News Column

Cato Reports 2Q EPS of $.56, Exceeds Guidance

September 6, 2014



By a News Reporter-Staff News Editor at Investment Weekly News -- The Cato Corporation (NYSE: CATO) reported net income of $15.7 million or $.56 per diluted share for the second quarter ended August 2, 2014, compared to net income of $14.8 million or $.51 per diluted share for the second quarter ended August 3, 2013. Net income increased 6% and earnings per diluted share increased 10% from the prior year. Earnings per share benefited $.03 in the second quarter due to share repurchases. Sales for the second quarter ended August 2, 2014 were $243.8 million, up 6% from sales of $229.4 million last year. Second quarter same-store sales increased 3%.

For the six months ended August 2, 2014, the Company earned net income of $45.7 million or $1.61 per diluted share, compared with net income of $45.6 million or $1.56 per diluted share for the six months ended August 3, 2013. Net income was flat and earnings per diluted share increased 3%. Earnings per share benefited $.05 in the first half due to share repurchases. Sales for the first half were $526.2 million, up 6% to the prior year's first half sales of $496.6 million. Same-store sales for the first half were up 3% from the prior year.

"Second quarter same-store sales were in line with our year-to-date trend," said John Cato, Chairman, President, and Chief Executive Officer. "However, we continue to expect the second half earnings per diluted share will be within our original guidance range, updated for share repurchases, of $.21 to $.30."

Second quarter gross margin was 38.9% compared to 36.8% last year due primarily to higher merchandise margins. Second quarter SG&A costs as a percent of sales increased to 28.0% from 25.7% last year primarily as a result of higher incentive compensation and point-of-sale (POS) equipment upgrades. The effective tax rate for the quarter was 36.8% compared to 36.0% last year, primarily due to the lack of the Work Opportunity Tax Credit (WOTC) this year, which has not been renewed by Congress.

Our guidance of earnings per diluted share for the second half is unchanged, but is updated for share repurchases, at $.21 to $.30. By quarter, earnings per share are estimated to be in the range of $.08 to $.13 versus $.17 last year for the third quarter and $.13 to $.17 versus $.13 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 adjusted range of $1.82 to $1.91 versus $1.86 last year, a decrease of 2% to an increase of 3%.

During the first half, the Company opened 11 new stores, relocated one store and closed three stores. The Company now expects to open 46 stores, down from the original plan of 65. As of August 2, 2014, The Cato Corporation operated 1,328 stores in 32 states, compared to 1,306 stores in 31 states as of August 3, 2013.

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 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.

Keywords for this news article include: Finance, The Cato Corporation.

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Source: Investment Weekly News


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