The Cato Corporation (CATO) | Investment Case

1. Company Snapshot

1.a. Company Description

The Cato Corporation, together with its subsidiaries, operates as a specialty retailer of fashion apparel and accessories primarily in the southeastern United States.It operates through two segments, Retail and Credit.The company's stores and e-commerce websites offer a range of apparel and accessories, including dressy, career, and casual sportswear; and dresses, coats, shoes, lingerie, costume jewelry, and handbags, as well as men's wear, and lines for kids and infants.

It operates its stores and e-commerce websites under the Cato, Cato Fashions, Cato Plus, It's Fashion, It's Fashion Metro, and Versona names.As of January 29, 2022, the company operated 1,311 stores in 32 states.It also provides credit card services to its customers, as well as layaway plans for customers who agree to make periodic payments.

The company was incorporated in 1946 and is headquartered in Charlotte, North Carolina.

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1.b. Last Insights on CATO

The recent stock performance of The Cato Corporation was negatively driven by the suspension of its regular quarterly dividend in light of the current economic conditions and sales trends. This announcement, made on November 22, 2024, likely concerned investors, who are now investigating possible securities fraud violations by the company. The investigations, led by law firms Levi & Korsinsky and Pomerantz LLP, may further impact investor confidence in the company.

1.c. Company Highlights

Last Price	3.41
Change Percentage	-5.28%
Open	3.53
Previous Close	3.6
Market Cap ( Millions)	64
Volume	26970
Year High	4.92
Year Low	2.19
M A 50	3.88
M A 200	3.28

FCF Yield	8.46%
Dividend Yield	0.00%
ROE	-5.46%
Debt / Equity	95.43%
Net Debt / EBIDTA	1734.23%
Price To Book	0.38
Price Earnings Ratio	-6.94
Price To FCF	11.81
Price To sales	0.1
EV / EBITDA	25.46

2. Transcript Summary

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3. NewsRoom

Cato's Q3 Loss Narrows Year Over Year as Same-Store Sales Drive Growth

Nov -26

Source: zacks.com

CATO REPORTS 3Q RESULTS

Nov -20

Source: prnewswire.com

Cato: Turnaround Play With Substantial Near-Term Upside - Strong Buy

Aug -29

Source: seekingalpha.com

Cato's Q2 Earnings Jump Y/Y on Same-Store Sales Growth

Aug -27

Source: zacks.com

CATO REPORTS 2Q RESULTS

Aug -21

Source: prnewswire.com

SHAREHOLDER ALERT: Purcell & Lefkowitz LLP Announces Shareholder Investigation of The Cato Corporation (NYSE: CATO)

Jul -22

Source: prnewswire.com

Cato Stock Gains 12% Despite Q1 Earnings Down Y/Y on Tariff Headwinds

May -28

Source:

REITs: The Riches Are In The Niches

May -25

Source: seekingalpha.com

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (4.83%)

6. Segments

Retail

Expected Growth: 4.83%

The 4.83% growth in Retail segment of The Cato Corporation is driven by increasing demand for affordable fashion, effective inventory management, and strategic store expansions. Additionally, the company's focus on e-commerce and omnichannel experiences has contributed to the growth. Furthermore, Cato's ability to offer trendy and quality products at competitive prices has helped to attract and retain customers, resulting in increased sales and revenue.

Credit

Expected Growth: 4.63%

The 4.63% growth of credit from The Cato Corporation is driven by increasing consumer spending, expansion into new markets, and effective inventory management. Additionally, the company's focus on providing affordable fashion and its strong brand recognition have contributed to its growth. Furthermore, the corporation's ability to adapt to changing consumer preferences and its strategic pricing strategy have also played a significant role in driving growth.

7. Detailed Products

Women's Apparel

The Cato Corporation offers a wide range of women's apparel, including dresses, tops, pants, and skirts, catering to various styles and preferences.

Plus Sizes

Cato's plus-size collection offers trendy and comfortable clothing for women of all shapes and sizes, promoting body positivity and self-confidence.

Kids' Apparel

The Cato Corporation provides a variety of kids' clothing, including casual wear, dressy outfits, and accessories, suitable for different ages and occasions.

Accessories

Cato's accessories range includes hats, scarves, belts, and jewelry, allowing customers to add a finishing touch to their outfits.

Shoes

The Cato Corporation offers a diverse selection of shoes, including boots, sandals, heels, and flats, catering to different tastes and preferences.

8. The Cato Corporation's Porter Forces

Forces Ranking

Threat Of Substitutes

The threat of substitutes for The Cato Corporation is moderate due to the presence of alternative clothing retailers and online shopping platforms.

Bargaining Power Of Customers

The bargaining power of customers is high due to the availability of numerous clothing retailers and online shopping platforms, giving customers the power to choose from a wide range of options.

Bargaining Power Of Suppliers

The bargaining power of suppliers is low due to the company's large scale of operations and its ability to negotiate prices with suppliers.

Threat Of New Entrants

The threat of new entrants is moderate due to the presence of barriers to entry, such as high startup costs and the need for significant marketing and advertising efforts.

Intensity Of Rivalry

The intensity of rivalry is high due to the presence of numerous clothing retailers and online shopping platforms, leading to intense competition in the market.

9. SWOT Analysis

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

	Value
Debt Weight	44.33%
Debt Cost	3.95%
Equity Weight	55.67%
Equity Cost	9.46%
WACC	7.02%
Leverage	79.62%

11. Quality Control: The Cato Corporation passed 2 out of 9 key points

Strong Liquidity

Low Debt

Strong Interest Coverage

Healthy Cash Flow

Operating Inefficiency

Strong Return On Equity

Consistent Revenue Growth

Consistent Operating Cash Flow Growth

Margin Improvement

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

Buckle

A-Score: 6.8/10

Value: 4.5

Growth: 3.9

Quality: 7.5

Yield: 10.0

Momentum: 8.0

Volatility: 7.0

1-Year Total Return ->

Shoe Carnival

A-Score: 4.3/10

Value: 7.2

Growth: 5.0

Quality: 4.9

Yield: 5.0

Momentum: 0.5

Volatility: 3.3

1-Year Total Return ->

J.Jill

A-Score: 4.2/10

Value: 8.7

Growth: 4.0

Quality: 6.3

Yield: 2.0

Momentum: 0.5

Volatility: 4.0

1-Year Total Return ->

Designer Brands

A-Score: 4.2/10

Value: 9.8

Growth: 2.8

Quality: 3.8

Yield: 6.0

Momentum: 1.5

Volatility: 1.3

1-Year Total Return ->

Cato

A-Score: 3.9/10

Value: 9.8

Growth: 1.1

Quality: 4.5

Yield: 5.0

Momentum: 1.5

Volatility: 1.7

1-Year Total Return ->

Hibbett

A-Score: 2.8/10

Value: 1.9

Growth: 2.1

Quality: 5.1

Yield: 1.0

Momentum: 5.0

Volatility: 2.0

1-Year Total Return ->

Peers Metrics

12.e Scoring ^Insights

12.f DCF ^BETA

Parameters

Short Term Growth

21.32%

Short term Time

10.0

Long-Term Growth

2.00%

WACC

7.02%

The Cato Corporation - US1492051065

1. Company Snapshot

1.a. Company Description

1.b. Last Insights on CATO

1.c. Company Highlights

Higher Yield

Cheaper

Weak Momentum

Lower Growth

More Volatile

2. Transcript Summary

3. NewsRoom

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (4.83%)

6. Segments

Retail

Expected Growth: 4.83%

Credit

Expected Growth: 4.63%

7. Detailed Products

Women's Apparel

Plus Sizes

Kids' Apparel

Accessories

Shoes

8. The Cato Corporation's Porter Forces

Forces Ranking

Threat Of Substitutes

Bargaining Power Of Customers

Bargaining Power Of Suppliers

Threat Of New Entrants

Intensity Of Rivalry

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

11. Quality Control: The Cato Corporation passed 2 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

3.41$

Current Price

3.41$

Potential

-0.00%

Expected Cash-Flows

12.e Scoring ^Insights

12.f DCF ^BETA