Cato(US:CATO)2020-03-27 15:30Store Operations - The Company operated 1,281 fashion specialty stores as of February 1, 2020, primarily in the southeastern United States[9]. - The Company opened 5 new stores and closed 35 stores in fiscal 2019, resulting in a total of 1,281 stores at the end of the year[27]. - The Company has a strategy of opening new stores in both new and existing markets while closing underperforming stores[29]. - The Company operated 1,281 stores at February 1, 2020, down from 1,311 stores at February 2, 2019[123]. Financial Performance - Retail sales for fiscal year 2019 were $816.2 million, a decrease from $821.1 million in 2018, representing a decline of 0.1%[116]. - Total revenues for fiscal year 2019 were $825.3 million, down from $829.7 million in 2018, reflecting a decrease of 0.4%[116]. - Net income for fiscal year 2019 was $35.9 million, compared to $30.5 million in 2018, indicating an increase of 17.9%[116]. - Basic earnings per share for fiscal year 2019 were $1.46, up from $1.23 in 2018, representing an increase of 18.7%[116]. - Retail sales for the fiscal year ended February 1, 2020, were $816,184 thousand, a decrease of 0.1% from $821,113 thousand in the previous year[193]. - Total revenues for the fiscal year ended February 1, 2020, were $825,335 thousand, down from $829,664 thousand in the prior year, reflecting a decrease of 0.4%[193]. - Net income for the fiscal year ended February 1, 2020, was $35,897 thousand, an increase of 17.9% compared to $30,461 thousand in the previous year[193]. - Basic and diluted earnings per share for the fiscal year ended February 1, 2020, were both $1.46, up from $1.23 in the prior year, representing an increase of 18.7%[193]. Expenses and Costs - Cost of goods sold was $508.9 million, or 62.4% of retail sales, in fiscal 2019, down from 63.6% in fiscal 2018[126]. - Selling, general and administrative expenses (SG&A) were $263.8 million in fiscal 2019, an increase of 0.5% from $262.6 million in fiscal 2018[127]. - Interest and other income increased to $6.1 million in fiscal 2019 from $5.0 million in fiscal 2018[129]. - Income tax expense was $7.3 million, or 0.9% of retail sales in fiscal 2019, compared to $2.6 million, or 0.3% in fiscal 2018[130]. Assets and Liabilities - The company’s total assets and total liabilities increased by 40% due to changes in lease accounting standards effective from fiscal 2019[71]. - The company had total assets of $685.0 million as of February 1, 2020, an increase from $497.9 million in 2018[116]. - Current liabilities increased to $199,302 thousand as of February 1, 2020, compared to $141,086 thousand in the previous year[195]. - Total stockholders' equity as of February 1, 2020, was $316,514,000, compared to $326,353,000 at the end of the previous fiscal year, reflecting a decline of approximately 3.5%[199]. Cash Flow and Investments - Cash provided by operating activities was $53.4 million in fiscal 2019, a decrease of $6.8 million compared to $60.2 million in fiscal 2018[156]. - Net cash used in investing activities totaled $22.6 million for fiscal 2019, compared to $71.1 million in fiscal 2018[163]. - The company experienced a net cash used in investing activities of $22,633,000, a significant improvement from $71,137,000 in the prior year, indicating a reduction of approximately 68%[197]. - The Company plans to invest approximately $20.0 million in capital expenditures for fiscal 2020, following expenditures of $8.3 million in fiscal 2019[162]. Risks and Challenges - The company anticipates that its first quarter results of operations will be negatively impacted by the COVID-19 outbreak and related store closures[47]. - The company faces risks related to international operations, including potential disruptions in the supply chain and increased costs due to political unrest and public health threats[50]. - The company is dependent on third-party vendors for merchandise, which subjects it to risks associated with vendor performance and compliance with regulations[52]. - The company faces risks related to payment processing, including potential increases in interchange fees and reliance on third-party service providers[76]. - The company is exposed to legal compliance and litigation risks that could increase costs and divert management attention[84]. Merchandise and Inventory - The Company sources a majority of its merchandise directly from manufacturers overseas, primarily in Southeast Asia, with significant reliance on materials sourced from China[18]. - Merchandise inventories decreased to $115,365 thousand as of February 1, 2020, from $119,585 thousand in the previous year[195]. - Merchandise inventories are valued at net realizable value using the weighted-average cost method[206]. Human Resources - The company employed approximately 10,060 full-time and part-time associates as of February 1, 2020[42]. - The company must continually attract, train, and retain skilled personnel to support its growth strategy and operational efficiency[80]. Corporate Governance - As of March 27, 2020, John P. D. Cato controlled approximately 46.1% of the voting power of the common stock, potentially limiting other shareholders' influence[97]. - The company maintained effective internal control over financial reporting as of February 1, 2020, according to the independent auditor's opinion[183].