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Cato raises lower end of full-year guidance as lower expenses boost Q3 profits

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Cato (NYSE:CATO) raised the bottom end of its full year outlook on Thursday after lower costs and expenses helped to boost its third quarter profits.

The maker of value fashions and accessories said it now expects earnings between $2.18 and $2.21 per share for the full year fiscal 2011, up from its previously guided range of $2.15 to $2.21 per share.

Analysts polled by Bloomberg are expecting $2.17 per share for the year.

For the three months ended October 29, Cato posted net income of $6.11 million, or $0.21 per share, up four percent from $5.90 million, or $0.20 per share, a year ago.

Revenues, however, fell two percent to $196.69 million, from $200.98 million in the same period last year.

Comparable store sales, or those locations open at least one year, fell three percent, while gross margins shed 70 basis points to 35.2 percent.

As a result of the same store sales decrease, Cato said it expects fourth quarter profits to be in the low end of its previously announced forecast, between $0.32 and $0.35 per share.

John Cato, president and CEO, commented: "Our third quarter same-store sales decrease reflects the continuing difficult economic situation facing our customers.

"During the quarter, we maintained merchandise margin and controlled costs while benefiting from lower accrued incentive compensation."

Revenues from retail sales across its 1,300 locations fell two percent to $194.09 million, while revenues from the company's financing options, including late fees and layaway, decreased seven percent to $2.59 million.

In other news, Cato said it repurchased 330,000 shares of its common stock during the quarter. It has about 1.9 million shares remaining under its current buyback program.

In New York, share prices in the Charlotte, North Carolina-based company rose 3.14 percent to $25.93, as of 1:47 pm EDT.

Quick facts: Cato Corp

Price: 18.5 USD

NYSE:CATO
Market: NYSE
Market Cap: $455.29 m
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