Despite lower gross margins due to markdowns, Cato Corp. posted robust profits on higher sales for the fourth quarter, which buoyed year-end results as well.

The retailer also reached the milestone of achieving $1 billion in annual revenue, and when setting guidance for the current fiscal period, cautioned that it “could be a difficult year.”

For the fourth quarter, sales rose 4 percent to $247.3 million from $237.8 million in the same period last year as net income gained 28 percent to $11.8 million or 42 cents per diluted share, from $9.2 million, or 33 cents. For the full-year period, sales rose 2 percent to $1 billion from $977.9 million last year as net income gained 10 percent to $66.8 million, or $2.39 per share, from $60.5 million, or $2.15. For the year, same-store sales were flat.

John Cato, chairman, president and chief executive officer of the Charlotte, N.C.-based company, said annual sales and earnings were the highest in the retailer’s history.

For the fourth quarter, gross margins dropped to 36.1 percent of sales from 36.5 percent in the same period last year “primarily due to reduced merchandise margins and higher occupancy costs,” the company said. And selling, general and administrative costs came in at 28.6 percent of sales — a drop from last year’s 30.6 percent.

“SG&A costs as a percent of sales were lower primarily due to lower accrued incentive compensation, which is based upon performance to the company’s incentive plan targets,” management said in the report.

Regarding the balance sheet, the ceo said the company “continues to maintain a strong” one with “approximately $283 million in cash and short-term investments and no debt.”

Cato said the for the year-end period, the retailer opened 31 units and relocated 11 stores while closing five. At the period ended Jan. 30, the retailer operated 1,372 stores in 32 states.

By way of outlook, the company said it expects first-quarter “same-store sales to be in the range of flat to down 2 percent and its gross margin rate will increase to 42.8 percent to 42.6 percent from 42.3 percent in 2015 resulting in net income to be in a range of $32.2 million to $31.2 million,” which compares to $31.1 million in the first quarter of last year. Earnings are pegged to come in between $1.12 and $1.16 a share.

For fiscal 2016, the company expects net income of between $57.8 million and $62.4 million, which would be a decrease of 7 percent to 13 percent compared to 2015. Earnings, therefore, would range between $2.07 and $2.24 a share.