Cato Reports 2Q EPS Of $.59, Down 3% Provides Second Half Guidance

CHARLOTTE, N.C., Aug. 16, 2012 /PRNewswire/ -- The Cato Corporation (NYSE: CATO) today reported net income of $17.3 million or $.59 per diluted share for the second quarter ended July 28, 2012, compared to net income of $18.1 million or $.61 per diluted share for the second quarter ended July 30, 2011.  Net income decreased 4% and earnings per diluted share decreased 3% from the prior year.  Sales for the second quarter ended July 28, 2012 were $231.5 million, down 1% from sales of $234.1 million last year.  Second quarter same-store sales decreased 4%.

For the six months ended July 28, 2012, the Company earned net income of $49.1 million or $1.68 per diluted share, compared with net income of $48.6 million or $1.65 per diluted share for the six months ended July 30, 2011, a 1% increase in net income and a 2% increase in earnings per diluted share.  Sales for the first half were $504.2 million, flat to the prior year's first half sales of $505.0 million.  Same-store sales for the first half were down 3% from the prior year.

"As we have noted all year, same-store sales have been volatile and have been affected by our customers' uncertainty regarding the country's economic and political situation," said John Cato, Chairman, President, and Chief Executive Officer.  "We expect this difficult environment to continue in the second half.  We expect earnings per diluted share for second half of the year will be within our original guidance range of $.50 to $.59."

Second quarter gross margin was 38.4% compared to 38.0% last year due primarily to better merchandise margins somewhat offset by higher store occupancy costs.  Second quarter SG&A costs as a percent of sales increased to 25.6% from 25.2% last year primarily as a result of a deleveraging of operating costs partially offset by lower insurance expense.  The effective tax rate for the quarter was 37.3% compared to 36.0% last year, primarily due to the elimination of the benefit of the Work Opportunity Tax Credit, which has not been renewed for 2012 by Congress as of the end of the quarter.

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 $2.18 to $2.27 versus $2.21 last year, a decrease of 1% to an increase of 3%.  By quarter, earnings per diluted share are estimated to be in the range of $.12 to $.17 versus $.21 last year for the third quarter and $.38 to $.42 versus $.35 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 2% to flat.

The Company's fourth quarter includes 14 weeks compared to 13 weeks in 2011 and the fiscal year includes 53 weeks compared to 52 weeks in 2011.  Earnings guidance for both the fourth quarter and year reflects the impact of the additional week. 

During the first half, the Company opened 12 new stores, relocated five stores and closed five stores.  The Company now expects to open 38 stores during 2012.  As of July 28, 2012, The Cato Corporation operated 1,295 stores in 31 states, compared to 1,285 stores in 31 states as of July 30, 2011.

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 or estimated financial results for the third quarter, fourth quarter and full year and any related assumptions, as well as the Company's expected plans for full year store openings 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 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, as amended or supplemented, 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 JULY 28, 2012 AND JULY 30, 2011









(Dollars in thousands, except per share data)


























Quarter Ended


Six Months Ended


















July 28,

%


July 30,

%


July 28,

%


July 30,

%


2012

Sales


2011

Sales


2012

Sales


2011

Sales

















REVENUES
















  Retail sales

$

231,450

100.0%


$

234,077

100.0%


$

504,240

100.0%


$

505,010

100.0%

  Other income (principally finance,
















    late fees and layaway charges)


2,613

1.1%



2,729

1.2%



5,167

1.0%



5,456

1.1%

















    Total revenues


234,063

101.1%



236,806

101.2%



509,407

101.0%



510,466

101.1%

















GROSS MARGIN (Memo)


88,991

38.4%



88,921

38.0%



203,949

40.4%



201,449

39.9%

















COSTS AND EXPENSES, NET
















  Cost of goods sold


142,459

61.6%



145,156

62.0%



300,291

59.6%



303,561

60.1%

  Selling, general and administrative


59,220

25.6%



58,955

25.2%



120,575

23.9%



122,271

24.2%

  Depreciation


5,742

2.5%



5,371

2.3%



11,513

2.3%



10,775

2.2%

  Interest and other income


(985)

-0.4%



(949)

-0.4%



(1,891)

-0.4%



(1,906)

-0.4%

















    Cost and expenses, net


206,436

89.2%



208,533

89.1%



430,488

85.4%



434,701

86.1%

































Income Before Income Taxes


27,627

11.9%



28,273

12.1%



78,919

15.6%



75,765

15.0%

















Income Tax Expense


10,294

4.4%



10,170

4.4%



29,864

5.9%



27,141

5.4%

















Net Income

$

17,333

7.5%


$

18,103

7.7%


$

49,055

9.7%


$

48,624

9.6%

































Basic Earnings Per Share

$

0.59



$

0.61



$

1.68



$

1.65


































Diluted Earnings Per Share

$

0.59



$

0.61



$

1.68



$

1.65


































































































































THE CATO CORPORATION














CONDENSED CONSOLIDATED BALANCE SHEETS 














(Dollars in thousands)































July 28,



July 30,



January 28







2012



2011



2012







(Unaudited)



(Unaudited)



(Unaudited)






















ASSETS
















Current Assets
















  Cash and cash equivalents

$

66,043



$

77,376



$

34,893






  Short-term investments


211,390




190,533




205,771






  Restricted Cash


5,311




4,801




5,325






  Accounts receivable - net


43,373




37,621




43,024






  Merchandise inventories


107,034




117,225




130,382






  Other current assets


7,695




7,077




9,737






















Total Current Assets


440,846




434,633




429,132






















Property and Equipment - net


125,520




104,333




115,445






















Other Assets


7,016




9,434




6,512






















      TOTAL

$

573,382



$

548,400



$

551,089






















LIABILITIES AND STOCKHOLDERS' EQUITY
































Current Liabilities

$

137,996



$

154,912



$

156,993






















Noncurrent Liabilities


32,118




23,730




27,417






















Stockholders' Equity


403,268




369,758




366,679






















      TOTAL

$

573,382



$

548,400



$

551,089







SOURCE The Cato Corporation



RELATED LINKS
http://www.catocorp.com

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