Tags: Cato | poor | sales | niche

Cato Expects Poor Sales, Despite Niche

By    |   Wednesday, 07 Dec 2011 04:41 PM

Despite Cato’s (CATO) niche focus on fashion retail at low prices, the company — which has more than 1,200 stores in 31 states — is getting rocked by the economy and expects poor sales to continue through year end.

Sales figures at comparable stores in August, a key fashion period for back-to-school purchases, saw a rise of 5 percent. Major competitor in the back-to-school market Gap (GPS) saw comparable North America sales fall 7 percent while Banana Republic North America fell 8 percent.

Yet it’s the figure at stores open for more than a year that has the company concerned, as its third quarter sales fell 2 percent. As an example, October sales in this area were down 3 percent, while Gap was down 6 percent and Wet Seal (WTSLA) was down 9.7 percent.

Cato’s CEO said during third quarter reporting in mid-November that the fall in sales was a result of the worsening economic crisis and its impact on the company’s target market.

He now expects fourth quarter earnings per diluted share will be at the lower end of their original guidance of 32 cents to 35 cents versus 37 cents last year. For the year, diluted EPS is estimated to be in the range of $2.18 to $2.21 vs. $2 last year, an increase of between 9 percent and 11 percent.

Cheaper, better

Companies in the sector that seem to be benefiting more than Cato from the economic downturn are those that cater to the lower end of the discount market, such as Ross Stores (ROST), where October sales at stores open more than a year were 5 percent higher compared to Cato’s 3 percent drop. TJX Companies (TJX) also saw sales in this segment climb 3 percent.

Cato’s third quarter profit was up 4 percent at $6.1 million while total sales slid 2 percent. The company’s stock has been trading in the range of $25 to $26.
Cato next reports on or around March 19.

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Despite Cato s (CATO) niche focus on fashion retail at low prices, the company which has more than 1,200 stores in 31 states is getting rocked by the economy and expects poor sales to continue through year end. Sales figures at comparable stores in August, a key...
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Wednesday, 07 Dec 2011 04:41 PM
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