Cato's Holiday Sales Disappoint - Analyst Blog

The holiday season was disappointing for Cato Corporation (CATO), a specialty retailer of fashion apparel, footwear and accessories, compelling management to lower its fiscal 2012 earnings guidance. The company witnessed a 7% decline in comparable store sales (comps) for December 2012, which fell short of management's expectations. Moreover, results worsened sequentially as Cato registered a 2% decline in comps for November 2012.

Compared to its peer, Buckle Inc. (BKE), Cato seems to be losing market share as the former reported better-than-expected sales results. Buckle witnessed an augmentation of 1% in comps during the period under review.

For the five-week period ended December 29, 2012, Cato's total sales decreased 4% to $103.3 million compared with total sales of $107.5 million for the five-week period ended December 31, 2011.

As per the company, total sales remained flat at $870 million for the 11 months ended December 29, 2012 compared with the prior-year period. However, comps marked a decline of 3%. 

Following the sluggish results, management lowered its earnings guidance range to 34 cents - 36 cents a share for the fourth quarter of fiscal 2012. The company earlier forecasted earnings to be in the range of 38 cents - 42 cents. The company now expects fiscal 2012 earnings in the range of $2.17 to $2.19 per share, down from its earlier guidance of $2.22 to $2.26 per share.

In the last 7 days, the Zacks Consensus Estimate for the fourth quarter and fiscal 2012 went down by 5 cents and 6 cents, respectively to 35 cents and $2.18 per share.

Earlier, the company reported third-quarter fiscal 2012 earnings of 16 cents a share that surpassed the Zacks Consensus Estimate of 14 cents. However, the reported earnings plunged 24% year over year. Total sales inched up 2% to $197.6 million, while comps marked a decline of 2% during the quarter.

Headquartered in Charlotte, North Carolina, Cato Corporation operates 1,311 stores across 31 states as of December 29, 2012. Currently, we maintain a long-term 'Neutral' recommendation on the stock.