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Cato Reports 2Q EPS of $.56, Exceeds Guidance

Provides Second Half Guidance

CHARLOTTE, N.C., Aug. 21, 2014 /PRNewswire/ -- The Cato Corporation (NYSE: CATO) today reported net income of $15.7 million or $.56 per diluted share for the second quarter ended August 2, 2014, compared to net income of $14.8 million or $.51 per diluted share for the second quarter ended August 3, 2013.  Net income increased 6% and earnings per diluted share increased 10% from the prior year. Earnings per share benefited $.03 in the second quarter due to share repurchases.  Sales for the second quarter ended August 2, 2014 were $243.8 million, up 6% from sales of $229.4 million last year.  Second quarter same-store sales increased 3%.

For the six months ended August 2, 2014, the Company earned net income of $45.7 million or $1.61 per diluted share, compared with net income of $45.6 million or $1.56 per diluted share for the six months ended August 3, 2013.  Net income was flat and earnings per diluted share increased 3%.  Earnings per share benefited $.05 in the first half due to share repurchases.  Sales for the first half were $526.2 million, up 6% to the prior year's first half sales of $496.6 million.  Same-store sales for the first half were up 3% from the prior year.

"Second quarter same-store sales were in line with our year-to-date trend," said John Cato, Chairman, President, and Chief Executive Officer.  "However, we continue to expect the second half earnings per diluted share will be within our original guidance range, updated for share repurchases, of $.21 to $.30."

Second quarter gross margin was 38.9% compared to 36.8% last year due primarily to higher merchandise margins.  Second quarter SG&A costs as a percent of sales increased to 28.0% from 25.7% last year primarily as a result of higher incentive compensation and point-of-sale (POS) equipment upgrades.  The effective tax rate for the quarter was 36.8% compared to 36.0% last year, primarily due to the lack of the Work Opportunity Tax Credit (WOTC) this year, which has not been renewed by Congress.

Our guidance of earnings per diluted share for the second half is unchanged, but is updated for share repurchases, at $.21 to $.30.  By quarter, earnings per share are estimated to be in the range of $.08 to $.13 versus $.17 last year for the third quarter and $.13 to $.17 versus $.13 last year for the fourth quarter.  Comparable store sales for both the third and fourth quarters are estimated to be in the range of down 2% to flat.  Based on year-to-date results and this guidance for the second half, earnings per diluted share are expected to be within the adjusted range of $1.82 to $1.91 versus $1.86 last year, a decrease of 2% to an increase of 3%.

During the first half, the Company opened 11 new stores, relocated one store and closed three stores.  The Company now expects to open 46 stores, down from the original plan of 65.  As of August 2, 2014, The Cato Corporation operated 1,328 stores in 32 states, compared to 1,306 stores in 31 states as of August 3, 2013.

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 accessories and apparel including jewelry, handbags and shoes at exceptional prices every day.  It's Fashion offers fashion with a focus on the latest trendy styles for the entire family at low prices every day.  Additional information on The Cato Corporation is available at www.catocorp.com.

Statements in this press release not historical in nature including, without limitation, statements regarding the Company's expected or estimated financial results for the third and fourth quarters 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, the following: general economic conditions; competitive factors and pricing pressures; the Company's ability to predict fashion trends; consumer apparel buying patterns; adverse weather conditions and inventory risks due to shifts in market demand 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, as amended or supplemented, 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.

 

 

THE CATO CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

FOR THE PERIODS ENDED AUGUST 2, 2014 AND AUGUST 3, 2013

(Dollars in thousands, except per share data)


















Quarter Ended


Six Months Ended


















August 2,

%


August 3,

%


August 2,

%


August 3,

%


2014

Sales


2013

Sales


2014

Sales


2013

Sales

















REVENUES
















  Retail sales

$

243,775

100.0%


$

229,378

100.0%


$

526,238

100.0%


$

496,559

100.0%

  Other income (principally finance,

    late fees and layaway charges)

















2,685

1.1%



2,340

1.0%



4,955

0.9%



4,857

1.0%

















    Total revenues


246,460

101.1%



231,718

101.0%



531,193

100.9%



501,416

101.0%

















GROSS MARGIN (Memo)


94,736

38.9%



84,428

36.8%



212,835

40.4%



194,708

39.2%

















COSTS AND EXPENSES, NET
















  Cost of goods sold


149,039

61.1%



144,950

63.2%



313,403

59.6%



301,851

60.8%

  Selling, general and administrative


68,332

28.0%



58,965

25.7%



135,819

25.8%



118,354

23.8%

  Depreciation


5,424

2.2%



5,436

2.4%



10,875

2.1%



10,885

2.2%

  Interest and other income


(1,099)

-0.5%



(730)

-0.3%



(1,841)

-0.4%



(1,605)

-0.3%

















    Cost and expenses, net


221,696

90.8%



208,621

91.0%



458,256

87.1%



429,485

86.5%

































Income Before Income Taxes


24,764

10.2%



23,097

10.1%



72,937

13.9%



71,931

14.5%

















Income Tax Expense


9,113

3.7%



8,322

3.6%



27,279

5.2%



26,317

5.3%

















Net Income

$

15,651

6.4%


$

14,775

6.4%


$

45,658

8.7%


$

45,614

9.2%

































Basic Earnings Per Share

$

0.56



$

0.51



$

1.61



$

1.56


































Diluted Earnings Per Share

$

0.56



$

0.51



$

1.61



$

1.56


 


 

THE CATO CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS 

(Dollars in thousands)


















August 2,



August 3,



February 1,







2014



2013



2014







(Unaudited)



(Unaudited)


























ASSETS
















Current Assets
















  Cash and cash equivalents

$

92,247



$

88,559



$

79,427






  Short-term investments


158,198




157,326




161,128






  Restricted Cash


4,692




4,807




4,701






  Accounts receivable - net


40,315




39,908




39,224






  Merchandise inventories


116,026




111,206




150,861






  Other current assets


11,970




15,834




11,407






















Total Current Assets


423,448




417,640




446,748






















Property and Equipment - net


145,614




139,550




141,129






















Noncurrent Deferred Income Taxes


1,375




0




1,373






















Other Assets


9,674




10,223




7,668






















      TOTAL

$

580,111



$

567,413



$

596,918






















LIABILITIES AND STOCKHOLDERS' EQUITY






























Current Liabilities

$

168,934



$

154,002



$

177,131






















Noncurrent Liabilities


31,951




29,850




28,678






















Stockholders' Equity


379,226




383,561




391,109






















      TOTAL

$

580,111



$

567,413



$

596,918






 

 

SOURCE The Cato Corporation

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