2014

Cato Reports 2Q EPS of $.51, Exceeds Guidance Provides Second Half Guidance

CHARLOTTE, N.C., Aug. 22, 2013 /PRNewswire/ -- The Cato Corporation (NYSE: CATO) today reported net income of $14.8 million or $.51 per diluted share for the second quarter ended August 3, 2013, compared to net income of $17.3 million or $.59 per diluted share for the second quarter ended July 28, 2012.  Earnings per diluted share exceeded the top end of our current guidance by $.03; however, both net income and earnings per diluted share decreased 14% from the prior year.  Sales for the second quarter ended August 3, 2013 were $229.4 million, down 1% from sales of $231.5 million last year.  Second quarter same-store sales decreased 2%.

For the six months ended August 3, 2013, the Company earned net income of $45.6 million or $1.56 per diluted share, compared with net income of $49.1 million or $1.68 per diluted share for the six months ended July 28, 2012, a 7% decrease in net income and earnings per diluted share.  Sales for the first half were $496.6 million, down 2% to the prior year's first half sales of $504.2 million.  Same-store sales for the first half were down 4% from the prior year.

"Same-store sales continue to be affected by slow economic growth, high unemployment and our customers' limited discretionary spending," said John Cato, Chairman, President, and Chief Executive Officer.  "We expect this difficult environment to continue in the second half.  We project second half earnings per diluted share will be within our original guidance range of $.19 to $.32."

Second quarter gross margin was 36.8% compared to 38.4% last year due primarily to lower merchandise margins and higher store occupancy costs.  Second quarter SG&A costs as a percent of sales was up slightly at 25.7% versus 25.6% last year primarily as a result of higher insurance costs offset by lower incentive compensation expense.  The effective tax rate for the quarter was 36.0% compared to 37.3% last year, primarily due to the late renewal of the Work Opportunity Tax Credit last year, which had not been renewed by Congress as of the end of the second quarter last year.

As noted above, based on year-to-date results and the Company's original guidance for the second half, earnings per diluted share are expected to be within the adjusted range of $1.75 to $1.88 versus $2.11 last year, a decrease of 17% to 11%.  By quarter, earnings per diluted share are estimated to be in the range of $.02 to $.09 versus $.16 last year for the third quarter and $.17 to $.23 versus $.27 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 four new stores, relocated three stores and closed eight stores.  The Company now expects to open 51 stores during 2013.  As of August 3, 2013, The Cato Corporation operated 1,306 stores in 31 states, compared to 1,295 stores in 31 states as of July 28, 2012.

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.  Versona is a unique fashion destination offering accessories and apparel including jewelry, handbags and shoes at exceptional prices every day.  It's Fashion offers fashion with a focus on the latest trendy styles 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 third quarter, fourth quarter and year 2013 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 AUGUST 3, 2013 AND JULY 28, 2012

(Dollars in thousands, except per share data)


















Quarter Ended


Six Months Ended


















August 3,

%


July 28,

%


August 3,

%


July 28,

%


2013

Sales


2012

Sales


2013

Sales


2012

Sales

















REVENUES
















  Retail sales

$

229,378

100.0%


$

231,450

100.0%


$

496,559

100.0%


$

504,240

100.0%

  Other income (principally finance,
















    late fees and layaway charges)


2,340

1.0%



2,613

1.1%



4,857

1.0%



5,167

1.0%

















    Total revenues


231,718

101.0%



234,063

101.1%



501,416

101.0%



509,407

101.0%

















GROSS MARGIN (Memo)


84,428

36.8%



88,991

38.4%



194,708

39.2%



203,949

40.5%

















COSTS AND EXPENSES, NET
















  Cost of goods sold


144,950

63.2%



142,459

61.6%



301,851

60.8%



300,291

59.6%

  Selling, general and administrative


58,965

25.7%



59,220

25.6%



118,354

23.8%



120,575

23.9%

  Depreciation


5,436

2.4%



5,742

2.5%



10,885

2.2%



11,513

2.3%

  Interest and other income


(730)

-0.3%



(985)

-0.4%



(1,605)

-0.3%



(1,891)

-0.4%

















    Cost and expenses, net


208,621

91.0%



206,436

89.2%



429,485

86.5%



430,488

85.4%

































Income Before Income Taxes


23,097

10.0%



27,627

11.9%



71,931

14.5%



78,919

15.6%

















Income Tax Expense


8,322

3.6%



10,294

4.4%



26,317

5.3%



29,864

5.9%

















Net Income

$

14,775

6.4%


$

17,333

7.5%


$

45,614

9.2%


$

49,055

9.7%

































Basic Earnings Per Share

$

0.51



$

0.59



$

1.56



$

1.68


































Diluted Earnings Per Share

$

0.51



$

0.59



$

1.56



$

1.68


































































































































THE CATO CORPORATION




CONDENSED CONSOLIDATED BALANCE SHEETS 





(Dollars in thousands)


























August 3,



July 28,



February 2







2013



2012



2013







(Unaudited)



(Unaudited)


























ASSETS
















Current Assets
















  Cash and cash equivalents

$

88,559



$

66,043



$

31,069






  Short-term investments


157,326




211,390




157,578






  Restricted Cash


4,807




5,311




5,999






  Accounts receivable - net


39,908




43,373




40,016






  Merchandise inventories


111,206




107,034




140,738






  Other current assets


15,834




7,695




14,814






















Total Current Assets


417,640




440,846




390,214






















Property and Equipment - net


139,550




125,520




134,227






















Other Assets


10,223




7,016




8,205






















      TOTAL

$

567,413



$

573,382



$

532,646






















LIABILITIES AND STOCKHOLDERS' EQUITY






























Current Liabilities

$

154,002



$

137,996



$

159,602






















Noncurrent Liabilities


29,850




32,118




27,810






















Stockholders' Equity


383,561




403,268




345,234






















      TOTAL

$

567,413



$

573,382



$

532,646






 

 

SOURCE The Cato Corporation



RELATED LINKS
http://www.catocorp.com

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