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For the second quarter of 2024, Cato Corporation CATO reported earnings per share (EPS) of 1 cent, a notable decline from the 6 cents recorded in the same quarter of 2023.
Revenues for the quarter also decreased by 8% to $166.9 million from $181.2 million in the previous year. The decline in sales was attributed to the closure of stores during 2023 and a 2% decrease in same-store sales.
Cato's second-quarter performance reflected ongoing challenges, particularly in maintaining sales momentum. The decline in net income and sales was primarily driven by store closures and weakened consumer demand. Management's commentary highlighted the difficult retail environment, emphasizing the impact of negative pressures on customers' discretionary spending.
The slight improvement in merchandise margins was not enough to offset the higher distribution costs and the negative impact of reduced sales volumes. The company's efforts to control costs were evident in the reduction of SG&A expenses, yet the deleveraging of payroll costs added pressure to the overall financial health.
Cato Corporation Price, Consensus and EPS Surprise
Cato Corporation price-consensus-eps-surprise-chart | Cato Corporation Quote
CATO’s Key Business Metrics
Gross Margin
Gross margin for the second quarter of 2024 decreased to 34.6% from 35.1% in the year-ago quarter, mainly due to higher distribution costs and the deleveraging of occupancy and buying costs, though partially offset by improved merchandise margins.
Selling, General and Administrative (SG&A) Expenses
SG&A expenses, as a percentage of sales, increased to 34.9% in the second quarter from 34% in the same quarter last year. This rise was largely due to the deleveraging of payroll costs, although it was somewhat mitigated by lower expenses from store closures and advertising. Notably, SG&A expenses in the quarter were $58.2 million, lower than $61.6 million in the prior-year quarter, thanks to reductions in payroll, insurance costs, equity compensation and advertising.
Income Before Income Taxes
Income before income taxes for the quarter stood at $0.7 million, a sharp decline from $2.5 million in the second quarter of 2023.
Net Income
Net income for the second quarter of 2024 was $0.1 million, a significant decrease from $1.1 million in the second quarter of 2023.
CATO’s Balance Sheet Update (As of Aug 3, 2024)
Cato reported cash and cash equivalents of $30.8 million, an increase from $23.9 million on Feb 3, 2024.
Total assets decreased to $455.6 million from $486.8 million.