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Cato Corp. Reports Operating Results (10-Q)

June 08, 2011 | About:
10qk

10qk

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Cato Corp. (CATO) filed Quarterly Report for the period ended 2011-06-08.

Cato Corp has a market cap of $726.9 million; its shares were traded at around $26.29 with a P/E ratio of 12.6 and P/S ratio of 0.8. The dividend yield of Cato Corp stocks is 2.9%. Cato Corp had an annual average earning growth of 4.2% over the past 10 years. GuruFocus rated Cato Corp the business predictability rank of 3.5-star.

Highlight of Business Operations:

Total retail sales for the first quarter were $270.9 million compared to last year s first quarter sales of $259.0 million, a 4.6% increase. Same-store sales increased 2.0% in the first quarter of fiscal 2011 due to favorable tax refund timing and favorable weather. Total revenues, comprised of retail sales and other income (principally, finance charges and late fees on customer accounts receivable and layaway fees), were $273.7 million for the first quarter ended April 30, 2011, compared to $262.0 million for the first quarter ended May 1, 2010. The Company operated 1,282 stores at April 30, 2011 compared to 1,272 stores at the end of last year s first quarter. For the first three months of fiscal 2011 the Company opened four new stores, relocated one store and closed four stores. The Company expects to open approximately 54 stores, relocate seven stores and close approximately 27 stores in fiscal 2011.

Credit revenue of $2.0 million represented 0.7% of total revenues in the first quarter of fiscal 2011, compared to 2010 credit revenue of $2.2 million or 0.8% of total revenues. Credit revenue decreased for the most recent comparable period due to lower finance charge income and lower late fee income from sales under the Company s proprietary credit card. Credit revenue is comprised of interest earned on the Company s private label credit card portfolio and related fee income. Related expenses include principally bad debt expense, payroll, postage and other administrative expenses and totaled $1.3 million in the first quarter of 2011, compared to last year s first quarter expenses of $1.6 million. The decrease was primarily due to lower bad debt and postage expenses compared to the first quarter of 2010.

Cost of goods sold was $158.4 million, or 58.5% of retail sales for the first quarter of fiscal 2011, compared to $149.9 million, or 57.9% of retail sales in the first quarter of fiscal 2010. The overall increase in cost of goods sold as a percent of retail sales for the first quarter of 2011 resulted primarily from higher freight costs and product mix changes partially offset by lower vendor allowances. Cost of goods sold includes merchandise costs, net of discounts and allowances, buying costs, distribution costs, occupancy costs, freight and inventory shrinkage. Net merchandise costs and in-bound freight are capitalized as inventory costs. Buying and distribution costs include payroll, payroll-related costs and operating expenses for the buying departments and distribution center. Occupancy expenses include rent, real estate taxes, insurance, common area maintenance, utilities and maintenance for stores and distribution facilities. Total gross margin dollars (retail sales less cost of goods sold) increased by 3.0% to $112.5 million for the first quarter of fiscal 2011 compared to $109.2 million in the first quarter of fiscal 2010. Gross margin as presented may not be comparable to those of other entities.

At April 30, 2011, the Company had working capital of $275.8 million compared to $231.3 million at May 1, 2010. Additionally, the Company had $2.4 million invested in privately managed investment funds and other miscellaneous equities and a single auction rate security of $3.5 million at April 30, 2011, which are included in Other assets on the Condensed Consolidated Balance Sheets.

Expenditures for property and equipment totaled $4.4 million in the first quarter of fiscal 2011, compared to $4.0 million in last year s first quarter. The expenditures for the first three months of 2011 were primarily for the development of four new stores and additional investments in new technology. For the full fiscal 2011 year, the Company expects to invest approximately $32.3 million for capital expenditures. This includes expenditures to open 54 new stores and relocate seven stores, upgrades to merchandise systems, and home office and distribution center expansion.

Additionally, at April 30, 2011, the Company had $1.9 million of privately managed funds, $0.5 million of corporate equities and a single auction rate security (“ARS”) of $3.5 million which continues to fail its auction. See Note 8 – Fair Value Measurements for further information regarding the failed ARS. All of these assets are recorded within Other assets in the Condensed Consolidated Balance Sheets.

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