PROFITS SHOW DOUBLE-DIGIT INCREASE AT CATO
Byline: Jennifer Weitzman
NEW YORK — Aggressive control of inventories and expenses paved the way to double-digit quarterly and yearly profit growth for Cato Corp. Tuesday despite a slip in comparable-store sales.
For the 13 weeks ended Feb. 2, the Charlotte, N.C.-based specialty retailer of value-priced women’s clothing and accessories said net income reached $11.2 million, or 43 cents a diluted share. That is a 29.6 percent improvement over the $8.6 million, or 34 cents, reported for the 14-week period in the year-ago quarter.
Net sales slimmed down .5 percent to $185.2 million from $186.1 million in the prior-year quarter and dropped 2 percent on a comparable-store basis. When excluding the extra week last year, total sales for the quarter increased 5 percent.
Noting it was Cato’s third consecutive year of record earnings and the fifth of earnings improvement, John Cato, president and chief executive, said in a statement, “During the last five years, we have worked diligently to provide our customers high quality, fashionable products at low prices, every day, and to enhance our customers’ shopping experience. We will continue our focus on customer-driven change and will further refine our operating strategies to produce earnings growth and increase shareholder value.”
Cato’s share price broke a new 52-week high Monday during intraday trading when it hit $23.84. On Tuesday, shares flirted with, but failed to reach, that level, closing up 31 cents, or 1.3 percent, to $23.71 on Nasdaq trading.
For the current fiscal year, Cato said it expects a 10 percent increase in net income to $47.4 million, or $1.82 a share, with the first quarter up 13 percent to $18 million, or 69 cents. Total sales growth is projected to increase 10 percent with a 2 percent comp gain. The company said it also plans to open 90 new stores during the year, with 35 expected to open in the first half.
To achieve these goals, Cato said it would leverage its buying, product development and sourcing operations to improve margins. It also plans to expand its stores into new markets and integrate its merchandising, financial and distribution system across the company, which will provide a way to build chain-wide assortments by store.
While value-oriented shoppers have flocked to retailers like Cato during the economic slowdown, Cato said he believes the firm will continue to do well as the economy improves. “Our customer has always looked for low prices, regardless of the economic environment,” Cato told WWD. “Over the last five years, our everyday low price strategy has given our customer the assurance that they are getting our best price. This has been an important part of building the Cato brand.”
In 2000, income improved 10.4 percent to $43.1 million, or $1.66, when compared to 2000’s income of $39 million, or $1.53. Sales rose 5.5 percent to $705.7 million from $669.1 million and were up 1 percent on a comp basis. Excluding the extra week in 2000, sales grew 7 percent.
Cato operates 940 stores under the nameplates Cato and It’s Fashion.