Cato Incurs Wider Q3 Loss, Sales Drop Y/Y Amid Operational Challenges

Shares of The Cato Corporation CATO have declined 40.3% since the company reported its earnings for the quarter ended Nov. 2, 2024, significantly underperforming the S&P 500 index’s 0.6% growth over the same period. Over the past month, Cato stock has declined 41.6%, contrasting with the S&P 500’s 2.6% increase, underscoring a challenging market reaction to the company’s latest financial performance.Cato incurred a net loss of 79 cents per share for the third quarter, wider than the net loss of 30 cents per share recorded in the same quarter of 2023. Quarterly sales fell 8% year over year to $144.6 million compared to $156.7 million in the prior-year period. Same-store sales for the quarter decreased by 3%.Stay up-to-date with all quarterly releases: See Zacks Earnings Calendar.The Cato Corporation Price, Consensus and EPS Surprise The Cato Corporation price-consensus-eps-surprise-chart | The Cato Corporation QuoteOther Key Business MetricsGross margin for the quarter fell to 28.8% of sales, down from 32.5% in the same quarter last year. This contraction was driven by increased markdowns, higher freight and distribution expenses, and elevated occupancy costs. Selling, general, and administrative (SG&A) expenses represented 40% of sales, slightly up from 39.4% in the third quarter of 2023, mainly due to deleveraging payroll costs. However, SG&A expenses decreased by $3.9 million year over year, reflecting reductions in payroll, advertising and insurance costs.Cato’s net loss widened to $15.1 million from $6.1 million in the prior-year period.Management Commentary and Influencing FactorsJohn Cato, chairman, president, and CEO, highlighted several challenges impacting the quarter’s performance. These included three major hurricanes, supply chain disruptions delaying merchandise shipments, and ongoing pressure on customers' disposable income. The bankruptcy of a logistics carrier that serviced 50% of Cato’s stores further exacerbated distribution issues, increasing costs. Additionally, the company faced higher distribution expenses related to system and automation upgrades at its distribution centers.Looking ahead, Cato’s management anticipates continued headwinds in the fourth quarter, citing sustained cost pressures and challenging economic conditions.Other DevelopmentsDuring the quarter, Cato opened one new store but closed 13 year to date, reducing its total store count to 1,167 across 31 states as of Nov. 2, 2024, compared to 1,245 stores as of Oct. 28, 2023.Research Chief Names "Single Best Pick to Double"From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.This company targets millennial and Gen Z audiences, generating nearly $1 billion in revenue last quarter alone. A recent pullback makes now an ideal time to jump aboard. Of course, all our elite picks aren’t winners but this one could far surpass earlier Zacks’ Stocks Set to Double like Nano-X Imaging which shot up +129.6% in little more than 9 months.Free: See Our Top Stock And 4 Runners UpWant the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Cato Corporation (The) (CATO): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks