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CATO Q2 Earnings Slump Y/Y Amid Sales Decline, Cost Pressures

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For the second quarter of 2024, Cato Corporation (CATO - Free Report) reported earnings per share (EPS) of 1 cent, a notable decline from the 6 cents recorded in the same quarter of 2023. 

Revenues for the quarter also decreased by 8% to $166.9 million from $181.2 million in the previous year. The decline in sales was attributed to the closure of stores during 2023 and a 2% decrease in same-store sales.

Cato's second-quarter performance reflected ongoing challenges, particularly in maintaining sales momentum. The decline in net income and sales was primarily driven by store closures and weakened consumer demand. Management's commentary highlighted the difficult retail environment, emphasizing the impact of negative pressures on customers' discretionary spending.

The slight improvement in merchandise margins was not enough to offset the higher distribution costs and the negative impact of reduced sales volumes. The company's efforts to control costs were evident in the reduction of SG&A expenses, yet the deleveraging of payroll costs added pressure to the overall financial health.

Cato Corporation Price, Consensus and EPS Surprise

Cato Corporation (The) Price, Consensus and EPS Surprise

Cato Corporation price-consensus-eps-surprise-chart | Cato Corporation Quote

CATO’s Key Business Metrics

Gross Margin

Gross margin for the second quarter of 2024 decreased to 34.6% from 35.1% in the year-ago quarter, mainly due to higher distribution costs and the deleveraging of occupancy and buying costs, though partially offset by improved merchandise margins.

Selling, General and Administrative (SG&A) Expenses

SG&A expenses, as a percentage of sales, increased to 34.9% in the second quarter from 34% in the same quarter last year. This rise was largely due to the deleveraging of payroll costs, although it was somewhat mitigated by lower expenses from store closures and advertising. Notably, SG&A expenses in the quarter were $58.2 million, lower than $61.6 million in the prior-year quarter, thanks to reductions in payroll, insurance costs, equity compensation and advertising.

Income Before Income Taxes

Income before income taxes for the quarter stood at $0.7 million, a sharp decline from $2.5 million in the second quarter of 2023.

Net Income

Net income for the second quarter of 2024 was $0.1 million, a significant decrease from $1.1 million in the second quarter of 2023.

CATO’s Balance Sheet Update (As of Aug 3, 2024)

Cato reported cash and cash equivalents of $30.8 million, an increase from $23.9 million on Feb 3, 2024. 

Total assets decreased to $455.6 million from $486.8 million. 

The lease liability, both current and noncurrent, fell to $123.4 million from $153.1 million as of Feb 3, 2024. 

Meanwhile, stockholders' equity saw a slight increase to $195.1 million from $192.3 million.

Other Developments for CATO

During the second quarter, Cato Corporation continued to adjust its store footprint, closing five stores. As of Aug 3, 2024, the company operated 1,166 stores across 31 states, down from 1,247 stores as of Jul 29, 2023. This strategic reduction in store count is part of the company's broader effort to streamline operations and improve profitability within a challenging retail environment.


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