What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2023-11-21 compared with 2023-08-23 · 245 added, 226 removed, 212 unchanged (69% of the section changed)

107 unchanged sentences

Three Months Ended

Six Months Ended

July 29, 2023

July 30, 2022

July 29, 2023

July 30, 2022

Nine Months Ended

October 28, 2023

October 29, 2022

October 28, 2023

October 29, 2022

Total retail sales

5 unchanged sentences

Interest and other income

Income before income taxes

Income (loss) before income taxes

Net income (loss)

12 unchanged sentences

Form 10-Q, as well as our 2022

Annual Report Form 10-K.

Annual Report on Form 10-K.

Recent Developments

Inflationary Cost Pressure and Rising Interest Rates

inflationary pressures

operating costs,

including higher

wages, operating supplies, and service costs continue to be negatively

impacted by the current inflationary

fuel, food, and

housing, including rent,

other consumable products

across the economy

discretionary

Inflationary Cost Pressure and High Interest Rates

operating supplies,

customers’ disposable income is impacted by increased costs related to

fuel, food, housing, including rent,

consumable products relative

to flattening wage

negatively impact our

willingness to purchase discretionary items such as apparel,

jewelry and shoes.

Reserve began

raising, interest

inflationary pressures

inflationary pressures subside to

acceptable levels.

interest rates

Increasing costs related

to revolving credit,

auto loans and

mortgages continue to

have a negative

Though the Federal

Reserve has paused

raising rates,

indicated it is

committed to reducing

inflation to its

targeted levels.

These high interest

costs related

mortgages continue

to negatively

discretionary

continue to be negatively impacted by high interest rates.

believe high prices

and interest rates

impacted the first

half of fiscal

2023 and will

likely continue to

negative impact

behavior and,

by extension,

operations and

condition during the remainder of fiscal 2023.

Comparison of the Three and Six

Months ended July 29, 2023 with

July 30, 2022

Total retail sales

for the second

$181.2 million

compared to last

year’s second

quarter sales

negatively impacted by these inflationary pressures and high interest

interest rates

negatively impacted

three quarters

operations and financial condition during the remainder of fiscal 2023.

Comparison of the Three and Nine

Months ended October 28, 2023 with

October 29, 2022

Total retail sales for the

third quarter were $156.7 million compared to

last year’s third quarter sales

million, a 10% decrease.

The Company’s sales

decrease in the third quarter

of fiscal 2023 was

primarily due

in same-store

permanently closed

stores, partially

from new stores.

months ended July

29, 2023, total

retail sales were

to an 8% decrease in same-store sales and closed stores, partially offset

by sales from new stores.

million compared

last year’s comparable six month sales of $399.9 million, a 7% decrease.

The decrease in sales in the first six

due primarily

in same-store

permanently closed

partially offset

sales include

similarly titled measures reported by other

E-commerce sales were less than

5% of total sales for

revenue (principally

finance charges

customer accounts

receivable and layaway fees), were $182.9 million

and $374.9 million for the

three and six months ended July

29, 2023, compared

to $196.9 million

and $403.6 million

for the three

and six months

ended July 30,

$574.9 million,

2023 was due primarily to

a 6% decrease in same-store

sales and closed stores, partially offset

by sales from

Same-store sales include stores

that have been open more than

Stores that have been

also included

same-store sales

calculation after

than 15 months.

The method of calculating same-store sales varies across the retail industry.

As a result, our

same-store sales calculation may not be comparable to similarly titled measures reported by other companies.

(principally finance

accounts receivable

respectively.

The Company operated 1,247 stores at July 29, 2023 compared to 1,312 stores at the end

Company operated

THE CATO CORPORATION

1 unchanged sentence

CONDITION AND RESULTS OF OPERATIONS

closed 41 stores.

The Company currently expects to close approximately 80

stores in total in fiscal 2023.

opened nine stores

The Company currently expects to close

approximately 110 stores in total in

interest earned on the Company’s private label credit card portfolio and related fee income.

Related expenses

principally include payroll,

postage and other

administrative expenses and

totaled $0.4 million

in the second

include payroll,

administrative expenses

quarter of fiscal 2023, compared to

last year’s second quarter expense of

last year’s third quarter expense of

$0.4 million.

Other revenue, a component of total revenues, was $1.7 million and $3.4 million for the

three and six months

ended July 29, 2023, respectively, compared

to $1.9 million and $3.6 million

for the prior year’s comparable

charges and late fees associated with

the Company’s proprietary credit card.

months ended October 28,

2023, respectively, compared to

$1.7 million and $5.4

million for the prior

comparable three and

nine month periods.

decrease in Other revenue

for both the three

and nine months

decreases in gift

card breakage and

e-commerce shipping revenue

partially offset by

finance charges and late fees

associated with the Company’s proprietary credit card.

65.4% of retail

for the three and six months

ended July 29, 2023, respectively, compared

to $131.7 million, or 67.6% of retail

$264.0 million,

the comparable

second quarter

resulted primarily

freight costs

merchandise costs (net of discounts and

allowances), buying costs, distribution costs, occupancy costs,

payroll-related

departments and distribution center.

Occupancy costs include rent, real estate taxes, insurance, common area

maintenance, utilities and

maintenance for stores and

distribution facilities.

margin dollars (retail

depreciation)

compared to $63.3

million and $135.9 million

for the prior year’s

comparable three and six

for the three and nine months ended October 28, 2023, respectively, compared to $123.8 million, or 70.7% of

comparable three

month periods

third quarter

inventory costs.

distribution costs

include payroll,

payroll-related costs

and operating

for the buying departments and distribution center.

Occupancy costs include rent, real estate taxes, insurance,

common area maintenance, utilities

and maintenance for stores

and distribution facilities.

dollars (retail sales less

cost of goods sold

exclusive of depreciation)

decreased by 0.6% to

$50.9 million for

compared to $51.2 million and $187.1 million for the prior year’s comparable three and nine

months of fiscal

2022, respectively.

Gross margin as presented may not be

comparable to those of other

comparable to those of other entities.

Selling, general and administrative expenses (“SG&A”) primarily include corporate and store payroll, related

second quarter and first six months of fiscal 2023, respectively, compared to $60.8 million, or

31.2% of retail

sales and $121.2 million, or 30.3% of retail sales for the prior year’s comparable three and

six month periods.

second quarter

primarily due

payroll and insurance expense.

expenses were $61.8 million, or 39.4% of retail sales and $185.3 million, or 35.1% of retail sales for the

quarter and first nine months of

fiscal 2023, respectively, compared to $61.4

million, or 35.1% of retail sales

comparable three

month periods,

respectively.

The increase in

third quarter and

first nine months

of fiscal 2023

was primarily

due to higher payroll and insurance

Depreciation expense was $2.5 million, or 1.6% of retail sales and $7.4 million, or 1.4% of

retail sales for the

second quarter

third quarter

2023, respectively,

$2.9 million,

sales and $5.6

million or 1.4%

of retail sales

for the comparable

three and six

month periods of

sales and $8.4 million or 1.5%

of retail sales for the comparable three

and nine month periods of fiscal

respectively.

Interest and other income was $1.5 million, or 1.0% of retail sales and $3.8 million, or 0.7% of retail sales for

the three and six

months ended July 29,

2023, respectively, compared to

$1.9 million, or 1.0%

of retail sales

the three and

nine months ended October

28, 2023, respectively, compared

to $2.3 million, or

1.3% of retail

sales and $4.6 million, or 0.8% of retail sales for the comparable three and nine month periods of fiscal

respectively.

The decrease for the second quarter and first six months of fiscal 2023 compared to fiscal 2022

The decrease for the

third quarter and first

nine months of

fiscal 2023 compared

to fiscal 2022

THE CATO CORPORATION

1 unchanged sentence

CONDITION AND RESULTS OF OPERATIONS

is primarily attributable

to the Company’s

receipt of insurance

proceeds in the

second quarter of

related to hurricane damage in 2021.

Income tax expense was $1.3 million and $3.5 million for the second quarter and first six months of fiscal

Carolina in 2022, partially offset by higher

amounts earned on investments due to

higher interest rates.

million for the

third quarter

nine months of fiscal

respectively,

comparable three

and nine month

respectively.

the Company’s

effective tax

38.5% compared to

of fiscal 2022.

to-date effective tax rate was primarily due to a decrease in Global Intangible Low-taxed Income

non-deductible

compensation,

employment credits, partially offset by the foreign rate differential.

Company’s effective

was 60.4% compared

for the first

nine months of

The change in the 2023 year-to-date effective tax rate was primarily due to increases in foreign rate

differential and the release of reserves for uncertain tax positions, offset by decreases in

Global Intangible

Income (GILTI),

income taxes,

non-deductible officer’s

compensation, and

credits, as percentages on a pre-tax loss.

LIQUIDITY, CAPITAL

11 unchanged sentences

for fiscal 2023 and the

activities for the first six months of fiscal 2023 was primarily generated by earnings adjusted for

and changes in working capital.

The increase in cash provided of $4.6 million

for the first six months of fiscal

compared to $19.3 million provided

in the first nine months of fiscal

The decrease in cash provided

$7.6 million for

the first nine

months of fiscal

2023 as compared

was primarily

accounts receivable and lower net income.

At July 29, 2023,

the Company had

working capital of $103.4

million compared to $74.7

million at January

The increase in working capital is

primarily attributable to a decrease in

current lease liability and

an increase in cash, partially offset

by a decrease in inventory

and short-term investments.

29, 2023, the

Company has an

unsecured revolving credit

line, which provides

for borrowings of

up to $35.0 million, less

the balance of any revocable letters

of credit related to purchase commitments,

amended the revolving credit

agreement to modify

a definition used in

calculating the Company’s

EBITDAR coverage ratio to add back certain income tax receivables for purposes of calculating

the quarter ended July

29, 2023, after giving

effect to the amendment,

the Company was in

compliance with

nine months of

fiscal 2022 was

primarily due to a net loss in 2023 compared to net income in 2022,

and higher accounts receivable, partially

offset by lower accounts payable and

accrued liabilities.

primarily attributable

current lease

liability and an increase in

cash, partially offset by a decrease

in inventory and short-term investments.

As of October 28, 2023, the Company has an unsecured revolving credit line, which provides for borrowings

million, less

revocable letters

purchase commitments,

committed through

The revolving

credit agreement

contains various

financial covenants

and limitations,

including the

maintenance of

specific financial

amended the revolving

credit agreement

the calculation

Company’s EBITDAR

coverage ratio

minimum EBITDAR

coverage ratio

quarter ended

forward, the Company

was in compliance

with the amended

credit agreement for

the quarter ended

compliance without

giving effect

availability,

facility was zero at July 29, 2023

October 28, 2023.

The weighted average

interest rate under

the credit facility

October 28, 2023

due to no borrowings outstanding.

Expenditures for property and equipment totaled $8.5 million in the first six months of fiscal 2023, compared

to $10.4 million in last

fiscal year’s first six months.

decrease in expenditures for property and equipment

$14.4 million

fiscal year’s

expenditures for

and equipment

projects related

to investments

distribution center

approximately

capital expenditures.

million for capital expenditures.

THE CATO CORPORATION

1 unchanged sentence

CONDITION AND RESULTS OF OPERATIONS

Net cash provided by investing activities totaled $23.8 million in the first six months of fiscal 2023

cash provided

comparable period

Net cash provided by investing activities totaled $6.1 million in the first nine months of fiscal 2023 compared

the comparable

cash provided

2023 was primarily due

to a net decrease

in the purchase of

short-term investments and a

decrease in capital

expenditures.

financing activities

2023 compared

2023 was primarily due to a

decrease in capital expenditures.

Net cash used in financing activities totaled $12.7 million in the first nine months of fiscal

2023 compared to

$22.2 million used in the comparable period of fiscal 2022.

The decrease in net cash used in fiscal 2023 was

primarily due to lower stock repurchases and

lower dividends.

authorizations

primarily due to lower stock repurchases.

On November 16, 2023, the Board

of Directors maintained the quarterly dividend at

$0.17 per share.

909,653 shares

open authorizations

repurchase program.

6 unchanged sentences

tax-exempt and taxable

governmental debt securities held in managed accounts

with underlying ratings of A or better

at July 29, 2023

from one day to 2.6 years.

Treasury Notes have contractual maturities which range from two

classified as

available-for-sale and

Restricted cash and Other assets on the accompanying Condensed Consolidated Balance Sheets.

comprehensive income.

The asset-backed

securities are bonds comprised

of auto loans and

bank credit cards

loan asset-backed

securities are

were originated and serviced by captive auto finance units, banks or finance companies.

The bank credit card

asset-backed securities are backed by revolving pools of credit card receivables generated by account holders

of cards from American Express, Citibank, JPMorgan

Chase, Capital One and Discover.

governmental debt securities held

in managed accounts with

underlying ratings of A

range from four days to 3.1 years.

Treasury Notes have contractual

maturities which range from 79

available-for-sale

investments, Restricted cash and Other assets on the accompanying Condensed Consolidated Balance Sheets.

unrealized gains

in Accumulated

other comprehensive income.

asset-backed securities are bonds

comprised of auto loans

and bank credit

cards that carry

asset-backed securities

that were originated and serviced by captive auto finance units, banks or finance companies.

The bank credit

card receivables

holders of cards from American Express, Citibank,

JPMorgan Chase, Capital One and Discover.

Additionally,

20 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis