Core Insights - Cato Corporation's shares have increased by 1.2% since the earnings report for the quarter ended Nov. 1, 2025, underperforming the S&P 500 index which rose by 1.5% during the same period. However, the stock has seen a significant decline of 20.7% over the past month, contrasting with a 1.6% drop in the broader market, indicating ongoing investor concerns despite improvements in financial metrics [1] Financial Performance - For Q3 2025, Cato reported a net loss of $0.28 per share, a significant improvement from a net loss of $0.79 per share in the same quarter of the previous year [2] - The company incurred a net loss of $5.2 million, a notable reduction from a net loss of $15.1 million in the prior year [3] Revenue and Sales - Retail sales increased by 6% year-over-year to $153.7 million, up from $144.6 million in Q3 2024, driven by a 10% rise in same-store sales. Total revenues, including finance and late fees, reached $155.4 million compared to $146.2 million a year earlier [2] Operational Efficiency - Cato achieved improvements in gross margin, which rose to 32% from 28.8%, primarily due to reductions in freight, distribution, buying, and occupancy costs, although higher markdowns partially offset these gains [4] - Selling, general and administrative (SG&A) expenses decreased to $57 million from $57.9 million a year ago, representing 37.1% of sales compared to 40% previously. Cost savings were attributed to reduced payroll, professional fees, and insurance costs [5] Management Commentary - The CEO attributed revenue growth partly to a weak comparable base from 2024, which was affected by hurricanes and supply chain disruptions. The company anticipates challenges in Q4 due to slowing employment growth and lower expected economic growth, and plans to manage expenses and inventory tightly while maintaining sales momentum [6] Tax Benefits - The reduction in net loss was supported by a favorable cost structure and operational improvements, including a $1.2 million tax benefit in the quarter compared to a $0.3 million tax expense last year, stemming from reduced foreign income taxes and the roll-off of uncertain tax position reserves [7] Store Footprint - Cato has continued to rationalize its store footprint, closing 16 stores year-to-date, resulting in 1,101 stores across 31 states as of Nov. 1, 2025, down from 1,167 stores a year earlier, reflecting efforts to optimize retail operations amid changing consumer behavior [8]

Financial Data and Key Metrics Changes - Net sales for Q4 2024 were $87 million, down 4% from $91 million in Q4 2023, reflecting lower volumes due to industry softness [22] - Full year net sales were $509 million, down 10% from $566 million in the prior year, primarily due to lower sales volume [26] - Adjusted EBITDA for Q4 was $4 million, down 63% from $10 million in the prior period, with an adjusted EBITDA margin of 4%, a decline of 670 basis points year over year [25] - Full year adjusted EBITDA was $80 million, compared to $88 million in the prior year, with an adjusted EBITDA margin of 15.8%, up 30 basis points from 15.5% in 2023 [29] Business Line Data and Key Metrics Changes - In-ground pool sales for Q4 were $44 million, down 5% from Q4 2023, while cover sales were $31 million, down 2% [22] - Full year in-ground pool sales were $259 million, down 13% year over year, but above the estimated 15% decline in in-ground pool starts in the US [26] - Liner sales for the full year were $180 million, down 8%, and cover sales were $131 million, down 7% [27] Market Data and Key Metrics Changes - Fiberglass pools represented 24% of US pool starts in 2024, up from 23% in 2023, indicating increased market penetration [7] - Approximately 17% of Latham Group's total fiberglass pool sales in 2024 were in the sand states, which account for about two-thirds of US pool starts [12] Company Strategy and Development Direction - The company is focused on expanding market share in the sand states (Florida, Texas, Arizona, California) and increasing fiberglass pool penetration [11] - Key priorities include expanding the dealer base, targeting master-planned communities, aligning product offerings with market demand, and addressing marketing campaigns specifically to consumers and builders in those markets [13] - The company plans to launch new fiberglass pool models tailored to the preferences of consumers in the sand states [13] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism about the operating environment, noting that while industry conditions are challenging, they expect to outperform the market in 2025 [20] - The company anticipates that new US pool starts in 2025 will be similar to 2024 levels, but they are prepared to ramp up quickly if market demand increases [19] - Management highlighted the importance of strategic investments in growth initiatives, particularly in fiberglass pools and automatic safety covers [11] Other Important Information - The company ended 2024 with a strong financial position, including a cash position of $56 million and total debt of $282 million [30] - Capital expenditures for 2024 were $20 million, with projections for 2025 to be in the range of $27 million to $33 million [36] Q&A Session Summary Question: Breakdown of the 8% sales growth guidance - Management indicated that the 8% sales growth is expected to come from approximately 3% from the full-year run rate effect of acquisitions and about 5% from organic growth [43][44] Question: Feedback from dealers in the sand states - Management reported positive feedback from dealers, with many indicating that their backlogs are flat or up compared to the previous year, and noted a 40% increase in leads from the Goosa campaign in Texas [48][50] Question: Exposure to tariffs and impact on business - Management stated that the tariff impact is limited, with around $15 million in material buys from affected countries, and emphasized their diversified supplier base to mitigate risks [59][60] Question: Effectiveness of the sand state strategy - Management acknowledged that fiberglass penetration in the sand states is significantly below the national average, presenting a substantial growth opportunity [75] Question: EBITDA margin guidance and tariff implications - Management confirmed that the guidance includes considerations for tariffs, with a focus on maintaining gross margin performance through operational efficiencies [121][130]