The Cato Corporation reported net income of $30.0 million or $1.04 per diluted share for the first quarter ended May 3, 2014, compared to net income of $30.8 million or $1.05 per diluted share for the first quarter ended May 4, 2013. Net income decreased 3% and earnings per diluted share decreased 1% for the quarter.
The Company repurchased 1.4 million shares during the quarter which increased the earnings per share by $.02. Sales for the first quarter were $282.5 million, a 6% increase from sales of $267.2 million for the first quarter ended May 4, 2013. The Company's same-store sales increased 3% in the quarter.
"Sales for the first quarter were above expectations," 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 2% to flat. However, due to the impact of share repurchases, the revised earnings per diluted share estimate for the second quarter is a range of $.40 to $.45 versus $.51 last year. After adjusting our original 2014 guidance for first quarter actual results and share repurchases, our estimated earnings per diluted share for the full year is now a range of $1.66 to $1.79 versus $1.86 last year and versus original guidance of $1.47 to $1.66."
Gross margin increased 50 basis points to 41.8% of sales primarily due to higher merchandise contribution in the quarter. SG&A expenses as a percent of sales increased 170 basis points to 23.9% during the quarter primarily due to higher accrued incentive compensation. The effective tax rate increased 90 basis points to 37.7% versus the prior year at 36.8% due to less benefit from Work Opportunity Tax Credit. The Company ended the quarter with cash and short-term investments of $243.5 million.
During the first quarter, the Company 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 as of May 4, 2013.
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. The Company also offers exclusive merchandise found in its Cato stores. Versona is a unique fashion destination offering accessories and apparel including jewelry, handbags and shoes at exceptional prices every day. It's Fashion offers fashion with a focus on the latest trendy styles for the entire family at low prices every day.