What changed in this filing

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Item 1. Business

2021-03-29 compared with 2020-03-27 · 580 added, 128 removed, 22 unchanged (97% of the section changed)

The Company, founded in 1946, operated 1,281 fashion specialty stores at February 1, 2020, in 31 states, principally in the southeastern United States, under the names “Cato,” “Cato Fashions,” “Cato Plus,” “It’s Fashion,” “It’s Fashion Metro” and “Versona.” The Cato concept seeks to offer quality fashion apparel and accessories at low prices every day, in junior/missy and plus sizes.

The Cato concept’s stores and e-commerce websites feature a broad assortment of apparel and accessories, including dressy, career, and casual sportswear, dresses, coats, shoes, lingerie, costume jewelry and handbags.

A major portion of the Cato concept’s merchandise is sold under its private label and is produced by various vendors in accordance with the concept’s specifications.

The It’s Fashion and It’s Fashion Metro concepts offer fashion with a focus on the latest trendy styles for the entire family at low prices every day.

The Versona concept’s stores and e-commerce website offer quality fashion apparel items, jewelry and accessories at exceptional values every day.

The Company’s stores range in size from 2,100 to 19,000 square feet and are located primarily in strip shopping centers anchored by national discounters or market-dominant grocery stores.

The Company emphasizes friendly customer service and coordinated merchandise presentations in an appealing store environment.

The Company offers its own credit card and layaway plan.

Credit and layaway sales under the Company’s plan represented 7% of retail sales in fiscal 2019.

See Note 14 to the Consolidated Financial Statements, “Reportable Segment Information,” for a discussion of information regarding the Company’s two reportable segments:

1946, operated

1,330 fashion specialty

states, principally

southeastern United

States, under

“Cato,” “Cato

Fashions,” “Cato

Fashion,” “It’s

Fashion Metro”

and “Versona.”

concept seeks

fashion apparel and accessories at low prices every day, in junior/missy and plus sizes.

concept’s stores and e-commerce website feature a broad assortment of apparel and accessories, including

dressy, career,

sportswear, dresses,

coats, shoes,

lingerie, costume jewelry

and handbags.

major portion of the Cato concept’s merchandise is sold under

its private label and is produced by various

vendors in accordance with the concept’s specifications.

The It’s Fashion and

It’s Fashion Metro

concepts offer fashion with a focus on the latest trendy styles for the entire family at low prices every day.

concept’s stores

and e-commerce website

offer quality

fashion apparel

items, jewelry and

accessories at exceptional

values every day.

The Company’s

stores range in

size from 2,100

located primarily

shopping centers

national discounters

market-dominant grocery

emphasizes friendly

customer service

and coordinated

merchandise presentations

appealing store

Company offers

and layaway plan.

Credit and layaway

sales under the

Company’s plan

represented 5% of

retail sales in

Consolidated Financial Statements,

“Reportable Segment Information,”

for a discussion of information regarding the Company’s two reportable segments:

retail and credit.

The Company’s primary objective is to be the leading fashion specialty retailer for fashion and value in its markets.

Management believes the Company’s success is dependent upon its ability to differentiate its stores from department stores, mass merchandise discount stores and competing specialty stores.

The key elements of the Company’s business strategy are:

Cato-branded retail

approximately 75

originated as a family-owned business and made its

first initial public offering of stock

the Company went private and in 1987 again conducted an initial public offering.

Business Strategy

The Company’s

primary objective is

leading fashion specialty

retailer for fashion

in its markets.

believes the Company’s

success is dependent upon

its ability to differentiate

its stores from

department stores, mass

merchandise discount stores

and competing specialty

elements of the Company’s business strategy are:

Merchandise Assortment.

The Company’s stores offer a wide assortment of on-trend apparel and accessory items in primarily junior/missy, plus sizes, mens and kids sizes, infant to boys size 20 and girls size 16 with an emphasis on color, product coordination and selection.

Colors and styles are coordinated and presented so that outfit selection is easily made.

Value Pricing.

The Company offers quality merchandise that is generally priced below comparable merchandise offered by department stores and mall specialty apparel chains, but is generally more fashionable than merchandise offered by discount stores.

Management believes that the Company has positioned itself as the every day low price leader in its market segment.

Strip Shopping Center Locations.

The Company locates its stores principally in convenient strip centers anchored by national discounters or market-dominant grocery stores that attract large numbers of potential customers.

The Company’s

assortment of

on-trend apparel

accessory items in

primarily junior/missy,

toddler to boys

product coordination

and selection.

coordinated and presented so that outfit selection is easily made.

The Company offers

quality merchandise that

is generally priced

below comparable

merchandise offered by department stores and mall specialty apparel chains,

but is generally more

fashionable than

merchandise offered

believes that

positioned itself as the every day low price leader in its market

Strip Shopping

Center Locations.

stores principally

in convenient

centers anchored by national

discounters or market-dominant grocery stores

that attract large

potential customers.

Customer Service.

Store managers and sales associates are trained to provide prompt and courteous

service and to assist customers in merchandise selection and wardrobe coordination.

Credit and Layaway Programs .

The Company offers its own credit card and a layaway plan to make the purchase of its merchandise more convenient for its customers.

Store managers and

sales associates are

trained to provide

prompt and courteous

service and to assist customers in merchandise selection and wardrobe

coordination.

and Layaway Programs

The Company offers

its own credit card

and a layaway plan

the purchase of its merchandise more convenient for its customers.

Merchandising

The Company seeks to offer a broad selection of high quality and exceptional value apparel and accessories to suit the various lifestyles of fashion and value-conscious customers.

In addition, the Company strives to offer on-trend fashion in exciting colors with consistent fit and quality.

The Company’s merchandise lines include dressy, career, and casual sportswear, dresses, coats, shoes, lingerie, costume jewelry, handbags, men’s wear and lines for kids and infants.

The Company primarily offers exclusive merchandise with fashion and quality comparable to mall specialty stores at low prices, every day.

The Company believes that the collaboration of its merchandising and design teams with an expanded in-house product development and direct sourcing function has enhanced merchandise offerings and delivers quality, exclusive on-trend styles at lower prices.

The product development and direct sourcing operations provide research on emerging fashion and color trends, technical services and direct sourcing options.

As a part of its merchandising strategy, members of the Company’s merchandising and design staff frequently attend trade shows to stay abreast of latest trends and styles, visit selected stores to monitor the merchandise offerings of other retailers, regularly communicate with store operations associates and frequently confer with key vendors.

The Company also takes aggressive markdowns on slow-selling merchandise and typically does not carry over merchandise to the next season.

broad selection

exceptional value

accessories to suit the

various lifestyles of fashion and value-conscious customers.

In addition, the

Company strives to offer on-trend fashion in exciting colors with consistent fit and

The Company’s merchandise lines

include dressy, career,

and casual sportswear, dresses, coats,

lingerie, costume jewelry,

handbags, men’s

wear and lines

offers exclusive merchandise

with fashion and

quality comparable to

mall specialty stores

at low prices,

The Company believes that the collaboration of its merchandising and design teams with an expanded

in-house product

development and

direct sourcing

enhanced merchandise

offerings and

delivers quality,

exclusive on-trend styles

at lower prices.

The product development

and direct sourcing

operations provide research on

emerging fashion and

color trends, technical

services and direct

of its merchandising

strategy, members

of the Company’s

merchandising and design

frequently attend trade shows to stay abreast of latest trends and styles, visit selected stores to monitor the

merchandise offerings

retailers, regularly

communicate with

store operations

associates and

frequently confer

aggressive markdowns

merchandise and typically does not carry over merchandise to the next season.

Purchasing, Allocation and Distribution

Although the Company purchases merchandise from approximately 580 suppliers, most of its merchandise is purchased from approximately 100 primary vendors.

In fiscal 2019, purchases from the Company’s largest vendor accounted for approximately 8% of the Company’s total purchases.

The Company is not dependent on its largest vendor or any other vendor for merchandise purchases, and the loss of any single vendor or group of vendors would not have a material adverse effect on the Company’s operating results or financial condition.

A substantial portion of the Company’s merchandise is sold under its private labels and is produced by various vendors in accordance with the Company’s strict specifications.

The Company sources a majority of its merchandise directly from manufacturers overseas, primarily in Southeast Asia.

These manufacturers have a dependence on materials that are primarily sourced from China.

The Company purchases its remaining merchandise from domestic importers and vendors, which typically minimizes the time necessary to purchase and obtain shipments;

however, these vendors are dependent on materials primarily sourced from China.

The Company opened its own overseas sourcing operations in the fall of 2014, replacing the Company’s former sourcing agent in 2015.

Although a significant portion of the Company’s merchandise is manufactured overseas, primarily in Southeast Asia, the Company does not expect that any economic, political, public health or social unrest in any one country would have a material adverse effect on the Company’s ability to obtain adequate supplies of merchandise.

However, the Company can give no assurance that any changes or disruptions in its merchandise supply chain would not materially and adversely affect the Company.

See “Risk Factors – Risks Relating To Our Business – Because we source a significant portion of our merchandise directly and indirectly from overseas, we are subject to risks associated with international operations and risks that affect the prevailing social, economic, political, public health and other conditions in the areas from which we source merchandise;

changes, disruptions, cost changes or other problems affecting the Company’s merchandise supply chain could materially and adversely affect the Company’s business, results of operations and financial condition.”

An important component of the Company’s strategy is the allocation of merchandise to individual stores based on an analysis of sales trends by merchandise category, customer profiles and climatic

A merchandise control system provides current information on the sales activity of each merchandise style in each of the Company’s stores.

Point-of-sale terminals in the stores collect and transmit sales and inventory information to the Company’s central database, permitting timely response to sales trends on a store-by-store basis.

All merchandise is shipped directly to the Company’s distribution center in Charlotte, North Carolina, where it is inspected and then allocated by the merchandise distribution staff for shipment to individual stores.

The flow of merchandise from receipt at the distribution center to shipment to stores is controlled by an on-line system.

Shipments are made by common carrier, and each store receives at least one shipment per week.

The centralization of the Company’s distribution process also subjects it to risks in the event of damage to or destruction of its distribution facility or other disruptions affecting the distribution center or the flow of goods into or out of Charlotte, North Carolina.

See “Risk Factors – Risks Relating To Our Business – A disruption or shutdown of our centralized distribution center or transportation network could materially and adversely affect our business and results of operations.”

The Company uses television, in-store signage, graphics, a Company website, two e-commerce websites and social media as its primary advertising media.

The Company’s total advertising expenditures were approximately 0.7% of retail sales for fiscal years 2019, 2018 and 2017.

Although the Company purchases

merchandise from approximately 540 suppliers,

merchandise is purchased

from approximately 100

primary vendors.

purchases from the

Company’s largest

vendor accounted

for approximately

the Company’s

total purchases.

Company is not

dependent on its

largest vendor or

any other vendor

for merchandise purchases,

loss of any single vendor or group of

vendors would not have a material adverse effect on the

operating results or financial condition.

A substantial portion of the Company’s merchandise is sold under

accordance with the

Company’s strict

specifications.

The Company sources a majority of its merchandise

directly from manufacturers overseas,

Southeast Asia

These manufacturers

dependence on

materials that

are primarily

Company purchases

its remaining

merchandise from

domestic importers

vendors, which typically minimizes the

time necessary to purchase

and obtain shipments;

vendors are dependent on materials primarily sourced from

The Company opened its

overseas sourcing operations in the fall

of 2014, replacing the Company’s

former sourcing agent in 2015.

significant portion

Company’s merchandise

red overseas,

Southeast Asia, the Company

does not expect

that any economic, political,

public health or

social unrest

adverse effect

Company’s ability

supplies of merchandise.

Company can give no

assurance that any changes

or disruptions

merchandise supply

not materially

and adversely

Factors – Risks

Our Business –

Because we source a

significant portion of our

directly and indirectly from

overseas, we are subject

to risks associated with

international operations and

risks that affect

the prevailing social,

economic, political, public health

and other conditions in

changes, disru

What changed 10-K

Item 1. Business