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Cato Q2 sales decrease offset by lower expenses

21
Aug '09
The Cato Corporation reported net income of $16.7 million or $.56 per diluted share for the second quarter ended August 1, 2009, compared to net income of $12.1 million or $.41 per diluted share for the second quarter ended August 2, 2008. Net income increased 38% and earnings per diluted share increased 37% over last year. Sales for the second quarter were $225.4 million, a 2% decrease from sales of $231.0 million last year. Second quarter comparable store sales decreased 3%.

For the six months ended August 1, 2009, the Company earned net income of $35.5 million or $1.20 per diluted share, compared with net income of $28.9 million or $.98 per diluted share for the six months ended August 2, 2008, an increase of 23% in net income and 22% in earnings per diluted share. Sales for the first half were $463.4 million, a 1% increase over the prior year's first half sales of $456.7 million. Comparable store sales for the first half were flat compared to first half 2008.

"Our second quarter sales decrease was offset by lower expenses," stated John Cato, Chairman, President, and Chief Executive Officer. "Our original guidance for the second half of the year remains unchanged and we continue to manage our business tightly in this difficult environment."

Second quarter gross margin was 36.3% compared to 35.9% last year due primarily to lower freight costs. Second quarter SG&A costs as a percent of sales decreased to 25.1% from 27.5% last year. The decrease in SG&A for the quarter was primarily a result of the costs associated with closing stores in the second quarter last year and a decrease in health and worker's compensation costs this year.

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 $1.21 to $1.29 versus $1.14 last year, an increase of 6% to 13%. By quarter, earnings per diluted share are estimated to be in the range of ($.07) to ($.03) versus $.03 last year for the third quarter and $.08 to $.13 versus $.13 last year for the fourth quarter. All 2008 quarterly and annual result references reflect the restatement of earnings per diluted share under EITF 03-6-1. 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 12 new stores and closed eight stores, four of which were It's Fashion stores converted to It's Fashion Metro stores. The Company now expects to open approximately 46 stores during 2009. As of August 1, 2009, The Cato Corporation operated 1,285 stores in 31 states, compared to 1,287 stores in 31 states as of August 2, 2008.

The Cato Corporation is a leading specialty retailer of value-priced women's fashion apparel operating two divisions, "Cato" and "It's Fashion". The Company's Cato division offers exclusive merchandise with fashion and quality comparable to mall specialtystores 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.

Cato Corporation


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