Cato Reports 4Q And Full-Year Earnings

CHARLOTTE, N.C., March 22, 2018

The fourth-quarter and full-year results include a one-time tax expense of $12.3 million or $0.48 per diluted share due to the enactment of the "Tax Cuts and Jobs Act of 2017." This non-cash expense is comprised of two items.  The first is the deemed repatriation charge related to our foreign operations.  The second is the revaluation of our net deferred tax assets.  

Sales for fiscal fourth quarter ended February 3, 2018 were $211.1 million, a decrease of 3% from sales of $218.2 million for the fourth quarter ended January 28, 2017.  For the quarter, same-store sales decreased 8% from last year.  The gap between sales and same-store sales percentages is due to the fourth quarter of 2017 containing fourteen weeks versus thirteen weeks in the fourth quarter of 2016, as the fiscal year ended February 3, 2018 contains 53 weeks versus 52 weeks in the fiscal year ended January 28, 2017. For the year, the Company's sales decreased 11% to $842.0 million from 2016 sales of $947.4 million.  Same-store sales for the year decreased 12% compared to last year.    

"While Cato remains profitable, the retail environment continues to be challenging, particularly in women's apparel,"  said John Cato, Chairman, President and Chief Executive Officer. "This was compounded by the longer than anticipated time it has taken to adjust our merchandising strategy.  Both merchandise margins and profitability were under pressure during the year as we worked through these issues by refining our merchandise mix and liquidating underperforming inventory. To help offset the sales decline, we initiated cost reduction initiatives to better align our cost structure.  These actions should also benefit us in the coming year."

Fourth-quarter gross margin increased to 32.9% of sales from 28.8% of sales in 2016 due primarily to significantly improved merchandise margins.  Selling, general and administrative expenses were 36.2% of sales, compared to 38.2% in the prior year.  SG&A costs as a percent of sales were lower primarily due to decreased store impairment charges.  Income tax for the quarter was an expense of $7.7 million compared to a benefit of $9.6 million last year.  The change in tax expense is primarily due to the "Tax Cuts and Jobs Act of 2017" enactment.  

For 2017, gross margin decreased to 34.3% of sales from 36.5% of sales in 2016 due to reduced merchandise margins and deleveraging of occupancy costs.  Selling, general and administrative expenses increased to 31.6% of sales compared to 30.6% in the prior year.  The selling, general and administrative expense increase was primarily due to deleveraging of expenses offset by cost savings initiatives and decreased store impairment charges.  Income tax for the year was an expense of $7.4 million compared to an expense of $1.9 million last year.  The change in tax expense is primarily due to the "Tax Cuts and Jobs Act of 2017" enactment offset by lower earnings.      

"Cato continues to maintain a strong balance sheet, with approximately $200 million in cash and short-term investments and no debt," Mr. Cato said.  During 2017, the Company returned $72.6 million to shareholders through dividends of $33.7 million and share repurchases of $38.9 million.  The Company maintained its quarterly dividend of $0.33 per share, or $1.32 over the year.  For the fiscal year ended February 3, 2018, the Company opened six stores, relocated two stores and closed 26 stores.  As of February 3, 2018, the Company operated 1,351 stores in 33 states.