US retailer Cato's sales drop 8% in Q3FY24

The company reported a net loss of $15.1 million or ($0.79) per diluted share for the third quarter ended November 2, 2024, compared to a net loss of $6.1 million or ($0.30) per diluted share for the third quarter ended October 28, 2023.

For the nine months ended November 2, 2024, the company reported a net loss of $4.0 million or ($0.24) per diluted share, compared to net loss of $0.5 million or ($0.02) per diluted share for the nine months ended October 28, 2023. Sales for the nine months ended November 2, 2024 were $486.8 million, a decrease of 8 per cent to sales of $528.2 million for the nine months ended October 28, 2023. Year-to-date same-store sales decreased 4 per cent compared to 2023, the company said in a press release.

"Our third quarter sales trend deteriorated from the second quarter, in part due to three major hurricanes over a five week span, supply chain issues causing late merchandise receipts to the stores and continued negative pressure on our customers' disposable income," said John Cato, chairman, president, and chief executive officer. "We are managing both SG&A expenses and inventory levels in line with our current sales trend. However, we continue to incur higher costs to move inventory to our stores due to the bankruptcy of a carrier that previously serviced 50 per cent of our stores, as well as, higher distribution costs associated with conversion issues for a distribution centre systems and automation upgrade. We believe that the fourth quarter will remain challenging."

Gross margin decreased from 32.5 per cent to 28.8 per cent of sales in the quarter due to higher markdowns, as well as, increased freight, distribution and occupancy costs as a percent of sales. SG&A expenses as a percent of sales increased from 39.4 per cent to 40.0 per cent of sales during the quarter primarily due to deleveraging of payroll costs, partially offset by lower advertising and insurance expenses. SG&A expenses were $3.9 million lower than last year due to lower payroll, advertising and insurance costs. Tax expense for the quarter was $0.3 million versus a tax benefit of $4.3 million in the prior year, primarily due to valuation allowances against net deferred tax assets.

Year-to-date gross margin decreased to 33.3 per cent of sales from 34.6 per cent in the prior year primarily due to increased occupancy, freight and distribution costs as a percent of sales, partially offset by increased merchandise margins. The year-to-date SG&A rate was 35.5 per cent versus 35.1 per cent primarily due to deleveraging of payroll costs and insurance costs, partially offset by lower advertising costs. SG&A expenses were $12.5 million lower than last year due to lower payroll, insurance and advertising costs. Tax expense for the nine-month period was $1.6 million compared to $0.8 million tax benefit last year, primarily due to valuation allowances against net deferred tax assets.

During the third quarter ended November 2, 2024, the company opened one store. Year-to-date, the company opened one store and closed 13 stores. As of November 2, 2024, the company has 1,167 stores in 31 states, compared to 1,245 stores in 31 states as of October 28, 2023.

Fibre2Fashion News Desk (RR)