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Cato Corp says Q1 profit up, comparable sales dip

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Cato Corp. (NYSE:CATO), a women’s specialty retailer, said fiscal first-quarter profit rose by nearly four percent amid sales growth and higher margins, though sales from established stores fell.

The Charlotte, North Carolina-based retailer sells everything from clothing to accessories, sportswear, shoes and handbags.

Net earnings grew to $31.7 million, or $1.09 per diluted share, compared with a year-ago profit of $30.5 million, or $1.04 per diluted share.

Sales climbed just one percent to $272.8 million, up from $270.9 million a year earlier.

"Although the level of sales by month varied due to unexpected circumstances including early warm weather and the delay of tax refunds, first quarter sales were within our expectations and reflect the continuing difficult economic environment," chief executive John Cato said in a statement.

"Higher merchandise margin and lower accrued incentive compensation had the largest impact in the quarter."

Same-store sales decreased two percent in the latest quarter. This is a key metric used to measure a retailer’s health as it excludes sales from stores that recently opened or closed during the year.

Overhead costs fell three percent to $224 million on lower accrued incentive compensation partly offset by higher health and insurance costs, the company said.

Gross margin grew 60 basis points to 42.1 percent, thanks to higher merchandise contribution in the quarter.

Cato had a tax rate of 38.2 percent, up from the 35.7 percent last year, due to the elimination of a government tax credit.

The retailer opened eight stores and relocated two stores in the latest period, as well as closed three locations. It had 1,293 locations across 31 states at quarter-end, up from the year-ago figure of 1,282 stores.

For the second quarter, the company left its earnings guidance unchanged at 53 to 57 cents per share, compared to 61 cents a year-ago. Sales from stores open at least one year are expected to be down two percent to flat.

For the full-year 2012, the company pegged per-share profit to be in the range of $2.16 to $2.26, versus analyst estimates for $2.22 a share.

In morning trade, Cato’s share price dropped by 1.42 percent to $27.72 apiece on the New York Stock Exchange.

Quick facts: Cato Corp

Price: 17.8 USD

NYSE:CATO
Market: NYSE
Market Cap: $438.54 m
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