Cato(US:CATO)2022-03-22 16:00Store Operations - The Company operated 1,311 fashion specialty stores as of January 29, 2022, with a focus on offering quality fashion apparel and accessories at low prices[13]. - The Company opened 6 new stores and closed 25 stores in fiscal 2021, resulting in a total of 1,311 stores at the end of the year[33]. - The Company's stores are primarily located in strip shopping centers, with 93% of stores in such locations[30]. - The ability to open new stores is contingent on identifying suitable locations and negotiating acceptable lease terms, which may present challenges in new regions[67]. Financial Performance - In fiscal 2021, retail sales increased by 34.2% to $761.4 million compared to $567.5 million in fiscal 2020, driven by a 34% increase in same-store sales[149]. - Total revenues rose by 33.8% to $769.3 million in fiscal 2021 from $575.1 million in fiscal 2020[149]. - Net income for fiscal 2021 was 4.8%, a significant improvement from a net loss of 8.4% in fiscal 2020[148]. - The comprehensive income for the year ended January 29, 2022, was $35.4 million, compared to a comprehensive loss of $47.8 million in the previous year[210]. - Basic and diluted earnings per share for the year ended January 29, 2022, were both $1.65, a significant improvement from a loss of $2.01 per share in the prior year[210]. Cost Management - Cost of goods sold decreased to $453.1 million, or 59.5% of retail sales, in fiscal 2021, down from 76.3% in fiscal 2020[152]. - Selling, general and administrative expenses (SG&A) rose by 29.2% to $267.0 million in fiscal 2021, representing 35.1% of retail sales[155]. - Increased product costs, freight costs, and wage increases due to inflation are expected to adversely affect the Company's margins and financial condition[56]. - Increased production costs from vendors may impact the company's ability to maintain or grow margins, affecting overall financial performance[79]. Customer Engagement - The loyalty program introduced in October 2021 allows customers to earn points for purchases, although its impact on fiscal 2021 financial statements was immaterial[36]. - The Company emphasizes customer service, with trained staff to assist in merchandise selection and wardrobe coordination[17]. Economic and Market Conditions - The COVID-19 pandemic has adversely impacted the Company's business, financial condition, and operating results through fiscal 2021, with expectations of continued effects into fiscal 2022 and possibly beyond[49]. - Consumer spending on apparel and accessories is influenced by economic conditions, with adverse perceptions potentially leading to decreased sales[76]. - The women's retail apparel industry is highly competitive, with many competitors having greater resources, leading to potential pricing pressures and loss of market share[74]. Supply Chain and Inventory - The Company sources a majority of its merchandise directly from manufacturers overseas, primarily in Southeast Asia, with 12% of total purchases coming from its largest vendor in fiscal 2021[24]. - The Company is subject to supply chain disruptions, including increased costs and delays in merchandise arrivals, which could adversely affect sales and increase markdowns[63]. - Fluctuating comparable sales and inventory management issues could negatively impact the Company's gross margin and overall results of operations[71]. Human Resources - The Company employs approximately 7,500 full-time and part-time associates as of January 29, 2022[45]. - High associate turnover rates, particularly among store sales associates, could increase recruiting and training costs, impacting operational efficiency[83]. - The Company is committed to promoting diversity and providing opportunities for advancement, with over 80% of store and field management promoted from within[46]. Financial Management - The Company provided cash from operating activities of $59.8 million in fiscal 2021, a significant increase of $90.5 million compared to a cash outflow of $30.7 million in fiscal 2020[172]. - Working capital as of January 29, 2022, was $111.5 million, slightly up from $108.6 million in the previous year, primarily due to higher short-term investments and inventory[173]. - The Company plans to invest $23.0 million in capital expenditures for fiscal 2022, alongside $71.3 million in lease obligations[171]. - The Company had no outstanding borrowings under its unsecured revolving credit agreement as of January 29, 2022, which allows for borrowings of up to $35.0 million[174]. Risks and Compliance - Security breaches resulting in unauthorized access to sensitive information could adversely affect the company's reputation and financial condition[93]. - The company faces payment-related risks, including potential increases in transaction fees and compliance costs associated with various payment methods[96]. - Changes in accounting rules and regulations may significantly impact the company's reported financial results and position[99]. - The company faces potential lawsuits regarding private label merchandise, which could adversely affect its financial condition and operations[110]. Shareholder Information - As of March 23, 2022, John P. D. Cato owned approximately 49.8% of the voting power, potentially limiting other shareholders' influence and affecting corporate governance[121]. - The trading price of the company's common stock has experienced significant volatility due to various factors, including market conditions and operational results[123]. - The cumulative total shareholder return for the company has fluctuated significantly over the past five fiscal years, with a base value of 100 on January 27, 2017, and a value of 87 on January 28, 2022[139].