Please ensure Javascript is enabled for purposes of website accessibility

Why Cato Corporation Stock Jumped Today

By Jeremy Bowman - May 20, 2021 at 4:48PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Two factors drove shares of the apparel retailer up.

What happened

Shares of Cato Corporation (CATO 2.96%) finished higher Thursday after the apparel retailer reported strong first-quarter results and reinstated its dividend.

The stock closed up 10.9% on the news.

A woman shopping for clothes in a boutique.

Image source: Getty Images.

So what

The North Carolina-based fashion retailer recouped most of its lost sales from the year-ago period when its stores were forced to close due to coronavirus lockdowns. Revenue came in at $211.2 million, which was more than double the year-ago total but was down 7% from the corresponding result in 2019. Comparable sales were down 8% from 2019 levels.

Thanks to prior cost-cutting and the rebound in demand, profitability was strong in the quarter as gross margin came in at 41.5% and operating margin reached 11.3%. On the bottom line, the company posted earnings per share (EPS) of $0.92, ahead of Q1 2019 EPS of $0.87.

CEO John Cato said, "We remain cautiously optimistic about the remainder of the year as we see customer traffic improve, states continue to lift capacity limits as more people are vaccinated, the comfort level with venturing out to social events increases and people prepare to return to work."

Separately, the company also reinstated its dividend after suspending it a year ago during the height of the crisis. The company will pay an $0.11 quarterly dividend on June 21, representing a yield of 2.8% at its current stock price.

Now what

Management did not give guidance in the report; however, Cato warned of headwinds, saying he expected stimulus to taper off and saw a negative impact from global supply chain challenges.

Still, apparel sales have been booming broadly in recent months, and the sector should continue to get tailwinds as more Americans start to return to the office and to social activities, which should benefit Cato as well.

Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

The Cato Corporation Stock Quote
The Cato Corporation
CATO
$12.88 (2.96%) $0.37

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
389%
 
S&P 500 Returns
125%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/12/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.