The Cato Corporation (NYSE: CATO) today reported net income of $20.7 million or $0.92 per diluted share for the first quarter ended May 1, 2021, compared to a net loss of $28.4 million or ($1.19) per diluted share for the first quarter ended May 2, 2020.
Sales for fiscal 2020 were significantly impacted by the closure of our stores for six weeks due to the COVID-19 pandemic, beginning March 19, 2020. Due to the impact of the unprecedented closures, the Company will report sales compared to each of the past two years. Sales for the first quarter were $211.2 million, or an increase of 114% from sales of $98.8 million for the first quarter ended May 2, 2020. Compared to the same period in 2019, sales decreased 7% from sales of $228.3 million for the quarter ended May 4, 2019. The Company’s same-store sales for the quarter increased 111% compared to 2020 and decreased 8% when compared to the same period in 2019.
“We remain cautiously optimistic about the remainder of the year as we see customer traffic improve, states continue to lift capacity limits as more people are vaccinated, the comfort level with venturing out to social events increases and people prepare to return to work,” stated John Cato, Chairman, President, and Chief Executive Officer. “We do anticipate the beneficial effects of stimulus funds on the economy to taper off in the near future and retail to continue to be negatively impacted by global supply chain challenges.”
Gross margin increased from 15.4% to 41.5% of sales in the quarter due to higher merchandise margins. SG&A expenses as a percent of sales decreased from 53.1% to 29.9% of sales during the quarter primarily due to leveraging of expenses as a result of normalized sales and a $5.3 million non-cash impairment charge in the prior year, partially offset by higher incentive compensation. Tax impact for the quarter was a $3.1 million expense versus a $9.1 million benefit in the prior year due to the pre-tax loss. The Company ended the quarter with unrestricted cash and short-term investments of $183.2 million, with no borrowings outstanding on its revolving line of credit compared to $117.8 million for the same period in 2020, net of $30 million drawn on its line of credit.
During the first quarter ended May 1, 2021, the Company permanently closed 5 stores. As of May 1, 2021, the Company has 1,325 stores in 32 states, compared to 1,300 stores in 31 states as of May 2, 2020.
“Our healthy cash position, no debt and actions taken to preserve capital contributed to Cato’s ability to weather a year like 2020,” Mr. Cato said. “And the hard work and dedication of our associates and the loyalty of our customers is allowing us to regain ground lost during 2020. Our priority, in addition to providing a safe shopping environment, is to provide fashion and outstanding customer service at a great value to our customers.”
“As the effects of the pandemic remain ongoing, there still remains a high level of uncertainty as to their continued impact on the retail industry as a whole. The lingering effects of the prolonged supply chain disruption are also a concern,” shared Mr. Cato. “In light of these uncertainties, we remain cautiously optimistic about the remainder of the year. However, should our strong start continue through the first half, we expect to revisit store development opportunities and other projects suspended due to COVID.”
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.
Statements in this press release that express a belief, expectation or intention, as well as those that are not a historical fact, including, without limitation, statements regarding the Company’s expected or estimated operational financial results, activities or opportunities, and potential impacts and effects of the coronavirus 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, any actual or perceived deterioration in the conditions that drive consumer confidence and spending, including, but not limited to, prevailing social, economic, political and public health conditions and uncertainties, levels of unemployment, fuel, energy and food costs, wage rates, tax rates, interest rates, home values, consumer net worth and the availability of credit; changes in laws or regulations affecting our business including but not limited to tariffs; uncertainties regarding the impact of any governmental action regarding, or responses to, to the foregoing conditions; competitive factors and pricing pressures; our ability to predict and respond to rapidly changing fashion trends and consumer demands; our ability to successfully implement our new store development strategy to increase new store openings and the ability of any such new stores to grow and perform as expected; adverse weather, public health threats (including the global coronavirus (COVID-19) outbreak) or similar conditions that may affect our sales or operations; inventory risks due to shifts in market demand, including the ability to liquidate excess inventory at anticipated margins; 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)
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THE CATO CORPORATION
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