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Cato Reports 3Q EPS of $0.11

Nov 16, 2017

CHARLOTTE, N.C., Nov. 16, 2017 /PRNewswire/ -- The Cato Corporation (NYSE: CATO) today reported net income of $2.7 million for the third quarter ended October 28, 2017, compared to net income of $8.3 million for the third quarter ended October 29, 2016.  Earnings per diluted share for the third quarter were $0.11, compared to $0.30 last year.  Sales for the third quarter ended October 28, 2017 were $188.4 million, a 9% decrease from sales of $207.0 million for the third quarter ended October 29, 2016.  Same-store sales for the quarter decreased 9%.

"Consistent with our previous releases, pressure on merchandise margins and profitability persist as we continue to work through our merchandise missteps," stated John Cato, Chairman, President, and Chief Executive Officer.  "The negative sales trends are below our expectations and, consequently, we continue to expect our full year earnings to be significantly below last year."

For the nine months ended October 28, 2017, the Company earned net income of $24.0 million, compared to net income of $60.0 million for the nine months ended October 29, 2016.  Earnings per diluted share were $0.93 compared to $2.17 last year.  Sales for the nine months ended October 28, 2017 were $631.0 million, a decrease of 13% from sales of $729.2 million for the nine months ended October 29, 2016.  Year-to-date same-store sales decreased 14%.

For the quarter, the gross margin rate decreased to 33.9% of sales from 35.5% last year, primarily due to lower merchandise margins and deleveraging of occupancy expenses.  The SG&A rate for the quarter increased to 33.0% from 32.8% last year primarily due to deleveraging of expenses offset by cost savings initiatives implemented in the third quarter.  Income tax for the quarter was a benefit of $2.8 million compared to a benefit of $4.9 million last year.  The company ended the quarter with cash and short-term investments of $218.6 million.

Year-to-date, the gross margin rate decreased to 34.8% of sales from 38.7% the prior year primarily due to lower merchandise margins and deleveraging of expenses.  The year-to-date SG&A rate was 30.1% versus 28.3% last year primarily due to deleveraging of expenses partially offset by cost savings initiatives.  Income tax for the year was a benefit of $0.3 million compared to an expense of $11.5 million last year.

The Company has opened six new stores during 2017, down from our original plan of 13 stores and expects to close 26 stores versus our original plan of 19 stores.  Additionally, two stores have been relocated.  As of October 28, 2017, the Company operated 1,370 stores in 33 states, compared to 1,372 stores in 33 states as of October 29, 2016.

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 OCTOBER 28, 2017 AND OCTOBER 29, 2016












(Dollars in thousands, except per share data)
































Quarter Ended


Nine Months Ended


















October 28,

%


October 29,

%


October 28,

%


October 29,

%


2017

Sales


2016

Sales


2017

Sales


2016

Sales

















REVENUES
















  Retail sales

$

188,368

100.0%


$

207,022

100.0%


$

631,049

100.0%


$

729,173

100.0%

  Other revenue (principally finance,
















    late fees and layaway charges)


1,905

1.0%



2,240

1.1%



5,926

0.9%



6,949

1.0%

















    Total revenues


190,273

101.0%



209,262

101.1%



636,975

100.9%



736,122

101.0%

















GROSS MARGIN (Memo)


63,906

33.9%



73,395

35.5%



219,546

34.8%



282,515

38.7%

















COSTS AND EXPENSES, NET
















  Cost of goods sold


124,462

66.1%



133,627

64.6%



411,503

65.2%



446,658

61.3%

  Selling, general and administrative


62,100

33.0%



67,815

32.8%



190,162

30.1%



206,441

28.3%

  Depreciation


5,047

2.7%



5,734

2.8%



14,989

2.4%



17,082

2.3%

  Interest and other income


(1,200)

-0.6%



(1,288)

-0.6%



(3,472)

-0.6%



(5,593)

-0.8%

















    Cost and expenses, net


190,409

101.1%



205,888

99.5%



613,182

97.2%



664,588

91.1%

































Income Before Income Taxes


(136)

-0.1%



3,374

1.6%



23,793

3.8%



71,534

9.8%

















Income Tax (Benefit)/Expense


(2,830)

-1.5%



(4,886)

-2.4%



(252)

0.0%



11,513

1.6%

















Net Income

$

2,694

1.4%


$

8,260

4.0%


$

24,045

3.8%


$

60,021

8.2%

































Basic Earnings Per Share

$

0.11



$

0.30



$

0.93



$

2.17


































Diluted Earnings Per Share

$

0.11



$

0.30



$

0.93



$

2.17


































 

THE CATO CORPORATION







CONDENSED CONSOLIDATED BALANCE SHEETS 





(Dollars in thousands)















October 28,



January 28,


2017



2017


(Unaudited)











ASSETS







Current Assets







  Cash and cash equivalents

$

78,666



$

47,234

  Short-term investments


136,207




201,233

  Restricted Cash


3,711




3,691

  Accounts receivable - net


30,507




30,336

  Merchandise inventories


127,763




145,682

  Other current assets


16,563




15,632








Total Current Assets


393,417




443,808








Property and Equipment - net


120,179




126,386








Noncurrent Deferred Income Taxes


12,487




13,773








Other Assets


22,268




22,357








      TOTAL

$

548,351



$

606,324








LIABILITIES AND STOCKHOLDERS' EQUITY












Current Liabilities

$

149,132



$

171,912








Noncurrent Liabilities


46,793




50,509








Stockholders' Equity


352,426




383,903








      TOTAL

$

548,351



$

606,324








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SOURCE The Cato Corporation

John R. Howe, Executive Vice President, Chief Financial Officer, 704-551-7315