Cato Corp. is showing its age. Approaching its 80th anniversary next year, the Charlotte-based operator of Cato, Versona and It’s Fashion stores is closing discount clothing stores faster than it opens them.
Amid falling sales and profit, it kicked off 2025 by eliminating 40 corporate jobs and warned of further cost reductions as new tariffs increase financial pressure. In November, it suspended its dividend, citing “current economic conditions and current sales trends.” It has also sold its corporate jet.
Once consistently in the black, Cato has reported Cato has reported minimal profit since 2018, including a cumulative $41 million net loss over the past two years. Its 68-cents-per-share payout had been costing the company more than $13 million annually.
Disruptions from three hurricanes last year and supply chain problems compounded cautious customer spending in 2024, with little improvement so far this year.
“While the tariffs are concerning, it is too early to accurately determine the overall impact on Cato, as there are still many moving pieces that we are working through,’’ CEO John Cato said in an email last month. “It would probably make more sense to discuss specifics once everything becomes clearer.’’
He was slightly more forthcoming to the Charlotte Business Journal in April, saying the retailer is “looking to update its merchandise offerings, increase efficiencies such as supply chain and reduce costs.”
Cato is among the few multistate retail chains still controlled by North Carolinians. Exceptions include Ingles Markets of Asheville and Hickory-based Alex Lee, which operates Lowes Foods and is owned by the George family.
Families controlling the Belk, Family Dollar and Harris Teeter chains, each based in Charlotte, sold their businesses over the past decade or so for billions of dollars as brick-and-mortar retailing consolidated.
A fat payout seems unlikely for Cato, where the CEO controls 53% of the voting power. The company he’s led since 2004 has been in a long-term descent, with revenue declining from a peak of about $1 billion in the mid-2010s to $650 million last year. Stores open for at least a year reported a 3.6% decline in average revenue.
Cato shares traded for more than $30 a decade ago but were selling for less than $4 in mid-April, their lowest level since the late 1990s. The company’s market value was about $50 million in mid-April.
The good news for Cato is that it has no long-term debt, $80 million in cash as of Feb. 1, and a $35 million asset-based lending facility secured primarily by inventory and third-party credit card receivables. As of March 31, there were no borrowings on the line.
The challenge is attracting folks to Cato stores. This year, it plans to close as many as 50 underperforming stores as leases expire, while opening as many as 15 new ones. Last year, Cato closed 62 stores, opened one and relocated four others. About $7 million in capital spending is projected.
Cato now operates about 1,120 stores in about 30 states, located primarily in strip shopping centers, often near Walmart. That’s 200-plus fewer locations than in 2000.
The shrinkage “reminds me of Sears,” says Mo Moshtaghi, a business professor at Johnson & Wales University in Charlotte. “The problem with this company is it’s still the old hierarchy.’’
None of its directors are younger than 60. Standing for re-election at the May 22 annual meeting are Theresa Drew, 67, and D. Harding Stowe, 69. Other directors include several veteran Charlotte business and civic leaders, including banker Bryan Kennedy, developer Bailey Patrick and former Queens University President Pamela Davies.
John’s father, Wayland Cato, opened the company’s first store in 1946. It sold shares to the public in 1968 and then went private in 1980. Seven years later, it returned to the
public markets. Wayland Cato died in 2023 at age 100. Over the past 20 years, the company has made donations of more than $17 million to charities and endowments, mostly in the Charlotte region.
Higher prices resulting from tariffs are expected to discourage spending by consumers grappling with higher costs. Cato “will continue our focus on reducing expenses,” the CEO said in an earnings-day statement. The company expects to achieve “expense reductions in other areas of our business,” such as distribution and domestic freight costs.
It cited as a risk, however, tariffs imposed earlier this year by President Donald Trump’s administration. While negotiations with some trading partners could change or eliminate such import taxes, Cato expects tariffs on merchandise from China to increase its costs. Sourcing some products such as shoes and handbags elsewhere “will be difficult,” Cato says.
Succession policy is another thing John Cato declined to discuss. He is 74. A company filing says it believes “our Company culture helps to retain our associates’’ and noted it employs several people with more than 40 years of service, including the CEO. On average, sales associates and assistant store managers have been employed for 1.4 years, while corporate managers have been on the payroll for 14.8 years.
Charging customers more isn’t a good option for Cato amid persistently high inflation, adds Moshtaghi of Johnson & Wales. “Their target market doesn’t have that much disposable income to start with.” ■
