The Cato (CATO) investor relations material

Executive summary

• Second quarter retail sales declined 6% year-over-year to $163.9 million, with same-store sales down 3.7% and a net reduction in store count due to closures.

• Net income for the quarter was $1.1 million ($0.06 per diluted share), down from $6.8 million ($0.35 per share) in the prior year quarter.

• Six-month retail sales decreased 2.9% year-over-year to $333.3 million, reflecting flat same-store sales and store closures.

• Six-month net income was $10.5 million ($0.53 per share), up slightly from $10.1 million ($0.51 per share) year-over-year.

• The company received a $5.7 million IEEPA tariff refund and a $5.6 million IRS tax refund during the period.

Financial highlights

• Total revenues for the quarter were $165.5 million, down from $176.5 million year-over-year; six-month revenues were $336.6 million, down from $346.8 million.

• Gross margin for Q2 2026 decreased to 32.8% from 36.2% in Q2 2025 due to lower merchandise margins and deleveraging of occupancy costs.

• SG&A expenses as a percent of sales increased to 33.0% from 32.8% in Q2 2025, though total SG&A expense fell by $3.3 million due to lower payroll and credit card fees.

• Cost of goods sold as a percent of retail sales increased to 67.2% for the quarter (from 63.8%) and 65.0% for the six months (from 64.4%).

• Interest and other income rose to $2.3 million for the quarter, driven by tariff and tax refunds.

Outlook and guidance

• Management expects continued pressure on discretionary spending due to inflation, higher fuel prices, and elevated interest rates.

• The back half of 2026 is anticipated to be challenging, with a focus on tight expense and inventory management.

• Up to 10 new stores are expected to open and approximately 50 stores to close in fiscal 2026.

• Capital expenditures for fiscal 2026 are projected at $7.4 million.