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Strong merchandise margins at Cato in Q2FY18

Sep '18
Courtesy: Cato Fashions
Courtesy: Cato Fashions
The Cato Corporation has seen strong merchandise margins in the second quarter of fiscal 2018 with net income of $6.5 million or $.26 per diluted share as against a net loss of $0.9 million or a loss of $.03 per diluted share in the second quarter of 2017. Sales were 206.8 million, or an increase of 1 per cent from $205.0 million during 2017 second quarter.

"We had a solid performance in the second quarter and first half of 2018 mainly due to positive same-store sales and strong merchandise margins, as a result of much lower markdown sales versus last year," said John Cato, chairman, president, and chief executive officer.  "However, again we are cautious about our second half merchandise margin improvement as markdown sales were not as significant in the second half of 2017."

For the six months ended August 4, 2018, the leading specialty retailer of value-priced fashion apparel and accessories, earned net income of $29.9 million, compared to net income of $21.4 million for the six months ended July 29, 2017.  Earnings per diluted share were $1.20compared to $0.82 last year.  Sales for the six months ended August 4, 2018 were $442.9 million, flat compared to sales of $442.7 million for the six months ended July 29, 2017.  Year-to-date same-store sales increased 1 per cent.

Gross margin increased 610 basis points to 37.2 per cent of sales in the quarter, primarily due to higher merchandise margins and lower buying and occupancy costs. SG&A expenses as a percent of sales increased 190 basis points to 33.3 per cent during the quarter primarily due to higher incentive compensation.  Income tax for the quarter was an expense of $1.0 million compared to a benefit of $1.2 million last year.  The company ended the quarter with cash and short-term investments of $228.6 million.

Year-to-date, the gross margin increased to 38.6 per cent of sales from 35.2 per cent the prior year primarily due to higher merchandise margins and lower buying and occupancy costs. The year-to-date SG&A rate was 30.4 per cent versus 28.9 per cent last year primarily due to higher incentive compensation and insurance costs. Income tax was an expense of $4.2 million compared to an expense of $2.6 million last year. (RR)

Fibre2Fashion News Desk – India

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