Cato Reports Record 1Q EPS Up 44%
CHARLOTTE, N.C., May 20, 2010 /PRNewswire via COMTEX/ --The Cato Corporation (NYSE: CATO) today reported record net income of $27.1 million or $.92 per diluted share for the first quarter ended May 1, 2010, compared to net income of $18.8 million or $.64 per diluted share for the first quarter ended May 2, 2009. Net income increased and earnings per diluted sharebothincreased 44% for the quarter. Sales for the first quarter were $259.8 million, a 9% increase over sales of $238.1 million for the first quarter ended May 2, 2009. The Company's same store sales increased 8% in the first quarter.
"Strong Easter sales and favorable weather were driving factors in generating a record quarter," commented John Cato, Chairman, President, and Chief Executive Officer. "A significant degree of uncertainty remains in the economic outlook in many of our markets and for many of our customers. Based on that uncertainty, we are continuing to take a conservative position with our sales expectations and estimate same store sales will be in the range of down 3% to flat for the second quarter. Considering those sales expectations and a strong second quarter last year, we are maintaining our estimate of second quarter earnings per diluted share reflected in our 2010 guidance in the range of $.43 to $.46 versus $.56 last year. After adjusting our original 2010 guidance for first quarter actual results, our estimate of earnings per diluted share for the full year is now a range of $1.72 to $1.81 versus $1.55 last year."
Gross margin in the quarter increased 310 basis points to 43.5% principally as a result of lower markdowns in the quarter. SG&A expenses as a percent of sales decreased during the quarter primarily as a result of leveraging higher sales. On a dollar basis, SG&A increased 6% principally due to higher accrued incentive compensation and health and workers' compensation insurance costs slightly offset by lower store closing and legal costs. The Company's cash and short-term investments increased by $21.8 million during the quarter to $222.7 million.
During the first quarter, the Company opened four stores, relocated one store and closed three stores. Two of the closings were It's Fashion stores closed to open an It's Fashion Metro store in the same market. As of May 1, 2010, the Company operated 1,272 stores in 31 states, compared to 1,285 stores in 31 states as of May 2, 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 www.catocorp.com.
Statements in this press release not historical in nature including, without limitation, statements regarding the Company's expected sales and financial results for the second quarter and year 2010 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. Additional information concerning these and other important factors can be found in Item 1A. "Risk Factors" of the Company's most recent Annual Report on Form 10-K and any subsequent Quarterly Reports on Form 10-Q filed with the Securities and Exchange Commission. 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 1, 2010 AND MAY 2, 2009
(Dollars in thousands, except per share data)
Quarter Ended
-------------
May 1, % May 2, %
2010 Sales 2009 Sales
---- ----- ---- -----
REVENUES
Retail sales $259,760 100.0% $238,055 100.0%
Other income (principally
finance,
late fees and layaway charges) 2,923 1.1% 2,972 1.3%
----- -----
Total revenues 262,683 101.1% 241,027 101.3%
------- ----- ------- -----
GROSS MARGIN (Memo) 112,906 43.5% 96,142 40.4%
COSTS AND EXPENSES, NET
Cost of goods sold 146,854 56.5% 141,913 59.6%
Selling, general and
administrative 68,559 26.4% 64,644 27.2%
Depreciation 5,271 2.0% 5,544 2.3%
Interest and other income (892) -0.3% (1,060) -0.4%
---- ------
Cost and expenses, net 219,792 84.6% 211,041 88.7%
------- -------
Income Before Income Taxes 42,891 16.5% 29,986 12.6%
Income Tax Expense 15,831 6.1% 11,173 4.7%
------ ------
Net Income $27,060 10.4% $18,813 7.9%
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Basic Earnings Per Share $0.92 $0.64
Diluted Earnings Per Share $0.92 $0.64
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THE CATO CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
May 1, May 2, January 30,
2010 2009 2010
(Unaudited) (Unaudited)
----------- -----------
ASSETS
Current Assets
Cash and cash equivalents $53,718 $42,006 $50,385
Short-term investments 166,417 115,696 147,955
Restricted Cash 2,565 9,016 2,575
Accounts receivable - net 40,742 42,518 40,154
Merchandise inventories 106,710 114,339 118,628
Other current assets 12,827 13,936 11,070
Total Current Assets 382,979 337,511 370,767
Property and Equipment - net 101,469 114,096 102,769
Other Assets 7,541 7,228 7,454
TOTAL $491,989 $458,835 $480,990
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current Liabilities $160,135 $160,500 $168,468
Noncurrent Liabilities 20,554 21,853 21,210
Stockholders' Equity 311,300 276,482 291,312
TOTAL $491,989 $458,835 $480,990
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SOURCE The Cato Corporation