Cato Corporation Reports Third Quarter Results: Key Financial Insights

Cato Corporation Reports Third Quarter Results

The Cato Corporation (NYSE: CATO), a prominent retailer specializing in value-priced fashion apparel and accessories, has disclosed its financial outcomes for the third quarter ending November 1, 2025. The results highlight both a net loss and an increase in sales compared to the previous year, providing insights into the company's performance amidst challenging market conditions.

Financial Overview

For the third quarter, Cato reported a net loss of $5.2 million, translating to a diluted loss per share of $0.28. This marks an improvement in performance compared to the $15.1 million loss or $0.79 per diluted share recorded in the same quarter of the previous year.

Sales for the quarter totaled $153.7 million, which represents a 6% increase from the $144.6 million reported for the third quarter ended November 2, 2024. Furthermore, the company's same-store sales experienced a significant rise of 10%, indicating a positive trend in consumer spending and operational stability.

Over the nine-month period ending November 1, 2025, Cato recorded a net income of $5.0 million, or $0.25 per diluted share, bouncing back from a net loss of $4.0 million (-$0.24 per diluted share) for the same period in 2024. Total sales for the nine months reached $496.8 million, a 2% increase from the $486.8 million achieved in the previous year.

Management Insights

John Cato, the Chairman and CEO, attributed the positive sales trajectory to an upward trend observed in the second quarter that persisted into the third quarter. He noted that the previous year's sales were adversely impacted by significant hurricanes and supply chain disruptions causing delays in merchandise distribution. Despite the optimistic sales growth, John Cato cautioned that the fourth quarter could pose challenges due to anticipated slowdowns in employment growth and overall economic activity.

To address these challenges, the company plans on stringently managing its expenses and maintaining favorable inventory levels while focusing on driving sales growth in the upcoming quarter.

Margins and Expenses

The gross margin for Cato improved from 28.8% to 32.0% of sales, largely attributed to decreased freight, distribution, and occupancy costs as a percentage of total sales, though this was partially offset by increased markdowns. The selling, general, and administrative (SGA) expenses as a percent of sales decreased from 40.0% to 37.1% due to lower payroll and insurance costs, along with a reduction in miscellaneous professional fees. Cato's SGA expenses were reported at $57.0 million, down by $0.9 million compared to the previous year.

The tax benefit for the quarter reached $1.2 million, in contrast to the tax expense of $0.3 million during the previous year, mainly due to reduced foreign income taxes and an increase in the release of reserves related to uncertain tax positions.

Store Closures

Year-to-date, the company has closed 16 stores, bringing the total store count to 1,101 across 31 states as of November 1, 2025, compared to 1,167 stores at the same time last year. This reduction is part of a strategic move to optimize their market presence amid fluctuating sales dynamics.

Company Background

The Cato Corporation is a leading specialty retailer that operates three distinct brands: Cato, Versona, and It's Fashion. Their unique selling proposition lies in offering high-quality fashion items comparable to those found in mall specialty stores but at significantly lower prices. Customers can also shop for exclusive merchandise online through catofashions.com and shopversona.com, which extends the company's reach and flexibility in meeting customer demands.

As Cato navigates through these complex market conditions, the company remains focused on leveraging its strengths, optimizing operational efficiencies, and enhancing customer experiences to drive continued growth in the retail sector.