Analyst upgrades Citi Trends on improving results

Last week Savannah, Ga.-based Citi Trends reported its first-quarter profit fell 10 percent, but results beat expectations. Revenue increased 14 percent, also besting analyst predictions.

Sales in stores open at least one year, a key retail metric known as same-store sales, edged up 0.3 percent during the quarter.

The company said total inventory fell 2.5 percent during the quarter compared with a year ago. In a conference call with analysts last week the company said it expects to report positive same-stores sales and declining inventory levels both in the second and third quarters of 2008.

In a note to investors on Friday, JPMorgan analyst Evren Dogan Kopelman said lower inventory and improving same-store sales will likely protect margins and boost results.

Kopelman added the company's specialization--it sells such items as sportswear, handbags and footwear, and focuses primarily on the African-American market--can also help results.

"Its focus on a niche differentiates it from the competition and enables more targeted merchandising," she wrote.

She upgraded the company to "Overweight" from "Neutral."

Shares climbed $2.95, or 15.3 percent, to $22.20. The stock has traded between $10.76 and $42.88 over the past 52 weeks, and is up almost 44 percent since the start of the year.