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Cato Q1 Earnings Surge Year Over Year on Tariff Refunds
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Shares of The Cato Corporation (CATO - Free Report) have gained 0.3% since the company reported earnings for the quarter ended May 2, 2026, compared with the S&P 500 index’s 1.1% change over the same period. Over the past month, the stock has risen 8.1%, outperforming the broader market’s 5.6% increase.
Cato reported net income of 47 cents per share for the first quarter of 2026, sharply higher than 17 cents per share in the year-ago quarter.
Sales increased 0.7% year over year to $169.5 million from $168.4 million, while same-store sales rose 3%. Gross margin expanded to 37.2% of sales from 35.1% a year earlier, and selling, general and administrative expenses declined to $53.9 million from $55.3 million.
Net income of $9.3 million denoted a sharp rise from $3.3 million in the year-ago quarter.
The Cato Corporation Price, Consensus and EPS Surprise
Cato’s first-quarter profitability benefited significantly from a refund claim related to International Emergency Economic Powers Act (IEEPA) tariffs. The company said the pre-tax tariff refund totaled $5.7 million and contributed to higher gross margin during the quarter. However, management noted that merchandise contribution was pressured by higher sales of marked-down goods.
Cost of goods sold declined to $106.3 million from $109.3 million in the prior-year quarter despite slightly higher sales, helping improve merchandise margins. SG&A expenses fell 2.5% year over year due to lower corporate payroll expense, reduced insurance costs and lower equipment maintenance expenses, partially offset by higher incentive compensation expense. SG&A expenses as a percentage of sales improved to 31.8% from 32.8% last year.
Income before taxes more than doubled to $9.8 million from $4.2 million a year earlier, while income tax expense declined to $0.5 million from $0.9 million, primarily due to lower foreign taxes.
Management Commentary on Consumer Spending
Chairman, president and chief executive officer John Cato said the company’s results were aided by the tariff refund claim but acknowledged that sales momentum weakened as the quarter progressed.
Management cited higher fuel prices as a key factor pressuring customers’ discretionary spending. According to the company, inflationary pressures tied to fuel and food costs are expected to continue weighing on consumer demand in the near term.
The company stated that, for the foreseeable future, it expects sales to be negatively affected by rising inflation, particularly fuel and food prices that reduce shoppers’ disposable income.
Store Base and Balance Sheet Metrics
During the quarter, Cato opened two stores and closed six stores. As of May 2, 2026, the company operated 1,065 stores across 31 states, down from 1,109 stores in 31 states a year earlier.
The company ended the quarter with cash and cash equivalents of $25.4 million, up from $16.8 million at the end of fiscal 2025. Short-term investments stood at $55.6 million compared with $56.9 million at the beginning of the fiscal year. Merchandise inventories increased to $92.5 million from $83.7 million. Stockholders’ equity rose to $166.7 million from $157.3 million at the end of fiscal 2025.
Other Developments
The company repurchased 107,823 shares during the quarter.
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Cato Q1 Earnings Surge Year Over Year on Tariff Refunds
Shares of The Cato Corporation (CATO - Free Report) have gained 0.3% since the company reported earnings for the quarter ended May 2, 2026, compared with the S&P 500 index’s 1.1% change over the same period. Over the past month, the stock has risen 8.1%, outperforming the broader market’s 5.6% increase.
Cato reported net income of 47 cents per share for the first quarter of 2026, sharply higher than 17 cents per share in the year-ago quarter.
Sales increased 0.7% year over year to $169.5 million from $168.4 million, while same-store sales rose 3%. Gross margin expanded to 37.2% of sales from 35.1% a year earlier, and selling, general and administrative expenses declined to $53.9 million from $55.3 million.
Net income of $9.3 million denoted a sharp rise from $3.3 million in the year-ago quarter.
The Cato Corporation Price, Consensus and EPS Surprise
The Cato Corporation price-consensus-eps-surprise-chart | The Cato Corporation Quote
Margin Expansion and Expense Trends
Cato’s first-quarter profitability benefited significantly from a refund claim related to International Emergency Economic Powers Act (IEEPA) tariffs. The company said the pre-tax tariff refund totaled $5.7 million and contributed to higher gross margin during the quarter. However, management noted that merchandise contribution was pressured by higher sales of marked-down goods.
Cost of goods sold declined to $106.3 million from $109.3 million in the prior-year quarter despite slightly higher sales, helping improve merchandise margins. SG&A expenses fell 2.5% year over year due to lower corporate payroll expense, reduced insurance costs and lower equipment maintenance expenses, partially offset by higher incentive compensation expense. SG&A expenses as a percentage of sales improved to 31.8% from 32.8% last year.
Income before taxes more than doubled to $9.8 million from $4.2 million a year earlier, while income tax expense declined to $0.5 million from $0.9 million, primarily due to lower foreign taxes.
Management Commentary on Consumer Spending
Chairman, president and chief executive officer John Cato said the company’s results were aided by the tariff refund claim but acknowledged that sales momentum weakened as the quarter progressed.
Management cited higher fuel prices as a key factor pressuring customers’ discretionary spending. According to the company, inflationary pressures tied to fuel and food costs are expected to continue weighing on consumer demand in the near term.
The company stated that, for the foreseeable future, it expects sales to be negatively affected by rising inflation, particularly fuel and food prices that reduce shoppers’ disposable income.
Store Base and Balance Sheet Metrics
During the quarter, Cato opened two stores and closed six stores. As of May 2, 2026, the company operated 1,065 stores across 31 states, down from 1,109 stores in 31 states a year earlier.
The company ended the quarter with cash and cash equivalents of $25.4 million, up from $16.8 million at the end of fiscal 2025. Short-term investments stood at $55.6 million compared with $56.9 million at the beginning of the fiscal year. Merchandise inventories increased to $92.5 million from $83.7 million.
Stockholders’ equity rose to $166.7 million from $157.3 million at the end of fiscal 2025.
Other Developments
The company repurchased 107,823 shares during the quarter.