The Cato Corporation reported net income of $12.5 million or $.39 per diluted share for the second quarter ended August 4, 2007, compared to net income of $12.1 million or $.38 per diluted share for the second quarter ended July 29, 2006.
Both net income and earnings per diluted share increased 3% over last year. Sales for the second quarter were $219.0 million, a 2% increase over sales of $214.6 million last year. Second quarter comparable store sales decreased 1%.
For the six months ended August 4, 2007, the Company earned net income of $31.2 million or $.97 per diluted share, compared with net income of $32.9 million or $1.04 per diluted share for the six months ended July 29, 2006, a decrease in net income of 5% and a decrease in earnings per diluted share of 7%.
Sales for the first half were $443.1 million, flat compared to the prior year's first half sales of $444.4 million. Comparable store sales for the first half decreased 3% from first half 2006.
"Our results through the first half reflect the challenging apparel retail environment," said John Cato, Chairman, President, and Chief Executive Officer. "Sell-throughs of regular priced goods have been below last year and, when coupled with higher markdowns, are the primary reason for the decrease in gross margin. Our inventory is in line with sales as we begin the third quarter."
The Company's income from operations was in line with previous guidance. Second quarter results were $.02 above the Company's estimate due primarily to an effective tax rate lower than anticipated due to volatility between quarters and higher tax credits.
When compared to the prior year, second quarter and first half SG&A costs decreased from 24.1% to 23.9% and 23.9% to 23.4%, respectively, due primarily to a reduction in accrued incentive compensation.
The Company's expectations for earnings per diluted share in the second half are unchanged from previous guidance. Comparable store sales for both the third and fourth quarters are estimated to be in the range of down 3% to flat. For the third quarter, earnings per diluted share are estimated to be in the range of $.10 to $.15 versus $.18 in 2006.
For the fourth quarter, the Company expects earnings per diluted share to be in the range of $.15 to $.25 versus $.40 in 2006. Fourth quarter 2006 included 14 weeks and several positive one-time adjustments. For the year, after adjusting for second quarter actual results, earnings per diluted share are expected to be in the range of $1.23 to $1.38 versus $1.62 last year, a decrease of 24% to 15%.
During the first half, the Company opened 31 new stores, relocated 10 stores, and closed one store. The Company now expects to open approximately 70 stores during 2007 as compared to its previous guidance of 80 stores. As of August 4, 2007, The Cato Corporation operated 1,306 stores in 31 states, compared to 1,259 stores in 31 states as of July 29, 2006.
