Cato triples its store closure plan to around 120 for the year

The Cato Corporation will close roughly 70 more stores in the third and fourth quarters, taking planned closures for fiscal 2026 to about 120 and marking a sharp acceleration for the value-priced women's chain.

The revision is the second this year. Cato said in March it expected to close up to 40 underperforming stores in 2026 while opening as many as 10, describing the impact as minimal. That figure had already been raised to 50 by the time of its second-quarter filing.

John Cato, chairman, president and chief executive, tied the decision to a change in how the company treats borderline locations. "Annually we review approximately one-third of our stores to exercise available lease options or negotiate an extension based on each store's performance including store sales trend and current and projected store profitability. In years past, marginal stores were renewed for an additional year to give the store more time to improve its sales trend and profitability," he said.

"In light of the current economic environment, especially with the negative pressure on our customers' discretionary income, we do not expect these marginal stores to improve appreciably. As a result, we are closing more stores than expected this year. We believe that closing these additional stores will have a positive impact on our operating results in fiscal 2027 and beyond."

The company expects exit costs of 1.0 to 1.3 million dollars through the end of 2026, covering the disposal of external signage and fixtures and the return of store systems to head office. All the affected stores are at the end of their lease terms, so Cato will not pay rent on them beyond this year.

A long retreat

The closures continue a contraction that has been running for years. Cato operated 1,311 stores across 32 states at the end of January 2022 and 1,057 in 31 states as of 1 August this year, a reduction of around 250 locations. It closed 48 stores in 2025 alone.

Sales for the first half of fiscal 2026 fell 2.9 percent to 333.3 million dollars on flat same-store sales, with the decline attributed largely to closed locations, while net income edged up to 10.5 million dollars from 10.1 million. The company posted a fourth-quarter loss of 10.7 million dollars in the year ended January, against full-year sales of 646.8 million dollars, up 0.7 percent.

Cato operates three formats — Cato, It's Fashion and Versona — concentrated in community strip centres, often sited near large discounters. Its customer base sits at the lower end of the income distribution, which management has repeatedly identified as the source of its trading pressure, citing fuel and food costs eroding discretionary spending.

This article was drafted with the assistance of AI and edited by a FashionUnited journalist.