By  on August 25, 2009

Lower expenses and controls on costs helped Cato Corp. improve on second-quarter profits despite a drop-off in sales.

The Charlotte, N.C.-based specialty retailer registered net income of $16.7 million, or 56 cents a diluted share, 37.8 percent above the $12.1 million, or 41 cents, logged in last year’s quarter and 2 cents above analysts’ consensus estimates.

Revenues in the quarter ended Aug. 1 fell 2.4 percent to $228.3 million from $233.9 million a year ago and were off 3 percent on a same-store sales basis.

Gross margin in the three months increased 40 basis points to 36.3 percent from 35.9 percent on lower freight costs.

Selling, general and administrative expenses decreased 11.2 percent to $56.5 million. Cato said it achieved the reduction by closing stores and cutting health and workers’ compensation costs.

The company said it expects to suffer a loss in the third quarter in the range of 3 cents to 7 cents a share. It projects earnings per share of 8 cents to 13 cents in the fourth quarter and full-year EPS of between $1.21 and $1.29.

In the first half, net income rallied 22.6 percent to $35.5 million, or $1.20 a diluted share, as revenues rose 1.4 percent to $469.3 million. Same-store sales were flat.

Cato operates 1,285 specialty stores in 31 states under the Cato and It’s Fashion nameplates.

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