Cato experiences good same-store sales in Q2
The Cato Corporation reported net income of $16.0 million or $.54 per diluted share for the second quarter ended July 31, 2010, compared to net income of $16.7 million or $.56 per diluted share for the second quarter ended August 1, 2009.
Net income decreased 4% and earnings per diluted share decreased 4% from last year. Sales for the second quarter were $231.9 million, a 3% increase over sales of $225.4 million last year. Second quarter comparable store sales increased 2%.
For the six months ended July 31, 2010, the Company earned net income of $43.1 million or $1.46 per diluted share, compared with net income of $35.5 million or $1.20 per diluted share for the six months ended August 1, 2009, an increase of 21% in net income and 22% in earnings per diluted share. Sales for the first half were $491.6 million, a 6% increase over the prior year's first half sales of $463.4 million. Comparable store sales for the first half increased 5%.
"We experienced good same-store sales in the second quarter and continued to control our inventory well," stated John Cato, Chairman, President, and Chief Executive Officer. "Even with better than expected sales year-to-date, we continue to believe much uncertainty exists as we look forward. We are maintaining our original guidance for the second half of the year and we continue to manage our business tightly."
Second quarter gross margin was 38.3% compared to 36.3% last year due primarily to lower markdowns. Second quarter SG&A costs as a percent of sales increased to 26.9% from 25.1% last year primarily as a result of higher accrued incentive compensation and worker's compensation costs. The effective tax rate for the quarter was 36.2% compared to 29.7% last year. The lower tax rate in 2009 was primarily due to the impact of the resolution of various tax audits and increased earnings per diluted share approximately $.05 in last year's second quarter.
Based on year-to-date results and the Company's original guidance for the second half, earnings per diluted share for the year is estimated to be in the range of $1.83 to $1.89 versus $1.55 last year, an increase of 18% to 22%. By quarter, earnings per diluted share are estimated to be in the range of $.12 to $.15 versus $.10 last year for the third quarter and $.25 to $.28 versus $.25 last year for the fourth quarter. Comparable store sales for both the third and fourth quarters are estimated to be in the range of down 3% to flat.
During the first half, the Company opened 13 new stores, relocated three stores and closed nine stores. Six of the closings were It's Fashion stores closed to open as It's Fashion Metro stores in the same market. The Company now expects to open approximately 41 stores during 2010. As of July 31, 2010, The Cato Corporation operated 1,275 stores in 31 states, compared to 1,285 stores in 31 states as of August 1, 2009.
The Cato Corporation is a leading specialty retailer of value-priced women's fashion apparel and accessories operating two divisions, "Cato" and "It's Fashion". The Company's Cato division offers exclusive merchandise with fashion and quality comparable to mall specialty stores at low prices every day. The It's Fashion division offers fashion with a focus on the latest trendy styles and nationally recognized urban brands for the entire family at low prices every day.