This retailer needs more shopping centers

Amid growing sales and surging profits, specialty retailer Cato is finding its expansion efforts being held back by the availability of suitable shopping centers.



Cato operates 1,370 stores focused on value-priced fashion apparel and accessories at everyday low prices under the Cato, Versona and It’s Fashion banners. The formula appeared to resonate with customers in the third quarter ended Oct. 31, with Cato reporting that sales increased 4% to $223.3 million and same-store sales increased 2%. Profits during the period, aided by expanding margins and a favorable tax adjustment, increased 46% to $8.3 million from $5.7 million. Earnings per share increased 50% to 30 cents from 20 cents.



"Our third quarter results exceeded our latest guidance. This was primarily the result of recent stronger sales trends and a favorable tax adjustment,” said John Cato, chairman, president and CEO.



Despite signs of strength, Cato said the company’s fourth quarter profits would be toward the low end of earlier guidance calling for earnings per share in the range of 35 cents to 39 cents because of challenging comparisons to the prior year fourth quarter’s earnings per share of 33 cents.



So far this year, Cato has opened 28 new stores and reduced its full year store opening projections to 31 units from 40. A lack of shopping center development and increased competition for available space was cited as the reason for Cato’s reduced pace of expansion.