Cato Reports 2Q EPS of $.61, Up 6% Provides Second Half Guidance

CHARLOTTE, N.C., Aug. 18, 2011 /PRNewswire/ -- The Cato Corporation (NYSE: CATO) today reported net income of $18.1 million or $.61 per diluted share for the second quarter ended July 30, 2011, compared to net income of $17.0 million or $.58 per diluted share, as restated, for the second quarter ended July 31, 2010.  Both net income and earnings per diluted share increased 6% over last year.  Sales for the second quarter were $234.1 million, a 1% increase over sales of $231.8 million last year.  Second quarter same-store sales decreased 1%.

For the six months ended July 30, 2011, the Company earned net income of $48.6 million or $1.65 per diluted share, compared with net income of $42.0 million or $1.42 per diluted share, as restated, for the six months ended July 31, 2010, an increase of 16% in both net income and earnings per diluted share.  Sales for the first half were $505.0 million, a 3% increase over the prior year's first half sales of $490.9 million.  Same-store sales for the first half were flat to the prior year.

"Same-store sales for the second quarter were within our estimated range and we were able to control expenses well," stated John Cato, Chairman, President, and Chief Executive Officer.  "As we noted in our July sales release, our same-store sales trend reflects the difficult economic conditions and uncertainty affecting our customers, especially the lower income customer.  Also, we continue to expect rising raw material costs will have a negative effect on second half performance.  As a result, we now expect earnings per diluted share for second half of the year will be at the low end of our original guidance range of $.50 to $.56."

Second quarter gross margin was 38.0% compared to 39.0% last year due primarily to higher markdowns.  Second quarter SG&A costs as a percent of sales decreased to 25.2% from 26.9% last year primarily as a result of lower accrued incentive compensation and insurance costs.  The effective tax rate for the quarter was 36.0% compared to 36.3% 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 at the low end of the adjusted range of $2.15 to $2.21 versus $2.00 last year, as restated, an increase of 8% to 11%.  By quarter, earnings per diluted share are estimated to be in the range of $.18 to $.21 versus $.20 last year, as restated, for the third quarter and $.32 to $.35 versus $.37 last year, as restated, 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.

During the first half, the Company opened 12 new stores, relocated one store and closed nine stores.  Five of the closings were It's Fashion stores closed to open as It's Fashion Metro stores in the same market.  The Company now expects to open approximately 41 stores during 2011.  As of July 30, 2011, The Cato Corporation operated 1,285 stores in 31 states, compared to 1,275 stores in 31 states as of July 31, 2010.

The Cato Corporation is a leading specialty retailer of value-priced 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 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 30, 2011 AND JULY 31, 2010

(Dollars in thousands, except per share data)


















Quarter Ended


Six Months Ended





As Restated





As Restated


July 30,

%


July 31,

%


July 30,

%


July 31,

%


2011

Sales


2010 (A)

Sales


2011

Sales


2010 (A)

Sales













REVENUES
















 Retail sales

$

234,077

100.0%


$

231,839

100.0%


$

505,010

100.0%


$

490,879

100.0%

 Other income (principally finance,
















   late fees and layaway charges)


2,729

1.2%



2,862

1.2%



5,456

1.1%



5,785

1.2%

















   Total revenues


236,806

101.2%



234,701

101.2%



510,466

101.1%



496,664

101.2%

















GROSS MARGIN (Memo)


88,921

38.0%



90,435

39.0%



201,449

39.9%



199,615

40.7%

















COSTS AND EXPENSES, NET
















 Cost of goods sold


145,156

62.0%



141,404

61.0%



303,561

60.1%



291,264

59.3%

 Selling, general and administrative


58,955

25.2%



62,340

26.9%



122,271

24.2%



130,421

26.6%

 Depreciation


5,371

2.3%



5,277

2.3%



10,775

2.2%



10,547

2.2%

 Interest and other income


(949)

-0.4%



(957)

-0.4%



(1,906)

-0.4%



(1,849)

-0.4%

















   Cost and expenses, net


208,533

89.1%



208,064

89.7%



434,701

86.1%



430,383

87.7%

































Income Before Income Taxes


28,273

12.1%



26,637

11.5%



75,765

15.0%



66,281

13.5%

















Income Tax Expense


10,170

4.4%



9,659

4.2%



27,141

5.4%



24,269

4.9%

















Net Income

$

18,103

7.7%


$

16,978

7.3%


$

48,624

9.6%


$

42,012

8.6%

































Basic Earnings Per Share

$

0.61



$

0.58



$

1.65



$

1.42


































Diluted Earnings Per Share

$

0.61



$

0.58



$

1.65



$

1.42




THE CATO CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollars in thousands)





As Restated



As Restated


July 30,



July 31,



January 29


2011



2010



2011


(Unaudited)



(Unaudited)



(Unaudited)









ASSETS











Current Assets











 Cash and cash equivalents

$

77,376



$

68,336



$

48,630

 Short-term investments


190,533




165,755




181,395

 Restricted Cash


4,801




2,547




4,826

 Accounts receivable - net


37,621




39,747




39,703

 Merchandise inventories


117,225




105,157




144,028

 Other current assets


7,077




13,154




6,859












Total Current Assets


434,633




394,696




425,441












Property and Equipment - net


104,333




100,869




99,773












Other Assets


9,434




7,499




7,545












     TOTAL

$

548,400



$

503,064



$

532,759












LIABILITIES AND STOCKHOLDERS' EQUITY






















Current Liabilities

$

154,912



$

152,418



$

173,918












Noncurrent Liabilities


23,730




24,195




24,827












Stockholders' Equity


369,758




326,451




334,014












     TOTAL

$

548,400



$

503,064



$

532,759























(A)  The Company has reclassified certain 2010 income statement items to conform with 2011 presentation.



SOURCE The Cato Corporation



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