So, you know how retail is supposed to be a tough business, especially for discounters? Well, someone forgot to tell Citi Trends, Inc. (CTRN). The stock shot up nearly 20% on Tuesday, hitting a fresh 52-week high. The reason? A classic one-two punch: a quarterly earnings beat and some seriously optimistic guidance for the year ahead.

Let's break it down. For the fourth quarter, Citi Trends reported adjusted earnings of 85 cents per share. That comfortably topped the analyst consensus estimate of 78 cents. Sales came in at $230.4 million, a 9.1% jump from a year ago and also ahead of the Street's forecast.

This wasn't a fluke. "Our fourth quarter results cap a transformational year for CITITRENDS," said CEO Ken Seipel. He pointed to an 8.9% increase in comparable store sales for the quarter, marking the company's sixth consecutive quarter of positive comps. Even more impressive, on a two-year basis, that growth rate jumps to 15.3%. The driver? An improved merchandise assortment that's bringing more customers into stores and getting them to buy more when they're there.

The good news didn't stop at the top line. Gross margin expanded by 20 basis points to 39.9%, thanks to fewer markdowns. Adjusted EBITDA more than doubled, jumping to $11.9 million from $7.1 million a year ago. And the company is managing its balance sheet well, ending the quarter with over $66 million in cash and equivalents, while merchandise inventory actually decreased by 7.4%.

But here's the part that really got investors excited: the outlook. For the full fiscal year 2026, Citi Trends is guiding for sales between $869.2 million and $885.6 million. That's above the analyst consensus of $859.3 million. They're also forecasting comparable store sales growth of 5% to 7%, gross margin expansion of about 100 basis points, and adjusted EBITDA of $34 million to $38 million.

They're putting their money where their mouth is, too. The plan includes opening about 25 new stores, remodeling 50 existing locations, and spending $35 million to $40 million in capital expenditures, mostly on that store growth and refresh strategy. They'll close just four stores.

By the time the dust settled on Tuesday, Citi Trends shares were up 19.76% at $52.90, trading at that new 52-week high. It's a clear vote of confidence from the market that this discount retailer's transformation is working.