Cato's Q2 Earnings Surge on Same-Store Sales Growth

Cato Corporation reported Q2 earnings of $0.35 per share, up from $0.01 in the same quarter last year. Sales increased 5% YoY to $174.7 million, driven by a 9% same-store sales increase. Gross margin improved to 36.2% of sales, up from 34.6% a year earlier. The company's net income jumped to $6.8 million from $0.1 million in the same quarter last year.

Cato Corporation (CATO) reported its fiscal second-quarter earnings on August 2, 2025, showcasing a significant improvement in financial performance compared to the same period last year. The company's basic and diluted earnings per share from continuing operations increased to USD 0.35, up from USD 0.01 a year ago [1]. Revenue for the quarter reached USD 176.51 million, a 5% year-over-year (YoY) increase, primarily driven by a 9% same-store sales growth [1].

The company's gross margin also improved, reaching 36.2% of sales, up from 34.6% a year earlier. This improvement was attributed to reduced distribution and buying costs, partially offset by lower merchandise margins [2]. Additionally, selling, general, and administrative (SG&A) expenses declined as a share of sales, falling to 32.8% from 34.9% in the prior-year quarter, reflecting lower payroll and insurance costs despite higher advertising and corporate expenses [2].

Cato's net income jumped to USD 6.8 million from USD 0.1 million in the same quarter last year, indicating a substantial increase in profitability [1]. This performance underscores a sharp improvement in the company's financial health compared to the prior year, when supply chain disruptions weighed on results [2].

Chairman, President, and CEO John Cato noted that sales trends continued to improve in the second quarter, partly because last year's results were negatively impacted by supply chain disruptions. However, management remained cautious, highlighting uncertainty in the second half of 2025 tied to tariffs and potential cost pressures on product acquisition [2].

Several factors contributed to the quarter's stronger showing, including improved same-store sales growth, healthier consumer demand, and more stable inventory flows. The company also recognized some offsetting factors, such as lower merchandise margins and rising advertising and corporate costs [2].

During the quarter, Cato closed eight stores, bringing its total store count to 1,101 in 31 states as of August 2, 2025. This store rationalization underscores management's ongoing efforts to balance footprint optimization with growth initiatives across its three retail concepts: Cato, Versona, and It’s Fashion [2].

Looking ahead, management pointed to uncertainty surrounding tariffs, inflationary pressures, and their potential negative impact on product acquisition costs. Broader macroeconomic conditions, such as consumer confidence, unemployment levels, and discretionary spending trends, were also highlighted as key variables that could affect future performance [2].

References:
[1] https://www.marketscreener.com/news/the-cato-corporation-reports-earnings-results-for-the-second-quarter-and-six-months-ended-august-02-ce7c51d3de80f422
[2] https://finance.yahoo.com/news/catos-q2-earnings-jump-y-171900599.html