CATO REPORTS 1Q EARNINGS
Cato (NYSE: CATO) reported a net income of $11.0 million ($0.54 per diluted share) for Q1 2024, up from $4.4 million ($0.22 per share) in Q1 2023.
Sales dropped by 8% to $175.3 million, and same-store sales fell by 6%, attributed to high interest rates and inflation affecting customer spending.
Gross margin remained steady at 35.8%, while Selling, General & Administrative (SG&A) expenses decreased to $56.8 million from $61.9 million.
Interest and other income surged to $5.8 million, driven by a $3.2 million gain on land sale. Tax expenses decreased to $0.6 million.
The company repurchased 431,415 shares, closed seven stores, and ended with 1,171 stores in 31 states.
- Net income rose to $11.0 million from $4.4 million YoY.
- Earnings per Share (EPS) increased to $0.54 from $0.22 YoY.
- SG&A expenses decreased to $56.8 million from $61.9 million.
- Interest and other income surged to $5.8 million, largely due to a $3.2 million gain on land sale.
- Income tax expense decreased to $0.6 million from $2.1 million.
- The company repurchased 431,415 shares.
- Sales decreased by 8% YoY to $175.3 million.
- Same-store sales dropped by 6%.
- Cato did not open any new stores and closed seven stores during the quarter.
- The total number of stores decreased to 1,171 from 1,264 YoY.
Insights
The first quarter earnings report for The Cato Corporation reveals a mixed yet notable financial performance. Net income saw a significant increase to
Despite this, sales dropped
Regarding expenditure, Selling, General and Administrative expenses decreased both in absolute terms and as a percentage of sales. This suggests better efficiency and cost-cutting measures, including reductions in equity compensation, advertising and store expenses.
Furthermore, the interest and other income increased substantially to
In summary, while the rise in net income is promising, the drop in sales and same-store performance signals caution. Investors should weigh the improved profitability against the challenging retail environment.
The Cato Corporation's decision to close seven stores during the quarter indicates a strategic response to challenging market conditions. The company now operates 1,171 stores, down from 1,264 a year ago. This could be viewed as a move to optimize the retail footprint and focus on more profitable locations.
Importantly, the reduction in store expenses and the maintenance of the gross margin at
On a broader scale, the fashion retail sector is experiencing a shift with increased competition from online retailers and changing consumer preferences. While Cato’s effort to enhance its online presence via catofashions.com and shopversona.com is commendable, the decline in physical store sales underscores the urgency of adapting to these market dynamics.
For retail investors, it’s important to monitor how Cato navigates these challenges, particularly their ability to drive online sales and manage costs. The company's cautious outlook for the remainder of the year underscores the uncertainty in the market.
Analyzing the tax component, The Cato Corporation's income tax expense decreased significantly to
For investors, understanding these tax components is important as they can influence net income. The valuation allowance indicates that the company is cautious about the recoverability of certain deferred tax assets, reflecting a prudent but conservative approach to tax planning.
Given the current economic conditions and the company's operational performance, the reduction in tax expense offers a short-term benefit to net income. However, it’s essential to consider if this lower tax expense is sustainable in the long-term and how it aligns with overall business strategy.
Sales for the first quarter ended May 4, 2024 were
"The pressure on our customers' discretionary spending levels due to high interest rates and inflation continue to negatively impact our sales," said John Cato, Chairman, President and Chief Executive Officer. "With the pressure on our customers' discretionary spending levels, we remain cautious about the remainder of the year."
First quarter gross margin as a percentage of sales was
Additionally, the Company bought back 431,415 shares during the quarter.
During the first quarter ended May 4, 2024, the Company did not open any stores and permanently closed seven stores. As of May 4, 2024, the Company operated 1,171 stores in 31 states, compared to 1,264 stores in 32 states as of April 29, 2023.
The Cato Corporation is a leading specialty retailer of value-priced fashion apparel and accessories operating three concepts, "Cato," "Versona" and "It's Fashion." The Company's Cato stores offer exclusive merchandise with fashion and quality comparable to mall specialty stores at low prices every day. The Company also offers exclusive merchandise found in its Cato stores at www.catofashions.com. Versona is a unique fashion destination offering apparel and accessories including jewelry, handbags and shoes at exceptional prices every day. Select Versona merchandise can also be found at www.shopversona.com. It's Fashion offers fashion with a focus on the latest trendy styles for the entire family at low prices every day.
Statements in this press release that express a belief, expectation or intention, as well as those that are not a historical fact, including, without limitation, statements regarding the Company's expected or estimated operational financial results, activities or opportunities, and potential impacts and effects of interest rates, inflation or other factors that may affect our customers' discretionary spending or our costs are considered "forward-looking" within the meaning of The Private Securities Litigation Reform Act of 1995. Such forward-looking statements are based on current expectations that are subject to known and unknown risks, uncertainties and other factors that could cause actual results to differ materially from those contemplated by the forward-looking statements. Such factors include, but are not limited to, any actual or perceived deterioration in, or continuation of negative trends in, the conditions that drive consumer confidence and spending, including, but not limited to, prevailing social, economic, political and public health conditions and uncertainties, levels of unemployment, fuel, energy and food costs, inflation, wage rates, tax rates, interest rates, home values, consumer net worth and the availability of credit; changes in laws, regulations or government policies affecting our business including but not limited to tariffs; uncertainties regarding the impact of any governmental action regarding, or responses to, the foregoing conditions; competitive factors and pricing pressures; our ability to predict and respond to rapidly changing fashion trends and consumer demands; our ability to successfully implement our new store development strategy to increase new store openings and the ability of any such new stores to grow and perform as expected; underperformance or other factors that may lead to, or affect the volume of, store closures; adverse weather, public health threats (including the global coronavirus (COVID-19) outbreak), acts of war or aggression or similar conditions that may affect our merchandise supply chain, sales or operations; inventory risks due to shifts in market demand, including the ability to liquidate excess inventory at anticipated margins; adverse developments or volatility affecting the financial services industry or broader financial markets; and other factors discussed under "Risk Factors" in Part I, Item 1A of the Company's most recently filed annual report on Form 10-K and in other reports the Company files with or furnishes to the SEC from time to time. The Company does not undertake to publicly update or revise the forward-looking statements even if experience or future changes make it clear that the projected results expressed or implied therein will not be realized. The Company is not responsible for any changes made to this press release by wire or Internet services.
THE CATO CORPORATION | |||||||
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) | |||||||
FOR THE PERIODS ENDED MAY 4, 2024 AND APRIL 29, 2023 | |||||||
(Dollars in thousands, except per share data) | |||||||
Quarter Ended | |||||||
May 4, | % | April 29, | % | ||||
2024 | Sales | 2023 | Sales | ||||
REVENUES | |||||||
Retail sales | $ | 175,272 | 100.0 % | $ | 190,311 | 100.0 % | |
Other revenue (principally finance, | |||||||
late fees and layaway charges) | 1,827 | 1.0 % | 1,739 | 0.9 % | |||
Total revenues | 177,099 | 101.0 % | 192,050 | 100.9 % | |||
GROSS MARGIN (Memo) | 62,767 | 35.8 % | 68,224 | 35.8 % | |||
COSTS AND EXPENSES, NET | |||||||
Cost of goods sold | 112,505 | 64.2 % | 122,087 | 64.2 % | |||
Selling, general and administrative | 56,752 | 32.4 % | 61,934 | 32.5 % | |||
Depreciation | 2,040 | 1.2 % | 2,357 | 1.2 % | |||
Interest and other income | (5,821) | -3.3 % | (897) | -0.5 % | |||
Costs and expenses, net | 165,476 | 94.4 % | 185,481 | 97.5 % | |||
Income Before Income Taxes | 11,623 | 6.6 % | 6,569 | 3.5 % | |||
Income Tax Expense | 649 | 0.4 % | 2,141 | 1.1 % | |||
Net Income | $ | 10,974 | 6.3 % | $ | 4,428 | 2.3 % | |
Basic Earnings Per Share | $ | 0.54 | $ | 0.22 | |||
Diluted Earnings Per Share | $ | 0.54 | $ | 0.22 | |||
THE CATO CORPORATION | ||||||
CONDENSED CONSOLIDATED BALANCE SHEETS | ||||||
(Dollars in thousands) | ||||||
May 4, | February 3, | |||||
2024 | 2024 | |||||
(Unaudited) | (Unaudited) | |||||
ASSETS | ||||||
Current Assets | ||||||
Cash and cash equivalents | $ | 39,101 | $ | 23,940 | ||
Short-term investments | 66,250 | 79,012 | ||||
Restricted cash | 3,533 | 3,973 | ||||
Accounts receivable - net | 31,716 | 29,751 | ||||
Merchandise inventories | 101,317 | 98,603 | ||||
Other current assets | 7,724 | 7,783 | ||||
Total Current Assets | 249,641 | 243,062 | ||||
Property and Equipment - net | 64,568 | 64,022 | ||||
Other Assets | 23,305 | 25,047 | ||||
Right-of-Use Assets, net | 139,635 | 154,686 | ||||
TOTAL | $ | 477,149 | $ | 486,817 | ||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||
Current Liabilities | $ | 127,997 | $ | 126,900 | ||
Current Lease Liability | 55,800 | 61,108 | ||||
Noncurrent Liabilities | 14,607 | 14,475 | ||||
Lease Liability | 81,834 | 92,013 | ||||
Stockholders' Equity | 196,911 | 192,321 | ||||
TOTAL | $ | 477,149 | $ | 486,817 | ||
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SOURCE The Cato Corporation
FAQ
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