The Cato (CATO) Q1 2026 earnings summary

Executive summary

• Total revenues for Q1 2025 were $170.2 million, down from $177.1 million in Q1 2024, primarily due to store closures; same-store sales were flat year-over-year.

• Net income for Q1 2025 was $3.3 million ($0.17 per diluted share), a significant decrease from $11.0 million ($0.54 per share) in Q1 2024, reflecting lower sales and a prior-year gain on asset sales.

• Gross margin decreased to 35.1% from 35.8% due to higher markdowns, partially offset by lower buying costs.

• SG&A expenses were $55.3 million (32.8% of sales), down from $56.8 million (32.4%) last year, but as a percentage of sales rose.

• The company operated 1,109 stores at quarter-end, down from 1,171 a year ago, with eight closures and none opened in Q1 2025.

Financial highlights

• Retail sales were $168.4 million in Q1 2025, compared to $175.3 million in Q1 2024; other revenue remained flat at $1.8 million.

• Operating income before taxes was $4.2 million, down from $11.6 million year-over-year.

• Interest and other income dropped to $1.2 million from $5.8 million, reflecting a prior-year gain on land sale and equity securities.

• Effective tax rate increased to 21.9% from 5.6% year-over-year, driven by higher foreign and state taxes.

• Basic and diluted EPS were $0.17, down from $0.54 in Q1 2024.

Outlook and guidance

• Company expects continued cost pressures from tariffs and supply chain disruptions, with potential negative impacts on margins and sales.

• Management remains cautious for the remainder of the year due to economic uncertainty and potential tariff impacts.

• Plans to close about 50 stores in fiscal 2025; capital expenditures for the year are projected at $7.3 million, focused on distribution center automation.

• Management believes liquidity is sufficient for the next 12 months, supported by cash, investments, and a new $35 million credit facility.