantities of branded merchandise and competitive pressures.

The company operates in a highly fragmented specialty retail sector and faces intense competition from larger off-price rivals, such as The TJX Companies Inc. and Ross Stores Inc., mass merchants including Wal-Mart Stores Inc. as well as smaller specialty retailers, such as Rainbow and Dots.

Moreover, Citi Trends' business is seasonal in nature, characterized by the spring and holiday seasons. Therefore, the company is exposed to significant risks if the seasons fail to deliver expected operating performance.

Consequently, Citi Trends currently has a Zacks #5 Rank, implying a short-term Strong Sell rating on the stock.

Sell-Short Citi Trends – Ticker CTRN

Sell Entry: 11.36 to 10.34

Stop-Loss: 12.26

Take Profit Areas: 7.56 to 7.05, 5.93 to 5.56

Company Profile

Citi Trends, Inc. operates as a retailer of urban fashion apparel and accessories in the United States. Its merchandise includes sportswear, dresses, outerwear, footwear, and intimate apparel and accessories, as well as an assortment of home decor items. The company provides fashion sportswear for men, women, and children comprising various offerings for newborns, infants, toddlers, boys, and girls; and accessories, such as handbags, jewelry, belts, and sleepwear. Citi Trends offers its products primarily to African-Americans in the United States. As of July 20, 2011, it operated 481 stores located in 27 states. The company was founded in 1946 and is headquartered in Savannah, Georgia.

Click here to review different investing trading software that scans analyzes stocks for different technical fundamental criteria, and low-risk high-reward trade pattern setups.

Click the Citi Trends stock chart below for a larger view.