American fashion retailer Cato reports net loss of $4.5 mn in Q3 2022

The company's same-store sales for the quarter increased 3 per cent compared to 2021.

For the nine months ended October 29, 2022, the company has reported net income of $3 million or $0.14 per diluted share, compared to net income of $43.3 million or $1.93 per diluted share for the same period in 2021. Sales for the nine months ended October 29, 2022, were $574.9 million, a decrease of 2 per cent to sales of $587.7 million from the corresponding period of last year. Year-to-date same-store sales decreased 2 per cent compared to 2021, the company said in a media release.

"We are appreciative of the ongoing support of our customers, especially considering the unrelenting pressure inflation has had on their ability to spend on discretionary items such as fashion apparel. The actions we've taken to improve our inventory levels, including increased markdowns, has put pressure on our financial performance during the quarter, as anticipated," stated John Cato, chairman, president, and chief executive officer. "We've made good progress, but we will continue to make adjustments to improve our inventory position and to offer our customers great fashion and customer service at a compelling value. We anticipate the remainder of the year to be challenging, given the unusual economic environment."

Gross margin of Cato Corporation decreased from 38.9 per cent to 29.3 per cent of sales in the quarter due to lower merchandise margins driven by increased markdowns taken to align inventory with sales trends and increased freight and distribution costs. SG&A expenses as a per cent of sales decreased from 36.6 per cent to 35.1 per cent of sales during the quarter compared to Q3 2021, primarily due to reduced incentive compensation expense, partially offset by increased store payroll expense, reflecting more normalised operations, coupled with a higher wage environment. Tax benefit for the quarter was $4.7 million versus a $5.7 million tax benefit in the prior year.

Year-to-date gross margin decreased to 32.5 per cent of sales from 41.6 per cent the prior year primarily due to decreased merchandise margins driven by increased markdowns taken to align inventory with sales trends and to clear late merchandise, coupled with increased freight and distribution costs. The year-to-date SG&A rate was 31.8 per cent versus 33.5 per cent primarily due to lower incentive compensation expense, partially offset by increased store payroll expense, which reflects more normalised operations and a higher wage environment. Income tax expense for the nine-month period was $3 million, compared to $1.9 million last year, the release added.

During the third quarter of 2022, the company opened 7 stores and closed 2 stores. As of October 29, 2022, the company has 1,317 stores in 32 states, compared to 1,324 stores in 32 states as of October 30, 2021.

The Cato Corporation is a leading specialty retailer of value-priced fashion apparel and accessories operating three concepts, Cato, Versona and It's Fashion.

Fibre2Fashion News Desk (KD)