The Cato Corporation — Second Quarter 2026 Earnings Summary

Financial Performance

• Net income for the quarter ended August 1, 2026, was $1.1 million ($0.06 per diluted share), down from $6.8 million ($0.35 per diluted share) in the prior year quarter.
• Net income for the six months ended August 1, 2026, was $10.5 million ($0.53 per diluted share), up from $10.1 million ($0.51 per diluted share) in the prior year period.
• Retail sales for the quarter were $163.9 million, a 6% decrease from $174.7 million in the prior year quarter.
• Retail sales for the six months were $333.3 million, a 2.9% decrease from $343.1 million in the prior year period.
• Gross margin decreased to 32.8% of sales in the quarter from 36.2% in the prior year quarter, and to 35.0% year-to-date from 35.6%.
• SG&A expenses as a percent of sales increased to 33.0% in the quarter from 32.8% in the prior year quarter, but decreased to 32.4% year-to-date from 32.8%.
• SG&A expenses decreased by $3.3 million in the quarter and $4.7 million year-to-date, driven by lower payroll, equipment, and insurance costs.
• Income tax expense was $0.1 million for the quarter compared to a $0.3 million benefit in the prior year; year-to-date expense increased to $0.7 million from $0.6 million.
• Cash and cash equivalents increased to $35.1 million as of August 1, 2026, from $16.8 million as of January 31, 2026.
• Total current assets were $208.5 million as of August 1, 2026, compared to $193.3 million at the start of the fiscal year.

Guidance and Future Outlook

• Management anticipates the back half of 2026 to be challenging due to continued pressure on customers' discretionary income.
• The company expects negative pressure on discretionary income to persist, driven by persistent inflation, higher fuel prices, and elevated interest rates.
• The company plans to continue tightly managing expenses and inventory.

Business Segments and Product Lines

• The company operates three concepts: "Cato," "Versona," and "It's Fashion."
• During the second quarter, the company closed eight stores.
• As of August 1, 2026, the company operated 1,057 stores across 31 states, down from 1,101 stores in 31 states as of August 2, 2025.
• Same-store sales decreased 3.7% in the second quarter compared to 2025.
• Year-to-date same-store sales were flat compared to 2025, with sales declines also impacted by closed stores.

Market and Competitive Landscape

• The company attributes sales declines to pressure on customer discretionary income caused by macroeconomic factors including inflation, fuel prices, and interest rates.
• The company operates as a leading specialty retailer of value-priced fashion apparel and accessories.

Risks and Challenges

• Forward-looking statements highlight risks including deterioration in consumer confidence, high unemployment, fuel and energy costs, inflation, wage rates, and interest rates.
• Risks include competitive pricing pressures, inability to predict changing fashion trends, difficulties in opening new stores, and potential acceleration of store closures.
• Additional risks include adverse weather, public health threats, inventory liquidation challenges, and regulatory changes such as tariffs.

Management Commentary and Tone

• John Cato, Chairman, President, and CEO, stated that results were largely due to continued pressure on customers' discretionary income.
• Management expressed a cautious tone, acknowledging the challenging environment and committing to tight expense and inventory management.

Other Key Points

• The company closed eight stores during the second quarter ended August 1, 2026.
• Merchandise inventories decreased to $82.5 million as of August 1, 2026, from $83.7 million at the beginning of the fiscal year.
• Total liabilities decreased slightly to $255.5 million as of August 1, 2026, from $264.1 million at the start of the fiscal year.
• Stockholders' equity increased to $167.9 million as of August 1, 2026, from $157.3 million at the start of the fiscal year.