The Cato (CATO) Q3 2024 earnings summary

Executive summary

• Q3 2024 retail sales were $144.6M, down 8% year-over-year, with a 3% decrease in same-store sales and store closures impacting results.

• For the nine months ended Nov 2, 2024, retail sales were $486.8M, down 8% from the prior year, mainly due to a 4% decrease in same-store sales and store closures.

• Q3 2024 net loss was $15.1M ($0.79 per share) versus a net loss of $6.1M ($0.30 per share) in Q3 2023.

• Nine-month net loss was $4.0M ($0.24 per share) compared to a net loss of $0.5M ($0.02 per share) in the prior year.

• The company operated 1,167 stores at quarter-end, down from 1,245 a year ago, and expects to close about 65 stores in fiscal 2024.

Financial highlights

• Gross margin for Q3 decreased to 28.8% from 32.5% year-over-year due to higher markdowns and increased costs.

• SG&A expenses as a percent of sales rose to 40.0% from 39.4% in Q3, but were $3.9M lower in absolute terms.

• Gross margin dollars fell 18.1% in Q3 and 11.1% for the nine months, primarily due to deleveraging of occupancy and higher distribution/freight costs.

• Interest and other income rose due to gains on asset sales and higher investment income.

• Cash used in operations was $13.3M for the nine months, compared to $11.7M provided in the prior year period.

Outlook and guidance

• Inflation and high interest rates continue to pressure customer disposable income and are expected to negatively impact results for the remainder of fiscal 2024.

• Ongoing supply chain disruptions, including issues at the Panama and Suez Canals, port congestion, and carrier bankruptcy, are expected to continue affecting costs and lead times.

• Management expects Q4 to remain challenging due to ongoing sales pressures and higher costs.

• The company expects to close approximately 65 stores in fiscal 2024 and invest about $7.0M in capital expenditures for the year.