CATO REPORTS 3Q RESULTS

Rhea-AI Summary

Cato Corporation (CATO) Reports Net Loss and Declining Sales, Despite Improved Gross Margin Rate. The Company Attributes Sales Decline to Economic Conditions and Changing Consumer Spending Habits, Highlighting the Impact of COVID-19. Cato Opens New Stores but Closes Others, Reflecting a Shift in Retail Strategy.

Positive

• Improved gross margin rate from 29.3% to 32.5% in the quarter due to higher merchandise margins.
• Cato opened nine stores and closed 44 stores year-to-date, indicating a strategic shift in retail operations.
• The Company's focus on controlling inventory has led to an improvement in gross margin rate compared to 2022.

Negative

• Net loss of $6.1 million reported for the third quarter, and a net loss of $0.5 million for the nine months ended October 28, 2023.
• Sales decreased by 10% in the third quarter and 8% for the nine months ended October 28, 2023, compared to the same periods in 2022.
• Same-store sales decreased by 8% in the third quarter and 6% year-to-date compared to 2022.

CHARLOTTE, N.C., Nov. 16, 2023 /PRNewswire/ -- The Cato Corporation (NYSE: CATO) today reported a net loss of $6.1 million or ($0.30) per diluted share for the third quarter ended October 28, 2023, compared to a net loss of $4.5 million or ($0.21) per diluted share for the third quarter ended October 29, 2022. 

Sales for the third quarter ended October 28, 2023 were $156.7 million, a decrease of 10% from sales of $174.9 million for the third quarter ended October 29, 2022.  The Company's same-store sales for the quarter decreased 8% compared to 2022.

For the nine months ended October 28, 2023, the Company reported a net loss of $0.5 million or ($0.02) per diluted share, compared to net income of $3.0 million or $0.14 per diluted share for the nine months ended October 29, 2022.  Sales for the nine months ended October 28, 2023 were $528.2 million, a decrease of 8% to sales of $574.9 million for the nine months ended October 29, 2022.  Year-to-date same-store sales decreased 6% compared to 2022.

"Our year-to-date sales trend continues to be negatively impacted by declining spending on goods versus services, as well as our customers' discretionary spending levels," stated John Cato, Chairman, President, and Chief Executive Officer.  "Our gross margin rate continues to improve compared to 2022, as we continue to focus on controlling our inventory in this difficult economic environment.  However given the current economic conditions, we believe that the fourth quarter will remain challenging."

Gross margin increased from 29.3% to 32.5% of sales in the quarter due to higher merchandise margins, partially offset by increased freight and occupancy costs as a percent of sales.  SG&A expenses as a percent of sales increased from 35.1% to 39.4% of sales during the quarter primarily due to increased payroll and insurance expense. Tax benefit for the quarter was $4.3 million versus a $4.7 million tax benefit in the prior year.

Year-to-date gross margin increased to 34.6% of sales from 32.5% in the prior year primarily due to increased merchandise margins, partially offset by occupancy costs as a percent of sales.  The year-to-date SG&A rate was 35.1% versus 31.8% primarily due to increased payroll and insurance expense.  Tax benefit for the nine-month period was $0.8 million compared to $3.0 million tax expense last year.

During the third quarter ended October 28, 2023, the Company opened one store and closed three stores.  Year-to-date, the Company opened nine stores and closed 44 stores.  As of October 28, 2023, the Company has 1,245 stores in 31 states, compared to 1,317 stores in 32 states as of October 29, 2022.

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 the coronavirus 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 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, wage rates, tax rates, interest rates, home values, consumer net worth and the availability of credit; changes in laws or regulations 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; adverse weather, public health threats (including the global coronavirus (COVID-19) outbreak) or similar conditions that may affect our sales or operations; inventory risks due to shifts in market demand, including the ability to liquidate excess inventory at anticipated margins; 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 OCTOBER 28, 2023 AND OCTOBER 29, 2022
(Dollars in thousands, except per share data)
	Quarter Ended								Nine Months Ended
	October 28,		%		October 29,		%		October 28,		%		October 29,		%
	2023		Sales		2022		Sales		2023		Sales		2022		Sales
REVENUES
Retail sales	$	156,682	100.0 %		$	174,921	100.0 %		$	528,174	100.0 %		$	574,860	100.0 %
Other revenue (principally finance,
late fees and layaway charges)		1,574	1.0 %			1,705	1.0 %			5,003	0.9 %			5,351	0.9 %
Total revenues		158,256	101.0 %			176,626	101.0 %			533,177	100.9 %			580,211	100.9 %
GROSS MARGIN (Memo)		50,850	32.5 %			51,169	29.3 %			182,638	34.6 %			187,116	32.5 %
COSTS AND EXPENSES, NET
Cost of goods sold		105,832	67.5 %			123,752	70.7 %			345,536	65.4 %			387,744	67.5 %
Selling, general and administrative		61,792	39.4 %			61,397	35.1 %			185,344	35.1 %			182,606	31.8 %
Depreciation		2,504	1.6 %			2,864	1.6 %			7,371	1.4 %			8,418	1.5 %
Interest and other income		(1,523)	-1.0 %			(2,278)	-1.3 %			(3,754)	-0.7 %			(4,565)	-0.8 %
Costs and expenses, net		168,605	107.6 %			185,735	106.2 %			534,497	101.2 %			574,203	99.9 %
Income (Loss) Before Income Taxes		(10,349)	-6.6 %			(9,109)	-5.2 %			(1,320)	-0.3 %			6,008	1.0 %
Income Tax Expense (Benefit)		(4,272)	-2.7 %			(4,656)	-2.7 %			(797)	-0.2 %			2,988	0.5 %
Net Income (Loss)	$	(6,077)	-3.9 %		$	(4,453)	-2.5 %		$	(523)	-0.1 %		$	3,020	0.5 %
Basic Earnings Per Share	$	(0.30)			$	(0.21)			$	(0.02)			$	0.14
Diluted Earnings Per Share	$	(0.30)			$	(0.21)			$	(0.02)			$	0.14

 

THE CATO CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
	October 28,				January 28,
	2023				2023
	(Unaudited)				(Unaudited)
ASSETS
Current Assets
Cash and cash equivalents	$	25,024			$	20,005
Short-term investments		93,552				108,652
Restricted cash		3,908				3,787
Accounts receivable - net		31,115				26,497
Merchandise inventories		98,872				112,056
Other current assets		8,591				6,676
Total Current Assets		261,062				277,673
Property and Equipment - net		66,302				70,382
Noncurrent Deferred Income Taxes		10,977				9,213
Other Assets		25,444				21,596
Right-of-Use Assets, net		123,583				174,276
TOTAL	$	487,368			$	553,140
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities	$	132,793			$	135,597
Current Lease Liability		51,431				67,360
Noncurrent Liabilities		14,683				16,183
Lease Liability		71,143				107,407
Stockholders' Equity		217,318				226,593
TOTAL	$	487,368			$	553,140

 

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SOURCE The Cato Corporation

FAQ

What were Cato Corporation's sales for the third quarter ended October 28, 2023?

Cato Corporation reported sales of $156.7 million for the third quarter ended October 28, 2023, representing a 10% decrease from the same period in 2022.

What is the reason behind Cato's net loss for the third quarter?

Cato attributed its net loss to declining spending on goods versus services and customers' discretionary spending levels, impacting sales negatively.

How many stores did Cato Corporation open and close during the third quarter?

During the third quarter ended October 28, 2023, Cato opened one store and closed three stores.

What is the primary focus of Cato's retail strategy?

Cato focuses on offering exclusive merchandise with fashion and quality comparable to mall specialty stores at low prices every day, as well as controlling inventory to improve gross margin rates.