2012 AnnuAl RepoRt
A Message to
Our Shareholders
A year ago we stated that 2012 would be a challenging year
similar to 2011, and it was. While the first quarter appeared
to start off okay, the year, and particularly the fourth quarter,
continued to be difficult due to slow job growth, higher food
and gas prices, and later, higher payroll taxes going into the
new year. All of these continue to affect our customers’
discretionary budgets.
In these uncertain times, we remain committed to providing our
customers value through great fashion, great quality, and low
prices every day. We continue to focus on executing our growth
strategies and to work hard on refining our merchandise mix
and assortments.
Net sales for the year increased to $933.8 million, up 1% over
2011 while 2012 same store sales were down 4%. Our net income
We opened our first Versona store in 2011 and have grown to 25
stores as of the end of 2012. The Versona target customer is a
higher income customer which allows us to diversify our overall
customer base. We are refining our store model to better align it
with sales trends by reducing inventory and occupancy costs.
We continue to receive positive feedback from customers and
are well positioned to expand this concept profitably.
We have pulled back on store development of our It’s Fashion
Metro concept as this customer group has been hit the hardest
during these tough financial times. We continue to put more
emphasis on our core fashion apparel and accessories which has
offset our reduction of urban brands. We are testing a larger
format Its Fashion store focused on the core junior and plus
fashion apparel and accessories.
We are currently pursuing the start-up of our e-commerce
program which we anticipate to be fully operational by the
end of 2013. We have been working towards this goal with
improvements to our website, expanding our customer e-mail
list, and increasing our presence in social media. We anticipate
incorporating the fulfillment process into our existing DC.
This is very positive as it will give us time to evaluate our future
decreased to $61.7 million from $ 64.8 million. Earnings per share
DC needs.
was $2.11, a decrease of 5%. Although 2012 was below last year,
it was the fifth straight year of strong earnings performance and
the second best year in our history.
We continue to maintain a strong balance sheet with over
$190 million in cash. We utilize our cash to internally fund new
concepts and store development, meet infrastructure needs,
and provide additional value to long-term shareholders through
dividends and share repurchases. Our cash position provides us
flexibility in this competitive and volatile fashion segment.
We continued to demonstrate our commitment to providing
shareholders value through increasing dividends. We increased
our annual dividend by 9% in March 2012 and paid dividends of
$1.00 per share on an annualized basis. As a result of the political
uncertainty and the tax treatment of dividends, we accelerated
the payment of the 2013 full-year dividend of $1.00 per share
into the fourth quarter of 2012. In addition, we declared a special
dividend of another $1.00 per share. In all, we returned over $87
million, or $2.98 per share to shareholders in 2012. In February
2013, we raised the quarterly dividend by $0.05, or 20% on an
annualized basis. The Company still has approximately 2 million
shares authorized for repurchase.
The real estate market continues to have limited growth with
the lack of shopping center development. We anticipate new
store growth of 65 stores including 40 new Cato stores, 15 new
Versona stores, 5 new It’s Fashion stores, and 5 new It’s Fashion
Metro stores. We anticipate closing up to 15 stores during 2013.
We are continuing to work hard to accelerate growth in our core
Cato concept through testing of alternative real estate strategies.
We also completed a major expansion of our home office
headquarters by adding over 60,000 square feet. This will
provide the needed space to accommodate our strategic
initiatives. The existing building space will be renovated
to improve efficiencies in our operations and the working
environment for our associates.
We will continue to invest in our infrastructure and anticipate
capital expenditures of approximately $44 million. This will
include new store development, the home office renovation, and
investment into our e-commerce strategy. The Company will also
continue to enhance and upgrade our systems.
We recently purchased approximately 300 acres of land located
over the state line in South Carolina, about 10 minutes away from
our current facility. This long-term investment will provide the
flexibility for expanding our facilities to continue to support our
growing Company.
The economic environment continues to be challenging in 2013
for all the reasons we have mentioned above. The investments
we are making will help us grow our business. We continue to
manage our costs and bring our customer the fashion, quality,
and value she desires. By continuing to focus on the customer
and getting better at all aspects of our business, we will be well
positioned for continued growth.
John p. D. Cato
Chairman, President &
Chief Executive Officer
The Cato Corporation is a leading specialty retailer of value-
priced women’s fashion apparel operating three concepts, Cato,
It’s Fashion and Versona Accessories. The Company currently
operates over 1,310 specialty stores throughout the United States.
Cato stores offer exclusive merchandise with updated fashion
and quality comparable to mall specialty stores at low prices
every day. Cato stores average approximately 4,500 square feet
and are located primarily in strip shopping centers anchored by
national discounters or market dominant grocery stores. The It’s
Fashion concept includes both It’s Fashion and It’s Fashion Metro
stores. It’s Fashion stores provide junior-inspired fashion apparel
and accessories at low prices every day with stores averaging
approximately 3,400 square feet. It’s Fashion Metro stores are an
expanded version of the It’s Fashion store with the latest styles
for the entire family including urban-inspired brands at low prices
every day. It’s Fashion Metro stores average approximately 9,700
square feet. The Versona Accessories concept offers quality
fashion jewelry and accessories accented by key apparel items
at exceptional values every day. The Versona stores average
approximately 7,300 square feet. The Company is headquartered
in Charlotte, North Carolina.
Financial Highlights
fiscal year
2012
2011
2010
2009
2008
for the year ended
Retail sales
Total revenue
$ 933,782
$ 920,622
$ 913,079
$ 872,138
$ 845,676
944,048
931,458
924,685
884,001
857,718
Comparable store sales increase (decrease)
(4)%
(1)%
3%
1%
(1)%
Income before income taxes
Income tax expense
Net income
Net income as a percentage of retail sales
Cash dividends paid per share
Basic earnings per share
Diluted earnings per share
98,971
37,303
100,271
35,437
92,772
33,921
66,920
21,935
52,610
18,976
$
61,668
$
64,834
$
58,851
$
44,985
$
33,634
6.6%
2.980
2.11
2.11
$
$
$
$
$
$
7.0%
.875
2.21
2.21
$
$
$
6.4%
.720
2.00
2.00
$
$
$
5.2%
.660
1.53
1.53
$
$
$
4.0%
.660
1.14
1.14
Stores open at end of year
Number of stores opened
Number of stores closed
Net increase (decrease) in number of stores
1,310
1,288
1,282
34
12
22
38
32
6
37
26
11
1,271
35
45
(10)
1,281
65
102
(37)
at year end
C ash, cash equivalents, short-term
investments and restricted cash
$ 194,646
$ 245,989
$ 234,851
$ 200,915
$ 144,803
Working capital
Current ratio
Total assets
Total Stockholders’ equity
230,612
272,139
251,523
214,024
164,639
2.4
532,646
345,234
2.7
551,089
366,679
2.5
532,759
334,014
2.3
492,063
298,649
2.1
435,353
261,813
Dollars in thousands, except per share data and selected operating data
The fiscal year ended February 2, 2013 contained 53 weeks versus 52 weeks in the prior fiscal years 2008-2011.
Delivering Fashion & Value
to Customers.
3
6
11
1
5
11
43
179
9
34
58
82
11
21
23
30
3
2
48
71
12 60
134
89
1
5
6
84
90
115
total number of stores
per state at year end
63
Cato currently operates three difference concepts with 1,072 Cato stores, 213 It’s Fashion and It’s Fashion
Metro stores and 25 Versona Accessories stores as of the end of 2012. Each concept targets a different
customer base, occupies a unique niche and provides growth opportunities. Across all concepts, the
Company focuses on providing fashion and accessories at exceptional values.
The Cato concept provides fashion with great styling, quality and fit at low prices every day. The concept
offers a broad assortment of exclusive merchandise under its Cato label. Cato stores average approximately
4,500 square feet.
It’s Fashion serves a younger customer with great fashions at low prices every day. It’s Fashion Metro is an
expanded version of It’s Fashion. The larger easy-to-shop stores offer trendy fashions for the entire family
at low prices every day. It’s Fashion stores average approximately 3,400 square feet while It’s Fashion Metro
stores are generally 8,000 to 10,000 square feet.
Versona carries apparel, fashion jewelry, shoes, handbags, scarves, belts and gifts in stores that are
generally 6,000 to 10,000 square feet. Most are our private label products developed both in-house and
with outside designers. We have leveraged our product development and sourcing teams to manufacture
the merchandise around the world. Versona provides all women a place where they can create their own
style, a place for guilt free indulgence.
Management Executive Group
John P. D. Cato
Chairman, President and
Chief Executive Officer
John R. Howe
Executive Vice President,
Chief Financial Officer
Sally J. Almason
Executive Vice President, Merchandising –
Cato and Versona Concepts
Michael T. Greer
Executive Vice President,
Director of Stores
Gordon D. Smith
Executive Vice President,
Chief Real Estate and
Store Development Officer
Board of Directors
John P. D. Cato
Chairman, President and
Chief Executive Officer
Thomas B. Henson 1, 3
Chief Executive Officer
American Spirit Media, LLC
Bryan F. Kennedy, III 1 , 3
President
Park Sterling Bank
Thomas E. Meckley 3
Consultant
Agility Recovery Solutions
Retired Partner
Ernst & Young LLP
Bailey W. Patrick 1, 2
General Manager
Merrifield Patrick Vermillion LLC
D. Harding Stowe 1, 2
Chairman and
Chief Executive Officer
New South Pizza
Edward I. Weisiger, Jr. 1, 2
President and
Chief Executive Officer
Carolina Tractor & Equipment Company
1 Member of the Corporate Governance and Nominating Committee
2 Member of the Compensation Committee
3 Member of the Audit Committee
Corporate Information
A copy of the Company’s Annual Report to the Securities
and Exchange Commission (Form 10-K) for the fiscal year
ended February 2, 2013 is available to shareholders without
charge upon written request to:
Mr. John R. Howe
Executive Vice President,
Chief Financial Officer
The Cato Corporation
P.O. Box 34216
Charlotte, North Carolina 28234
corporate headquarters
market & dividend notice
The Cato Corporation
8100 Denmark Road
Charlotte, North Carolina 28273-5975
(704) 554-8510
mailing address
P.O. Box 34216
Charlotte, North Carolina 28234
independent auditor
PricewaterhouseCoopers LLP
Charlotte, North Carolina 28202
corporate counsel
Robinson, Bradshaw & Hinson, P.A.
Charlotte, North Carolina 28246
transfer agent and registrar
American Stock Transfer
Securities Transfer Department, CMG-5
Charlotte, North Carolina 28288
annual meeting notice
The Annual Meeting of Shareholders
Thursday, May 23, 2013 – 11:00 a.m.
Corporate Office
8100 Denmark Road
Charlotte, NC 28273-5975
The Company’s Class A Common Stock trades on the New
York Stock Exchange (“NYSE”) under the symbol CATO.
Below is the market range and dividend information for
the four quarters of fiscal 2012 and 2011.
price
2012
high
low
dividend
First quarter
$ 29.19
$ 25.93
$ .230
Second quarter
Third quarter
Fourth quarter
31.71
31.75
29.99
27.50
27.50
26.08
.250
.250
2.250
price
2011
high
low
dividend
First quarter
$ 25.64
$ 23.03
$ .185
Second quarter
Third quarter
Fourth quarter
30.74
28.19
26.95
25.11
21.98
22.83
.230
.230
.230
As of April 2, 2013 the approximate number of record
holders of the Company’s Class A Common Stock was 5,000,
and there were 2 record holders of the Company’s Class B
Common Stock.
8100 DenmARk RoAD ChARlotte, nC 28273-5975 CAtoCoRp.Com