Headquartered in Charlotte, North Carolina,
) recently reported disappointing same store (comps) as well as
total sales results for the five-week period ended June 30,
The company stated that total sales of $83.7 million for the
month of June 2012, declined 7% from $90.4 million in the five-week
period ended July 2, 2011. Comps plunged 10% year over year for the
month, which was below the company's expectation.
For the 22-weeks period ended June 30, 2012, Cato's sales were
almost flat at $440.8 million compared with $442.0 million in the
same period last year. However, year-to-date, the company's comps
dropped 3% over the prior-year period.
As per the company, comps data remains volatile throughout the
22-weeks period. The company's year-to-date comps were primarily
battered by unfavorable weather conditions along with the economic
and political uncertainties.
Anticipating volatility to continue in the near future, Cato
revised its earnings estimate for the second-quarter of fiscal
2012. The company now expects earnings to be in the lower end of
its earlier guidance range of 53 cents to 57 cents per share. The
current Zacks Consensus Estimate for the second-quarter stands at
55 cents per share.
The company's competitors also faced weak comps for the month of
June. One of its competitors,
) witnessed a 2.5% decline in comps while net sales of the company
inched down 0.3% to $79.4 million.
During the month, the company opened two stores, one each at
Houston and San Antonio, Texas while it relocated one store in
Bastrop, Los Angeles and closed down one store. Cato ended the
month with 1,295 retail stores in 31 states compared with 1,286
stores in 31 states as of July 2, 2011.
To attract more consumers Cato Corporation offers quality
fashion apparel and accessories at everyday low prices in
junior/missy and plus sizes. In addition, the company offers
clothing and accessories for girls aged between 7 and 16 in
selected locations. With the objective of offering head-to-toe
dressing for its customers, the company's stores feature a broad
assortment of apparel and accessories, including casual and dressy
sportswear, dresses, careerwear, coats, hosiery, shoes, costume
jewelry, handbags and millinery.
Cato is on its way of taking prudent steps for improving its top
line while enhancing operational efficiency. The company is
effectively utilizing its cash to expand its store network, develop
e-commerce platform and build additional distribution center. We
believe these initiatives will certainly facilitate Cato in
improvising its top- and bottom-line.
Currently, we are maintaining a long-term Neutral recommendation
on the stock.
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