For the six months ended August 3, 2013, the Company earned net income of $45.6 million or $1.56 per diluted share, compared with net income of $49.1 million or $1.68 per diluted share for the six months ended July 28, 2012, a 7% decrease in net income and earnings per diluted share. Sales for the first half were $496.6 million, down 2% to the prior year's first half sales of $504.2 million. Same-store sales for the first half were down 4% from the prior year.
"Same-store sales continue to be affected by slow economic growth, high unemployment and our customers' limited discretionary spending," said John Cato, Chairman, President, and Chief Executive Officer. "We expect this difficult environment to continue in the second half. We project second half earnings per diluted share will be within our original guidance range of $.19 to $.32."
Second quarter gross margin was 36.8% compared to 38.4% last year due primarily to lower merchandise margins and higher store occupancy costs. Second quarter SG&A costs as a percent of sales was up slightly at 25.7% versus 25.6% last year primarily as a result of higher insurance costs offset by lower incentive compensation expense. The effective tax rate for the quarter was 36.0% compared to 37.3% last year, primarily due to the late renewal of the Work Opportunity Tax Credit last year, which had not been renewed by Congress as of the end of the second quarter last year.
As noted above, based on year-to-date results and the Company's original guidance for the second half, earnings per diluted share are expected to be within the adjusted range of $1.75 to $1.88 versus $2.11 last year, a decrease of 17% to 11%. By quarter, earnings per diluted share are estimated to be in the range of $.02 to $.09 versus $.16 last year for the third quarter and $.17 to $.23 versus $.27 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 four new stores, relocated three stores and closed eight stores. The Company now expects to open 51 stores during 2013. As of August 3, 2013, The Cato Corporation operated 1,306 stores in 31 states, compared to 1,295 stores in 31 states as of July 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. It's Fashion offers fashion with a focus on the latest trendy styles for the entire family at low prices every day.
The Cato Corporation