Shares of The Cato Corporation CATO have gained 1.2% since the company reported earnings for the quarter ended Nov. 1, 2025, modestly underperforming the S&P 500 index, which rose 1.5% during the same period. However, over the past month, Cato shares have declined significantly, falling 20.7% compared to a more modest 1.6% drop in the broader market. The stock’s underwhelming monthly performance reflects ongoing investor concerns despite a narrowing quarterly loss and improving sales trends.
For the third quarter of 2025, Cato incurred a net loss of 28 cents per share, significantly narrower than the net loss of 79 cents per share in the year-ago period.
Retail sales rose 6% year over year to $153.7 million from $144.6 million in the third quarter of 2024, driven by a 10% increase in same-store sales. Total revenues, which also include finance, late fees and layaway charges, were $155.4 million compared to $146.2 million a year earlier.
Cato incurred a net loss of $5.2 million, sharply narrower than the net loss of $15.1 million in the year-ago period.
The Cato Corporation Price, Consensus and EPS Surprise
The Cato Corporation price-consensus-eps-surprise-chart | The Cato Corporation Quote
Operational Metrics Show Efficiency Gains
Cato achieved notable improvements in both gross margin and operating efficiency. The gross margin increased to 32% from 28.8% during the quarter, which was primarily due to reductions in freight, distribution, buying and occupancy costs. However, these gains were partially offset by higher markdowns, reflecting continued price sensitivity among consumers.
Selling, general and administrative (SG&A) expenses decreased both in dollar terms and as a percentage of sales. Quarterly SG&A expenses fell to $57 million from $57.9 million a year ago, or 37.1% of sales compared to 40%. Cost savings came primarily from reduced payroll, professional fees, and insurance costs.
Depreciation expenses dropped slightly to $2.4 million from $2.7 million, and interest and other income totaled $2.2 million, a decrease from $2.6 million a year earlier.
Management Commentary and Outlook
John Cato, chairman, president, and CEO, attributed the revenue uptick partly to a weak comparable base from 2024, which had been disrupted by three hurricanes and supply chain issues that delayed merchandise deliveries. He noted that while the sales trend from the second quarter had continued, the company expects the fourth quarter to be challenging, citing a slowdown in employment growth and lower expected economic growth. Management plans to continue managing expenses and inventory tightly while aiming to maintain sales momentum.
Factors Influencing Headline Numbers
A year-over-year reduction in net loss was achieved despite a still-negative bottom line. This was supported by a more favorable cost structure and operational improvements. The company benefited from a $1.2 million tax benefit in the quarter compared to a $0.3 million tax expense last year. The change stemmed from a reduction in foreign income taxes and an increased roll-off of reserves for uncertain tax positions.
Other Developments
Cato continued rationalizing its store footprint in 2025. On a year-to-date basis, the company closed 16 stores. As of Nov. 1, 2025, it operated 1,101 stores across 31 states, down from 1,167 stores a year earlier. The closures reflect ongoing efforts to optimize physical retail operations amid a shifting consumer landscape.
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