Reconfirms 4Q and Updates Full Year Guidance
CHARLOTTE, N.C., Nov. 19 /PRNewswire-FirstCall/ -- The Cato Corporation (NYSE: CATO) today reported net income of $3.0 million for the third quarter ended October 31, 2009, compared to net income of $0.8 million for the third quarter ended November 1, 2008, an increase of 262% on an unrounded basis. Earnings per diluted share for the third quarter were $0.10, compared to $0.03 last year, an increase of 233%. Sales for the third quarter ended October 31, 2009 were $191.0 million, a 6% increase over sales of $179.8 million for the third quarter ended November 1, 2008. Same-store sales for the quarter increased 4%.
The Company earned net income of $38.5 million for the nine months ended October 31, 2009, compared to net income of $29.8 million for the nine months ended November 1, 2008, an increase of 29%. Earnings per diluted share were $1.31 compared to $1.01 last year, an increase of 30%. Sales for the nine months ended October 31, 2009 were $654.4 million, a 3% increase over sales of $636.6 million for the nine months ended November 1, 2008. Year-to-date same-store sales increased 1%.
For the quarter, the gross margin rate increased to 34.8% versus 29.3% last year primarily due to better merchandise margins and lower freight costs. The SG&A rate for the quarter increased to 31.7% from 28.3% last year primarily as a result of higher accrued incentive compensation. The Company's effective tax rate was 30.2% vs. 35.4% last year as the effect of quarterly adjustments was lower than last year.
Year-to-date, the gross margin rate increased to 37.4% versus 34.5% last year primarily due to better merchandise margins and lower freight costs. The year-to-date SG&A rate increased to 27.7% from 26.8% last year primarily as a result of increased accrued incentive compensation offset by a reduction in store closing costs compared to last year. The year-to-date effective tax rate decreased to 33.7% vs. 36.4% last year.
"We had an unexpectedly strong quarter," stated John Cato, Chairman, President, and Chief Executive Officer. "However, we recognize that much uncertainty still exists for our customers in this economic environment. Due to this uncertainty, we continue to estimate that same-store sales for the fourth quarter will be in the range of down 3% to flat. Similarly, we are maintaining our original guidance for fourth quarter earnings per diluted share in the range of $0.08 to $0.13 versus $0.13 last year. For the year, earnings per diluted share are estimated to be in the range of $1.38 to $1.43 vs. $1.14 last year, an increase of 21% to 25%."
Year-to-date, the Company has opened 26 new stores, relocated one store, and closed 16 stores, 10 of which were conversions of It's Fashion stores to It's Fashion Metro stores. The Company now expects to open approximately 36 stores during 2009 as compared to its previous guidance of 46 stores. As of October 31, 2009, the Company operated 1,291 stores in 31 states, compared to 1,305 stores in 31 states as of November 1, 2008.
The Cato Corporation is a leading specialty retailer of value-priced women's fashion apparel and accessories operating two divisions, "Cato" and "It's Fashion". The 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 fourth quarter and full year and any related assumptions 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 OCTOBER 31, 2009 AND NOVEMBER 1, 2008
(Dollars in thousands, except per share data)
Quarter Ended
-------------
October 31, % November 1, %
2009 Sales 2008 Sales
---- ----- ---- -----
REVENUES
Retail sales $190,966 100.0% $179,838 100.0%
Other income (principally
finance, late fees and
layaway charges) 2,854 1.5% 2,947 1.6%
----- --- ----- ---
Total revenues 193,820 101.5% 182,785 101.6%
------- ----- ------- -----
GROSS MARGIN (Memo) 66,421 34.8% 52,666 29.3%
COSTS AND EXPENSES, NET
Cost of goods sold 124,545 65.2% 127,172 70.7%
Selling, general and
administrative 60,519 31.7% 50,908 28.3%
Depreciation 5,441 2.9% 5,614 3.1%
Interest and other income (957) -0.5% (2,183) -1.2%
---- ---- ------ ----
Cost and expenses, net 189,548 99.3% 181,511 100.9%
------- ---- ------- -----
Income Before Income Taxes 4,272 2.2% 1,274 0.7%
Income Tax Expense 1,289 0.7% 451 0.2%
----- --- --- ---
Net Income $2,983 1.5% $823 0.5%
====== === ==== ===
Basic Earnings Per Share $0.10 $0.03
===== =====
Diluted Earnings Per Share $0.10 $0.03
===== =====
Nine Months Ended
-----------------
October 31, % November 1, %
2009 Sales 2008 Sales
---- ----- ---- -----
REVENUES
Retail sales $654,389 100.0% $636,585 100.0%
Other income (principally
finance, late fees and
layaway charges) 8,724 1.3% 8,895 1.4%
----- --- ----- ---
Total revenues 663,113 101.3% 645,480 101.4%
------- ----- ------- -----
GROSS MARGIN (Memo) 244,472 37.4% 219,774 34.5%
COSTS AND EXPENSES, NET
Cost of goods sold 409,917 62.6% 416,811 65.5%
Selling, general and
administrative 181,643 27.7% 170,804 26.8%
Depreciation 16,467 2.5% 16,881 2.6%
Interest and other income (2,878) -0.4% (5,792) -0.9%
------ ---- ------ ----
Cost and expenses, net 605,149 92.4% 598,704 94.0%
------- ---- ------- ----
Income Before Income Taxes 57,964 8.9% 46,776 7.4%
Income Tax Expense 19,509 3.0% 17,009 2.7%
------ --- ------ ---
Net Income $38,455 5.9% $29,767 4.7%
======= === ======= ===
Basic Earnings Per Share $1.31 $1.01
===== =====
Diluted Earnings Per Share $1.31 $1.01
===== =====
THE CATO CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
October 31, November 1, January 31,
2009 2008 2009
(Unaudited) (Unaudited)
----------- ----------- -----------
ASSETS
Current Assets
Cash and cash equivalents $32,636 $35,959 $42,262
Short-term investments 147,528 90,878 93,452
Restricted Cash 2,647 8,991 9,089
Accounts receivable - net 40,472 43,267 44,136
Merchandise inventories 101,139 110,282 112,290
Other current assets 11,204 14,684 14,140
------ ------ ------
Total Current Assets 335,626 304,061 315,369
Property and Equipment - net 108,572 120,859 116,262
Other Assets 7,341 4,317 3,722
----- ----- -----
TOTAL $451,539 $429,237 $435,353
======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities $142,499 $144,523 $150,730
Noncurrent Liabilities 20,689 22,771 22,810
Stockholders' Equity 288,351 261,943 261,813
------- ------- -------
TOTAL $451,539 $429,237 $435,353
======== ======== ========
SOURCE The Cato Corporation
For further information: John R. Howe, Executive Vice President, Chief Financial Officer, +1-704-551-7315
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