Cato Reports 2Q EPS Flat To Last Year

Provides Second Half Guidance

News provided by

Aug 20, 2015, 07:00 ET

CHARLOTTE, N.C., Aug. 20, 2015 /PRNewswire/ -- The Cato Corporation (NYSE: CATO) today reported net income of $15.6 million or $.56 per diluted share for the second quarter ended August 1, 2015, compared to net income of $15.7 million or $.56 per diluted share for the second quarter ended August 2, 2014. Net income and earnings per diluted share were flat to the prior year. Sales for the second quarter ended August 1, 2015 were $249.2 million, up 2% from sales of $243.8 million last year. Second quarter same-store sales were flat to last year.

For the six months ended August 1, 2015, the Company earned net income of $46.7 million or $1.67 per diluted share, compared with net income of $45.7 million or $1.61 per diluted share for the six months ended August 2, 2014. Net income increased 2% and earnings per diluted share increased 4%. Sales for the first half were $530.8 million, up 1% to the prior year's first half sales of $526.2 million. Same-store sales for the first half were down 2% from the prior year.

"Sales continue to be challenging in the current retail environment," said John Cato, Chairman, President, and Chief Executive Officer. "We expect second half earnings per diluted share will be within our original guidance range of $.46 to $.55."

Second quarter gross margin was 38.0% compared to 39.0% last year due primarily to lower merchandise margins. Second quarter SG&A costs as a percent of sales decreased to 26.9% from 28.0% last year primarily as a result of lower incentive compensation. The effective tax rate for the quarter was 37.5% compared to 36.8% last year, primarily due to lower Work Opportunity Tax Credit (WOTC) credits this year.

Our guidance of earnings per diluted share for the second half is unchanged from our original guidance of $.46 to $.55. By quarter, earnings per share are estimated to be in the range of $.12 to $.16 versus $.20 last year for the third quarter and $.35 to $.39 versus $.33 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. Based on year-to-date results and this guidance for the second half, earnings per diluted share are expected to be within the range of $2.10 to $2.23 versus $2.15 last year, a decrease of 2% to an increase of 4%.

During the first half, the Company opened 14 new stores, relocated five stores and closed two stores. The Company now expects to open 40 stores, down from the original plan of 45. As of August 1, 2015, The Cato Corporation operated 1,358 stores in 32 states, compared to 1,328 stores in 32 states as of August 2, 2014.

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. The Company also offers exclusive merchandise found in its Cato stores at www.catofashions.com. Versona is a unique fashion destination offering apparel and accessories including jewelry, handbags and shoes at exceptional prices every day. Select Versona merchandise can also be found at www.shopversona.com. 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 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 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 AUGUST 1, 2015 AND AUGUST 2, 2014
(Dollars in thousands, except per share data)

	Quarter Ended						Six Months Ended

	August 1,		%	August 2,		%	August 1,		%	August 2,		%
	2015		Sales	2014		Sales	2015		Sales	2014		Sales

REVENUES
Retail sales	$	249,215	100.0%	$	243,775	100.0%	$	530,790	100.0%	$	526,238	100.0%
Other revenue (principally finance,
late fees and layaway charges)		2,054	0.8%		2,283	0.9%		4,378	0.8%		4,553	0.9%

Total revenues		251,269	100.8%		246,059	100.9%		535,168	100.8%		530,791	100.9%

GROSS MARGIN (Memo)		94,732	38.0%		95,138	39.0%		213,787	40.3%		213,237	40.5%

COSTS AND EXPENSES, NET
Cost of goods sold		154,483	62.0%		148,637	61.0%		317,003	59.7%		313,001	59.5%
Selling, general and administrative		67,111	26.9%		68,332	28.0%		135,695	25.6%		135,819	25.8%
Depreciation		5,554	2.2%		5,424	2.2%		10,928	2.1%		10,875	2.1%
Interest and other income		(834)	-0.3%		(1,099)	-0.5%		(1,402)	-0.3%		(1,841)	-0.4%

Cost and expenses, net		226,314	90.8%		221,294	90.8%		462,224	87.1%		457,854	87.0%


Income Before Income Taxes		24,955	10.0%		24,764	10.2%		72,944	13.7%		72,937	13.9%

Income Tax Expense		9,361	3.8%		9,113	3.7%		26,267	5.0%		27,279	5.2%

Net Income	$	15,594	6.3%	$	15,651	6.4%	$	46,677	8.8%	$	45,658	8.7%


Basic Earnings Per Share	$	0.56		$	0.56		$	1.67		$	1.61


Diluted Earnings Per Share	$	0.56		$	0.56		$	1.67		$	1.61

THE CATO CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)

	August 1,		August 2,		January 31,
	2015		2014		2015
	(Unaudited)		(Unaudited)

ASSETS
Current Assets
Cash and cash equivalents	$	70,132	$	92,247	$	93,946
Short-term investments		213,848		158,198		162,185
Restricted Cash		4,472		4,692		4,479
Accounts receivable - net		37,580		40,315		41,023
Merchandise inventories		123,195		116,026		137,549
Other current assets		18,870		11,970		15,269

Total Current Assets		468,097		423,448		454,451

Property and Equipment - net		134,993		145,614		135,181

Noncurrent Deferred Income Taxes		4,567		1,375		3,363

Other Assets		20,506		9,674		15,283

TOTAL	$	628,163	$	580,111	$	608,278

LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities	$	179,928	$	168,934	$	193,901

Noncurrent Liabilities		36,546		31,951		34,179

Stockholders' Equity		411,689		379,226		380,198

TOTAL	$	628,163	$	580,111	$	608,278