Despite flat same-store sales, Cato Q1 earnings improve 16 percent

The Cato Corporation reported net income of 35.9 million dollars or 1.29 dollars per diluted share for the first quarter ended April 30, 2016, compared to 31.1 million dollars or 1.11 dollars per diluted share for the first quarter ended May 2, 2015. Net income increased 15 percent and earnings per diluted share increased 16 percent for the quarter. Sales were 285.5 million dollars, or an increase of 1 percent and same-store sales for the quarter were flat to last year.

“Although same-store sales for the first quarter were flat, our earnings per diluted share increased over last year primarily due to higher gross margins, change in recognition of unredeemed gift cards and favorable adjustments to the effective tax rate as a result of tax initiatives," stated John Cato, Chairman, President, and Chief Executive Officer.

First quarter review and guidance

Gross margin increased 30 basis points to 42.6 percent of sales primarily due to higher merchandise margin in the quarter. During the first quarter, the company opened one store, relocated two stores and closed one store. As of April 30, 2016, Cato operated 1,372 stores in 33 states, compared to 1,352 stores in 32 states as of May 2, 2015.

"Our expectations for the second quarter remain unchanged from what was included in the original guidance for the full year and reflect same store sales in the range of down 2 percent to flat and earnings per diluted share in the range of 0.50 dollar to 0.53 dollar versus 0.56 dollar last year. After adjusting our original 2016 guidance for first quarter actual results, our estimate of earnings per diluted share for the full year is now a range of 2.25 dollars to 2.38 dollars versus 2.39 dollars last year," added Cato.

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