This retailer thinks 2016 could be a difficult year

Cato Corp., just delivered its highest earnings in company history and sales topped $1 billion, but chairman, president and CEO John Cato said the road ahead could be rocky.



Cato, operator of 1,372 stores in 32 states, said its fourth quarter sales increased 4% to $247.3 million and same-store sales increased 1%. Full year sales increased 2.4% to slightly exceed $1 billion, but the addition of 31 new stores was the primary driver of full year growth as same-store sales were flat.



Profits in the fourth quarter increased 28% to $11.8 million, or 42 cents a share while full year profits increased 10% to $66.8 million, or $2.39 a share.



"In 2015, Cato delivered its highest earnings and earnings per diluted share in company history. We were also able to achieve over $1 billion in sales, a major milestone for the company,” Cato said.



Despite the company’s performance, Cato said continued volatility and overall difficulty in the retail environment could make 2016 a difficult year. As a result, the company issue a conservative profit forecast based on assumptions of flat to negative 2% same-store sales and a reduced pace of store growth and increased closures. Cato plans to open 23 new stores in 2016, but also expects to close 17 locations, up from five closures last year.



First quarter profits are projected to range from $32.2 million to $31.2 million, an increase of 4% to flat compared to the prior year first quarter. Meanwhile, earnings per share are expected to increase between 1% to 5%. Full year profits are forecast to decline between 7% and 13% to $62.4 million to $57.8 million, and earnings per share are forecast to decline 6% to 13%, to $2.07 to $2.24.