CHARLOTTE, N.C., Aug. 18, 2022 /PRNewswire/ -- The Cato Corporation (NYSE: CATO) today reported a net loss of $2.3 million or ($0.11) per diluted share for the second quarter ended July 30, 2022, compared to net income of $14.0 million or $0.62 per diluted share for the second quarter ended July 31, 2021. 

Sales for the second quarter ended July 30, 2022 were $195.0 million, or a decrease of 5% from sales of $206.0 million for the second quarter ended July 31, 2021.  The Company's same-store sales for the quarter decreased 5% compared to 2021.

For the six months ended July 30, 2022, the Company reported net income of $7.4 million or $0.35 per diluted share, compared to net income of $34.7 million or $1.54 per diluted share for the six months ended July 31, 2021.  Sales for the six months ended July 30, 2022 were $399.9 million, a decrease of 4% to sales of $417.2 million for the six months ended July 31, 2021.  Year-to-date same-store sales decreased 4% to 2021.

"Our sales were negatively impacted during the first half of the year by the increasing pressure of inflation on consumers' ability to spend on discretionary items such as fashion apparel, resulting in significant markdowns to clear inventory," stated John Cato, Chairman, President, and Chief Executive Officer.  "We have taken steps to right size our inventory by the end of the fourth quarter, including increased markdowns and reducing future order volumes.  However, we believe the back half of the year will be challenging as a result of the increasing inflationary environment,effects of the tight labor market and continued late merchandise shipments due to supply chain disruption."

Gross margin decreased from 43.9% to 32.4% of sales in the quarter due to lower merchandise margins and increased freight expense.  SG&A expenses as a percent of sales decreased from 34.5% to 31.2% of sales during the quarter primarily due to reduced incentive compensation expense, partially offset by increased payroll expense, reflecting more normalized operations, coupled with wage inflation. Tax expense for the quarter was $5.7 million versus $4.6 million in the prior year, reflecting a true-up of the projected year-end tax rate, resulting in a quarterly rate of 166.5%, which generated the net loss for the period. 

Year-to-date gross margin decreased to 34.0% of sales from 42.6% the prior year primarily due to decreased merchandise margins and increased freight expense.  The year-to-date SG&A rate was 30.3% versus 32.2% primarily due to lower incentive compensation expense, partially offset by increased payroll expense, which is a reflection of normalized operations and higher wages.  Income tax expense for the first half was $7.6 million, flat to last year.

During the second quarter ended July 30, 2022, the Company opened 4 stores, relocated 2 stores and closed 7 stores.  As of July 30, 2022, the Company has 1,312 stores in 32 states, compared to 1,325 stores in 32 states as of July 31, 2021.

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, 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

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SOURCE The Cato Corporation