Ladies and gentlemen, thank you for standing by. Welcome to Citi Trends’ second quarter 2009 earnings conference call. During the presentation all participants will be in a listen only mode. Afterwards we will conduct a question and answer session. (Operator Instructions) I would now like to turn the conference over to Mr. Bruce Smith.

Thank you. Good afternoon, everybody, and thank you for joining us today. Also on the call are David Alexander, President and Chief Executive Officer, and Beth Feher, Executive Vice President and Chief Merchandising Officer. Our second quarter earnings release was sent out at 4 pm Eastern time today. If you’ve not received the release, it is available on our 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 and 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 could cause actual results to differ materially from those described in any forward-looking statements. First I will provide you with some details related to the second quarter results as well as guidance for the remainder of 2009, then David will discuss further the second quarter results and our business outlook after which we will address any questions you might have. Total sales in the second quarter decreased 3.5% to $112 million including the 12.4% decrease in comparable store sales. Customer traffic was 10% lower with the remainder of the comp store decrease resulting from a decline in the average customer purchase. By month, comparable store sales were down 10% in May, 14% in June, and 12% in July. Our merchandise category sales in the second quarter in comparable stores were as follows: accessories were down 4% versus flat in 2008 second quarter. Home sales were 11% lower after…

Thank you, Bruce, and good afternoon everyone. As we stated back in our first quarter call, we expected the second quarter to be our most challenging of the fiscal year for several reasons. First, we faced our strongest same store sales comparison of any quarter this year. We estimate that last year’s stimulus checks drove a 6% to 8% sales increase from a flat to slightly negative trend to a positive 6.5% comp. Second, our customers endured very difficult economic conditions this quarter. This was particularly true for our teenaged customers who used their summer jobs to purchase summer fashions. According to the Wall Street Journal, July unemployment for African American teenagers was nearly 36%. Third, 8 of our most important states representing 44% of our stores decided to shift their sales tax holidays from July last year to August this year. This impacted second quarter sales by roughly 1%. Finally, our ladies sales were impacted this summer by a significant consumer shift to summer dresses. As you are aware, our strength is casual fashion sportswear and unlike our off-price competitors, we haven’t developed a large dress business. This summer dresses became the sportswear of choice and while we saw substantial gains in this business, these gains in what has been a relatively small category for us were not sufficient to offset decreases in our more significant summer categories such as shorts, tops, and capris. Given these trends in casual dresses, we are increasing our focus on the dress business. All in all, it was a very tough sales quarter. Looking at the longer term, however, we saw a lot that we were pleased with. First, we continued our track record of solid real estate grip. Inventory management continued to improve with more disciplined planning and allocation. After great shrink…

(Operator Instructions) Your first question comes from Jeffrey Klinefelter - Piper Jaffray.

Interesting comments on the teen unemployment rates and I was just curious if you could share a little bit more about what you’re expecting from those teen customers as we go through the back half of the year. Clearly summer jobs are important during school breaks. Just wondering if you think a lack of summer jobs would actually carry forward into the second half, is that a factor in your comp forecast for that period and any sense for what percent of your transactions are traffic or any way you can define these actual teen purchasing for themselves versus the parents?

I have a hard time quantifying it. I’m in stores just about every week and obviously see a lot of teenagers shopping. The things that I would tell you is we had expressed in our first quarter conference call a concern about the effect of summer sales on teens not having summer jobs and as the summer plays out, that turned out to be a very big issue in terms of unemployment for teenagers. We have a lot less of a concern about that in the other three quarters of the year and as I mentioned, we’re pleased with some of the trends we’re seeing as we go into the third quarter, particularly related to categories that will be important for us in the third quarter. So I can’t give you a lot of specific details. I can tell you that we recognized that as a concern before the quarter ever began and do recognize it in the summer. Teens when they’re working this summer tend to spend money on apparel and that is very key to our customer.

In terms of those trends that you’re encouraged by, going into the back half, can you share a little bit more about what you’re seeing and how you anticipate that being supported by product availability?

Sure. Let me have Beth address both the things we’re seeing good trends in and also talk about product availability for the fall.

We are actually excited about the positive fashion trends we are seeing in categories that are very important to us. The most significant is probably denim which is critical to our success this fall. We’re feeling strong about denim in ladies, mens, and kids, and based on our season to date trend and the amount of newness within the category, like destructed, crinkles, skinny leg, and color, we’re feeling really good about denim. We also feel very optimistic about the junior and plus brand area because there are several core and mid tier brands there that are really back on track. We also like the momentum that we’re seeing in the jewelry area, the handbag area, and ladies accessories which we feel will continue into the fall season. As far as the quality and the availability of inventory out there, we are pleased that we are finding what we feel are the correct levels of both in line, off price, and closeout. We really aren’t seeing any consequential changes as far as availability is concerned.

Particularly in light of the CIT issues that had surfaced here recently, I’m thinking also about the viability of some of the smaller vendors. Any impact at all there to your product flow?

We certainly haven’t seen any and Bruce has kind of been our point guy following CIT. You want to talk about what you’re seeing?

There is no question they are a significant player in the retail industry including our portion of it, but we really haven’t had any disruptions at this point. There’s been a lot of chatter but no disruptions in the flow of merchandise and I guess it seems like they’ve made some improvement in their own position recently. As you can imagine, it’s impossible for us to forecast what ultimately is going to happen to them but we would like to think that our vendors would be able to work with other factors in a worst case scenario, but quite honestly, we don’t have a real way to predict that.

Your next question comes from Patrick McKeever - MKM Partners.

Just a question on the guidance for the back half of the year and I’m just wondering if you might be able to maybe provide us with a little more comfort that that’s achievable given the performance in the second quarter. On the EPS side, if I’m doing my math correctly, it implies about 18% EPS growth in the back half of the year and then you said comps in the 3% or 4% area for the back half of the year so are you looking… Can we get there just with the comparisons or do you need something to change in terms of the basic underlying tone of the business?

Let me let Bruce start regarding sort of the top line and then I’ll make a couple other comments.

The key is clearly the top line. We’ve shown the ability to maintain the gross margin and also closely monitor the expenses. The key is the top line and really the things that we’re looking at there I guess are historical in nature but also forward-looking. When you go back over the past few years, whether it’s 2007 fiscal year or 2008, we’ve been pretty much at a run rate of flat to slightly up in comps. Then in the first half of this year we did a negative 2% but it was up against a 3% positive number last year so once again, the trend over that two year period is slightly up with an easier comparison in the second half of the year where we’re going up against negative 3%, we’re thinking that a positive 4% which would put us at 1% for the full year is a reasonable expectation.

Beyond that to the rest of your question regarding EPS, apart from the negative sales trend we saw this summer virtually every other metric was positive and we have in the last couple of weeks begun to see sales much more consistent with what we had assumed our sales trend would be post the second quarter. Second quarter we expected and we had said in our first quarter call that we expected negative comps and there were a couple reasons we expected. One was the teen unemployment. Two was just the general state of the economy, and three was the fact that we were up against strong comparisons. We had a couple of surprises in the second quarter that we didn’t anticipate. One was the shift in the tax holidays. That cost us about 1%. The other we were somewhat surprised by how strong consumer sentiment shifted to dresses this summer and how much that affected sales in more typical summer apparel. As I mentioned, we are putting the focus on that business. That has not been a significant business for us. If that trend continues we want to be able to handle it. But as we move into the fall, I think we’re moving back into things we’re very strong in. We’ve had very good underlying trends in long denim throughout the year and we’ve seen very good trends throughout the last few weeks and that’s very foundational to our fall results. A few other key categories for us we’ve begun to see some good movement in and that’ s given us the confidence for our forecast for the fall.

Maybe a clarification but I think you did answer it. So that shift in the tax free holidays for you by, just one percentage point?

There’s really two things moving. The thing we could fairly easily quantify was the tax holiday shift. That was about 1%. The other thing that’s harder to quantify is back to school dates and there was movement in that as well and when we look at individual markets and shifts in back to school date, you can see a very obvious impact. Some of that is still affecting us. We’re seeing markets have gone back to school with very good sales. We’re seeing markets like for example Florida where most schools are still several days away from going back. Last week we lost sales and this week those sales have come roaring back. But the things that we can quantify, we know we lost about 1% of July as school start shifts, we may have lost a little more than that, but the thing we feel confident is in the 1%.

Your next question comes from Brian Rounchek - BLR Capital Partners.

Just a couple clarifications. Bruce, in your prepared remarks you had mentioned something about up 7.6% and down 2.2%. I couldn’t quite catch what that referred to.

That was our first half of the year number, the total sales were up 7.6% and comps were down 2.2%.

So that’s the six month comp and total sales number.

That’s correct.

AUR, I think I just heard a number of transactions are down 10% for the quarter.

Customer transactions were down 10%.

Any AUR?

The average customer transaction was down about 2.5%. The AUR was actually slightly up so it was the number of items in the basket that caused the 2.5% decline.

UPTs you said were down slightly or the average transaction amount?

Yes, that’s right.

Inventories at the end of the quarter per square foot, did I hear down 10?

That’s right. Comp inventories are down 10%.

But totals are up 4, right?

Right.

Okay, the spread looks a little wider. Is there a timing issue there?

That’s really just related to new stores, non-comp stores, stores that opened in 2008 and 2009.

I got you, and I think you opened those 8 new stores in the second quarter late in the quarter?

That’s right. Those were July openings.

Okay, and are you guys on pace for the third quarter around 21 to 23 stores?

I’d have to think about the exact calendar because there are October/November openings for the rest of the year. We’re absolutely on pace to hit our number for the year. I think 7 have already opened this month. We’ve got another 5 more to open in August so that will be 12 in August. We’ve got several to open in October, the rest in November. The answer to the question is we’ll hit 45 exactly how many will land in the third versus fourth quarter I’m not certain. I just don’t have the schedule with me.

Sorry to press you on that, it’s not a major question. And the last issue I had was, David, you had mentioned some metrics that were positive. Can you just review some of those that you were referring to specifically?

Sure. The things that I think are fairly significant, one, shrink was very strong this quarter. 0.9 and actually stronger than what I would advise is sustainable. I think we have really improved our shrink. I think a sustainable run rate is probably 1.3 to 1.5. We’ve done a number of things to get there. I view that as very positive. SG&A increased only 5.7% against the 13% square footage increase and really when I look at the P&L, line item after line item, we’re very well managed and well controlled. Store manager turnover decreased to a level that I’m pretty pleased with, in the mid 20s on store manager turnover which is a very good number. So I view all those as very positive things. I’m pleased with things that are happening in our technology area. We have just completed a new site profiling store predictive model which we used a third party consultant for. We’ve just rolled out the first phase of our new on boarding and staffing tool so as I look across the company, both in terms of measurable things and in terms of initiatives, I think we had a very positive quarter. DC productivity continued to improve. We’re still ahead of schedule in terms of that ramp up in terms of our new systems. Inventory management I also commented on. I think we ended the quarter very clean and with the right inventory level. So as I look at things apart from the top line, I see a lot of positives. Obviously the top line was very tough this summer.

Your next question comes from Dan Chase - Stevens Investment Management.

First off, what I just heard you go through which is what I wanted to talk about, which is it sounds like income statement from an inventory perspective, from a G&A perspective, from a shrink perspective, was all very positive in the quarter and has been I think for a while now. Is there anything that leads you to believe with positive comps I guess in the forecast that those should not get worse as time goes on, correct?

I would say… let me just take them one at a time. I’ll dig into shrink more because that’s obviously a significant one. Shrink we have seen good reductions. I think we were 1.1. last quarter and 0.9 this quarter. We believe now that we can probably sustain a run rate in the 1.3 to 1.5 and the things we’ve done there is we’ve taken 43 of our highest shrink stores, we’ve put in a 24/7 monitoring system with 15 cameras and we’ve seen a nice reduction in shrink in those stores. We have recategorized our stores based on shrink risk. We’ve realigned and redirected our loss prevention department. We’re allocating more time and more attention to prevention in those high risk shrink stores. We’ve seen an improvement there. We have more management turnover that almost always equates to lower shrink. We have lower store inventory levels. That’s leading to lower shrink. So the shrink improvements we think are something that are positive and are sustainable. In terms of SG&A, when we look at the distribution centers, in April we put in a new WMS system. We put in a new [put delight] system, we tried that once before and had some challenges. This time it went very smoothly and we’ve seen productivity improvements and capacity improvements from that. So we’re excited about that. We are in the early stages of making improvements in terms of store labor management, trying to better allocate labor based on key factors in terms of store opening hours and risk classification and sales and so on. I think we managed store payroll very well this quarter. Then all the other expense categories, I think there have been some positives in those as well. So kind of the long answer to your question. The short answer is there is no reason that those would move south if we begin to see good sales again. Now I would also tell you though, we knew second quarter was going to be tough and we were very aggressive in managing expenses in the second quarter. So any place we could squeeze, we did, because we knew it was going to be a tough quarter.

On the quarter date sales, I know historically you guys have usually given a number and I guess today you haven’t, but is it fair to say that since it seems to be more, I don’t want to say it’s aggressive, because I know the comparisons are easier, but since they are, 4% is the guidance, is it fair to say that you guys month to date are at least running 4% positive?

We’re running 3.5% month to date. What we try to do is to the extent we can, take the noise out of those numbers with school shifts and tax shifts and everything else that’s going on and we’ve looked at how that relates to what we’re up against in September/October and so on and that’s how we come back to saying 4%.

Your next question comes from Evren Kopelman - J.P. Morgan.

The first question is on the kid business. Over the past year or two that has been outperforming the other categories, especially mens and womens on a relative basis. That wasn’t as strong maybe on a relative basis in the quarter. Can you talk about that business?

One thing we were up against, very, very strong comps. I’ll let Beth comment on that. But we were up against a 17% comp so that’s a pretty steep hill. Beth will kind of talk about where we are in the kids business.

Like David mentioned, we were definitely up against the biggest increases in our kids area. They definitely reap the biggest benefits last year from the stimulus package. As we see going into the August time period and we’ve gotten further away from that noise, we’ve started to see turn abounds in that area.

On the subject of dresses, a couple of things there. One, you said you’re going to focus a little bit more on it. When do you expect that inventory to flow into the stores? Two, do you think dresses are going to be as strong for the fall period as much as the summer period?

Let me start with the first part of that. I’ll let Beth talk about fall trends. I kind of alluded to the fact that we did have good sales in dresses. Our challenge was that dresses is just a very small part of our business. Our overall comps in dresses in the fourth quarter were north of 40% so the problem is it’s only between 1% and 2% of our business. We had extremely strong dress business, particularly the junior dress business which the numbers were a lot higher than that, but again it’s a small part of our business. Dresses in the fall are not typically as important as in the spring but we’re continuing to see good dress sales right now, it’s just unfortunately not on nearly as big a base as lots of other people’s. Let me shift to Beth.

In response to the other part of your question, we are reviewing what dresses will mean to us as a company as we go into next spring and we certainly feel that we can position ourselves stronger than we were this year because we do feel that that trend is going to continue into spring of ’10.

The other thing I would add is we don’t currently even carry dresses in all of our stores. From what we’ve seen this summer, that’s something we intend to change for next spring. Again, we saw improvement in junior dresses of very strong reaction and we will offer that in all of our stores next spring.

Question on the gross margin for the second half. The first rate expense, do you expect that to be a pressure in the second half, and secondly, on markdowns, if you deliver the 4% comps that you guided to, would you expect markdowns to be higher or lower in the second half year-over-year?

As it relates to freight, I don’t expect any unusual pressure. If you remember last year, the third quarter there was quite a bit in the way of fuel surcharges that were being passed onto us that we incurred so we think over the course over the last half of the year freight won’t look a lot different than it did in 2008’s second half. As far as markdowns go, what we’ve seen historically is that when we have reasonable sales increases we can do a very good job of controlling the markdowns and even in quarters like this where we have a very difficult comp store sales number, we were in such a good position as it related to inventory, that we were able to maintain our gross margin and not let the markdowns get out of hand. Were they higher as a percent of sales than last year? Absolutely, but they didn’t kill us.

Lastly, can you talk about advertising, especially television, I think you’re doing some new things. If you can we talk a little bit about that, that would be great.

One of the things we’ve found is that in this economy we’re able to buy more with our advertising dollars and based on that and based on the fact that we’re now going into California, we sort of broadened our store base. We had an opportunity to begin to advertise with BET so in addition to radio which we’re continuing to do, and some local TV which we’re continuing to do, what we’ve done is shifted dollars away from some of the local advertising we were doing into the program that we’re excited about. We’re not increasing our advertising spend. We’re just I think being more effective with it and that is new for us.

There are no further questions at this time and I’ll now turn the call back over to you. Please continue with your presentation or your closing remarks.

Thank you very much. That’s all we have and we appreciate everyone calling in today. Goodbye.

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