Cato Reports 2012 4Q And Full Year Earnings

Thu Mar 21, 2013 7:00am EDT

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Provides 2013 Outlook
CHARLOTTE, N.C.,  March 21, 2013  /PRNewswire/ -- The Cato Corporation (NYSE:
CATO) today reported net income for the fourth quarter and year ended  February
2, 2013.  For the fourth quarter, the Company reported net income of  $7.9
million  or  $0.27  per diluted share, compared to net income of  $10.1 million 
or  $0.35  per diluted share for the fourth quarter ended  January 28, 2012. 
For the quarter, net income decreased 22% and earnings per diluted share
decreased 23% from the prior year.  Full year fiscal 2012 net income was  $61.7
million  or  $2.11  per diluted share compared to  $64.8 million  or  $2.21  per
diluted share for 2011.  For the year, both net income and earnings per diluted
share decreased 5% from the prior year.

Sales for fiscal fourth quarter ended  February 2, 2013  were  $232.0 million,
an increase of 5% over sales of  $221.5 million  for the fourth quarter ended 
January 28, 2012.  On a comparable 14-week basis, total sales for the quarter
decreased 4% and same-store sales decreased 7% from last year.  For the year,
the Company's sales increased 1% to  $933.8 million  over 2011 sales of  $920.6
million.  On a comparable 53-week basis, total sales for the fiscal year ended 
February 2, 2013  decreased 1% and same-store sales decreased 4% from last year.

"Cato faced a very difficult year in 2012," stated  John Cato, Chairman,
President and Chief Executive Officer.  "The already weak economic environment
was further impacted by political uncertainty, tax changes and higher costs that
negatively impacted our customer."

4Q AND 2012 REVIEW  

In the fourth quarter, gross margin increased 20 basis points over the prior
year to 34.8%of sales primarily due to higher merchandise margin, somewhat
offset by higher store occupancy costs.  Selling, general and administrative
expenses were 28.3%of sales, compared to 26.7% in the prior year.  SG&A costs as
a percent of sales were higher primarily due to the deleveraging of store
payroll costs and higher impairment costs, partially offset by lower accrued
incentive compensation. The Company's effective income tax rate increased to
40.0% from 35.2% last year due to higher state taxes and a correction of an
immaterial prior period error.   

For 2012, gross margin increased 10 basis points to 37.7%of sales primarily due
to higher merchandise margin, partially offset by higher store occupancy costs. 
Selling, general and administrative expenses increased to 26.2%of sales due to
the same reasons as the fourth quarter.  The Company's effective income tax rate
increased to 37.7% from 35.3% last year primarily due to the reasons discussed
above for the fourth quarter.     

"Cato continues to maintain a strong balance sheet, with approximately  $200
million  in cash and short-term investments and no debt," commented Mr. Cato. 
During 2012, the Company returned  $87.2 million  in profits to shareholders
through dividends.  The dividends paid in 2012 include the acceleration of
2013's full dividend of  $1.00  and a special dividend of  $1.00. In late 
February 2013, the Company increased its dividend by an annualized amount of 
$0.20, a 20% increase over the annualized dividend rate for 2012, exclusive of
the special dividend and accelerated 2013 dividend discussed above.  

For the fiscal year ended  February 2, 2013, the Company opened 34 stores,
relocated nine stores and closed 12 stores.  The closings for the year include
two It's Fashion stores closed to open It's Fashion Metro stores in the same
market.  As of  February 2, 2013, the Company operated 1,310 stores in 31
states.   

2013 OUTLOOK

The Company believes that the sales environment in 2013 will continue to be
difficult due to the ongoing negative economic environment, including slow job
growth, higher gasoline and food prices and increased payroll taxes, all of
which are squeezing our customers' discretionary budgets.   In addition,
continued cooler weather conditions through the Easter selling season and
additional markdowns from weak sales are anticipated to negatively impact first
quarter results.

Earnings Estimates

For 2013, the Company estimates same-store sales will be in a range of down 3%
to down 1% and its gross margin rate will decrease to 37.1% from 37.7% in 2012,
resulting in net income in a range of  $48.1 million to $56.8 million, a
decrease of 22% to 8% compared to  $61.7 million  in 2012.  The Company
estimates earnings per diluted share will be in a range of  $1.64 to $1.93, a
decrease of 22% to 9% compared to  $2.11  in 2012.  Fiscal 2013 includes 52
weeks versus 53 weeks in 2012.

The Company estimates first quarter 2013 net income to be in a range of  $30.3
million to $33.3 million, or  $1.03 to $1.14  per diluted share, a decrease of
5% to an increase of 5% compared to  $1.09  in first quarter 2012.  This
estimate is based on same-store sales of down 4% to down 2%.  

The Company's net income estimates for 2013 also reflect the following
assumptions:

* The Company expects to open 65 new stores during the year.  The expected new
store openings include 40 new Cato stores, 15 Versona Accessories stores, five
It's Fashion stores and five It's Fashion Metro stores (including opening an
estimated two Metro stores while simultaneously closing an existing It's Fashion
store in the same market).   
* The Company anticipates closing up to 15 stores by year-end, including the two
It's Fashion store closings mentioned above.  At this time, only six specific
stores have been identified for closure.  
* Capital expenditures are projected to be approximately  $44 million, including
 $26 million  for store development,  $10 million  for home office renovation
and additional investment into our e-commerce initiative as well as continued
investment to enhance and upgrade our existing systems.  The anticipated
Distribution Center expansion has been delayed past 2013 based on current needs.
 
* Depreciation is expected to be approximately  $23 million  for the year.  
* The effective tax rate is expected to be approximately 35.7%.

The Cato Corporation is a leading specialty retailer of value-priced fashion
apparel and accessories operating three concepts, "Cato", "Versona" and "It's
Fashion".  The Company's Cato stores offer exclusive merchandise with fashion
and quality comparable to mall specialty stores at low prices every day. 
Versona is a unique fashion destination offering accessories and apparel
including jewelry, handbags and shoes at exceptional prices every day.  It's
Fashion offers fashion with a focus on the latest trendy styles for the entire
family at low prices every day.  Additional information on The Cato Corporation
is available at  www.catocorp.com.

Statements in this press release not historical in nature including, without
limitation, statements regarding the Company's expected financial results and
operational activities for fiscal 2013 and the first quarter of 2013, including
statements under the headings "2013 Outlook" and "Earnings Estimates," are
considered "forward-looking" within the meaning of The Private Securities
Litigation Reform Act of 1995.  These statements include, but are not limited
to, stated expectations, results and underlying assumptions regarding future
events, conditions and results, including consumer spending and its underlying
drivers, same-store sales, gross margin rates, net income, earnings per diluted
share, store openings and closings, capital expenditures, depreciation and
effective tax rates. Such forward-looking statements are based on current
expectations that are subject to known and unknown risks, uncertainties and
other factors that could cause actual results to differ materially from those
contemplated by the forward-looking statements.  Such factors include, but are
not limited to, the following: any actual or perceived deterioration in, or
uncertainties regarding,   prevailing U.S. and global economic, political or
financial market conditions or changes in other factors that drive consumer or
corporate confidence and spending, including, but not limited to, levels of
unemployment, fuel, energy and food costs, wage rates, tax rates, home values,
consumer net worth and the availability of credit;  uncertainties regarding the
impact of any governmental responses to the foregoing conditions; competitive
factors and pricing pressures; our ability to predict fashion trends; consumer
apparel and accessory buying patterns; adverse weather or similar conditions
that may affect our sales or operations; inventory risks due to shifts in market
demand; and other factors discussed under "Risk Factors" in Part I, Item 1A of
our annual report on Form 10-K for the fiscal year ended  January 28, 2012, as
amended or supplemented, and in other reports we file with or furnish to the SEC
from time to time. We do not undertake, and expressly decline, any obligation to
update any such forward-looking information contained in this report, whether as
a result of new information, future events, or otherwise,  even if experience or
future changes make it clear that the projected results expressed or implied
therein will not be realized.  The Company is not responsible for any changes
made to this press release by wire or internet services.

 THE CATO CORPORATION                                                                                                                                                  
 CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)                                                                                                                
 FOR THE PERIODS ENDED FEBRUARY 2, 2013 AND JANUARY 28, 2012                                                                                                                
 (Dollars in thousands, except per share data)                                                                                                                              
                                                                                                                                                             
                                      Quarter Ended                                                         Twelve Months Ended                                          
                                                                                                                                                             
                                      February 2,       %              January 28,       %              February 2,       %            January 28,       %       
                                      2013              Sales          2012              Sales          2013              Sales        2012              Sales   
                                                                                                                                                             
 REVENUES                                                                                                                                                    
 Retail sales                         $       231,967  100.0%         $       221,518  100.0%         $       933,782  100.0%       $       920,622  100.0%  
 Other income (principally finance,                                                                                                                          
 late fees and layaway charges)               2,669    1.1%                   2,789    1.2%                   10,266   1.1%                 10,836   1.2%    
                                                                                                                                                             
 Total revenues                               234,636  101.1%                 224,307  101.2%                 944,048  101.1%               931,458  101.2%  
                                                                                                                                                             
 GROSS MARGIN (Memo)                          80,696   34.8%                  76,721   34.6%                  351,821  37.7%                346,446  37.6%   
                                                                                                                                                             
 COSTS AND EXPENSES, NET                                                                                                                                     
 Cost of goods sold                           151,271  65.2%                  144,797  65.4%                  581,961  62.3%                574,176  62.4%   
 Selling, general and administrative          65,616   28.3%                  59,227   26.7%                  244,443  26.2%                239,003  25.9%   
 Depreciation                                 5,595    2.4%                   5,729    2.6%                   22,455   2.4%                 21,825   2.4%    
 Interest and other income                    (1,077)  -0.5%                  (1,050)  -0.5%                  (3,782)  -0.4%                (3,817)  -0.4%   
                                                                                                                                                             
 Cost and expenses, net                       221,405  95.4%                  208,703  94.2%                  845,077  90.5%                831,187  90.3%   
                                                                                                                                                             
                                                                                                                                                             
 Income Before Income Taxes                   13,231   5.7%                   15,604   7.0%                   98,971   10.6%                100,271  10.9%   
                                                                                                                                                             
 Income Tax Expense                           5,287    2.3%                   5,499    2.5%                   37,303   4.0%                 35,437   3.9%    
                                                                                                                                                             
 Net Income                           $       7,944    3.4%           $       10,105   4.5%           $       61,668   6.6%         $       64,834   7.0%    
                                                                                                                                                             
                                                                                                                                                             
 Basic Earnings Per Share             $       0.27                    $       0.35                    $       2.11                  $       2.21             
                                                                                                                                                             
                                                                                                                                                             
 Diluted Earnings Per Share           $       0.27                    $       0.35                    $       2.11                  $       2.21             
                                                                                                                                                             


 THE CATO CORPORATION                                                                                               
 CONDENSED CONSOLIDATED BALANCE SHEETS                                                                              
 (Dollars in thousands)                                                                                             
                                                                                                          
                               February 2,                          January 28,            January 28        
                               2013                                 2012                   2012              
                               (Unaudited)                          (Unaudited)            (Unaudited)       
                                                                                                          
 ASSETS                                                                                                   
 Current Assets                                                                                           
 Cash and cash equivalents     $        31,069                     $        34,893       $       34,893   
 Short-term investments                 157,578                             205,771              205,771  
 Restricted Cash                        5,999                               5,325                5,325    
 Accounts receivable - net              40,016                              43,024               43,024   
 Merchandise inventories                140,738                             130,382              130,382  
 Other current assets                   14,814                              9,737                9,737    
                                                                                                          
 Total Current Assets                   390,214                             429,132              429,132  
                                                                                                          
 Property and Equipment - net           134,227                             115,445              115,445  
                                                                                                          
 Other Assets                           8,205                               6,512                6,512    
                                                                                                          
 TOTAL                         $        532,646                    $        551,089      $       551,089  
                                                                                                          
 LIABILITIES AND STOCKHOLDERS' EQUITY                                                                          
                                                                                                          
 Current Liabilities           $        159,602                    $        156,993      $       156,993  
                                                                                                          
 Noncurrent Liabilities                 27,810                              27,417               27,417   
                                                                                                          
 Stockholders' Equity                   345,234                             366,679              366,679  
                                                                                                          
 TOTAL                         $        532,646                    $        551,089      $       551,089  
                                                                                                          


SOURCE  The Cato Corporation


John R. Howe, Executive Vice President, Chief Financial Officer,
+1-704-551-7315

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