Cato Q1 Profit Declines Despite Higher Revenues, Lifts 2014 Earnings Outlook

(RTTNews) - Value-priced fashion apparel retailer Cato Corp. (CATO) on Tuesday reported a 3 percent decline in profit for the first quarter from last year, as higher costs and expenses more than offset an increase in revenues and margins. However, the company raised its earnings outlook for fiscal 2014.

Charlotte, North Carolina-based Cato's net income for the first quarter was $30.01 million or $1.04 per share, down from $30.84 million or $1.05 per share in the year-ago period. The company repurchased 1.4 million shares during the quarter which increased the earnings per share by $0.02.

Total revenues for the quarter increased 6 percent to $284.73 million from $269.70 million in the prior-year period.

Retail sales also grew 6 percent from last year to $282.46 million. Other income, principally finance, late fees and layaway charges, declined 9 percent to $2.27 million.

Cato's same-store sales for the quarter increased 3 percent year-over-year.

Gross margin rose 50 basis points from last year to 41.8 percent of sales, primarily due to higher merchandise contribution in the quarter.

Total costs and expenses for the quarter were $236.56 million, up from $220.86 million in the year-ago period.

During the first quarter, Cato opened six stores and closed two stores. As of May 3, 2014, the company operated 1,324 stores in 32 states, compared to 1,307 stores in 31 states a year ago.

Looking ahead to the second quarter, Cato forecast earnings in a range of $0.40 to $0.45 per share, compared to earnings of $0.51 per share in the year-ago period.

John Cato, Chairman, President, and Chief Executive Officer of Cato said, "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% to flat."

For fiscal 2014, Cato now forecasts earnings in a range of $1.66 to $1.79 per share, after adjusting the group's original 2014 guidance for first-quarter actual results and share repurchases. Earlier, the company forecast earnings for the year in a range of $1.47 to $1.66 per share.

CATO closed Monday's trading at $30.41, down $0.11 or 0.36 percent on a volume of 250,446 shares.