PR Newswire | Nov 17, 2021 07:00AM EST

11/17 06:00 CST

Cato Reports 3Q Net Income CHARLOTTE, N.C., Nov. 17, 2021

CHARLOTTE, N.C., Nov. 17, 2021 /PRNewswire/ -- The Cato Corporation (NYSE: CATO) today reported net income of $8.6 million or $0.39 per diluted share for the third quarter ended October 30, 2021, compared to a net loss of $3.6 million or ($0.15) per diluted share for the third quarter ended October 31, 2020.

Sales for fiscal 2020 were significantly impacted by the closure of our stores for six weeks due to the COVID-19 pandemic, beginning March 19, 2020. Due to the impact of the unprecedented closures, the Company will report sales compared to the past two years. Sales for the third quarter ended October 30, 2021 were $170.5 million, or an increase of 14% from sales of $149.2 million for the third quarter ended October 31, 2020. Compared to the same period in 2019, sales decreased 10% from sales of $189.4 million for the quarter ended November 2, 2019. The Company's same-store sales for the quarter increased 14% compared to 2020 and decreased 13% when compared to the same period in 2019.

For the nine months ended October 30, 2021, the Company reported net income of $43.3 million or $1.93 per diluted share, compared to a net loss of $39.2 million or ($1.64) per diluted share for the nine months ended October 31, 2020. Sales for the nine months ended October 30, 2021 were $587.7 million, an increase of 42% to sales of $414.3 million for the nine months ended October 31, 2020. Compared to the same period in 2019, sales decreased 6% from sales of $627.8 million for the nine months ended November 2, 2019. Year-to-date same-store sales increased 41% to 2020 and decreased 9% compared to the same period in 2019.

"We continue to face challenges due to the lingering effects of the pandemic on the retail industry and the economy as a whole," stated John Cato, Chairman, President and Chief Executive Officer. "Our sales for the third quarter were negatively impacted by lower inventory levels related to further deterioration in the supply chain coupled with increased positive cases related to the COVID-19 Delta variant."

Gross margin increased from 26.7% to 38.9% of sales in the quarter due to higher merchandise margins. SG&A expenses as a percent of sales increased from 34.8% to 36.6% of sales during the quarter primarily due to increased employee benefit/bonus expense and store operating expenses as store operating hours have increased substantially compared to prior year. Income tax benefit for the quarter was $5.7 million due to increased benefits from tax planning initiatives and lower reserves related to uncertain tax positions, offset by higher pre-tax earnings versus a $9.7 million benefit in the prior year due to the pre-tax loss. The Company ended the quarter with unrestricted cash and short-term investments of $200.1 million driven by strong cash flow from operations, offset by dividends and share repurchases. This compares with $151.4 million for the same period in 2020.

Year-to-date gross margin increased to 41.6% of sales from 21.4% the prior year primarily due to increased merchandise margins. The year-to-date SG&A rate was 33.5% versus 35.8% primarily due to leveraging of expenses, partially offset by higher employee benefit/bonus expense. Income tax expense for the nine months ended October 30, 2021 was $1.9 million versus a $22.7 million benefit last year.

Year-to-date, the Company permanently closed 6 stores. As of October 30, 2021, the Company operates 1,324 stores in 32 states, compared to 1,347 stores in 33 states as of October 31, 2020.

"While our first half sales benefitted from pent-up demand, government stimulus and more reasonable inventory levels, third quarter sales softened due to decreasing inventory levels caused by worsening supply chain disruption," stated Mr. Cato. "As we see these conditions persisting, coupled with the effects of rising inflation and potential government vaccine mandates, we believe the fourth quarter will be very challenging."

"As we enter the Holidays, amid the lingering effects of the pandemic, our associates' and customers' safety remain our primary focus," Mr. Cato said. "We strive to offer our customers a safe place to shop for their favorite fashion trends at a great value with outstanding customer service."

The Cato Corporation is a leading specialty retailer of value-priced fashion apparel and accessories operating three concepts, "Cato," "Versona" and "It's Fashion." The Company's Cato stores offer exclusive merchandise with fashion and quality comparable to mall specialty stores at low prices every day. The Company also offers exclusive merchandise found in its Cato stores at www.catofashions.com. Versona is a unique fashion destination offering apparel and accessories including jewelry, handbags and shoes at exceptional prices every day. Select Versona merchandise can also be found at www.shopversona.com. It's Fashion offers fashion with a focus on the latest trendy styles for the entire family at low prices every day.

Statements in this press release that express a belief, expectation or intention, as well as those that are not a historical fact,including, without limitation, statements regarding the Company's expected or estimated operational financial results, activities or opportunities, and potential impacts and effects of the coronavirus are considered "forward-looking" within the meaning of The Private Securities Litigation Reform Act of 1995. Such forward-looking statements are based on current expectations that are subject to known and unknown risks, uncertainties and other factors that could cause actual results to differ materially from those contemplated by the forward-looking statements.Such factors include, but are not limited to, any actual or perceived deterioration in the conditions that drive consumer confidence and spending, including, but not limited to, prevailing social, economic, political and public health conditions and uncertainties, levels of unemployment, fuel, energy and food costs, wage rates, tax rates, interest rates, home values, consumer net worth and the availability of credit; changes in laws or regulations affecting our business including but not limited to tariffs; uncertainties regarding the impact of any governmental action regarding, or responses to, to the foregoing conditions; competitive factors and pricing pressures; our ability to predict and respond to rapidly changing fashion trends and consumer demands; our ability to successfully implement our new store development strategy to increase new store openings and the ability of any such new stores to grow and perform as expected; adverse weather, public health threats (including the global coronavirus (COVID-19) outbreak) or similar conditions that may affect our sales or operations; inventory risks due to shifts in market demand, including the ability to liquidate excess inventory at anticipated margins; and other factors discussed under "Risk Factors" in Part I, Item 1A of the Company's most recently filed annual report on Form 10-K and in other reports the Company files with or furnishes to the SEC from time to time. The Company does not undertake to publicly update or revise the forward-looking statements even if experience or future changes make it clear that the projected results expressed or implied therein will not be realized. The Company is not responsible for any changes made to this press release by wire or Internet services.

THE CATOCORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

FOR THE PERIODS ENDED OCTOBER 30, 2021 AND OCTOBER 31, 2020

(Dollars in thousands, except per share data)

Quarter Ended Nine Months Ended

October 30, % October 31, % October 30, % October 31, %

2021 Sales 2020 Sales 2021 Sales 2020 Sales

REVENUES

Retail sales $ 170,513 100.0% $ 149,205 100.0% $ 587,709 100.0% $ 414,283 100.0%

Otherrevenue(principallyfinance,

late feesand layaway 1,700 1.0% 1,586 1.1% 5,335 0.9% 5,410 1.3%charges)

Total 172,213 101.0% 150,791 101.1% 593,044 100.9% 419,693 101.3%revenues

GROSS MARGIN 66,288 38.9% 39,801 26.7% 244,222 41.6% 88,545 21.4%(Memo)

COSTS ANDEXPENSES, NET

Cost of 104,225 61.1% 109,404 73.3% 343,487 58.4% 325,738 78.6%goods sold

Selling,general and 62,466 36.6% 51,885 34.8% 196,687 33.5% 148,353 35.8%administrative

Depreciation 3,173 1.9% 3,619 2.4% 9,352 1.6% 11,113 2.7%

Interest and (541) -0.3% (791) -0.5% (1,719) -0.3% (3,603) -0.9%other income

Cost and 169,323 99.3% 164,117 110.0% 547,807 93.2% 481,601 116.3%expenses, net

Income (Loss)Before Income 2,890 1.7% (13,326) -8.9% 45,237 7.7% (61,908) -14.9%Taxes

Income Tax(Benefit) (5,713) -3.4% (9,704) -6.5% 1,929 0.3% (22,698) -5.5%Expense

Net Income $ 8,603 5.0% $ (3,622) -2.4% $ 43,308 7.4% $ (39,210) -9.5%(Loss)

Basic Earnings $ 0.39 $ (0.15) $ 1.93 $ (1.64)Per Share

DilutedEarnings Per $ 0.39 $ (0.15) $ 1.93 $ (1.64)Share

THE CATO CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollars in thousands)

October 30, January 30,

2021 2021

(Unaudited) (Unaudited)

ASSETS

Current Assets

Cash and cash equivalents $ 23,990 $ 17,510

Short-term investments 176,120 126,416

Restricted cash 3,919 3,918

Accounts receivable - net 56,017 52,743

Merchandise inventories 90,229 84,123

Other current assets 11,478 5,840

Total Current Assets 361,753 290,550

Property and Equipment - net 65,115 72,550

Noncurrent Deferred Income Taxes 5,920 5,685

Other Assets 23,528 22,850

Right-of-Use Assets, net 130,842 199,817

TOTAL $ 587,158 $ 591,452

LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities $ 164,103 $ 118,513

Current Lease Liability 50,234 63,421

Noncurrent Liabilities 17,408 19,705

Lease Liability 84,635 143,315

Stockholders' Equity 270,778 246,498

TOTAL $ 587,158 $ 591,452

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SOURCE The Cato Corporation