16 percent rise in earnings at Cato, lowers outlook

The Cato Corporation reported net income for the fourth quarter of 9.2 million dollars or 0.33 dollars per diluted share, compared to net income of 3.8 million dollars or 0.13 dollars per diluted share for the fourth quarter, last year. For the quarter, net income increased 139 percent and earnings per diluted share increased 154 percent from the prior year. Full year fiscal 2014 net income was 60.5 million dollars or 2.15 dollars per diluted share compared to 54.3 million dollars or 1.86 dollars per diluted share for 2013. For the year, net income increased 11 percent and earnings per diluted share increased 16 percent from the prior year.

Sales for fiscal fourth quarter were 237.8 million dollars, an increase of 11 percent from sales of 215.2 million dollars for the fourth quarter, last year. For the quarter same-store sales increased 8 percent from last year. For the year, the company's sales increased 7 percent to 977.9 million dollars from 2013 sales of 910.5 million dollars. Same-store sales for the year 2014 increased 4 percent from 2013.

"In 2014, Cato delivered its third highest earnings and second highest earnings per diluted share in company history," commented John Cato, Chairman, President and Chief Executive Officer, adding, “In addition, fourth quarter gross margin increased to 36.5 percent of sales primarily due to higher merchandise margins. For 2014, gross margin increased to 38.6 percent of sales from 37.3 percent of sales in 2013.”

The company maintained its quarterly dividend of 0.30 dollars per share or 1.20 dollars per year. For the fiscal year ended January 31, 2015, the company opened 33 stores, relocated four stores and closed seven. As of January 31, 2015, it operated 1,346 stores in 32 states.

The start of 2015 has been difficult, with February same-store sales down 10 percent, primarily due to adverse weather. The company believes that 2015 may continue to be challenging. It estimates first quarter same-store sales to be down 3 percent to 4 percent based upon February same-store sales being down 10 percent and adverse weather continuing into March. Based upon these estimates, the company expects first quarter 2015 net income to be in a range of 28.8 million dollars to 27.9 million dollars, a decrease of 4 percent to 7 percent. The company estimates earnings per diluted share will be in a range of 1.03 dollar to 1 dollar, a decrease of 1 percent to 4 percent compared to 1.04 dollars in first quarter 2014.

For 2015, the company estimates same-store sales will be in a range of flat to down 2 percent and its gross margin rate will decrease to 38 percent to 37.8 percent from 38.6 percent in 2014, resulting in net income in a range of 61.2 million dollars to 56.7 million dollars, an increase of 1 percent to a decrease of 6 percent compared to 60.5 million dollars in 2014. Earnings per diluted share are expected to be in the range of 2.19 dollars to 2.03 dollars, an increase of 2 percent to a decrease of 6 percent compared to 2.15 dollars in 2014.