Net income and earnings per diluted share both decreased 3% for the quarter. Sales for the first quarter were $267.2 million, a 2% decrease from sales of $272.8 million for the first quarter ended April 28, 2012. The Company's same-store sales decreased 5% in the quarter.
"Continuing difficult economic conditions, higher payroll taxes, delayed income tax refunds and cooler than normal temperatures in March and April negatively impacted first quarter sales," stated John Cato, Chairman, President, and Chief Executive Officer.
"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 3% to flat and earnings per diluted share in the range of $.42 to $.48 versus $.59 last year. After adjusting our original 2013 guidance for first quarter actual results, our estimate of earnings per diluted share for the full year is now a range of $1.66 to $1.84 versus $2.11 last year."
Gross margin decreased 80 basis points to 41.3% of sales primarily due to lower merchandise contribution in the quarter as well as higher occupancy costs related to store growth. SG&A expenses as a percent of sales decreased 30 basis points to 22.2% during the quarter primarily due to lower accrued incentive compensation.
The effective tax rate decreased to 36.8% from 38.2% in the prior year, primarily due to the benefit of the Work Opportunity Tax Credit, which had not been renewed by Congress at this time last year and was therefore not considered for first quarter 2012, but was for first quarter 2013. The Company ended the quarter with cash and short-term investments of $231.3 million.
During the first quarter, the Company opened three stores, relocated one store and closed six stores. As of May 4, 2013, the Company operated 1,307 stores in 31 states, compared to 1,293 stores in 31 states as of April 28, 2012.
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. Versona is a unique fashion destination offering accessories and apparel including jewelry, handbags and shoes at exceptional prices every day.
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