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Cato (CATO) Breaks Dismal Trend With March Comps Soaring 6%

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The Cato Corporation CATO has reversed its long standing trend of declining comparable-store sales (comps) with growth of 6% for March. The fashion apparel and accessories’ retailer also posted sales of $96.9 million for the five-week period (ended Apr 7, 2018), which grew 4% from $93.1 million recorded in five weeks ended Apr 1, 2017.

Upbeat comps in the month were driven by the shift of Easter from April to March in 2018, unlike the previous year. However, this uptrend does not seem to last longer as management expects comps for April to decline in high single digits.

Due to the Easter shift, management intends to combine sales for March and April in order to analyze the company’s performance better compared with last year. Incidentally, comps for the combined period are expected to be down in low single digits.

Retail sector has long been bearing the brunt of evolving consumer preferences toward online shopping, lower store traffic and volatile consumer spending. Consequently, retailers are now focusing more on enhancing their omni-channel capabilities, optimizing store fleet and restructuring activities to counter these headwinds. Also, they are resorting to store closures to focus more on digital channels as smart phones started becoming the primary avenue to make purchases.

Notably, Cato operated 1,351 stores across 33 states as of Apr 7, 2018, down from 1,373 stores as of April 1, 2017.

These factors adversely weighed upon the company’s performance in terms of dismal sales and comps trend. As a result, Cato’s merchandise margins remain pressurized, which might dent overall profitability.

In a year’s time, shares of Cato have lost 24% against the industry’s gain of 7.2%.

Apart from Cato, retailers like L Brands, Inc. LB, Zumiez Inc. ZUMZ and Costco Wholesale Corporation (COST - Free Report) recently came out with their sales data for March. While L Brands reported an equal increase in comps as Cato, Zumiez and Costco continued with their favorable comps trend, surging 12.6% and 8.6%, respectively. In fact, mall-based retailer Zumiez marked 13th straight month of comps growth.

A glance at the stocks’ price performance reveals that L Brands has lost 23.8% in a year. Meanwhile, Zumiez and Costco gained 47.1% and 11.8%, respectively, amid retail hurdles.

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