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Cato Reports Increase In 2Q Net Income And EPS

CHARLOTTE, N.C., Aug. 22, 2019 /PRNewswire/ -- The Cato Corporation (CATO) today reported net income of $11.9 million or $.48 per diluted share for the second quarter ended August 3, 2019, compared to a net income of $6.5 million or $.26 per diluted share for the second quarter ended August 4, 2018.  Sales for the second quarter were $210.4 million, or an increase of 2% from sales of $206.8 million for the second quarter ended August 4, 2018.   The Company's same-store sales for the quarter increased 4% to last year.

For the six months ended August 3, 2019, the Company earned net income of $33.1 million, compared to net income of $29.9 million for the six months ended August 4, 2018.  Earnings per diluted share were $1.34 compared to $1.20 last year.  Sales for the six months ended August 3, 2019 were $438.4 million, down 1% to sales of $442.9 million for the six months ended August 4, 2018.  Year-to-date same-store sales increased 1%.

"Our performance in the second quarter and first half of 2019 exceeded our expectations with higher same-store sales, higher merchandise margins and savings in SG&A," commented John Cato, Chairman, President, and Chief Executive Officer.  "However, we remain cautiously optimistic about the second half of the year given the difficult retail environment and the potential effect of new tariffs."

Gross margin increased 80 basis points to 38.0% of sales in the quarter, primarily due to higher merchandise margins and lower occupancy costs.  SG&A expenses as a percent of sales decreased 190 basis points to 31.4% during the quarter primarily due to lower insurance expense partially offset by higher incentive compensation.  Income tax for the quarter was an expense of $2.1 million compared to $1.0 million last year.  The Company ended the quarter with cash and short-term investments of $237.2 million.

Year-to-date, the gross margin increased to 39.2% of sales from 38.6% the prior year primarily due to higher merchandise margins and lower buying and occupancy costs.  The year-to-date SG&A rate was 30.1% versus 30.5% last year primarily due to lower insurance costs partially offset by higher incentive compensation.  Income tax was an expense of $6.4 million compared to an expense of $4.2 million last year. 

As of August 3, 2019, The Cato Corporation operated 1,299 stores in 31 states, compared to 1,350 stores in 33 states as of August 4, 2018. 

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 not historical in nature including, without limitation, statements regarding the Company's expected or estimated operational and financial results 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, the following: any actual or perceived deterioration in the conditions that drive consumer confidence and spending, including, but not limited to, levels of unemployment, fuel, energy and food costs, wage rates, tax rates, home values, consumer net worth and the availability of credit; uncertainties regarding the impact of any governmental responses to the foregoing conditions; competitive factors and pricing pressures; our ability to predict and respond to rapidly changing fashion trends and consumer demands; adverse weather 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 AUGUST 3, 2019 AND AUGUST 4, 2018











(Dollars in thousands, except per share data)
































Quarter Ended


Six Months Ended


















August 3,

%


August 4,

%


August 3,

%


August 4,

%


2019

Sales


2018

Sales


2019

Sales


2018

Sales

















REVENUES
















  Retail sales

$

210,357

100.0%


$

206,848

100.0%


$

438,423

100.0%


$

442,873

100.0%

  Other revenue (principally finance,
















    late fees and layaway charges)


2,224

1.1%



2,069

1.0%



4,510

1.0%



4,344

1.0%

















    Total revenues


212,581

101.1%



208,917

101.0%



442,933

101.0%



447,217

101.0%

















GROSS MARGIN (Memo)


79,985

38.0%



77,047

37.3%



171,968

39.2%



170,785

38.6%

















COSTS AND EXPENSES, NET
















  Cost of goods sold


130,372

62.0%



129,801

62.8%



266,455

60.8%



272,088

61.4%

  Selling, general and administrative


66,066

31.4%



68,892

33.3%



132,056

30.1%



134,851

30.4%

  Depreciation


3,836

1.8%



4,152

2.0%



7,679

1.8%



8,376

1.9%

  Interest and other income


(1,693)

-0.8%



(1,431)

-0.7%



(2,829)

-0.7%



(2,185)

-0.5%

















    Cost and expenses, net


198,581

94.4%



201,414

97.4%



403,361

92.0%



413,130

93.3%

































Income Before Income Taxes


14,000

6.7%



7,503

3.6%



39,571

9.0%



34,087

7.7%

















Income Tax (Benefit)/Expense


2,134

1.0%



1,021

0.5%



6,450

1.5%



4,195

0.9%

















Net Income

$

11,866

5.6%


$

6,482

3.1%


$

33,121

7.6%


$

29,892

6.7%

































Basic Earnings Per Share

$

0.48



$

0.26



$

1.34



$

1.20


































Diluted Earnings Per Share

$

0.48



$

0.26



$

1.34



$

1.20


 

THE CATO CORPORATION







CONDENSED CONSOLIDATED BALANCE SHEETS 





(Dollars in thousands)















August 3,



February 2,


2019



2019


(Unaudited)



(Unaudited)








ASSETS







Current Assets







  Cash and cash equivalents

$

26,011



$

24,603

  Short-term investments


207,366




182,711

  Restricted cash


3,855




3,802

  Accounts receivable - net


27,479




28,137

  Merchandise inventories


99,952




119,585

  Other current assets


4,651




11,750








Total Current Assets


369,314




370,588








Property and Equipment - net


89,567




94,304








Noncurrent Deferred Income Taxes


10,821




11,209








Other Assets


22,676




21,805








Right-of-Use Assets, net


164,988




0








      TOTAL

$

657,366



$

497,906








LIABILITIES AND STOCKHOLDERS' EQUITY












Current Liabilities

$

123,862



$

141,086








Current Lease Liability


55,747




0








Noncurrent Liabilities


22,822




39,984








Lease Liability


120,317




0








Stockholders' Equity


334,618




316,836








      TOTAL

$

657,366



$

497,906

 

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