Cato Corporation (NYSE:CATO) shares declined sharply in premarket trading Thursday after the apparel retailer posted third-quarter results that, while improved from last year, still failed to meet market expectations.
The stock slid 5.85% after Cato reported a quarterly net loss of –$0.28 per share, a notable improvement from the –$0.79 loss recorded in the same quarter of 2024. Revenue increased 6% year over year to $155.4 million, up from $144.6 million, with same-store sales rising 10%.
However, the better comparison was not enough to satisfy investors, who focused on the continued losses. The company noted that last year’s results were heavily disrupted by three major hurricanes that hit key markets over a five-week period, as well as supply chain delays that slowed merchandise arrivals.
“Our positive second quarter sales trend continued into the third quarter,” stated John Cato, Chairman, President, and Chief Executive Officer. “We believe the fourth quarter will be challenging due in part to the slowdown in employment growth and lower expected economic growth.”
Gross margin improved to 32.0%, up from 28.8% a year ago, helped by reductions in freight, distribution, occupancy and buying expenses—although these gains were partially offset by heavier markdown activity. SG&A costs eased slightly to $57.0 million, or 37.1% of sales, compared with 40.0% in the prior-year quarter.
For the first nine months of fiscal 2025, Cato returned to profitability, reporting net income of $5.0 million, or $0.25 per diluted share, versus a net loss of –$4.0 million (–$0.24 per share) in the same period last year.
The retailer continued trimming its footprint, closing 16 stores year-to-date. As of November 1, 2025, Cato operated 1,101 locations across 31 states, compared with 1,167 the previous year.