Cato spikes after better-than-feared earnings

J. Michael Jones

The Cato Corporation (NYSE:CATO [https://seekingalpha.com/symbol/CATO]) spiked to its highest level since March after reporting better-than-feared Q2 earnings.

Sales for the quarter that ended on August 2 were up 4.7% to $174.7 million, primarily due to a 9% same-store sales increase.

Gross margin increased to 36.2% of sales from 34.6% a year ago due to lower distribution and buying costs, partially offset by lower merchandise margins. SG&A expenses as a percent of sales decreased to 32.8% of sales from 34.9%, primarily due to lower payroll and insurance costs, partially offset by higher advertising and general corporate costs. Cato's (NYSE:CATO [https://seekingalpha.com/symbol/CATO]) total cost of goods sold fell to 63.8% of sales from 65.4% a year ago. GAAP EPS of $0.35 was reported vs. $0.01 a year ago.

"Our sales trend continued to improve during the second quarter. We attribute this improvement in part due to 2024 sales being impacted by supply chain disruptions," stated CEO John Cato. "We will continue to tightly manage our expenses as we anticipate the back half of 2025 to be challenging due to the continued uncertainty regarding tariffs and the potential negative impact on our product acquisition costs," he added.

Shares of Cato (CATO [https://seekingalpha.com/symbol/CATO]) jumped 28.1% in late morning trading.

MORE ON CATO

* Cato Corporation: Classic Value Trap With An Evaporating Cash Balance [https://seekingalpha.com/article/4795717-cato-corporation-classic-value-trap-with-an-evaporating-cash-balance]
* Financial information for Cato [https://seekingalpha.com/symbol/CATO/income-statement]