NEW YORK — Planning for its 1,000th store sometime this autumn, Cato Corp. is set to grow at a clip of 90 to 120 new doors annually for the “next several years.”
At the firm’s annual meeting last week in its headquarters in Charlotte, N.C., John Cato, president, vice chairman and chief executive officer, declared: “We’ve built a strong, but simple business” that “can deliver annual earnings growth of 10 percent or more going forward,” according to a statement.
The ceo said Cato, which at the end of 2001 had 949 stores in 24 states, would realize its retail growth “in our current geography and adjacent states as we move toward becoming a national chain.”
Operating under the Cato and It’s Fashion nameplates, the firm’s stores reside in strip shopping centers anchored by a national discounter or a market-dominant grocer.
Before the meeting, Cato’s board raised its dividend to shareholders by 11 percent to an annualized rate of 60 cents a share.
For the year ended Feb. 2, Cato carried $85 million in cash and investments and no debt. The company also bought back 775,000 shares during the year and said it will continue to concentrate its shareholders’ stake.
The Cato family also has been actively selling off its portion of the specialty retailer. Last week, Cato’s Roseneath Limited Partnership, in which Edgar Cato, a founder and board member, has a beneficial interest, reported plans to sell up to 650,000 shares of the firm’s class A common stock.
The shares, set to be sold through Banc of America Securities, represent about 26 percent of the total Cato stock owned by the partnership. Excluding shares up for sale, Roseneath’s stake commands 23 percent of the firm’s common stock’s voting power.
Cato’s chairman, Wayland Cato, sold 750,000 shares under a similar plan earlier this year.
The firm reported prior to the meeting that, in the first quarter ended May 4, net income rose 15 percent to $18.3 million, or 71 cents a diluted share, from $15.9 million, or 61 cents. Sales for the quarter were $201.6 million, a 8.6 percent gain over year-ago sales of $180.3 million. Comparable-store sales inched up 2 percent.
“The combination of on-plan sales and good inventory management led to gross margin improvement of 120 basis points, to 36.7 percent of sales,” John Cato said in a statement. In addition, he said selling, general and administrative expenses decreased 30 basis points as a percent of sales.
Due to the first-quarter results, Cato upped its earnings-per-share estimate for the full year to $1.84 a share from $1.82. Last year, it earned $1.66. Net income is forecast at $47.7 million, from $43.1 million in 2001. For the second quarter, the retailer left unchanged its EPS target of 46 cents. Income is projected to reach $12 million versus $11 million last year.