Cato Corp. kicked off 2025 by eliminating 40 corporate jobs and warned of further cost reductions as new tariffs increase financial pressures on the discount clothing chain.
Sales by the Charlotte-based operator of 1,117 Cato, Versona and It’s Fashion stores dropped in the fourth quarter, and the full year ended Feb. 1. The declines accelerated from a year earlier, as disruptions from three hurricanes over five weeks and supply chain problems compounded cautious customer spending. Higher costs eroded gross margin, contributing to a loss of $14.1 million in the quarter and $18.1 million last year.
“As we look ahead to 2025, we remain cautious in this challenging economic environment with pressures related to newly implemented tariffs and the uncertainty of potential additional tariffs,” CEO John Cato said in a statement Thursday morning.
Higher prices resulting from tariffs discourage spending by consumers already grappling with higher costs of living. As Walmart Stores is reportedly pressuring Chinese suppliers to absorb the costs of tariffs, Cato “will continue our focus on reducing expenses,” the CEO said.
Aside from the job cuts, he said, the company anticipates its productivity and efficiency efforts will lead to “expense reductions in other areas of our business,” such as distribution and domestic freight costs. The company didn’t immediately reply to a request for its total number of corporate jobs after last month’s cutback.
The decline of Cato’s sales slowed in the fourth quarter, compared to the third quarter and the full year. The trend resulted from supply chain improvements and greater distribution center efficiencies, the company said.
As it approaches its 80th anniversary, Cato is further shrinking its footprint. It plans to close as many as 50 underperforming stores this year as leases expire while opening as many as 15 new stores. Last year’s closing of 62 stores outpaced the opening of one store and relocation of four others.
This past November citing “current economic conditions and current sales trends,” Cato suspended its regular quarterly dividend of 17 cents a share. It was last paid Sept. 30.
Earlier this week, the company said in a securities filing it entered into an agreement with Wells Fargo Bank to establish an asset-based revolving credit facility in an amount up to $35
million for working capital and general corporate purposes. The pact replaced a credit agreement that expired March 13.
The new agreement contains a $15 million “uncommitted accordion feature” permitting the borrower, under certain conditions, to ask the lender to increase revolving loan commitments up to $50 million. The amount available for borrowing is tied to credit card receivables and inventory.
Cato shares closed Wednesday at $3.04, after trading between $2.64 and $6.70 in the past year. Shares are down more than 51% in the last year, and down $72.7% in the last five years. It has a market cap of $62.4 million.
