THE CATO CORPORATION 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
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August 1, % August 2, % August 1, % August 2, %
2015 Sales 2014 Sales 2015 Sales 2014 Sales
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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%
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Basic Earnings Per Share $0.56 $0.56 $1.67 $1.61
Diluted Earnings Per Share $0.56 $0.56 $1.67 $1.61
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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
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SOURCE The Cato Corporation
