Cato Reports 2Q EPS of $.54
CHARLOTTE, N.C., Aug 19, 2010 /PRNewswire via COMTEX/ -- The Cato Corporation (NYSE: CATO) today reported net income of $16.0 million or $.54 per diluted share for the second quarter ended July 31, 2010, compared to net income of $16.7 million or $.56 per diluted share for the second quarter ended August 1, 2009. Net income decreased 4% and earnings per diluted share decreased 4% from last year. Sales for the second quarter were $231.9 million, a 3% increase over sales of $225.4 million last year. Second quarter comparable store sales increased 2%.
For the six months ended July 31, 2010, the Company earned net income of $43.1 million or $1.46 per diluted share, compared with net income of $35.5 million or $1.20 per diluted share for the six months ended August 1, 2009, an increase of 21% in net income and 22% in earnings per diluted share. Sales for the first half were $491.6 million, a 6% increase over the prior year's first half sales of $463.4 million. Comparable store sales for the first half increased 5%.
"We experienced good same-store sales in the second quarter and continued to control our inventory well," stated John Cato, Chairman, President, and Chief Executive Officer. "Even with better than expected sales year-to-date, we continue to believe much uncertainty exists as we look forward. We are maintaining our original guidance for the second half of the year and we continue to manage our business tightly."
Second quarter gross margin was 38.3% compared to 36.3% last year due primarily to lower markdowns. Second quarter SG&A costs as a percent of sales increased to 26.9% from 25.1% last year primarily as a result of higher accrued incentive compensation and worker's compensation costs. The effective tax rate for the quarter was 36.2% compared to 29.7% last year. The lower tax rate in 2009 was primarily due to the impact of the resolution of various tax audits and increased earnings per diluted share approximately $.05 in last year's second quarter.
Based on year-to-date results and the Company's original guidance for the second half, earnings per diluted share for the year is estimated to be in the range of $1.83 to $1.89 versus $1.55 last year, an increase of 18% to 22%. By quarter, earnings per diluted share are estimated to be in the range of $.12 to $.15 versus $.10 last year for the third quarter and $.25 to $.28 versus $.25 last year for the fourth quarter. Comparable store sales for both the third and fourth quarters are estimated to be in the range of down 3% to flat.
During the first half, the Company opened 13 new stores, relocated three stores and closed nine stores. Six of the closings were It's Fashion stores closed to open as It's Fashion Metro stores in the same market. The Company now expects to open approximately 41 stores during 2010. As of July 31, 2010, The Cato Corporation operated 1,275 stores in 31 states, compared to 1,285 stores in 31 states as of August 1, 2009.
The Cato Corporation is a leading specialty retailer of value-priced women's fashion apparel and accessories operating two divisions, "Cato" and "It's Fashion". The Company's Cato division offers exclusive merchandise with fashion and quality comparable to mall specialty stores at low prices every day. The It's Fashion division offers fashion with a focus on the latest trendy styles and nationally recognized urban brands for the entire family at low prices every day. Additional information on The Cato Corporation is available at http://www.catocorp.com/.
Statements in this press release not historical in nature including, without limitation, statements regarding the Company's expected or estimated financial results for the third quarter, fourth quarter and full year and any related assumptions, as well as the Company's expected plans for full year store openings 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: general economic conditions; competitive factors and pricing pressures; the Company's ability to predict fashion trends; consumer apparel buying patterns; adverse weather conditions and inventory risks due to shifts in market demand 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, as amended or supplemented, 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 JULY 31, 2010 AND AUGUST 1, 2009
(Dollars in thousands, except per share data)
Quarter Ended
-------------
July 31, % August 1, %
2010 Sales 2009 Sales
---- ----- ---- -----
REVENUES
Retail sales $231,865 100.0% $225,369 100.0%
Other income
(principally finance,
late fees and layaway
charges) 2,862 1.2% 2,897 1.3%
----- -----
Total revenues 234,727 101.2% 228,266 101.3%
------- ----- ------- -----
GROSS MARGIN (Memo) 88,826 38.3% 81,910 36.3%
COSTS AND EXPENSES, NET
Cost of goods sold 143,039 61.7% 143,459 63.7%
Selling, general and
administrative 62,268 26.9% 56,480 25.1%
Depreciation 5,277 2.3% 5,482 2.4%
Interest and other
income (957) -0.4% (861) -0.4%
---- ----
Cost and expenses, net 209,627 90.4% 204,560 90.8%
------- -------
Income Before Income
Taxes 25,100 10.8% 23,706 10.5%
Income Tax Expense 9,081 3.9% 7,048 3.1%
----- -----
Net Income $16,019 6.9% $16,658 7.4%
======= === ======= ===
Basic Earnings Per
Share $0.54 $0.57
Diluted Earnings Per
Share $0.54 $0.56
Six Months Ended
----------------
July 31, % August 1, %
2010 Sales 2009 Sales
---- ----- ---- -----
REVENUES
Retail sales $491,625 100.0% $463,423 100.0%
Other income
(principally finance,
late fees and layaway
charges) 5,785 1.2% 5,870 1.3%
----- --- ----- ---
Total revenues 497,410 101.2% 469,293 101.3%
------- ----- ------- -----
GROSS MARGIN (Memo) 201,732 41.0% 178,051 38.4%
COSTS AND EXPENSES, NET
Cost of goods sold 289,893 59.0% 285,372 61.6%
Selling, general and
administrative 130,828 26.6% 121,124 26.1%
Depreciation 10,547 2.2% 11,026 2.4%
Interest and other
income (1,849) -0.4% (1,921) -0.4%
------ ---- ------ ----
Cost and expenses, net 429,419 87.3% 415,601 89.7%
------- ---- ------- ----
Income Before Income
Taxes 67,991 13.9% 53,692 11.6%
Income Tax Expense 24,912 5.1% 18,220 3.9%
------ --- ------ ---
Net Income $43,079 8.8% $35,472 7.7%
======= === ======= ===
Basic Earnings Per
Share $1.46 $1.21
===== =====
Diluted Earnings Per
Share $1.46 $1.20
===== =====
THE CATO CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
January
July 31, August 1, 30,
2010 2009 2010
(Unaudited) (Unaudited)
----------- -----------
ASSETS
Current Assets
Cash and cash equivalents $68,336 $28,888 $50,385
Short-term investments 165,755 145,427 147,955
Restricted Cash 2,547 9,057 2,575
Accounts receivable - net 39,747 41,798 40,154
Merchandise inventories 95,720 93,807 118,628
Other current assets 13,100 14,283 11,070
Total Current Assets 385,205 333,260 370,767
Property and Equipment - net 100,869 111,001 102,769
Other Assets 7,499 7,324 7,454
TOTAL $493,573 $451,585 $480,990
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current Liabilities $152,944 $141,130 $168,468
Noncurrent Liabilities 20,449 21,167 21,210
Stockholders' Equity 320,180 289,288 291,312
TOTAL $493,573 $451,585 $480,990
======== ======== ========
SOURCE The Cato Corporation