Executive Summary

Q1 2026 delivered net income of $3.3M ($0.17 diluted EPS) on $170.2M total revenues, down 4% YoY, with gross margin at 35.1% vs 35.8% last year; SG&A fell in dollars but deleveraged to 32.8% of sales .
Same-store sales were flat; interest and other income fell to $1.2M from $5.8M due to prior-year gains on land sale and equity security sales .
Management tone was cautious given macro uncertainty and proposed tariffs, despite late-quarter sales improvement; no explicit numerical guidance was provided .
The company repurchased 294,036 shares in the quarter, a potential support for the stock; Cato operated 1,109 stores (no openings, eight permanent closures) .

What Went Well and What Went Wrong

What Went Well

SG&A decreased to $55.3M, driven by lower corporate and field payroll, insurance, and store expenses; SG&A rate was 32.8% of sales, reflecting ongoing cost focus .
Sales trend improved later in the quarter, per CEO comment: “While our sales trend improved later in the quarter…” .
Share repurchases of 294,036 shares were executed, signaling capital return amid cautious outlook .

What Went Wrong

Revenue declined 4% YoY; gross margin compressed 70 bps to 35.1% due to higher sales of marked-down goods, partially offset by lower buying costs .
Interest and other income declined to $1.2M from $5.8M, cycling a $3.2M land sale gain and equity sales in the prior year .
Pre-tax margin fell to 2.5% vs 6.6% prior year as merchandise contribution weakened; net income fell to $3.3M from $11.0M .

Financial Results

Headline Metrics: Multi-Quarter Comparison (oldest → newest)

Metric	Q3 2025	Q4 2025	Q1 2026
Total Revenues ($USD Millions)	$146.17	$157.91	$170.24
Gross Margin %	28.8%	28.0%	35.1%
SG&A % of Sales	40.0%	37.8%	32.8%
Income Before Income Taxes ($USD Millions)	($14.75)	($13.72)	$4.24
Pre‑Tax Margin %	-10.2%	-8.8%	2.5%
Net Income ($USD Millions)	($15.07)	($14.05)	$3.31
Diluted EPS ($USD)	($0.79)	($0.74)	$0.17
Same‑Store Sales %	-3%	-0.8% (13‑week comparable)	0% (flat)

Q1 2026 YoY vs Q1 2025

Metric	Q1 2025 (YoY Prior)	Q1 2026
Total Revenues ($USD Millions)	$177.10	$170.24
Gross Margin %	35.8%	35.1%
Net Income ($USD Millions)	$10.97	$3.31
Diluted EPS ($USD)	$0.54	$0.17
Interest & Other Income ($USD Millions)	$5.82	$1.20
Same‑Store Sales %	Not disclosed	0% (flat)

Segment Breakdown

Not disclosed; Cato reports consolidated results across concepts (Cato, Versona, It’s Fashion) without segment revenue detail .

KPIs and Balance Sheet Highlights

KPI	Q4 FY2025 (Feb 1, 2025)	Q1 FY2026 (May 3, 2025)
Store Count	1,117	1,109
Store Openings / Closures	Year: 1 opened, 62 closed	Quarter: 0 opened, 8 closed
Same‑Store Sales	-0.8% (13‑week comparable)	0% (flat)
Share Repurchases (Shares)	Not disclosed	294,036
Cash & Cash Equivalents ($USD Millions)	$20.28	$31.35
Short‑Term Investments ($USD Millions)	$57.42	$48.61
Merchandise Inventories ($USD Millions)	$110.74	$109.43
Current Liabilities ($USD Millions)	$130.68	$130.00
Stockholders’ Equity ($USD Millions)	$162.30	$164.92

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Overall Outlook	FY2025	“Remain cautious… pressures related to newly implemented tariffs and potential additional tariffs.”	“Cautious about the remainder of the year given economic uncertainty and proposed tariffs.”	Maintained
Store Development	FY2025	Open up to 15 stores; close up to 50 underperforming stores as leases expire	Q1: No openings; eight closures; no update to full‑year targets	Maintained (execution in Q1)
Expense Actions	FY2025	Eliminated ~40 corporate positions; expect reductions in distribution and domestic freight expenses	Continued cost control with SG&A down YoY; no numeric guidance provided	Maintained
Dividend	Ongoing	Regular quarterly dividend suspended (Nov 21, 2024)	No change announced in Q1	Maintained (suspended)
Tax Rate	Q1	No guidance	Tax expense rose due to state and foreign rate changes (actuals, not guidance)	N/A

Earnings Call Themes & Trends

Note: No Q1 2026 earnings call transcript was found for Cato.

Topic	Previous Mentions (Q3 2025, Q4 2025)	Current Period (Q1 2026)	Trend
Tariffs/Macro	Cautious outlook tied to newly implemented and potential tariffs	Caution reiterated due to economy and proposed tariffs	Ongoing caution
Supply Chain & Freight	Q3: Carrier bankruptcy raised costs; DC automation conversion issues; hurricanes disrupted receipts	No new issues cited; margin pressure from markdowns; lower buying costs helped	Improving operationally vs Q3/Q4
Same‑Store Sales	Q3: -3% comps ; Q4: -0.8% on 13‑week comparable	Flat comps in Q1	Stabilizing
Cost Control & SG&A	Q4: corporate headcount reductions; expected distribution/freight savings	SG&A down YoY; SG&A rate up due to deleverage	Mixed (absolute costs down; rate elevated)
Store Footprint	Q4: plan up to 15 openings, up to 50 closures	Q1: 0 openings, 8 closures; 1,109 stores	Executing closures
Capital Return	No repurchase disclosed prior	Repurchased 294,036 shares	New positive action

Management Commentary

“Our results reflect our customers’ cautious approach to discretionary spending.”
“While our sales trend improved later in the quarter, the general uncertainty regarding the economy and the potential impact of the proposed tariffs has us cautious about the remainder of the year.”
“As we look ahead to 2025, we remain cautious… pressures related to newly implemented tariffs and the uncertainty of potential additional tariffs. In 2025, we will continue our focus on reducing expenses… eliminated approximately 40 corporate positions in February… expect expense reductions in distribution and domestic freight… improving our merchandise assortment.”

Q&A Highlights

No Q1 2026 earnings call transcript was available; therefore, no Q&A themes or clarifications can be provided.

Estimates Context

Wall Street consensus via S&P Global was unavailable for Q1 2026 EPS and revenue; therefore, estimate comparisons cannot be made for this quarter. Values retrieved from S&P Global.

Key Takeaways for Investors

Margin reset off Q4 lows: gross margin rebounded to 35.1% in Q1 from 28.0% in Q4, though still below 35.8% last year; deleverage persists on SG&A rate as sales declined .
Macro/tariff sensitivity: management remains cautious; headlines on proposed tariffs and consumer discretionary pressure are near‑term stock drivers .
Capital return amid caution: share repurchases were executed despite an uncertain outlook, potentially supporting per‑share metrics and signaling confidence .
Operational stabilization: comps improved to flat and supply chain/freight headwinds cited in Q3/Q4 were not emphasized in Q1, suggesting progress on execution .
Interest/other income headwind: lapping prior‑year gains (land sale, securities) pressured below‑the‑line results; expect limited contribution from this line versus last year .
Footprint rationalization continues: closures outpaced openings in Q1 (eight closures, no openings), consistent with the plan to prune underperforming stores .
Without guidance or consensus estimates, positioning is event‑driven: watch for tariff policy developments, comp trends into Q2, and any update on dividend policy and store development cadence .

Sources: Q1 2026 8‑K and Exhibit 99.1 press release ; Q1 press release (PR Newswire) ; Q4 2025 8‑K and press release ; Q3 2025 8‑K and press releases .

CATO CORP (CATO)·Q1 2026 Earnings Summary