CATO Cato Corp

CHARLOTTE, N.C., Nov. 19, 2020 /PRNewswire/ -- The Cato Corporation (NYSE: CATO) today reported a net loss of $3.6 million or ($0.15) per diluted share for the third quarter ended October 31, 2020, compared to net income of $6.0 million or $0.24  per diluted share for the third quarter ended November 2, 2019.  Sales for the third quarter were $149.2 million, or a decrease of 21% from sales of $189.4 million for the third quarter ended November 2, 2019.   The Company's same-store sales for the quarter decreased 23% to the same period last year.

As previously announced, Cato closed all stores due to the COVID-19 pandemic beginning March 19, 2020.  On May 1, 2020, the Company began reopening stores in a phased approach, with limited operating hours, consistent with local health and safety guidelines and regulations.  As of June 15, 2020, all stores had reopened.

For the nine months ended October 31, 2020, the Company reported a net loss of $39.2 million or ($1.64) per diluted share, compared to net income of $39.1 million or $1.59 per diluted share for the nine months ended November 2, 2019.  Sales for the nine months ended October 31, 2020 were $414.3 million, down 34% to sales of $627.8 million for the nine months ended November 2, 2019.  Year-to-date same-store sales decreased 35%.

"Sales in the third quarter reflected continued softening of customer demand as COVID-19 cases continued to rise throughout our market areas and many people still have not returned to work. As we see this trend continuing, we anticipate that the remainder of the year will be challenging," stated John Cato, Chairman, President, and Chief Executive Officer. "We appreciate our store associates' diligence in providing a safe shopping environment and our customers' patience as we continue our enhanced cleaning and product handling procedures to make our stores as safe as possible in light of the COVID-19 pandemic."

For the quarter, gross margin decreased to 26.7% from 37.4% of sales the prior year due to a reduction in merchandise contribution, combined with the effects of deleveraging from the sales decline. SG&A expenses as a percent of sales increased to 34.8% from 34.2% during the quarter primarily due to the effects of deleveraging, and an impairment charge of $2.3 million, partially offset by company-wide expense reductions and reduction of incentive compensation compared to prior year. A pre-tax loss and the beneficial effects of the CARES Act resulted in $9.7 million of tax benefit versus $0.1 million of expense in the prior year. The Company ended the quarter with unrestricted cash and short-term investments of $151.4 million and full availability of its $35 million revolving line of credit.

Year-to-date gross margin decreased to 21.4% of sales from 38.7% the prior year primarily due to a reduction in merchandise contribution combined with the effects of deleveraging resulting from the sales decline.  The year-to-date SG&A rate was 35.8% versus 31.2% last year primarily due to the effects of deleveraging and impairment charges of $7.6 million, partially offset by company-wide expense reductions and the reduction of incentive compensation.  Income tax benefit for the nine months was $22.7 million compared to an expense of $6.5 million last year.

During the third quarter ended October 31, 2020, the Company opened 16 new stores, which had leases prior to the COVID-19 pandemic and permanently closed 2 stores.  As of October 31, 2020, the Company operated 1,347 stores in 33 states, compared to 1,298 stores in 31 states as of August 3, 2019.

The Cato Corporation is a leading specialty retailer of value-priced fashion apparel and accessories operating three concepts, "Cato," "Versona" and "It's Fashion."  The Company's Cato stores offer exclusive merchandise with fashion and quality comparable to mall specialty stores at low prices every day.  The Company also offers exclusive merchandise found in its Cato stores at www.catofashions.com. Versona is a unique fashion destination offering apparel and accessories including jewelry, handbags and shoes at exceptional prices every day.  Select Versona merchandise can also be found at www.shopversona.com.  It's Fashion offers fashion with a focus on the latest trendy styles for the entire family at low prices every day.

Statements in this press release not historical in nature including, without limitation, statements regarding the Company's expected or estimated operational and financial results and potential impact of the coronavirus are considered "forward-looking" within the meaning of The Private Securities Litigation Reform Act of 1995.  Such forward-looking statements are based on current expectations that are subject to known and unknown risks, uncertainties and other factors that could cause actual results to differ materially from those contemplated by the forward-looking statements.  Such factors include, but are not limited to, any actual or perceived deterioration in the conditions that drive consumer confidence and spending, including, but not limited to, prevailing social, economic, political and public health conditions and uncertainties, levels of unemployment, fuel, energy and food costs, wage rates, tax rates, interest rates, home values, consumer net worth and the availability of credit; changes in laws or regulations affecting our business including tariffs; uncertainties regarding the impact of any governmental responses to the foregoing conditions; competitive factors and pricing pressures; our ability to predict and respond to rapidly changing fashion trends and consumer demands; our ability to successfully open new stores as planned and our ability of any such new stores to grow and perform as expected; adverse weather, public health threats (including the global coronavirus (COVID-19) outbreak) or similar conditions that may affect our sales or operations; inventory risks due to shifts in market demand, including the ability to liquidate excess inventory at anticipated margins; and other factors discussed under "Risk Factors" in Part I, Item 1A  of the Company's most recently filed annual report on Form 10-K and in other reports the Company files with or furnishes to the SEC from time to time.  The Company does not undertake to publicly update or revise the forward-looking statements even if experience or future changes make it clear that the projected results expressed or implied therein will not be realized. The Company is not responsible for any changes made to this press release by wire or Internet services.

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SOURCE The Cato Corporation