Cato(CATO) - 2026 Q2 - Quarterly Results

Second Quarter and Year-to-Date 2025 Financial Results The Cato Corporation reported significant improvements in net income and sales for Q2 2025, driven by strong same-store sales growth and improved profitability metrics. Year-to-date results showed a slight decline in net income despite stable sales Second Quarter 2025 Performance Highlights The company achieved substantial growth in net income and diluted EPS for Q2 2025, alongside a 5% increase in sales, primarily due to a 9% rise in same-store sales. Profitability improved with higher gross margin and reduced SG&A expenses Net Income and Earnings Per Share Net income for Q2 2025 surged to $6.8 million, or $0.35 per diluted share, a significant increase from $0.1 million, or $0.01 per diluted share, in Q2 2024 Q2 2025 Net Income and Earnings Per Share | Metric | Q2 2025 | Q2 2024 | Change | | :--- | :--- | :--- | :--- | | Net Income | $6.8 million | $0.1 million | +$6.7 million | | Diluted EPS | $0.35 | $0.01 | +$0.34 | Sales Performance Q2 2025 sales increased by 5% to $174.7 million, primarily driven by a 9% same-store sales increase compared to the prior year Q2 2025 Sales Performance | Metric | Q2 2025 | Q2 2024 | Change | | :--- | :--- | :--- | :--- | | Sales | $174.7 million | $166.9 million | +5% | | Same-Store Sales | +9% | N/A | +9% | Profitability and Expense Management Gross margin improved to 36.2% of sales, up from 34.6%, due to lower distribution and buying costs. SG&A expenses decreased to 32.8% of sales from 34.9%, mainly from lower payroll and insurance costs Q2 2025 Profitability Metrics | Metric | Q2 2025 | Q2 2024 | Change | | :--- | :--- | :--- | :--- | | Gross Margin (% of sales) | 36.2% | 34.6% | +1.6 pts | | SG&A Expenses (% of sales) | 32.8% | 34.9% | -2.1 pts | | Income Tax (Benefit)/Expense | ($0.3 million benefit) | $0.6 million expense | -$0.9 million | - Gross margin increase was due to lower distribution and buying costs, partially offset by lower merchandise margins[5] - SG&A expenses decrease was primarily due to lower payroll and insurance costs, partially offset by higher advertising and general corporate costs[5] Year-to-Date 2025 Performance Highlights For the first six months of 2025, net income slightly decreased to $10.1 million, or $0.51 per diluted share, compared to $11.1 million, or $0.54 per diluted share, in the prior year. Sales remained relatively flat at $343.1 million, with a 4% same-store sales increase offset by store closures Net Income and Earnings Per Share Year-to-date net income was $10.1 million ($0.51 per diluted share), a decrease from $11.1 million ($0.54 per diluted share) in the same period last year YTD 2025 Net Income and Earnings Per Share | Metric | YTD 2025 | YTD 2024 | Change | | :--- | :--- | :--- | :--- | | Net Income | $10.1 million | $11.1 million | -$1.0 million | | Diluted EPS | $0.51 | $0.54 | -$0.03 | Sales Performance Year-to-date sales were $343.1 million, a marginal increase of 0.3%, supported by a 4% same-store sales increase, but partially offset by the impact of closed stores YTD 2025 Sales Performance | Metric | YTD 2025 | YTD 2024 | Change | | :--- | :--- | :--- | :--- | | Sales | $343.1 million | $342.2 million | +0.3% | | Same-Store Sales | +4% | N/A | +4% | Profitability and Expense Management Year-to-date gross margin increased to 35.6% of sales from 35.2%, driven by lower distribution and buying costs. SG&A expenses decreased to 32.8% of sales from 33.6%, primarily due to lower payroll and insurance costs YTD 2025 Profitability Metrics | Metric | YTD 2025 | YTD 2024 | Change | | :--- | :--- | :--- | :--- | | Gross Margin (% of sales) | 35.6% | 35.2% | +0.4 pts | | SG&A Expenses (% of sales) | 32.8% | 33.6% | -0.8 pts | | Income Tax Expense | $0.6 million | $1.3 million | -$0.7 million | - Year-to-date gross margin increased primarily due to lower distribution and buying costs, partially offset by lower merchandise margins[6] - Year-to-date SG&A expenses decreased primarily due to lower payroll and insurance costs, partially offset by higher advertising expenses and general corporate costs[6] Management Commentary Chairman, President, and CEO John Cato noted continued sales trend improvement in Q2, partly attributing it to overcoming 2024 supply chain disruptions. He anticipates a challenging second half of 2025 due to tariff uncertainties and potential impacts on product acquisition costs, emphasizing tight expense management - Sales trend continued to improve during the second quarter, partly attributed to 2024 sales being impacted by supply chain disruptions[5] - Anticipates the back half of 2025 to be challenging due to continued uncertainty regarding tariffs and potential negative impact on product acquisition costs[5] - Company will continue to tightly manage expenses[5] Business Operations and Company Profile The Cato Corporation operates 1,101 stores across 31 states under three distinct retail concepts: "Cato," "Versona," and "It's Fashion," offering value-priced fashion apparel and accessories Store Operations and Footprint During Q2 2025, the company closed eight stores, resulting in a total of 1,101 stores in 31 states as of August 2, 2025, down from 1,166 stores a year prior Store Count and Changes | Metric | As of Aug 2, 2025 | As of Aug 3, 2024 | Change | | :--- | :--- | :--- | :--- | | Total Stores | 1,101 | 1,166 | -65 | | Stores Closed (Q2 2025) | 8 | N/A | -8 | | States of Operation | 31 | 31 | No Change | Retail Concepts The Cato Corporation operates three retail concepts: "Cato" (exclusive value-priced fashion apparel and accessories, also online), "Versona" (unique fashion destination for apparel and accessories, also online), and "It's Fashion" (trendy styles for the entire family at low prices) - Cato stores offer exclusive merchandise with fashion and quality comparable to mall specialty stores at low prices every day, also available online at www.catofashions.com[7](index=7&type=chunk)[8] - Versona is a unique fashion destination offering apparel and accessories including jewelry, handbags and shoes at exceptional prices every day, with select merchandise also found at www.shopversona.com[8](index=8&type=chunk) - It's Fashion offers fashion with a focus on the latest trendy styles for the entire family at low prices every day[8] Condensed Consolidated Financial Statements This section presents the unaudited condensed consolidated statements of income for the quarter and six months ended August 2, 2025, and August 3, 2024, along with the condensed consolidated balance sheets as of August 2, 2025, and February 1, 2025 Statements of Income The condensed consolidated statements of income provide a detailed breakdown of revenues, costs, expenses, and net income for both the second quarter and the first six months of fiscal years 2025 and 2024 Condensed Consolidated Statements of Income (Unaudited, in thousands) | | | Q2 2025 | % Sales | Q2 2024 | % Sales | YTD 2025 | % Sales | YTD 2024 | % Sales | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | REVENUES Retail sales | | $174,653 | 100.0% | $166,934 | 100.0% | $343,072 | 100.0% | $342,206 | 100.0% | | Other revenue (principally finance, late fees and layaway charges) | | 1,856 | 1.1% | 1,694 | 1.0% | 3,679 | 1.1% | 3,521 | 1.0% | | Total revenues | | 176,509 | 101.1% | 168,628 | 101.0% | 346,751 | 101.1% | 345,727 | 101.0% | | GROSS MARGIN (Memo) | | 63,186 | 36.2% | 57,812 | 32.5% | 122,288 | 35.6% | 120,579 | 35.2% | | COSTS AND EXPENSES, NET | | | | | | | | | | | Cost of goods sold | | 111,467 | 63.8% | 109,122 | 67.5% | 220,784 | 64.4% | 221,627 | 64.8% | | Selling, general and administrative | | 57,371 | 32.8% | 58,181 | 39.4% | 112,696 | 32.8% | 114,933 | 33.6% | | Depreciation | | 2,525 | 1.4% | 2,329 | 1.6% | 5,089 | 1.5% | 4,369 | 1.3% | | Interest and other income | | (1,393) | -0.8% | (1,742) | -1.0% | (2,594) | -0.8% | (7,563) | -2.2% | | Costs and expenses, net | | 169,970 | 97.3% | 167,890 | 107.6% | 335,975 | 97.9% | 333,366 | 97.4% | | Income Before Income Taxes | | 6,539 | 3.7% | 738 | -6.6% | 10,776 | 3.1% | 12,361 | 3.6% | | Income Tax Expense | | (293) | -0.2% | 643 | -2.7% | 635 | 0.2% | 1,292 | 0.4% | | Net Income (Loss) | | $6,832 | 3.9% | $95 | -3.9% | $10,141 | 3.0% | $11,069 | 3.2% | | Basic Earnings Per Share | | $0.35 | | $0.01 | | $0.51 | | $0.54 | | | Diluted Earnings Per Share | | $0.35 | | $0.01 | | $0.51 | | $0.54 | | Balance Sheets The condensed consolidated balance sheets present the company's financial position, detailing assets, liabilities, and stockholders' equity as of August 2, 2025, compared to February 1, 2025 Condensed Consolidated Balance Sheets (Unaudited, in thousands) | | August 2, 2025 | February 1, 2025 | | :--- | :--- | :--- | | ASSETS | | | | Current Assets | | | | Cash and cash equivalents Short-term investments | $34,225 | $20,279 | | Restricted cash Accounts receivable - net | 2,675 | 2,799 | | Merchandise inventories | 97,273 | 110,739 | | Other current assets | 8,941 | 7,406 | | Total Current Assets | 225,816 | 223,186 | | Property and Equipment - net | 57,641 | 60,326 | | Other Assets | 20,201 | 19,979 | | Right-of-Use Assets, net | 133,228 | 148,870 | | TOTAL | $436,886 | $452,361 | | LIABILITIES AND STOCKHOLDERS' EQUITY | | | | Current Liabilities | $121,470 | $130,684 | | Current Lease Liability | 53,877 | 57,555 | | Noncurrent Liabilities | 13,340 | 13,485 | | Lease Liability | 76,018 | 88,341 | | Stockholders' Equity | 172,181 | 162,296 | | TOTAL | $436,886 | $452,361 | Forward-Looking Statements and Risk Factors This section contains forward-looking statements based on current expectations, subject to known and unknown risks and uncertainties that could cause actual results to differ materially. Key factors include consumer confidence, economic conditions, regulatory changes (e.g., tariffs), competitive pressures, fashion trends, store development, supply chain disruptions, inventory risks, and financial market volatility. The company disclaims any obligation to publicly update or revise these statements - Forward-looking statements are based on current expectations and are subject to known and unknown risks, uncertainties, and other factors that could cause actual results to differ materially[9] - Such factors include, but are not limited to, conditions affecting consumer confidence and spending, changes in laws (including tariffs), competitive factors, ability to predict fashion trends, store development strategy, store closures, adverse weather, supply chain disruptions, inventory risks, and financial market volatility[9] - The Company does not undertake to publicly update or revise the forward-looking statements[9]