Remittance Companies

Remittance, Sectors

Screening in the search of new stock picks I came accross a firm that provides remittance services (sending of money mainly from US to Latin American), International Money Express ($IMXI). The numbers looked good, the reports ok, … basically through some independent agents or own stores around several US states they offer their services to inmigrants. At the same time, they have already established relationships with banks and other receipt nodes at the offered destinations. Making it possible to transfer, through their own technology the money in only some minutes. A fee is then charged to the sender, from which a part goes to the agent, another to the receipt node, and finally a part to International Money Express. All looked good, but still in my mind resonated the question, why they don’t just user Paypal, a digital cryptocurrency or something similar? It looks quite complicated. In one of the disclosed risks, in one of the reports sent to the SEC, they acknowledge that eventually a digital platform might disrupt this process, but they don’t expect it in the short term. And that is what finally switch on my bulb. Why, if I plan to invest for the long-term will I enter in a company which acknowledges a big disruption, but at least not in the short-term. I’ve realized then, that there are many other companies waiting in the pipeline, and that investing in a company (even if it is very cheap) with this risk in the back, wouldn’t let me sleep well. So I definitely decided to let it go, and discard any of the other ones offering this same services (which also sit in the cheap ones, but that now I understand they are there for a good reason).

David Makuen, CEO of Citi Trends, highlighted the company’s achievements in the fourth quarter and throughout fiscal year 2022. He emphasized the following points:

  1. The company achieved a healthy gross margin of 39.1% in 2022 and reduced operating expenses by 9% compared to 2021.
  2. The company managed its inventories well and ended the fiscal year with a better-than-expected cash position of nearly $104 million and no debt.
  3. Citi Trends has been investing in enhancing the in-store experience and its infrastructure, and now 13% of their stores reflect the improved CTX experience.
  4. Despite a challenging economic environment, the strong balance sheet enables the company to invest in key product categories to continue delighting customers with fresh, exciting products at affordable prices.

For 2023, the company will focus on four main priorities:

  1. Driving comparable store productivity, focusing on opportunities to capture market share in areas such as footwear, beauty, kids’ apparel, and juniors and missy ladies’ apparel.
  2. Managing inventory and maximizing margin, expanding select categories, recouping sales in specific categories, and broadening the brand’s appeal to new multicultural families.
  3. Controlling SG&A expenses and leveraging the balance sheet, using analytics to eliminate unnecessary costs and establishing solid controls for spending decisions.
  4. Executing technology enhancements, continuing to develop the technology infrastructure to improve operational efficiency across the business.

However, the first quarter of 2023 has had a slower start than expected due to unfavorable economic factors affecting Citi Trends’ customers. The company remains cautiously optimistic and expects an improvement in the economic situation throughout the year.