NEW YORK — The Cato Corp. on Tuesday posted a 37 percent drop in second-quarter income, as well as a 17.5 percent decline in earnings for the six months.
This story first appeared in the August 20, 2003 issue of WWD. Subscribe Today.
The retailer also said its compensation committee was still in negotiations with its founders, brothers Wayland and Edgar Cato, regarding their retirement, and hopes to reach an agreement during the third quarter.
For the three months ended Aug. 2, income was $7.7 million, or 30 cents a diluted share, from $12.3 million, or 47 cents, last year. Sales inched up 0.7 percent to $188.2 million from $186.9 million. Comparable-store sales were down 7 percent.
John Cato, president, vice chairman and chief executive officer, said in a statement, “Second-quarter results were unfavorably impacted by lower-than-planned sales and additional markdowns taken to bring inventory levels in line with current sales trends.”
The company opened 29 new stores in the first half and relocated 12 sites. It said it was moving forward on its plan to open 90 new stores for the year.
For the six months, income was $25.2 million, or 98 cents a diluted share, versus $30.6 million, or $1.18, in the year-ago period. Sales gained 0.5 percent to $385.5 million from $383.5 million, while comps fell 7 percent.
Cato said if current sales trends continue, operating results for the second half could be 25 to 30 percent below last year’s. In addition, second-half income and earnings per share are expected to be affected by share repurchases and retirement agreements.
As reported, the specialty chain said on July 22 that it would repurchase 5.1 million class B shares from affiliates of Cato’s founders for $18.50 a share, or a total of $95 million. The company will fund the transaction, which is expected to close by Aug. 22, through a combination of $65 million in cash and a new $30 million five-year term loan. Wayland Cato, 80, is non-executive chairman of the firm and Edgar Cato, 78, is a director and former vice chairman.