CATO REPORTS 1Q EARNINGS
Rhea-AI Summary
Cato (NYSE:CATO) reported first quarter 2026 net income of $9.3 million, or $0.47 per diluted share, up from $3.3 million, or $0.17, a year earlier. Sales rose 0.7% to $169.5 million and same-store sales increased 3%.
Gross margin improved to 37.2%, aided by a pre-tax $5.7 million tariff refund. SG&A fell to $53.9 million (31.8% of sales). Cato repurchased 107,823 shares and ended the quarter with 1,065 stores. Management expects inflation, especially fuel and food costs, to pressure future sales.
AI-generated analysis. Not financial advice.
Positive
- Net income rose to $9.3 million from $3.3 million year over year
- Diluted EPS increased to $0.47 from $0.17 year over year
- Quarterly sales grew 0.7% to $169.5 million
- Same-store sales increased 3% for the quarter
- Gross margin expanded to 37.2% from 35.1%
- SG&A decreased to $53.9 million and 31.8% of sales
- Company received a pre-tax $5.7 million tariff refund claim
- Repurchased 107,823 shares during the quarter
- Cash and cash equivalents increased to $25.4 million from $16.8 million January 31, 2026
Negative
- Management expects rising inflation, especially fuel and food prices, to negatively impact future sales
- Sales trend softened later in the quarter due in part to higher fuel prices
- Total quarterly sales increased only 0.7% year over year
- Store base declined to 1,065 from 1,109 year over year
- Tariff refund contributed to gross margin, indicating a non-recurring benefit
Key Figures
Market Reality Check
Peers on Argus
CATO slipped about 0.97% pre-release while peers were mixed: DXLG +5.96%, DLTH +6.01%, BRIA +1.83%, AKA -1.43%, TLYS -5.36%, suggesting a stock-specific setup rather than a uniform sector move.
Historical Context
| Date | Event | Sentiment | Move | Catalyst |
|---|---|---|---|---|
| Mar 19 | Q4 and FY loss | Negative | -0.7% | Reported Q4 and full-year net losses with modest sales and margin improvement. |
Limited recent history, but the prior loss-related headline saw a modest negative price reaction aligned with weak results.
In the last six months, Cato’s most notable news was its Q4 2025 and full-year 2025 results showing a net loss of $10.7 million for the quarter and a full-year net loss of $5.9 million. Sales were essentially flat, with slight annual growth and improved gross margin and SG&A leverage. That report produced a small negative reaction of -0.68%, indicating the market had already discounted a challenging backdrop before this quarter’s stronger earnings.
Market Pulse Summary
This announcement highlights a return to quarterly profitability, with net income of $9.3 million, diluted EPS of $0.47, and a gross margin of 37.2%, aided by a $5.7 million tariff refund. Same-store sales grew 3%, while SG&A declined in dollar terms. Management, however, cautioned that higher fuel and food prices could constrain customers’ discretionary income. Investors may watch future quarters for underlying margin stability once the tariff benefit is absent and as store counts continue to adjust.
Key Terms
international emergency economic powers act regulatory
tariffs regulatory
forward-looking regulatory
risk factors regulatory
AI-generated analysis. Not financial advice.
Sales for the first quarter ended May 2, 2026 were
"Our results significantly benefited from the refund claim of IEEPA (International Emergency Economic Powers Act) tariffs in the quarter. Our sales trend softened as the quarter continued in part due to higher fuel prices pressuring our customers' discretionary income," said John Cato, Chairman, President and Chief Executive Officer." For the foreseeable future we expect our sales to be negatively impacted by rising inflation, especially fuel and food prices, which will reduce our customers' discretionary income."
First quarter gross margin as a percentage of sales was
Additionally, the Company bought back 107,823 shares during the quarter.
During the first quarter ended May 2, 2026, the Company opened two stores and closed six stores. As of May 2, 2026, the Company operated 1,065 stores in 31 states, compared to 1,109 stores in 31 states as of May 2, 2025.
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. The Company also offers exclusive merchandise found in its Cato stores at www.catofashions.com. Versona is a unique fashion destination offering apparel and accessories including jewelry, handbags and shoes at exceptional prices every day. Select Versona merchandise can also be found at www.shopversona.com. It's Fashion offers fashion with a focus on the latest trendy styles for the entire family at low prices every day.
Statements in this press release that express a belief, expectation or intention, as well as those that are not a historical fact, including, without limitation, statements regarding the Company's expected or estimated operational financial results, activities or opportunities, and potential impacts and effects of events, risks or contingencies are considered "forward-looking" within the meaning of The Private Securities Litigation Reform Act of 1995. 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, any actual or perceived deterioration in the conditions that drive consumer confidence and spending, including, but not limited to, prevailing social, economic, political and public health conditions and uncertainties, levels of unemployment, fuel, energy and food costs, inflation, wage rates, tax rates, interest rates, home values, consumer net worth and the availability of credit; changes in laws or regulations affecting our business, including but not limited to tariffs and taxes; uncertainties regarding the impact of any governmental action regarding, or responses to, the foregoing conditions; competitive factors and pricing pressures; our ability to predict and respond to rapidly changing fashion trends and consumer demands; our ability to open new stores in attractive locations and the ability of any such new stores to grow and perform as expected; underperformance or other factors that may lead to a continuation or acceleration of store closures and negative affect on the Company's profitability; adverse weather, public health threats, acts of war or aggression or similar conditions that may affect our sales or operations; inventory risks due to shifts in market demand, including the ability to liquidate excess inventory at anticipated margins; and other factors discussed under "Risk Factors" in Part I, Item 1A of the Company's most recently filed annual report on Form 10-K and in other reports the Company files with or furnishes to the SEC from time to time. The Company does not undertake to publicly update or revise the forward-looking statements 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 | |||||||
Quarter Ended | |||||||
May 2, | % | May 3, | % | ||||
2026 | Sales | 2025 | Sales | ||||
REVENUES | |||||||
Retail sales | $ | 169,410 | 100.0 % | $ | 168,419 | 100.0 % | |
Other revenue (principally finance, | |||||||
late fees and layaway charges) | 1,694 | 1.0 % | 1,823 | 1.1 % | |||
Total revenues | 171,104 | 101.0 % | 170,242 | 101.1 % | |||
GROSS MARGIN (Memo) | 63,070 | 37.2 % | 59,101 | 35.1 % | |||
COSTS AND EXPENSES, NET | |||||||
Cost of goods sold | 106,340 | 62.8 % | 109,318 | 64.9 % | |||
Selling, general and administrative | 53,930 | 31.8 % | 55,325 | 32.8 % | |||
Depreciation | 2,236 | 1.3 % | 2,564 | 1.5 % | |||
Interest and other income | (1,233) | -0.7 % | (1,202) | -0.7 % | |||
Costs and expenses, net | 161,273 | 95.2 % | 166,005 | 98.6 % | |||
Income Before Income Taxes | 9,831 | 5.8 % | 4,237 | 2.5 % | |||
Income Tax Expense | 522 | 0.3 % | 928 | 0.6 % | |||
Net Income | $ | 9,309 | 5.5 % | $ | 3,309 | 2.0 % | |
Basic Earnings Per Share | $ | 0.47 | $ | 0.17 | |||
Diluted Earnings Per Share | $ | 0.47 | $ | 0.17 | |||
THE CATO CORPORATION | ||||||
May 2, | January 31, | |||||
2026 | 2026 | |||||
(Unaudited) | (Unaudited) | |||||
ASSETS | ||||||
Current Assets | ||||||
Cash and cash equivalents | $ | 25,412 | $ | 16,788 | ||
Short-term investments | 55,558 | 56,859 | ||||
Restricted cash | 2,675 | 2,675 | ||||
Accounts receivable - net | 33,159 | 25,462 | ||||
Merchandise inventories | 92,490 | 83,696 | ||||
Other current assets | 7,928 | 7,787 | ||||
Total Current Assets | 217,222 | 193,267 | ||||
Property and Equipment - net | 52,504 | 53,748 | ||||
Other Assets | 20,720 | 20,471 | ||||
Right-of-Use Assets, net | 148,734 | 153,933 | ||||
TOTAL | $ | 439,180 | $ | 421,419 | ||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||
Current Liabilities | $ | 116,130 | $ | 102,385 | ||
Current Lease Liability | 52,088 | 53,507 | ||||
Noncurrent Liabilities | 11,318 | 11,272 | ||||
Lease Liability | 92,939 | 96,941 | ||||
Stockholders' Equity | 166,705 | 157,314 | ||||
TOTAL | $ | 439,180 | $ | 421,419 | ||
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SOURCE The Cato Corporation