THE CATO CORPORATION
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)
26
month sales of
$528.2 million, an
8% decrease. The
decrease in sales
in the first
nine months of
fiscal 2024
was due
primarily to
a 4%
decrease in
same-store sales
and store
closures.
Same-store sales
include stores
that have been open
more than 15 months.
Stores that have been
relocated or expanded are
also included in
the same-store sales
calculation after they
have been open
more than 15
months.
The method of
calculating
same-store
sales
varies across
the
retail industry.
As
a
result,
our
same-store
sales
calculation
may
not
be
comparable to similarly titled measures reported by other companies. E-commerce sales were less than 5% of
total sales for the nine months ended
November 2, 2024 and are included in
the same-store sales calculation.
Total
revenues,
comprised
of
retail
sales
and
other
revenue
(principally
finance
charges
and
late
fees
on
customer accounts
receivable and
layaway fees),
were $146.2
million and
$491.9 million
for the
three and
nine months ended November 2, 2024, compared to $158.3 million and $533.2
million for the three and nine
months
ended
October
28,
2023,
respectively.
The
Company
operated
1,167
stores
at
November
2,
2024
compared
to
1,245 stores
at
October
28,
2023.
During
the first
nine
months of
fiscal
2024, the
Company
opened one store
and closed
13 stores.
The Company currently
expects to
close approximately
65 stores
in
total in fiscal 2024.
Credit
revenue
of
$0.7
million
represented
0.5%
of
total
revenues
in
the
third
quarter
of
fiscal
2024,
compared to credit revenue of $0.7 million or 0.4% of total revenues in the third quarter of fiscal 2023. Credit
revenue is
comprised of
interest earned
on the
Company’s private
label credit
card portfolio
and related
fee
income.
Related expenses principally include
payroll, postage and other
administrative expenses and totaled
$0.4 million in the third quarter
of fiscal 2024, compared to
last year’s third quarter expense of
$0.4 million.
Other
revenue,
a
component
of
total
revenues,
was
$1.5
million
and
$5.0
million
for
the
three
and
nine
months ended November 2, 2024, respectively, compared to $1.6 million and $5.0 million for the prior year’s
comparable three
and nine
month periods.
The slight
decrease in
Other revenue
for the
three months
ended
November
2,
2024
was
due
to
decreases
in
e-commerce
shipping
revenue
and
finance
charges
associated
with the Company’s proprietary credit
card, partially offset by an increase
in gift card breakage income.
Cost of
goods sold
was $103.0
million, or
71.2% of
retail sales
and $324.6
million, or
66.7% of retail
sales
for the three and
nine months ended November
2, 2024, respectively, compared
to $105.8 million, or
67.5%
of retail sales and $345.5 million, or 65.4% of retail sales for the comparable three and nine month periods of
fiscal 2023.
The overall increase in cost of goods sold as a percent of retail sales for the third
quarter and first
nine
months
of
fiscal
2024
versus
the
comparable
three
and
nine
month
periods
of
fiscal
2023
resulted
primarily from deleveraging of occupancy and buying costs and higher distribution and freight costs, partially
offset
by
higher
selling
margins.
Cost
of
goods
sold
includes
merchandise
costs
(net
of
discounts
and
allowances),
buying
costs,
distribution
costs,
occupancy
costs,
freight
and
inventory
shrinkage.
Net
merchandise
costs
and
in-bound
freight
are
capitalized
as
inventory
costs.
Buying
and
distribution
costs
include
payroll,
payroll-related
costs
and
operating
expenses
for
the
buying
departments
and
distribution
center.
Occupancy
costs include
rent,
real
estate taxes,
insurance, common
area
maintenance, utilities
and
maintenance for
stores and
distribution facilities.
Total gross
margin
dollars (retail
sales less
cost of
goods
sold exclusive of depreciation) decreased by
18.1% to $41.7 million for the third quarter
of fiscal 2024 and by
11.1%
to
$162.3
million
for
the
first
nine
months
of
fiscal
2024,
compared
to
$50.9
million
and
$182.6
million for the
prior year’s comparable
three and nine
months of fiscal
2023, respectively.
Gross margin as
presented may not be comparable to those
of other entities.
Selling, general and administrative expenses (“SG&A”) primarily include corporate and store payroll, related
payroll
taxes
and
benefits,
insurance,
supplies,
advertising,
bank
and
credit
card
processing
fees.
SG&A
expenses were $57.9 million, or 40.0% of retail sales and $172.8 million, or 35.5% of retail sales for the
third
quarter and first nine months of
fiscal 2024, respectively, compared to $61.8
million, or 39.4% of retail sales
and
$185.3
million,
or 35.1%
of retail
sales
for the
prior
year’s
comparable three
and
nine
month periods,