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Cato Chief says expectations for Q2 remain unchanged

19
May '12
The Cato Corporation reported record net income of $31.7 million or $1.09 per diluted share for the first quarter ended April 28, 2012, compared to net income of $30.5 million or $1.04 per diluted share for the first quarter ended April 30, 2011.

Net income and earnings per diluted share increased 4% and 5%, respectively, for the quarter. Sales for the first quarter were $272.8 million, a 1% increase over sales of $270.9 million for the first quarter ended April 30, 2011. The Company's same-store sales decreased 2% in the quarter.

"Although the level of sales by month varied due to unexpected circumstances including early warm weather and the delay of tax refunds, first quarter sales overall were within our expectations and reflect the continuing difficult economic environment for our customers," stated John Cato, Chairman, President, and Chief Executive Officer.

"Higher merchandise margin and lower accrued incentive compensation had the largest impact in the quarter. 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 and earnings per diluted share in the range of $.53 to $.57 versus $.61 last year.

“After adjusting our original 2012 guidance for first quarter actual results, our estimate of earnings per diluted share for the full year is now a range of $2.16 to $2.26 versus $2.21 last year."

Gross margin in the quarter increased 60 basis points to 42.1% of sales primarily due to higher merchandise contribution in the quarter. SG&A expenses as a percent of sales decreased 90 basis points to 22.5% during the quarter.

On a dollar basis, SG&A decreased 3% principally due to lower accrued incentive compensation partially offset by higher health and workers' compensation insurance costs. The effective tax rate increased to 38.2% from 35.7% in the prior year, primarily due to elimination of the benefit of the Work Opportunity Tax Credit, which has not been renewed for 2012 by Congress as of the end of the quarter.

The Company's cash and short-term investments increased by $42.3 million during the quarter to $288.3 million.

During the first quarter, the Company opened eight stores, relocated two stores and closed three stores. As of April 28, 2012, the Company operated 1,293 stores in 31 states, compared to 1,282 stores in 31 states as of April 30, 2011.

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 Cato Corporation


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