The Cato (CATO) Q2 2024 earnings summary

Executive summary

• Q2 2024 retail sales were $166.9M, down 8% year-over-year, with a 2% decrease in same-store sales and store closures impacting results.

• Net income for Q2 2024 was $95K ($0.01 per share), down from $1.1M ($0.06 per share) in Q2 2023; six-month net income rose to $11.1M ($0.54 per share) from $5.6M ($0.27 per share) year-over-year.

• The company operated 1,166 stores at quarter-end, down from 1,247 a year ago, with five closures in Q2 and plans to close about 65 stores in fiscal 2024.

• Inflationary pressures, high interest rates, and supply chain disruptions continued to negatively impact consumer demand and costs.

Financial highlights

• Total revenues for Q2 2024 were $168.6M, down from $182.9M in Q2 2023; six-month revenues were $345.7M, down from $374.9M year-over-year.

• Gross margin for Q2 2024 was 34.6% ($57.8M), down from 35.1% year-over-year; gross margin as a percent of sales declined due to deleveraging and higher distribution costs.

• SG&A expenses decreased to $58.2M (34.9% of sales) in Q2 2024, reflecting lower payroll, advertising, and equity compensation.

• Interest and other income rose to $1.7M in Q2 2024, driven by higher investment returns.

• Effective tax rate for the first six months was 10.5%, down from 38.5% in 2023, due to valuation allowance changes and lower state taxes.

Outlook and guidance

• Management expects continued negative impact from inflation, high interest rates, and supply chain disruptions for the remainder of fiscal 2024.

• Capital expenditures for fiscal 2024 are projected at $7.0M.

• The Board maintained the quarterly dividend at $0.17 per share as of August 29, 2024.

• SG&A expenses will continue to be managed tightly in line with sales trends.