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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

(RULE 14a-101)

INFORMATION REQUIRED IN PROXY STATEMENT

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No.     )

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104 Coleman Boulevard

Savannah, Georgia 31408

(912) 236-1561

April 19, 2016

Dear Stockholder:

You are cordially invited to attend the annual meeting of stockholders of Citi Trends, Inc. to be held at 9:00 a.m., EDT, on Wednesday, May 25, 2016, at the Embassy Suites-Airport, 145 West Mulberry Boulevard, Savannah, Georgia 31322. The formal notice of annual meeting appears on the next page.

In addition to the formal items of business to be brought before the meeting, we will be pleased to report on the affairs of the Company.

We look forward to greeting personally those stockholders who are able to be present at the meeting. However, regardless of whether you plan to be with us at the meeting, it is important that your shares be represented. Accordingly, we request that you promptly complete, sign, date and return the enclosed proxy card in the envelope provided.

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Citi Trends, Inc.

104 Coleman Boulevard
Savannah, Georgia 31408

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

to be held on May 25, 2016

TO THE STOCKHOLDERS:

You are cordially invited to attend the annual meeting of stockholders of Citi Trends, Inc., a Delaware corporation, which will be held at the Embassy Suites-Airport, 145 West Mulberry Boulevard, Savannah, Georgia 31322, on Wednesday, May 25, 2016, at 9:00 a.m., EDT, for the following purposes:

1.              To elect the two nominees named in the attached proxy statement to the board of directors to serve as Class II directors whose terms will expire at the 2019 annual meeting of stockholders;

2.              To vote on a non-binding, advisory resolution to approve the compensation of our named executive officers for 2015;

3.              To ratify the appointment of KPMG LLP as our independent registered public accounting firm for the fiscal year ending January 28, 2017; and

4.              To transact any other business properly brought before the meeting or any adjournment or postponement of the meeting.

You can vote your shares of common stock if our records show that you were the owner of the shares as of the close of business on March 28, 2016, the record date for the annual meeting.

For directions to the annual meeting, please call the Embassy Suites-Airport at (912) 330-8222.

Regardless of whether you plan to attend the meeting in person, please promptly complete, sign, date and return the accompanying proxy card, so that your shares may be represented and voted at the annual meeting. A return envelope is enclosed for your convenience. No postage need be affixed to the enclosed envelope if mailed in the United States.

Important Notice Regarding the Availability of Proxy Materials for the Stockholder Meeting to be Held on May 25, 2016:  The Proxy Statement and our 2015 Annual Report are available at http://ir.cititrends.com/annual-proxy.cfm

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CITI TRENDS, INC.
104 Coleman Boulevard
Savannah, Georgia 31408

PROXY STATEMENT

Annual Meeting of Stockholders

to be held on May 25, 2016

GENERAL INFORMATION ABOUT THE ANNUAL MEETING AND VOTING

This proxy statement is furnished in connection with the solicitation by the board of directors of Citi Trends, Inc. of proxies to be voted at the annual meeting of stockholders on May 25, 2016. This proxy statement, the accompanying proxy card and the annual report to stockholders are being mailed to stockholders on or about April 20, 2016.

The principal executive offices of Citi Trends, Inc., a Delaware corporation, are located at 104 Coleman Boulevard, Savannah, Georgia 31408, and our telephone number is (912) 236-1561.

The terms “Citi Trends” or the “Company” (as well as the words “we,” “us” and “our”) refer to Citi Trends, Inc.  References to “you” or “your” refer to our stockholders.

In this section of the proxy statement, we answer some common questions regarding the annual meeting of stockholders and the voting of shares of common stock at the meeting.

Where and when will the annual meeting be held?

The date, time and place of the meeting are:  May 25, 2016, at 9:00 a.m., EDT, at Embassy Suites-Airport, 145 West Mulberry Boulevard, Savannah, Georgia 31322.  For directions to the meeting, please call the Embassy Suites at (912) 330-8222.

Why did you send me this proxy statement?

This proxy statement was prepared under the direction of our board of directors to solicit your proxy for voting at our annual meeting. We sent you this proxy statement and the enclosed proxy card because our board of directors is asking for your proxy to vote your shares at the annual meeting. We have summarized information in this proxy statement that you should consider in deciding how to vote at the meeting. But you do not have to attend in order to vote your shares. Instead, you may simply complete, sign, date and return the enclosed proxy card.

What can I vote on at the meeting?

The matters scheduled to be voted on at the meeting are:

(1)         The election of the two nominees named in the proxy statement to our board of directors to hold office until the annual meeting of stockholders in 2019 and until their successors are elected and qualified (“Proposal 1”);

(2)         A non-binding, advisory resolution to approve the compensation of our named executive officers for 2015 (“Proposal 2”); and

(3)         Ratification of the appointment of KPMG LLP as our independent registered public accounting firm for the fiscal year ending January 28, 2017 (“Proposal 3”).

How does the board of directors recommend that I vote?

The board of directors recommends that you vote your shares (i) “FOR” each of the nominees to be elected to the board of directors, (ii) “FOR” the approval of the non-binding, advisory resolution to approve the compensation paid to our named executive officers for 2015, and (iii) “FOR” the ratification of KPMG LLP as our independent registered public accounting firm for the fiscal year ending January 28, 2017.

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Who can vote?

You can vote your shares of common stock if our records show that you were the owner of the shares as of the close of business on March 28, 2016, the record date for determining the stockholders who are entitled to vote at the annual meeting. As of the close of business on March 28, 2016, there were a total of 14,907,355 shares of our common stock outstanding and entitled to vote at the annual meeting. You get one vote for each share of common stock that you own. Holders of shares of common stock do not have cumulative voting rights. The enclosed proxy card shows the number of shares you can vote.

What is the required vote for approval of each proposal?

The election of our nominees for director requires a plurality of the votes cast at the annual meeting.  That means the nominees will be elected if more votes are cast for such nominees than for any other person.

Approval of the non-binding, advisory resolution to approve the compensation of our named executive officers and the ratification of the appointment of KPMG LLP as our independent registered public accounting firm each require the affirmative vote of a majority of the votes cast at the annual meeting.

How are votes counted?

We will hold the annual meeting if stockholders representing the required quorum of shares of common stock entitled to vote either sign and return their proxy cards or attend the meeting in person. One-third of the shares of common stock outstanding and entitled to vote at the meeting present in person or by proxy will constitute a quorum. If you sign and return your proxy card, your shares will be counted to determine whether we have a quorum even if you abstain or fail to vote as indicated on the proxy card.

Votes withheld from the director nominees, abstentions and broker non-votes will be counted as shares present for the purpose of determining a quorum but will not be counted in determining the number of shares voted “FOR” the director nominees or treated as votes cast on any other proposal and, therefore, will not affect the outcome of the election of our director nominees or these other proposals.

A broker non-vote occurs when a bank, broker or other nominee who holds shares for another person returns a proxy but does not vote on a particular item, usually because the nominee does not have discretionary voting authority for that item and has not received instructions from the owner of the shares.

How do I vote?

Stockholders of record may vote in person by attending the annual meeting or by completing and returning the proxy card by mail. Your vote is very important, so regardless of whether you plan to attend the annual meeting, we encourage you to vote by proxy as soon as possible.

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How do I vote by proxy?

Follow the instructions on the enclosed proxy card to vote on the matters to be considered at the annual meeting. The individuals named and designated as proxies on the proxy card will vote your shares as you instruct. If you do not mark a selection, your proxy will be voted as recommended by the board of directors.

You have the following choices in completing your proxy:

·                  You may vote on each proposal, in which case your shares will be voted in accordance with your choices.

·                  In voting on the nominees for director, you can either vote “FOR ALL” of the nominees or withhold your vote on the nominees as a group or with respect to any particular nominee.

·                  You may abstain on one or more of the Company’s proposals:  to approve, on a non-binding, advisory basis, the compensation of our named executive officers and to ratify the appointment of KPMG LLP as our independent registered public accounting firm.

·                  You may return a signed proxy card without indicating your vote on any matter, in which case the designated proxies will vote (i) to elect all of the nominees as directors, (ii) to approve the compensation of our named executive officers, and (iii) to ratify the appointment of KPMG LLP as our independent registered public accounting firm for the fiscal year ending January 28, 2017.

How do I vote if my shares are held in “street name”?

If your shares are held in the name of your broker, a bank or other nominee, that party will give you instructions for voting your shares.  Under the rules of the New York Stock Exchange, if you do not give instructions to your bank or brokerage firm, it will still be able to vote your shares with respect to certain “discretionary” items such as Proposal 3 (ratification of the appointment of KPMG LLP), but will not be allowed to vote your shares with respect to certain “non-discretionary” items such as Proposals 1 (election of directors) and 2 (“say-on-pay”).  In the case of non-discretionary items, in the absence of voting instructions, shares subject to such so-called broker non-votes will not be counted as voted on those proposals and so will have no effect on the vote, but will be counted as present for the purpose of determining the existence of a quorum.  If you do not provide voting instructions to your bank or broker, the organization that holds your shares will not be authorized to vote on Proposals 1 and 2.  Accordingly, we encourage you to vote promptly, even if you plan to attend the annual meeting.

What if other matters come up at the annual meeting?

The only matters we now know of that will be voted on at the annual meeting are the proposals we have described in this proxy statement: the election of the Class II directors, the advisory vote to approve the compensation of our named executive officers and the proposal to ratify the appointment of KPMG LLP as our independent registered public accounting firm for the fiscal year ending January 28, 2017.  If other matters are properly presented at the meeting, the designated proxies will vote your shares in their discretion.

Can I change my vote after I return my proxy card?

Yes, so long as you are the record holder. At any time before the vote on a proposal, you can change your vote either by giving us a written notice revoking your proxy card, or by signing, dating and returning to us a new proxy card, or by attending the annual meeting and voting your shares in person. We will honor the proxy card with the latest date.

Proxy revocation notices or new proxy cards should be sent to Citi Trends, Inc. c/o American Stock Transfer and Trust Company, 6201 15th Avenue, Brooklyn, New York 11219.

If you hold shares in “street name”, you should contact your broker, bank or other nominee regarding any change in voting instructions.

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Can I vote in person at the annual meeting rather than by completing the proxy card?

Although we encourage you to complete and return the proxy card to ensure that your vote is counted, you can attend the annual meeting and vote your shares in person even if you have submitted a proxy card if you are a stockholder of record on the record date.  If your shares are held in street name, then you may vote your shares in person only if you have a legal proxy from the entity that holds your shares giving you the right to vote the shares. A legal proxy is a written document from your brokerage firm or bank authorizing you to vote the shares it holds in its name. If you attend the meeting and vote your shares by ballot, your vote at the meeting will revoke any vote you submitted by mail.

What do I do if I receive duplicate proxy statements and cards?

You may receive more than one proxy statement, proxy card or annual report. This duplication will occur if you have shares registered in different names or your shares are in more than one type of account maintained by American Stock Transfer and Trust Company, our transfer agent. To have all your shares voted, please sign, date and return all proxy cards.

Who will count the votes?

American Stock Transfer and Trust Company will tabulate the votes. Corporate Communications, Inc. will serve as the inspector of election.

Who will conduct this proxy solicitation and who pays for this proxy solicitation?

We regularly retain the services of Corporate Communications, Inc. to assist with our investor relations and other stockholder communications issues. Corporate Communications, Inc. will assist in the solicitation of proxies and will not receive any additional compensation for these services. Corporate Communications, Inc. may solicit proxies by telephone, facsimile, other forms of electronic transmission and by mail. We will reimburse the firm’s expenses in connection with the solicitation. In addition, proxies may be solicited on our behalf by our directors, officers or employees in person or by telephone, facsimile, electronic transmission and by mail. None of these persons will receive any extra compensation for doing this.

In addition, we will request that brokerage houses, banks and other custodians or nominees holding shares in their names for others forward proxy materials to their customers or principals who are the beneficial owners of shares and we will reimburse them for their expenses in doing so.

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PROPOSAL 1:
ELECTION OF DIRECTORS

Our board of directors currently consists of six directors, R. Edward Anderson, Brian P. Carney, Laurens M. Goff, Lawrence E. Hyatt, John S. Lupo and Jason T. Mazzola.  Our directors are divided into three classes with staggered three-year terms so that the term of one class expires at each annual meeting of stockholders. Two nominees will be proposed for election as Class II directors at the annual meeting on May 25, 2016.

It is intended that the persons named in the accompanying proxy will vote to elect the nominees listed below unless authority to vote is withheld. The elected directors will serve until the annual meeting of stockholders in 2019 or until an earlier resignation or retirement or until their successors are elected and qualify to serve.

The nominees have agreed to be named in this proxy statement, stand for election and serve as directors if elected. However, if for any reason any nominee shall not be a candidate for election as a director at the annual meeting, it is intended that shares represented by the accompanying proxy will be voted for the election of a substitute nominee designated by our board of directors, or the board may determine to leave the vacancy temporarily unfilled.

Nominees for Election as Class II Directors

Brian P. Carney currently serves as a Class II Director whose term expires at the annual meeting.  Mr. Carney has been nominated by our board of directors to stand for re-election at this annual meeting for a three-year term expiring in 2019.  Mr. Carney currently is Chairman of the Compensation Committee of our board of directors and a member of the Audit Committee and the Nominating and Corporate Governance Committee of our board of directors.  Mr. Carney’s biographical information is set forth in the “Board of Directors and Committees of the Board of Directors” section that follows.

John S. Lupo currently serves as a Class II director whose term expires at the annual meeting.  Mr. Lupo has been nominated by our board of directors to stand for re-election at this annual meeting for a three-year term expiring in 2019.  Mr. Lupo currently is the lead independent director and is a member of the Audit Committee, the Compensation Committee and the Nominating and Corporate Governance Committee of our board of directors.  Mr. Lupo’s biographical information is set forth in the “Board of Directors and Committees of the Board of Directors” section that follows.

The board of directors recommends that stockholders vote “FOR” each of the nominees listed above for election.

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BOARD OF DIRECTORS AND COMMITTEES OF THE BOARD OF DIRECTORS

Board Leadership Structure

The board of directors does not have a set policy with respect to the separation of the offices of the chairman and chief executive officer, as the board believes it is in the best interests of the Company to make that determination based on the position and direction of the Company and the membership of the board.  Mr. Anderson held both offices from January 2012 through his retirement as Chief Executive Officer (“CEO”) in March 2015, at which time he became Executive Chairman of the board in order to provide for an orderly transition of the CEO role to his successor, Jason Mazzola.  As a result, the two offices have been separated since March 2015.  In April 2016, Mr. Anderson transitioned from Executive Chairman to non-executive Chairman.

The Company’s Corporate Governance Guidelines provide for the appointment of a lead independent director at any time when the Chairman is not independent.  The board believes that the appointment of a lead independent director and the use of regular executive sessions of the independent directors, along with the board’s independent committee system and majority of independent directors, allow it to maintain effective oversight of management. The board recognizes that depending on the circumstances, other leadership models might be appropriate. Accordingly, the board regularly reviews and reassesses its leadership structure.

Our board of directors consists of six directors (Messrs. Anderson, Carney, Goff, Hyatt, Lupo and Mazzola), all of whom, except Messrs. Anderson and Mazzola, have been determined by the board to be independent under NASDAQ listing standards.  Our Second Amended and Restated Certificate of Incorporation divides our board into three classes having staggered terms, with one of such classes being elected each year for a new three-year term.  Our Class I directors, Messers. Goff and Mazzola, have terms expiring in 2018, our Class II directors, Messrs. Carney and Lupo, have terms expiring in 2016, and our Class III directors, Messrs. Anderson and Hyatt, have terms expiring in 2017.

Lead Independent Director

The Company’s independent directors have appointed Mr. Lupo as the board’s lead independent director, and he presides at all meetings of the board at which the Chairman is not present, including executive sessions of the independent directors. The board has adopted guidelines that provide for the lead independent director to fulfill the following functions:

·                  Serve as a liaison, as needed, between the directors and the Chairman;

·                  Call meetings of the independent directors, when appropriate;

·                  If requested by Company management or stockholders, ensure that he or she is available, as appropriate, for consultation with management and/or direct communication with stockholders;

·                  Be the focal point for stockholder communications addressed to independent directors;

·                  Recommend the retention of outside advisors who report directly to the Board as he or she may determine is necessary or appropriate; and

·                  Assist in the annual evaluation of the Chief Executive Officer, and, if an officer other than the Chief Executive Officer is serving as Chairman of the Board, such other officer. For the officer serving as Chairman of the Board, such evaluation shall include an evaluation of such officer’s effectiveness as Chairman of the Board and as an officer of the Company and an annual evaluation of his or her interactions with directors and ability to provide leadership and direction to the full Board.

Directors

The following sets forth selected biographical information for our directors.

Nominees for Class II Directors.

Brian P. Carney.  Mr. Carney, age 55, has served as a director since 2007, and is Chairman of the Compensation Committee and a member of the Audit Committee and the Nominating and Corporate Governance Committee.  Mr. Carney currently serves as Executive Vice President and Chief Financial Officer of BI-LO Holding, LLC, a grocery retailer, a position he has held since 2005.  Prior to that time, Mr. Carney served as Executive Vice President and Chief Financial Officer of Jo-Ann Stores, Inc., a specialty retailer, from 1997 to 2005, as Senior Vice President of Finance of Revco, D.S., Inc., a drug store retailer, from 1989 to 1997, and as an Audit Manager with Arthur Andersen & Co., a public accounting firm, from 1982 to 1989.

On March 23, 2009, BI-LO Holding, LLC filed a voluntary petition for reorganization under Chapter 11 of the U.S. Bankruptcy Code.  BI-LO Holding, LLC emerged from Chapter 11 through a plan of reorganization on May 12, 2010.

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In determining that Mr. Carney should continue serving as one of our directors, the board considered in particular his financial, accounting and audit experience with publicly reporting retail companies and a public accounting firm, as well as his performance as a member of the board of directors of Citi Trends.  His financial background is such that he is considered to be an “audit committee financial expert” as defined by the rules of the Securities and Exchange Commission (the “SEC”).

John S. Lupo.  Mr. Lupo, age 69, has served as a director since 2003, and is the lead independent director, as well as a member of the Audit Committee, the Compensation Committee and the Nominating and Corporate Governance Committee.  Mr. Lupo was a principal in the consulting firm, Renaissance Partners, LLC, from 2000 through 2008.  From 1998 through 1999, Mr. Lupo served as Executive Vice President of Basset Furniture. From 1996 until 1998, Mr. Lupo served as the Chief Operating Officer of the International Division of Wal-Mart Stores Inc., and from 1990 until 1996, Mr. Lupo served as Senior Vice President and General Merchandise Manager of Wal-Mart Stores, Inc.  Mr. Lupo also served as a director of Cobra Electronics Corporation from 2007 to 2014, as a director of AB Electrolux from 2007 to 2012 and as a director of Spectrum Brands Inc. (formerly Rayovac Corporation) from 1998 to 2009.

In determining that Mr. Lupo should continue serving as one of our directors, the board considered in particular his retail merchandising and operational experience with Wal-Mart Stores, Inc. and as a consultant with Renaissance Partners, LLC, as well as his performance as a member of the board of directors of Citi Trends.

Continuing Class III Directors with terms expiring in 2017.

R. Edward Anderson.  Mr. Anderson, age 66, has served as a director since 2001 and as Chairman of the board of directors since May 2006, including service as Executive Chairman from April 2009 to April 2010, from October 2011 to January 2012 and from March 2015 through April 2, 2016.  He served as CEO of the Company from 2001 to April 2009 and returned to that position from January 2012 to March 2015.  From 1997 to 2001, Mr. Anderson was Chief Financial Officer of Variety Wholesalers, Inc., an operator of discount stores.  Prior to 1997, Mr. Anderson served as Chairman, President and Chief Executive Officer of Rose’s Stores, Inc., a discount retailer.

In determining that Mr. Anderson should continue serving as one of our directors, the board considered in particular his in-depth knowledge of Citi Trends attained from his tenure of more than ten years as CEO and fourteen years as a director.  In addition, the board considered his experience as CFO, CEO and chairman of other discount retailers prior to joining Citi Trends.

Lawrence E. Hyatt.  Mr. Hyatt, age 61, has served as a director since 2006, and is Chairman of the Audit Committee and a member of the Compensation Committee and the Nominating and Corporate Governance Committee.  Mr. Hyatt has served as the Senior Vice President and Chief Financial Officer of Cracker Barrel Old Country Store, Inc., a restaurant and retail company, since January 2011.  Cracker Barrel Old Country Store, Inc. has announced that Mr. Hyatt will retire on or before August 5, 2016.  From 2004 through 2010, Mr. Hyatt served as the Chief Financial Officer, Secretary and Treasurer of O’Charley’s Inc., a multi-concept restaurant company.  He also served as Interim Chief Executive Officer of O’Charley’s Inc. from February 2009 through June 2009.  Mr. Hyatt served as the Executive Vice President and Chief Financial Officer of Cole National Corporation, a specialty retailer, from 2002 to 2004, as Chief Financial and Restructuring Officer of PSINet Inc., an internet service provider, from 2000 to 2002, as Chief Financial Officer of HMS Host Corporation, a subsidiary of Autogrill S.p.A., from 1999 to 2000, and as Chief Financial Officer of Sodexho Marriott Services, Inc. and its predecessor company from 1989 to 1999.

In determining that Mr. Hyatt should continue serving as one of our directors, the board considered in particular his experience as a public company CFO and his retail background.  His financial background is such that he is considered to be an “audit committee financial expert” as defined by the rules of the SEC and, as a result, the board named him Chairman of the Audit Committee.  In addition, the board considered his performance as a director of Citi Trends.

Continuing Class I Directors with terms expiring in 2018

Laurens M. Goff.  Mr. Goff, age 43, has served as a director since November 2013, and is Chairman of the Nominating and Corporate Governance Committee and a member of the Audit Committee and the Compensation Committee.  Mr. Goff is a co-founder and Managing Partner of Stone-Goff Partners, a private equity firm founded in 2010 that is focused on investing in private companies in the lower middle market.  Prior to that, he was Managing Partner of Goff Management, a predecessor firm, which he founded in 2007.  Mr. Goff began his career in the investment banking division of Furman Selz LLC.  He subsequently joined Hampshire Equity Partners, a middle market buyout firm, where he spent over eight years sourcing, executing and managing private equity investments, including Citi Trends prior to its initial public offering in 2005.

In determining that Mr. Goff should serve as one of our directors, the board considered in particular his business and financial experience described above, as well as his knowledge of Citi Trends attained from serving as a director over the past two years and prior to the Company’s initial public offering.

Jason T. Mazzola.  Mr. Mazzola, age 46, has served as President and Chief Executive Officer and as a director since March 2015.  Mr. Mazzola served as Executive Vice President and Chief Merchandising Officer of the Company from February 2012 to March 2015.

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From May 2011 to February 2012, Mr. Mazzola was the Chief Merchandising Officer of ideeli Inc., an online apparel retailer.  From November 2009 to May 2011, Mr. Mazzola served as a consultant and Executive Vice President of Sales and Design for Long Street Industries Inc., an apparel wholesaler.  From 2001 to 2009, as well as from 1993 to 1996, Mr. Mazzola was employed in various merchandising positions with TJX Companies, Inc., including Senior Vice President/General Merchandise Manager-Ladies Sportswear, Shoes, Domestics and Giftware of the A. J. Wright division.

In determining that Mr. Mazzola should serve as one of our directors, the board considered in particular his knowledge of Citi Trends attained from serving as an officer of the Company over the last four years and his merchandising experience with other retailers obtained over the course of 20 years prior to joining the Company in 2012.

Board Risk Oversight

Our management team is responsible for identifying, assessing and managing our exposure to risk, while the board of directors is responsible for providing oversight of risk management.  The oversight role performed by the board and its committees includes, among other things, the following:

·                  Review of risks associated with our long-term strategic plan and annual budgets;

·                  Meetings with various members of management regarding initiatives being undertaken in their areas, including, among others, merchandising, real estate, finance, human resources and information services;

·                  Private meetings with our independent registered public accounting firm, our Chief Financial Officer, and our Director of Internal Audit and Loss Prevention;

·                  Performance of a comprehensive risk assessment, including those significant risk factors discussed in Item 1A of our Annual Report on Form 10-K;

·                  Review and approval of our Investment Policy; and

·                  Review of legal matters

Our Audit Committee, Compensation Committee, and Nominating and Corporate Governance Committee each have responsibility for addressing risks inherent within their areas of oversight.  In accordance with its charter, the Audit Committee is responsible for assisting the board with its oversight of our overall risk management profile and our financial reporting risks.  The Compensation Committee’s responsibilities related to risk include ensuring that compensation policies have a fair balance of risk and reward.  The Nominating and Corporate Governance Committee’s primary risk-related responsibilities deal with the development and recommendation of appropriate corporate governance guidelines and oversight to ensure compliance with such guidelines.  Each of the committee chairs regularly reports to the board regarding significant issues addressed.

Risk and Employee Compensation

We believe that Citi Trends’ compensation policies do not create risks that are reasonably likely to have a material adverse effect on the Company.  Instead, we believe that our compensation structure encourages a fair balance of risk and reward.  The process undertaken by the board to determine that the compensation policies do not create unnecessary risk includes detailed reviews of the assumptions used in the budget on which annual cash incentives are based.  In addition, the board participates in the strategic planning process to ensure that the goals and planned strategies to achieve such goals are aligned between management and the board.  As a retail company operating only one store concept, we are not subject to many of the issues that cause employees in other industries to take excessive and unnecessary risks in order to maximize their compensation.  We believe that the components of our employee-wide compensation program are consistent in form with similar companies.  Also, the performance targets for our named executive officers are at the consolidated company level, not at individual division or subsidiary levels, and there is a balance between annual cash incentive compensation and long-term equity incentives to enhance the likelihood that management will not make decisions in the short-term to earn cash incentives at the risk of achieving long-term success.

Board of Directors Committees

The board of directors has established an Audit Committee, a Compensation Committee and a Nominating and Corporate Governance Committee, each comprised solely of the independent members of our board of directors, Messrs. Carney, Goff, Hyatt and Lupo.

Audit Committee

The Audit Committee, currently consisting of all four of the Company’s independent directors, reviews our internal accounting procedures and consults with and reviews the services provided by our independent registered public accounting firm. The current members of the Audit Committee satisfy NASDAQ’s audit committee member independence requirements. Mr. Hyatt is the Chairman of

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the Audit Committee.  The board of directors has determined that Mr. Hyatt and Mr. Carney are “audit committee financial experts” as defined by the rules of the SEC.  During fiscal 2015, the Audit Committee met 9 times.

The Audit Committee was established in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).  The Audit Committee oversees the Company’s accounting and financial reporting processes, both internal and external, and audits of the Company’s financial statements, on behalf of the board of directors.  The principal duties and responsibilities of our Audit Committee, among other things, are to:

·                  have direct responsibility for the appointment, selection, compensation, retention, replacement and oversight of the work of our independent registered public accounting firm, including prescribing what services are allowable and approving in advance all services provided by them;

·                  discuss with the internal auditors and the independent registered public accounting firm the overall scope and plans for their respective audits and the results of their respective audits;

·                  review our annual audited financial statements and quarterly unaudited financial statements, and discuss the statements with management and the independent registered public accounting firm and review our earnings press releases, as well as financial information and earnings guidance, if any, provided to analysts and rating agencies;

·                  review and discuss with management, the internal auditors and the independent registered public accounting firm the adequacy and effectiveness of our internal controls, including our ability to monitor and manage business risk, legal and ethical compliance programs and financial reporting;

·                  review and approve all related party transactions consistent with the rules applied to companies listed on The NASDAQ Stock Market; and

·                  establish procedures regarding complaints received by us or our employees regarding accounting, accounting controls or auditing matters.

The Audit Committee is required to report regularly to our board of directors to discuss any issues that arise with respect to the quality or integrity of our financial statements, our compliance with legal or regulatory requirements, the performance and independence of our independent registered public accounting firm, or the performance of the internal audit function. The Audit Committee’s work is guided by a written charter which has been approved and adopted by the board of directors. A copy of the current Audit Committee charter is available on the Company’s website located at http://www.cititrends.com. The information set forth on this website should not be deemed filed with, and is not incorporated by reference into, this proxy statement or any of the Company’s other filings under the Securities Act of 1933 or the Exchange Act, except to the extent that the Company specifically so provides.

Compensation Committee

The Compensation Committee, currently consisting of all four of the Company’s independent directors, reviews and determines the compensation and benefits of the Company’s executive officers and administers our incentive and equity-based compensation plans. The current members of the Compensation Committee satisfy NASDAQ’s compensation committee member independence requirements.  Mr. Carney is the Chairman of the Compensation Committee. The Compensation Committee has adopted a formal charter which is available on our corporate website at http://www.cititrends.com.  During fiscal 2015, the Compensation Committee met 6 times.  The principal duties and responsibilities of our Compensation Committee, among other things, are to:

·                  review and approve corporate goals and objectives relevant to our CEO’s compensation, evaluate the CEO’s performance in light of these goals and objectives, and determine and approve the CEO’s compensation based on such evaluation;

·                  make recommendations to our board of directors regarding compensation for our other executive officers, including the salaries and awards under our incentive compensation plans and equity-based plans;

·                  review and administer the Company’s incentive and equity-based compensation plans;

·                  review and make recommendations to our board of directors concerning compensation arrangements for non-employee members of our board of directors;

·                  oversee, in consultation with management, regulatory compliance with respect to compensation matters;

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·                  review the Company’s overall compensation systems and determine whether any incentive compensation arrangements encourage excessive risk-taking;

·                  review and approve any severance or similar termination payments proposed or made to any of our current or former executive officers; and

·                  review and approve any employment contracts or other contractual arrangements resulting in any payment to any employee of the Company proposed to be made as a result of a change in control of the Company.

The Compensation Committee has the discretion to delegate all or a portion of its duties and responsibilities to a subcommittee of the Compensation Committee.  In addition, the Compensation Committee has delegated limited authority to a committee consisting of our CEO to grant awards under the 2012 Incentive Plan to non-executive employees of the Company. The Compensation Committee has the authority and resources to engage compensation consultants and legal, accounting or other advisors to provide the committee with advice and information in connection with carrying out its responsibilities.  The Compensation Committee has engaged Hay Group (the “Compensation Consultant”) to provide advice on the Company’s executive and director compensation practices.

See “Compensation Discussion and Analysis” elsewhere in this proxy statement for a discussion of the role of the Compensation Consultant and executive officers in the compensation process and further discussion of the processes and procedures of the Compensation Committee.  See also “Compensation Committee Report” elsewhere in this proxy statement.

Nominating and Corporate Governance Committee

The Nominating and Corporate Governance Committee currently consists of all four of the Company’s independent directors.  Mr. Goff is the Chair of the Nominating and Corporate Governance Committee. The Nominating and Corporate Governance Committee has adopted a formal charter which is available on our corporate website at http://www.cititrends.com.  During fiscal 2015, the Nominating and Corporate Governance Committee met 5 times.  The principal duties and responsibilities of our Nominating and Corporate Governance Committee, among other things, are to:

·                  review the composition of our board of directors and committee structure and evaluate the performance of the board, its directors and its committees;

·                  identify individuals qualified to become board members, consistent with criteria approved by our board of directors;

·                  select and recommend individuals as nominees to serve as directors at annual meetings of our stockholders and nominate individuals to fill any vacancies;

·                  develop and recommend to the board of directors a set of corporate governance principles applicable to us and periodically review and assess such corporate governance principles; and

·                  review the institutional and other affiliations of our board members and nominees for directors for any potential conflicts of interest and make recommendations to our board of directors with respect to the determination of director independence.

Code of Business Conduct and Ethics

We have adopted a written Code of Business Conduct and Ethics applicable to our directors, executive officers (including our principal executive officer, principal financial officer, principal accounting officer or controller or persons performing similar functions) and employees in accordance with the rules of The NASDAQ Stock Market and the SEC. Our Code of Business Conduct and Ethics is designed to deter wrongdoing and to promote:

·                  honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest;

·                  full, fair, accurate, timely and understandable disclosure in reports and documents that we file with the SEC and in all other public communications;

·                  compliance with applicable laws, rules and regulations, including insider trading compliance; and

·                  accountability for adherence to the code and prompt internal reporting of violations of the code, including illegal or unethical behavior regarding accounting or auditing practices.

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The Code of Business Conduct and Ethics is available on our corporate website at http://www.cititrends.com. In the event of any amendment or waiver of our Code of Business Conduct and Ethics applicable to our principal executive officer, principal financial officer, principal accounting officer or controller or persons performing similar functions, such amendment or waiver will be posted on our website.  Our directors, executive officers and employees are required to affirm annually their compliance with the Code of Business Conduct and Ethics.

Stock Ownership Guidelines for Directors and Executives

In order to align the financial interests of our directors and certain executive officers with the long-term interests of our stockholders, we have Stock Ownership Guidelines (the Guidelines).  Under the Guidelines in effect as of January 30, 2016, each of our non-employee directors is expected to retain all of his or her shares of common stock (except for shares withheld to pay withholding taxes) until they attain stock ownership with a fair market value equal to at least two times the annual base cash retainer paid to directors (excluding committee and attendance fees).  Mr. Anderson, our Executive Chairman as of January 30, 2016, Mr. Mazzola, our President and Chief Executive Officer, and Bruce D. Smith, our Chief Operating Officer and Chief Financial Officer, were each similarly expected to retain shares equal to three times annual base salary.  Shares owned directly or indirectly count toward meeting the Guidelines; however, shares of unvested time-based restricted stock and unearned performance shares do not count.  As of January 30, 2016, each of our non-employee directors, with the exception of Mr. Goff who joined the board in November 2013, owned shares with a fair market value in excess of the Guidelines’ requirements and are, therefore, in compliance with the Guidelines.  Mr. Goff has not disposed of any shares since joining the board, therefore, he is also in compliance with the Guidelines.  As of January 30, 2016, Mr. Anderson owned shares with a fair market value in excess of the Guidelines’ requirements.  Mr. Mazzola and Mr. Smith had not yet accumulated enough shares under the requirements; however, they have not disposed of any shares (other than shares withheld to pay withholding taxes) since being promoted to their respective positions, therefore, they are also in compliance with the Guidelines.

Compensation Committee Interlocks and Insider Participation

No current member of the Compensation Committee serves or has ever served as one of our executive officers or employees. None of our executive officers serves or has ever served as a member of the board of directors or the compensation committee of any entity that has one or more executive officers serving on our board of directors or our Compensation Committee.

Attendance of Directors

During fiscal 2015, the board of directors held 11 meetings. Each director attended at least 75% of the aggregate of the total number of meetings held by the board of directors and the total number of meetings held by all committees of the board of directors on which he or she served, which meetings were held when he or she was a director.

Policies Relating to our Board of Directors

Nomination and Selection of Directors

Our Nominating and Corporate Governance Committee identifies and evaluates potential director candidates in a variety of ways. Recommendations may come from current members of our board of directors, professional search firms, members of management, stockholders or other persons. In assessing the qualifications of potential nominees, the Nominating and Corporate Governance Committee may rely on personal interviews or discussions with the candidate and others familiar with the candidate’s professional background, on third-party background and reference checks and on such other due diligence information as reasonably available. The Nominating and Corporate Governance Committee must be satisfied that the candidate possesses the highest professional and personal ethics and values and has broad experience at the policy-making level in business before it would recommend a candidate as a nominee to our board of directors, and the nominee must meet the following minimum qualifications:

·                  demonstrates personal integrity and moral character;

·                  shows a willingness to apply sound and independent business judgment for the long-term interests of stockholders of the Company;

·                  possesses relevant business or professional experience, technical expertise or specialized skills;

·                  exhibits personality traits and background that appear to fit with those of the other directors to produce a collegial and cooperative board responsive to the Company’s needs; and

·                  maintains the ability to commit sufficient time to effectively carry out the substantial duties of a director.

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Neither the board nor the Nominating and Corporate Governance Committee has a formal diversity policy with regard to the consideration of diversity in identifying director candidates; however, our Corporate Governance Guidelines state that the committee will review candidates’ experience, integrity, competence, diversity, skills, and dedication in the context of the needs of the board.  Accordingly, in connection with its evaluation of each candidate, the committee takes into account how all of these factors pertaining to a candidate may complement or supplement those skills of other board members.  This helps to explain how our board, consisting of six members, represents such a wide range of experiences, including executive, financial, merchandising, retail operations and distribution.

The Nominating and Corporate Governance Committee evaluates nominees submitted by stockholders in the same manner as nominees from other sources.  Stockholders may recommend nominees for consideration at the annual meeting by submitting the names and supporting information to the Secretary of the Company at: Stockholder Nominations, Citi Trends, Inc., 104 Coleman Boulevard, Savannah, Georgia 31408. Such submissions must be delivered or mailed to the Secretary not less than ninety (90) calendar days and not more than one hundred twenty (120) calendar days prior to the first anniversary of the previous year’s annual meeting. The submission should include a current resume and curriculum vitae of the candidate, a statement describing the candidate’s qualifications and contact information for personal and professional references. The submission must also include the name and address of the stockholder who is submitting the nominee, the number of shares which are owned of record or beneficially by the submitting stockholder and a description of all arrangements or understandings between the submitting stockholder and the candidate and must also comply with the requirements of our bylaws.

Communications with our Board of Directors

Stockholders and other interested parties may communicate directly with our board of directors, the non-management directors as a group or individual directors. All communications should be in writing and should be directed to the Secretary of the Company at: Stockholder Communications, Citi Trends, Inc., 104 Coleman Boulevard, Savannah, Georgia 31408. The sender should indicate in the address whether it is intended for the entire board of directors, the non-management directors as a group or an individual director. Each communication received by the Secretary will be forwarded to the intended recipients.

Director Attendance at Annual Meeting of Stockholders

We do not have a formal policy regarding attendance by directors at our annual meeting of stockholders but invite, expect and encourage all directors to attend. All of the individuals who were directors at the time of the 2015 annual meeting of stockholders attended such meeting.

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AUDIT COMMITTEE REPORT

The Audit Committee reviews the Company’s financial reporting process on behalf of the board of directors.  Management has primary responsibility for the financial statements, the reporting process, and maintaining an effective system of internal controls over financial reporting.  The Audit Committee operates under a written charter adopted by the board of directors, a copy of which is available on the “Investor Relations” section of the Company’s website at http://www.cititrends.com.

In fulfilling its oversight responsibilities, the Audit Committee reviewed and discussed with management the audited financial statements in the Annual Report on Form 10-K for the 2015 fiscal year. The Audit Committee has also discussed with KPMG LLP, the Company’s independent registered public accounting firm during the 2015 fiscal year, the matters required to be discussed by PCAOB Auditing Standard No. 16, Communications with Audit Committees.

The Audit Committee has received and reviewed the written disclosures and the letter from KPMG LLP required by applicable requirements of the PCAOB regarding KPMG LLP’s communications with the Audit Committee concerning independence and has discussed with KPMG LLP its independence from the Company.

Based on the reviews and discussions referred to above, the Audit Committee recommended to the board of directors that the audited financial statements of the Company be included in the Company’s Annual Report on Form 10-K for the fiscal year ended January 30, 2016 for filing with the SEC.

Submitted by the Audit Committee of the board of directors:

Lawrence E. Hyatt, Chairman

Brian P. Carney

Laurens M. Goff

John S. Lupo

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COMPENSATION COMMITTEE REPORT

The Compensation Committee has reviewed the Compensation Discussion and Analysis section of this proxy statement and discussed that disclosure with management.  Based on its review and discussions with management, the committee recommended to our board of directors that the Compensation Discussion and Analysis be included in the Company’s proxy statement for the 2016 annual meeting of stockholders and incorporated by reference into the Company’s Annual Report on Form 10-K for the fiscal year ended January 30, 2016.

The undersigned members of the Compensation Committee have submitted this Report to the Board of Directors.

Submitted by the Compensation Committee of the board of directors:

Brian P. Carney, Chairman

Laurens M. Goff

Lawrence E. Hyatt

John S. Lupo

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EXECUTIVE OFFICERS

The following table sets forth the names, ages and positions of our current executive officers.

The following sets forth selected biographical information for our executive officers who are not directors.

Bruce D. Smith. Mr. Smith has served as our Chief Operating Officer and Chief Financial Officer since March 2015.  Mr. Smith served as our Executive Vice President and Chief Financial Officer from March 2010 to March 2015 and as our Senior Vice President and Chief Financial Officer from April 2007 to March 2010.  From 2005 to March 2007, Mr. Smith served as Executive Vice President, Chief Financial Officer and Treasurer of Hancock Fabrics, Inc. (“Hancock”), a specialty retailer of fabrics and related accessories, and served as the Senior Vice President, Chief Financial Officer and Treasurer of Hancock from 1996 until 2005.  From 1991 to 1996, Mr. Smith served as Executive Vice President and Chief Financial Officer of Fred’s, Inc.  From 1980 to 1991, Mr. Smith was a Senior Manager with Price Waterhouse (now PricewaterhouseCoopers LLP). Mr. Smith is a certified public accountant.

On March 21, 2007, Hancock, for which Mr. Smith served as an executive officer as described above, filed a voluntary petition for reorganization under Chapter 11 of the United States Bankruptcy Code.  On August 1, 2008, Hancock’s plan of reorganization became effective and Hancock emerged from bankruptcy protection.

Ivy D. Council. Ms. Council has served as our Executive Vice President of Human Resources and Chief Compliance Officer since March 2012 and as our Senior Vice President of Human Resources since January 2007.  In 2006, Ms. Council served as Vice President of Human Resources for Baja Fresh Restaurants, a division of Wendy’s, Inc.  From 2003 to 2006, Ms. Council served as Executive Vice President of Human Resources for Pasta Pomodoro Restaurants and as a director of such entity from 2001 through 2002.  Prior to that, Ms. Council served as Senior Vice President of Human Resources for Ross Stores.

James A. Dunn. Mr. Dunn has served as our Senior Vice President of Store Operations since 2006 and as our Vice President of Store Operations since 2001. From January to April 2001, Mr. Dunn was our Director of Training and Development and from 2000 to 2001, was one of our Regional Managers. Prior to joining us, Mr. Dunn was a Store Manager at Staples from 1999 to 2000. Prior to that, Mr. Dunn was a Regional Manager at Dress Barn, where he supervised 77 stores and 10 district managers.

Charles D. Crowell. Mr. Crowell has served as our Senior Vice President of Supply Chain since April 2011. From 2004 to March 2011, Mr. Crowell served as Vice President, Distribution for Hecht’s, a division of May Department Stores Company, and Macy’s, Inc. upon the merger of the two companies.  Mr. Crowell served as Vice President, Distribution Services for The Home Depot from 1997 to 2002 where he was responsible for the operations of a worldwide network of 62 distribution facilities. Prior to that, Mr. Crowell served as Vice President of Transportation and Distribution for Best Products.

Each of the executive officers serves at the discretion of the board of directors and holds office until his or her successor is elected and qualified or until his or her earlier resignation or removal.  There are no family relationships among any of the directors or executive officers.

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EXECUTIVE COMPENSATION

Compensation Discussion and Analysis

In the paragraphs that follow, we will give an overview and analysis of the material elements of our compensation program and policies, the material compensation decisions we have made under those programs and policies with respect to our top executive officers, and the material factors that we considered in making those decisions.  This information should be read in conjunction with the compensation tables, related narratives and notes contained later in this proxy statement, containing specific information about the compensation earned or paid in fiscal 2015 to the following individuals, whom we refer to as our named executive officers (positions shown are those held by the respective officers during fiscal 2015):

·                  R. Edward Anderson, our Chief Executive Officer through March 21, 2015 and the Executive Chairman of our board of directors from March 22, 2015 through April 2, 2016,

·                  Jason T. Mazzola, our President and Chief Executive Officer,

·                  Bruce D. Smith, our Chief Operating Officer and Chief Financial Officer,

·                  Ivy D. Council, our Executive Vice President of Human Resources and Chief Compliance Officer,

·                  James A. Dunn, our Senior Vice President of Store Operations, and

·                  Charles D. Crowell, our Senior Vice President of Supply Chain.

The discussion below is intended to help you understand the detailed information provided in the compensation tables and put that information into context within our overall compensation program.

Summary of Fiscal 2015

In 2015, the Company’s net income increased more than 70% to $15.5 million, or $1.03 per diluted share.  A 140 basis point improvement in cost of sales as a percentage of sales, together with a 1.9% increase in total sales, contributed to the higher level of earnings.  As discussed in the “Annual Cash Incentives” section below, we attained 109.5% of our Adjusted EBITDA target, resulting in cash incentives being paid to our named executive officers at a rate equal to 115% of the target award.  Our compensation program is designed to link the interests of management and stockholders, such that the achievement of challenging goals results in rewards for our executive officers.

Consideration of Last Year’s Advisory Stockholder Vote on Executive Compensation

At the annual meeting of stockholders on June 3, 2015, over 98% of the shares cast were voted to approve the compensation of the Company’s named executive officers, as discussed and disclosed in the 2015 proxy statement.  The Board and the Compensation Committee appreciate and value the views of our stockholders.  In considering the results of this advisory vote on executive compensation, the Committee concluded that the compensation paid to our named executive officers and the Company’s overall pay practices enjoy strong stockholder support.

In light of the strong stockholder support of the compensation paid to our named executive officers evidenced by the results of this advisory vote, the Compensation Committee decided to retain our general approach to executive compensation and did not make significant changes to our executive compensation programs for 2016 as a result of this advisory vote.  Going forward, future advisory votes on executive compensation will serve as an additional tool to guide the Committee in evaluating the alignment of the Company’s executive compensation programs with the interests of the Company and its stockholders.

At the annual meeting of stockholders on May 25, 2011, our stockholders expressed a preference that advisory votes on executive compensation occur annually.  Consistent with this preference, the Board determined to implement an advisory vote on executive compensation every year until the next required vote on the frequency of stockholder votes on the compensation of executive officers, which is scheduled to occur at the 2017 annual meeting.

Objective of Our Compensation Program

In order to maintain a critical advantage in our competitive marketplace, we believe our compensation program should be designed to provide market-competitive compensation and benefits that will enable us to attract and retain a talented, diverse workforce.  In

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furtherance of those goals, our compensation program is designed to:

·                  enable the Company to attract, retain and motivate a team of high quality executives who will create long-term stockholder value;

·                  create opportunities to participate in the ownership of the Company and to share in the value the executives help create; and

·                  provide rewards that are proportional to each executive’s contribution to our success.

Our compensation philosophy emphasizes each individual’s responsibility for high achievement and provides a strong link between pay and performance on both an individual and Company level.  Our management team and Compensation Committee will continue to develop and refine our compensation philosophy, program and practices over time, with the goal of maximizing stockholder value.

How We Determine and Assess Executive Compensation

Role of the Compensation Committee and Executive Officers

The Compensation Committee plays an integral role in the strategic direction and administration of the compensation structure of the Company.  The Compensation Committee and our CEO work together to ensure that the compensation paid to our named executive officers is in line with our compensation philosophy and furthers our long-term goals.

Our CEO recommends to the Compensation Committee base salary, target annual cash incentive amounts and formulas, and long-term equity incentive grants for our executive officers (other than himself), after forming qualitative judgments regarding individual performance within each executive’s areas of direct responsibility, as well as how such performance serves the entire Company, and after having discussions with the Compensation Committee and other members of management regarding appropriate levels of compensation. The Compensation Committee reviews such recommendations and determines whether, in light of our compensation philosophy, the recommended compensation levels are appropriate. This determination includes consideration of recommendations by the Compensation Consultant as described below. Upon such determination, the Compensation Committee formally approves the compensation levels for recommendation to the board of directors.  Our CEO is not involved with any aspect of determining his own compensation.  The Compensation Committee independently sets the CEO’s total compensation package, taking into account the same factors as for the other executive officers.

Compensation Consultant

The Compensation Committee has the authority to directly engage outside compensation consultants and other experts to assist in fulfilling its duties.  As discussed in further detail in the following section, the committee engaged Hay Group in 2014 to provide an analysis of the Company’s compensation practices and to provide the Committee with survey data and an update on current compensation trends.  The Compensation Committee has assessed the independence of Hay Group against specific criteria under applicable SEC and NASDAQ rules and concluded that no conflict of interest exists that would prevent Hay Group from independently representing the Compensation Committee.  The Hay Group does not have any relationship or arrangement with the Company other than their engagement as a consultant to the Compensation Committee.

Market Data

Periodically, the Compensation Committee reviews the compensation practices of a group of public companies selected from an industry peer group comprised primarily of specialty apparel retailers that are similar in size to the Company.  The peer group used by the Compensation Consultant in the 2014 peer group analysis consisted of the apparel retailers indicated below.  The Compensation Committee believes that the companies comprising this peer group represent appropriate comparisons due to the similarity in business and financial characteristics.

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The Compensation Committee also reviewed compensation information provided by the Compensation Consultant in 2014 from a survey of more than 130 retail companies, including four of the companies in our peer group. The Compensation Committee found in 2014 that for executive officers other than our Chief Executive Officer, Chief Financial Officer, and, formerly, our Chief Merchandising Officer, the retail company surveys provided better, more comparable, data than the more limited peer group analysis. The Compensation Consultant’s analysis focused on the following areas of compensation:

·                  base salary,

·                  annual cash incentives,

·                  total cash compensation (the sum of base salary and annual cash incentives),

·                  long-term equity incentives (a variable incentive vesting over a multi-year period), and

·                  total direct compensation (the sum of total cash compensation and long-term equity incentives).

We do not strive to set our executive officers’ targeted total direct compensation at a specific level relative to the median reflected in the Compensation Consultant’s peer group study or retail survey.  Instead, the use of the data as a guide is combined with the experience and judgment of the Compensation Committee’s members to determine the reasonableness of total direct compensation.  The 2014 analysis by the Compensation Consultant indicated that total direct compensation at target levels for the majority of our executive officers was at or below median in relation to the peer group or retail survey, as applicable.

The allocation of our executive officers’ total direct compensation among base salary, annual cash incentives and long-term equity incentives is based on the Compensation Committee’s judgment, taking into consideration market practices reflected in previous and current peer group and retail surveys, together with a goal of providing a fair balance of risk and reward through an allocation that includes a reasonable mix of both fixed and variable components.

Elements of our Compensation Program

Our executive officer compensation program consists of the following elements:  base salary, annual cash incentives, long-term equity incentives, and certain other benefits.

Base Salary

Base salaries fulfill the fixed portion of our compensation program.  Base salaries are set annually by the Compensation Committee based on a variety of factors, including peer group information, a qualitative review of the executive’s performance and contributions to the Company during the year and over a number of years, and changes in responsibilities, if any.  After considering these factors and considering the increased responsibilities for Messrs. Mazzola and Smith in connection with their promotions, the Compensation Committee approved adjustments to certain of our named executive officers’ base salaries in March 2015 as shown below:

(1)         Mr. Anderson retired as CEO on March 21, 2015, at which time he became Executive Chairman of the board of directors.

(2)         Mr. Mazzola was promoted to President and Chief Executive Officer on March 22, 2015.

(3)         Mr. Smith was promoted to Chief Operating Officer and Chief Financial Officer on March 22, 2015.

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Annual Cash Incentives

We measure our overall financial performance based on a number of financial metrics, of which the most important are (1) earnings before interest, taxes, depreciation and amortization (“EBITDA”) and (2) Adjusted EBITDA, which is comprised of EBITDA, as adjusted for asset impairment expense, a non-cash charge similar in certain respects to depreciation, and certain other unusual items.  The Company’s performance in these areas allows us to evaluate the Company’s success in any given year.  The Company’s success and performance impacts our compensation decisions with respect to our executive officers.  Our annual cash incentives are directly tied to these financial metrics, and we believe the future value of long-term equity incentives is linked to such metrics.

Our annual cash incentive program provides our executive officers with an opportunity to earn cash awards based on the achievement of our budgeted goal for Adjusted EBITDA. Due to the importance of this financial metric to the annual and long-term success of the Company, we strive to make the achievement of this goal each year to be a meaningful challenge to our executive officers. The budgeted Adjusted EBITDA that represents our goal considers many key operating and financial factors, including the following:

·                  Store selling square footage;

·                  Comparable store sales;

·                  Average sales per store;

·                  Gross margin;

·                  Store and distribution operating expenses as a percentage of sales; and

·                  Corporate expenses.

Our CEO recommends a target award for each executive officer (other than himself) based on the executive’s position within the Company and consideration of data provided by the Compensation Consultant and, together with the Compensation Committee, determines the appropriate target award for each executive.  For fiscal 2015, each executive officer’s target award (as a percentage of base salary) was as follows:

The annual cash incentive program is directly linked to our budget, such that if the Company achieves 100% of its budgeted Adjusted EBITDA, it is expected that the executive officers would receive 100% of their target award.  Items such as unplanned and significant costs related to litigation, claim judgments or settlements are excluded from both the budget and actual amounts used in the cash incentive calculation.  Since the calculation of cash incentives is based on performance versus budget, the exclusion of items such as these ensures that the inability to accurately budget such items does not positively or negatively influence cash incentives.

There is a scale in place that dictates payment of annual cash incentives in the event that actual Adjusted EBITDA as a percentage of budgeted Adjusted EBITDA is between the threshold and maximum levels of the scale.  For 2015, if actual EBITDA was equal to 90% of budget (threshold), then 50% of the target award was to be paid, while if it was equal to or greater than 140% of budget (maximum), then 200% of the target award was to be paid.  In 2015, the Adjusted EBITDA budget was $38,686,000, representing a 23.3% increase over 2014’s actual Adjusted EBITDA.  As described in the preceding paragraph, the budgeted amount for legal settlement and related costs (totaling $200,000) was excluded from the budget used in the incentive calculation, resulting in a performance target for incentive purposes of $38,886,000.  Actual Adjusted EBITDA for fiscal 2015 was $42,794,000.  The exclusion of actual 2015 expense or income related to settlement and legal costs (income totaling $218,000) resulted in actual performance for incentive purposes of $42,576,000, or 109.5% of the performance target.  As prescribed by the scale, achieving 109.5% of the performance target resulted in cash incentives equal to 115% of the target award being payable to the executive officers.

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The graph below reflects the various potential payout levels at different levels of performance:

Actual awards earned in each of the past three years by our named executive officers are shown in the “Non-Equity Incentive Plan Compensation” column of the Summary Compensation Table elsewhere in this proxy statement.

Long-Term Equity Incentives

Long-term equity incentive compensation awards are designed to encourage the creation of long-term value for our stockholders by increasing the retention of qualified key employees and aligning the interests of executive officers with our stockholders through the officers’ ownership of equity in the Company.

The dollar value of each equity grant is within the discretion of the Compensation Committee and is based on recommendations made by our CEO (with respect to executives other than the CEO), which take into account the executive’s past performance, the executive’s position within the Company, and an evaluation of other elements of compensation provided to the executive officer.  The committee also considers studies performed by the Compensation Consultant to determine the appropriate size of the equity-based awards.

We believe that grants of restricted stock and restricted stock units provide strong incentives for the creation of long-term stockholder value and provide significant retention value for the executives.  In 2015, the CEO received long-term equity incentives with a total value equal to 100% of base pay, split equally between restricted shares that vest based on continued future employment with the Company and restricted stock units that vest based on the achievement of performance criteria. The 2015 grant for Bruce Smith had a total value equal to 80% of base pay, split equally between time-based restricted shares and performance-based restricted stock units.  The 2015 grants for Ivy Council, Jim Dunn and Charles Crowell each consisted of time-based restricted shares with values determined as a percentage of base pay, equal to 65% for Ms. Council (executive vice president) and 50% for Messrs. Dunn and Crowell (senior vice presidents).  As previously discussed, the grant levels were determined as one of several components designed to achieve the desired total direct compensation; however, they were not set to be at any specific level within our peer group. The vesting period for the 2015 time-based grants was set as three equal installments on the first three anniversaries of the grant date.  The vesting for performance-based grants to Mr. Mazzola and Mr. Smith were set to occur in increments of 25% each if the Company’s stock price reaches $27.00; $29.25; $31.50; and $33.50 for twenty consecutive trading days at any time during the three years after the grant date.  The vesting periods were determined based on consideration of peer group practices and discussions with the Compensation Consultant.  For more information regarding these long-term incentives granted to our named executive officers in fiscal 2015, please see “Grants of Plan-Based Awards

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Table for Fiscal Year 2015” and “Outstanding Equity Awards at 2015 Fiscal Year-End Table” and the related footnotes elsewhere in this proxy statement.

Other Benefits

Retirement.  We maintain the Citi Trends, Inc. 401(k) Profit Sharing Plan, a tax-qualified, defined contribution employee benefit plan in which a substantial majority of our employees, including the named executive officers, are eligible to participate.  We match 50% of employee contributions to the plan, up to a maximum of 4% of an employee’s total calendar year compensation (subject to IRS limits).

Perquisites.  During fiscal 2015, the Company provided Mr. Anderson with a travel allowance, Mr. Mazzola with reimbursements of commuting expenses and Mr. Dunn with the use of a Company car.  Each executive officer also received life/long-term disability insurance coverage.  We did not provide any other special benefits or perquisites to our executive officers.  We believe these perquisites are reasonable in light of peer group practices.  We provide health and welfare benefits to our executive officers on the same basis as we provide to all of our salaried employees.

Employment Agreements and Severance Agreements.  We have entered into severance agreements with all of the named executive officers, which provide severance benefits in the event their employment is terminated by the Company without Cause (as defined in the severance agreement) or in connection with a Change in Control (as defined in the severance agreement) of the Company.  Each severance agreement provides that if the Company terminates an executive’s employment without Cause or if the executive terminates his or her employment within twelve months of a Change in Control, provided that within such period the executive’s job duties have been materially diminished or compensation has been materially decreased, the Company will provide the executive with separation payments of twelve months base salary. The Company provides these involuntary termination severance benefits to protect individuals from events outside their control and to offer compensation packages similar to those commonly found in our market for competing executive talent. Furthermore, the Company provides these benefits to protect the Company against disruption in the event of a change in control. We believe that these severance agreements serve as an important retention element of the compensation package provided to these officers.  The potential severance benefits payable to our named executive officers are described in “Potential Payments upon Termination or Change in Control” elsewhere in this proxy statement.

Equity Grant Practices

The Company has a practice of generally making equity awards on pre-established dates.  Annual equity awards are presented to the Compensation Committee for approval at a regularly scheduled Compensation Committee meeting, usually held in March.  Equity awards are also given to employees throughout the year as they are hired or promoted into positions eligible for those awards. We make decisions on equity grants based solely on our compensation and retention objectives and our established measurements of the value of these awards.  The Company makes an effort to issue the annual grants each March after the Company’s fourth quarter earnings release, in order to allow time for the release to be disseminated to the investment community.

Stock Ownership Guidelines

As described above under “Stock Ownership Guidelines for Directors and Executives” in “Board of Directors and Committees of the Board of Directors”, certain of our executives are expected to retain all shares of common stock (except for shares withheld to pay withholding taxes) until such point that the owned stock has a fair market value equal to at least three times annual base salary.

Compensation Recoupment (“Clawback”) Policy

In November 2014, the board adopted the Citi Trends, Inc. Compensation Recoupment Policy (the “Clawback Policy”).  Pursuant to the Clawback Policy, in the event of a restatement of the Company’s financial results as a result of material non-compliance with financial reporting requirements, the Compensation Committee will review the incentive compensation, including equity awards and non-equity incentive compensation, that the Company’s executive officers received or realized based on the erroneous financial results reported by the Company (“covered compensation”). If any covered compensation would have been lower had the covered compensation been calculated based on the Company’s restated financial results, the Committee will, as and to the extent it deems appropriate and as permitted by applicable law, recoup any portion of covered compensation paid in excess of what would have been paid based on the restated financial results. The Compensation Committee shall seek recovery from any executive officer whose misconduct is determined by the Compensation Committee to have caused or contributed to the requirement for the restatement, unless the Compensation Committee determines that the cost of recovery would exceed the amount sought to be recovered. The Clawback Policy applies to all current and former executive officers of the Company.

This Clawback Policy applies in addition to any right of recoupment against the Company’s Chief Executive Officer and Chief Financial Officer pursuant to the Sarbanes-Oxley Act of 2002.  The policy does not apply in any situation where a restatement is not the result of material non-compliance with financial reporting requirements, such as any restatement due to a change in applicable accounting rules, standards or interpretations, a change in segment designations or the discontinuance of an operation.

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Anti-Hedging Policy; Policy on Pledging

We have an insider trading policy that sets forth guidelines and restrictions applicable to transactions involving our stock by directors, officers and employees.  Among other things, this policy prohibits our directors, officers and employees from engaging in purchases or sales of puts, calls, options or other derivative securities based on the Company’s securities.  These hedging transactions are prohibited because they would allow directors, officers and employees to continue to own the covered securities, but without the full risks and rewards of ownership.  When that occurs, their interests and the interests of the Company and its stockholders may be misaligned and may signal a message to the trading market that may not be in the best interests of the Company and its stockholders at the time it is conveyed.  The insider trading policy also prohibits directors and officers from engaging in short sales of the Company’s securities.

Our insider trading policy, which is available on our corporate website at http://www.cititrends.com, prohibits any pledging of the Company’s securities as collateral for a loan by a director or executive officer.

Tax and Accounting Considerations

The accounting treatment of compensation has been a factor in determining the type of equity awards to grant to our executive officers.  Prior to fiscal 2007, the favorable accounting treatment of stock options played an important role in the Company’s decision to use this form of equity award.  However, following the adoption of new accounting regulations requiring the recording of stock-based compensation expense, the Company reevaluated its equity grant practices, and in fiscal 2007 shifted to restricted stock as its primary form of equity award, as discussed above.

It is the Compensation Committee’s intent to maximize tax deductibility of executive compensation while retaining some discretion needed to compensate executives in a manner commensurate with performance and the competitive landscape for executive talent.  Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”), places a limit of $1 million on the amount of compensation that we may deduct in any year with respect to any one of our named executive officers.  This limitation does not apply to compensation that meets the requirements under Section 162(m) for “qualifying performance-based” compensation.  No deductions for compensation paid for 2015 were limited under Section 162(m) of the Code, with the exception of $695,230 paid to Mr. Mazzola and $56,535 paid to Mr. Smith.

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2015 Fiscal Year Compensation Tables

Summary Compensation Table

The following table sets forth the cash and other compensation that we paid to our named executive officers, or that was otherwise earned by our named executive officers, for their services in all capacities during fiscal years 2013, 2014 and 2015.

(1)         Reflects the grant-date fair value of restricted stock awards and restricted stock units computed in accordance with FASB ASC Topic 718.  The fair value of time-based grants of restricted stock is based on the Company’s stock price at the close of business on the date of grant, and the fair value of performance-based grants of restricted stock units is estimated using a lattice model with the following assumptions for 2015 (1) risk-free rate of return: 1.0%; (2) volatility: 39%; and (3) term: three years.  The aggregate grant date fair value of the awards to Mr. Mazzola and Mr. Smith, assuming the highest level of performance conditions will be achieved under their performance-based restricted stock units, is $500,000 and $360,000, respectively.

(2)         Reflects the value of cash incentive compensation earned under our annual cash incentive program.

(3)         Other Compensation in 2015 for Mr. Anderson includes a travel allowance of $9,000 and for Mr. Mazzola reimbursements for commuting expense totaling $42,813.  Mr. Dunn’s Other Compensation in 2015 includes $8,622 related to the use of a Company car.  Additionally, 2015 Other Compensation includes amounts for each officer related to life/long-term disability insurance coverage and amounts for Mr. Mazzola, Mr. Smith, Ms. Council, Mr. Dunn, and Mr. Crowell representing the Company’s 401(k) matching contributions.

(4)         Mr. Anderson retired from the position of Chief Executive Officer effective March 21, 2015, but continued as an employee of the Company in fiscal 2015, serving as Executive Chairman of the Board of Directors.

(5)         Mr. Mazzola was promoted to President and Chief Executive Officer on March 22, 2015.

(6)         Mr. Smith was promoted to Chief Operating Officer and Chief Financial Officer on March 22, 2015.

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Grants of Plan-Based Awards Table for Fiscal Year 2015

The following table sets forth the individual grants of awards made to each of our named executive officers during fiscal year 2015.

(1)             Represents threshold, target and maximum payout values pursuant to our annual cash incentive program for fiscal year 2015 performance.  For more information on our annual cash incentive program, see the description contained in the “Compensation Discussion and Analysis” elsewhere in this proxy statement.  In each case, the actual amount earned pursuant to our annual cash incentive program by each named executive officer is reported under the Non-Equity Incentive Plan Compensation column in the Summary Compensation Table.

(2)             Reflects the target payout level of performance-based restricted stock units that vest in 25% increments if the Company’s stock price reaches $27.00, $29.25, $31.50 and $33.50 for twenty consecutive trading days during the three years following the grant date.

(3)             Represents awards of time-based restricted stock under the 2012 Incentive Plan, which vest in three equal installments on the first three anniversaries of the grant date.

(4)             Reflects the grant-date fair value of restricted stock awards and restricted stock units computed in accordance with FASB ASC Topic 718.  The fair value of time-based grants of restricted stock is based on the Company’s stock price at the close of business on the date of grant, and the fair value of performance-based grants of restricted stock units is estimated using a lattice model with the following assumptions: (1) risk-free rate of return: 1.0%; (2) volatility: 39%; and (3) term: three years.

Employment Agreements

In January 2012, the Compensation Committee of our board of directors approved Mr. Anderson’s compensation upon his return to the position of CEO, providing for an annual gross starting salary of $700,000 and participation in our annual bonus plan for management.  Letter agreements with Mr. Smith (March 2007), Ms. Council (December 2006), Mr. Crowell (February 2011) and Mr. Mazzola (January 2012) provided for an annual gross starting salary of $250,000, $200,000, $245,000 and $375,000, respectively, and participation in our annual bonus plan.  The letter agreements may be terminated by the executive or us at any time for any reason or no reason.  See “Potential Payments Upon Termination or Change in Control” for further information concerning severance agreements and employment non-compete, non-solicit and confidentiality agreements between the Company and each of the named executive officers.

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Outstanding Equity Awards at 2015 Fiscal Year-End Table

The following table provides information concerning unexercised options and unvested restricted stock and restricted stock units outstanding as of January 30, 2016 for each of our named executive officers.

(1)             Market value is based on the closing stock price of $20.66 on January 29, 2016, the last trading day of our 2015 fiscal year.

(2)             Stock options were awarded on January 8, 2007 under the 2005 Long-Term Incentive Plan and vested in four equal installments on the first four anniversaries of the grant date.

(3)             Stock options were awarded on March 17, 2006 under the 2005 Long-Term Incentive Plan and vested in four equal installments on the first four anniversaries of the grant date.

(4)             Restricted shares were awarded on March 20, 2014 under the Citi Trends, Inc. 2012 Incentive Plan and vest in three equal installments on the first three anniversaries of the grant date.

(5)             Restricted shares were awarded on March 19, 2013 under the Citi Trends, Inc. 2012 Incentive Plan and vest in three equal installments on the first three anniversaries of the grant date.

(6)             Restricted shares were awarded March 19, 2015 under the Citi Trends, Inc. 2012 Incentive Plan and vest in three equal installments on the first three anniversaries of the grant date.

(7)             Restricted shares were awarded on May 23, 2012 under the Citi Trends, Inc. 2012 Incentive Plan and vest in four equal installments beginning March 20, 2013 and on March 20th of each of the three years thereafter.

(8)             Restricted stock units were awarded on March 19, 2015 under the Citi Trends, Inc. 2012 Incentive Plan.  These units are payable in shares of Common Stock and will be earned and vest based on the achievement of the closing price of the Company’s Common Stock equaling or exceeding certain threshold amounts for 20 consecutive trading days.  The restricted stock units expire if the threshold amounts are not reached prior to March 19, 2018.