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Cato Stock Improves 16% as Q4 Loss Narrows Year Over Year
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Shares of The Cato Corporation (CATO - Free Report) have gained 15.8% since the company reported its earnings for the quarter ended Feb. 1, 2025. This compares to the S&P 500 index’s 0.1% decline over the same time frame. Over the past month, the stock has gained 9.7% against the S&P 500’s 4.9% decline, reflecting a sharp divergence in performance as investors reacted positively to the company’s narrowed quarterly loss and operational updates.
See the Zacks Earnings Calendar to stay ahead of market-making news.
For the fourth quarter, Cato incurred a net loss of 74 cents per share, narrower than a net loss of $1.14 per share in the prior-year quarter.
Quarterly sales declined 10% year over year to $155.3 million from $172.1 million. However, adjusting for the extra week in the 2023 fiscal fourth quarter, sales on a comparable 13-week basis decreased a more modest 5.1%, with same-store sales dipping 0.8%.
The company incurred a net loss of $14.1 million, narrower than a net loss of $23.4 million in the prior-year quarter.
The Cato Corporation Price, Consensus and EPS Surprise
Cato’s fourth-quarter gross margin contracted to 28% of sales from 31% a year earlier. This decline was due to increased markdowns, higher distribution and domestic freight costs, and deleveraging of occupancy expenses. SG&A expenses for the quarter fell $8.8 million and as a percentage of sales, improved to 37.8% from 39.2% in the prior-year quarter, largely attributed to reductions in incentive compensation, insurance and impairment charges, though partially offset by higher professional fees.
Management Commentary and Strategic Focus
Cato’s leadership pointed to ongoing macroeconomic headwinds impacting discretionary spending, along with operational disruptions earlier in the year. CEO John Cato noted that the company faced a particularly difficult third quarter, citing three hurricanes and supply chain interruptions. However, he emphasized that fourth-quarter trends showed improvement as distribution center (DC) efficiency rebounded and earlier DC automation issues were addressed.
As part of its cost-efficiency initiatives, the company eliminated approximately 40 corporate positions in February and anticipates further expense reductions across its operations. Merchandise assortment enhancements, including new product offerings, remain a priority to drive traffic and sales.
Pressures Behind the Numbers
The company attributed weaker sales performance to continued pressure on consumer discretionary budgets and external disruptions. Increased markdown activity and elevated logistics costs compressed margins. However, expense controls across multiple categories and improved investment income helped cushion losses.
A non-cash valuation allowance recorded against U.S. federal and state deferred tax assets last year led to a substantial drop in income tax expense, from $10.9 million in the fourth quarter of 2023 to $0.3 million in the fourth quarter of 2024.
Full Year Update
For fiscal 2024, net loss narrowed to $18.1 million or 97 cents per share from $23.9 million or $1.17 per share in 2023. Annual sales declined 8.3% to $642.1 million, or 6.8% on a comparable 52-week basis, with same-store sales down 3.1%.
For the full year, gross margin dropped to 32% from 33.7%, while SG&A expenses decreased $21.3 million. Notably, the company reported $11.8 million in interest and other income for the year, more than doubling from $5.1 million the year prior.
Other Developments
Cato closed 62 underperforming stores during fiscal 2024 while opening one and relocating four. As of Feb. 1, 2025, the company operated 1,117 stores across 31 states, down from 1,178 locations the previous year. For fiscal 2025, the company plans to open up to 15 new stores and close up to 50 additional underperforming locations as leases expire. Management expects these closures to have minimal financial impact.
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Cato Stock Improves 16% as Q4 Loss Narrows Year Over Year
Shares of The Cato Corporation (CATO - Free Report) have gained 15.8% since the company reported its earnings for the quarter ended Feb. 1, 2025. This compares to the S&P 500 index’s 0.1% decline over the same time frame. Over the past month, the stock has gained 9.7% against the S&P 500’s 4.9% decline, reflecting a sharp divergence in performance as investors reacted positively to the company’s narrowed quarterly loss and operational updates.
See the Zacks Earnings Calendar to stay ahead of market-making news.
For the fourth quarter, Cato incurred a net loss of 74 cents per share, narrower than a net loss of $1.14 per share in the prior-year quarter.
Quarterly sales declined 10% year over year to $155.3 million from $172.1 million. However, adjusting for the extra week in the 2023 fiscal fourth quarter, sales on a comparable 13-week basis decreased a more modest 5.1%, with same-store sales dipping 0.8%.
The company incurred a net loss of $14.1 million, narrower than a net loss of $23.4 million in the prior-year quarter.
The Cato Corporation Price, Consensus and EPS Surprise
The Cato Corporation price-consensus-eps-surprise-chart | The Cato Corporation Quote
Key Business Metrics Show Mixed Trends
Cato’s fourth-quarter gross margin contracted to 28% of sales from 31% a year earlier. This decline was due to increased markdowns, higher distribution and domestic freight costs, and deleveraging of occupancy expenses. SG&A expenses for the quarter fell $8.8 million and as a percentage of sales, improved to 37.8% from 39.2% in the prior-year quarter, largely attributed to reductions in incentive compensation, insurance and impairment charges, though partially offset by higher professional fees.
Management Commentary and Strategic Focus
Cato’s leadership pointed to ongoing macroeconomic headwinds impacting discretionary spending, along with operational disruptions earlier in the year. CEO John Cato noted that the company faced a particularly difficult third quarter, citing three hurricanes and supply chain interruptions. However, he emphasized that fourth-quarter trends showed improvement as distribution center (DC) efficiency rebounded and earlier DC automation issues were addressed.
As part of its cost-efficiency initiatives, the company eliminated approximately 40 corporate positions in February and anticipates further expense reductions across its operations. Merchandise assortment enhancements, including new product offerings, remain a priority to drive traffic and sales.
Pressures Behind the Numbers
The company attributed weaker sales performance to continued pressure on consumer discretionary budgets and external disruptions. Increased markdown activity and elevated logistics costs compressed margins. However, expense controls across multiple categories and improved investment income helped cushion losses.
A non-cash valuation allowance recorded against U.S. federal and state deferred tax assets last year led to a substantial drop in income tax expense, from $10.9 million in the fourth quarter of 2023 to $0.3 million in the fourth quarter of 2024.
Full Year Update
For fiscal 2024, net loss narrowed to $18.1 million or 97 cents per share from $23.9 million or $1.17 per share in 2023. Annual sales declined 8.3% to $642.1 million, or 6.8% on a comparable 52-week basis, with same-store sales down 3.1%.
For the full year, gross margin dropped to 32% from 33.7%, while SG&A expenses decreased $21.3 million. Notably, the company reported $11.8 million in interest and other income for the year, more than doubling from $5.1 million the year prior.
Other Developments
Cato closed 62 underperforming stores during fiscal 2024 while opening one and relocating four. As of Feb. 1, 2025, the company operated 1,117 stores across 31 states, down from 1,178 locations the previous year. For fiscal 2025, the company plans to open up to 15 new stores and close up to 50 additional underperforming locations as leases expire. Management expects these closures to have minimal financial impact.