Cato(US:CATO)2025-03-31 19:00Store Operations - The Company operated 1,117 fashion specialty stores as of February 1, 2025, down from 1,178 stores in fiscal 2023, representing a decrease of approximately 5.2%[35] - The Company opened 5 new stores and closed 66 stores in fiscal 2024, resulting in a net decrease of 61 stores[35] - The Company’s stores average approximately 4,500 square feet in size and are primarily located in strip shopping centers[31][32] - The Company's ability to open new stores is dependent on securing suitable locations and navigating economic downturns in the commercial real estate industry[62][63] Financial Performance - Retail sales decreased by 8.3% to $642.1 million in fiscal 2024 compared to $700.3 million in fiscal 2023[135] - Total revenues decreased by 8.2% to $649.8 million in fiscal 2024 compared to $708.1 million in fiscal 2023[135] - Same-store sales decreased by 3.2% in fiscal 2024, primarily due to lower transactions[135] - The net loss for the fiscal year ended February 1, 2025, was $18.1 million, compared to a net loss of $23.9 million in fiscal 2024[187] - Basic and diluted earnings per share for fiscal 2025 were both $(0.97), compared to $(1.17) in fiscal 2024[187] Cost and Expenses - Cost of goods sold increased to 68.0% of retail sales in fiscal 2024, up from 66.3% in fiscal 2023[134] - Total gross margin dollars decreased by 12.8% to $205.7 million in fiscal 2024 from $236.0 million in fiscal 2023[138] - Selling, general and administrative expenses (SG&A) were $231.5 million in fiscal 2024, down 8.4% from $252.8 million in fiscal 2023, maintaining SG&A as 36.1% of retail sales[139] - Dividends paid decreased to $10,516,000 in fiscal 2024 from $13,954,000 in fiscal 2023, a decline of approximately 25%[192] Inventory and Merchandise - Merchandise inventories increased to $110.7 million as of February 1, 2025, compared to $98.6 million in the previous year, reflecting a 12.6% increase[189] - Merchandise inventories decreased by $12,136,000 in fiscal 2024, compared to an increase of $13,453,000 in fiscal 2023, indicating a significant shift in inventory management[191] Credit and Sales - Credit and layaway sales accounted for 6% of retail sales in fiscal 2024, with the Company's credit card program representing 3.4% of retail sales[36] - Layaway sales represented approximately 2.8% of retail sales in fiscal 2024, slightly down from 3.0% in fiscal 2023[40] - Credit revenue increased to $2.7 million, representing 0.4% of total revenue in fiscal 2024[137] Risks and Challenges - The Company is subject to supply chain disruptions, including increased ocean freight costs and delays due to geopolitical tensions and natural disasters, which may adversely affect its ability to sell merchandise[49][50] - Increased costs from tariffs on Chinese products and inflationary pressures on labor and raw materials may negatively impact the Company's financial condition and results of operations[51][54] - Continued high interest rates are expected to reduce customers' discretionary income, adversely affecting their willingness to purchase discretionary items[53] - The Company faces risks related to consumer confidence and spending, which can be influenced by economic conditions, inflation, and public health threats[52] - The women's retail apparel industry is highly competitive, with significant pressure from discount stores, mass merchandisers, and internet-based retailers, potentially impacting market share and financial condition[67] Cybersecurity and Compliance - The company faces risks related to cybersecurity, with potential breaches leading to increased costs and damage to reputation[78] - The company has increased investments in cybersecurity risk management, including an enterprise cybersecurity program to mitigate threats[106] - Compliance with the Payment Card Industry Data Security Standard is maintained, and third-party providers are regularly assessed for cybersecurity compliance[108] - Legal compliance and regulatory risks may lead to increased costs and liabilities, diverting management's attention and adversely affecting business operations[85] Shareholder and Governance - The principal shareholder holds 53.3% of the voting power, which may limit other shareholders' influence and affect corporate governance[104] - The Board of Directors authorized an increase of 1,000,000 shares in the Company's share repurchase program on December 23, 2024[209] Cash Flow and Investments - Cash used in operating activities was $19.7 million in fiscal 2024, a decrease of $20.2 million compared to fiscal 2023[157] - Net cash provided by investing activities was $29.0 million in fiscal 2024, compared to $19.8 million in fiscal 2023[164] - The company had an unsecured revolving credit agreement for borrowings of up to $35.0 million, which was terminated on March 13, 2025, in favor of a new asset-backed revolving line of credit[160] Other Financial Metrics - The Company reported a provision for customer credit losses of $654,000 in fiscal 2024, up from $554,000 in fiscal 2023, marking an increase of about 18%[191] - The company incurred asset impairment charges of $786,000 in fiscal 2024, down from $1,811,000 in fiscal 2023, showing a reduction of about 57%[200] - The Company recognized $1,447,934 in income from unredeemed gift cards in fiscal 2024, compared to $1,116,000 in fiscal 2023 and $256,000 in fiscal 2022, reflecting a significant increase in gift card breakage revenue[205]