Cato Stock Improves 16% as Q4 Loss Narrows Year Over Year

Core Viewpoint - The Cato Corporation's stock has significantly outperformed the S&P 500 following its earnings report, reflecting positive investor sentiment due to a narrowed quarterly loss and operational improvements [1] Financial Performance - For the fourth quarter, Cato reported a net loss of $0.74 per share, an improvement from a net loss of $1.14 per share in the same quarter last year [2] - Quarterly sales decreased by 10% year-over-year to $155.3 million, down from $172.1 million; however, on a comparable 13-week basis, the decline was only 5.1% [2] - The company incurred a net loss of $14.1 million, which is narrower than the $23.4 million loss reported in the prior-year quarter [3] Key Business Metrics - Cato's gross margin contracted to 28% from 31% year-over-year, attributed to increased markdowns and higher distribution costs [4] - SG&A expenses fell by $8.8 million, improving as a percentage of sales to 37.8% from 39.2% in the prior-year quarter, mainly due to reductions in various costs [4] Management Insights - The CEO highlighted ongoing macroeconomic challenges affecting discretionary spending and operational disruptions earlier in the year, but noted improvements in the fourth quarter [5] - The company has initiated cost-efficiency measures, including the elimination of approximately 40 corporate positions and plans for further expense reductions [6] Sales and Market Pressures - Weaker sales performance was linked to consumer budget pressures and external disruptions, with increased markdowns and logistics costs impacting margins [7] - A significant drop in income tax expense was noted, from $10.9 million in Q4 2023 to $0.3 million in Q4 2024, due to a non-cash valuation allowance against deferred tax assets [8] Full Year Overview - For fiscal 2024, Cato's net loss narrowed to $18.1 million or $0.97 per share from $23.9 million or $1.17 per share in 2023; annual sales declined by 8.3% to $642.1 million [9] - Gross margin for the full year dropped to 32% from 33.7%, while SG&A expenses decreased by $21.3 million [9] - The company reported $11.8 million in interest and other income for the year, more than doubling from $5.1 million the previous year [9] Operational Developments - Cato closed 62 underperforming stores during fiscal 2024, while opening one and relocating four, resulting in a total of 1,117 stores as of February 1, 2025 [10] - For fiscal 2025, the company plans to open up to 15 new stores and close up to 50 additional underperforming locations, expecting minimal financial impact from these closures [10]