Cato raises fiscal 2026 store closures to 120

Cato lifts closures to 120 stores

Cato raised its planned fiscal 2026 store closures by 70 on 18 September, taking the total to 120. The company had originally targeted 50.

The 120 closures represent more than a tenth of the 1,057 stores Cato operated across 31 states in August. The 70 additional closures alone are about 6.6% of that base. For investors, the plan is a test of whether closing marginal stores can offset the second-quarter sales and profit decline. Cato did not specify which individual stores are expected to close.

The exits are not free. Cato expects the additional closures to cost $1 million to $1.3 million through the end of 2026, mostly for removing signs and fixtures and returning store systems.

All affected stores are at the end of their lease terms, meaning Cato will not pay rent at those locations beyond 2026, the company said.

Profit fell faster than sales

Cato reported second-quarter revenue of $163.9 million, down from $174.7 million a year earlier, a decline of 6%. A separate report gave $165.5 million and $176.5 million for the same comparison; Cato's press release, as reported by The Independent, put the figures at $163.9 million and $174.7 million.

Net income dropped to $1.1 million from $6.8 million, a fall of 83%. Diluted earnings per share went to $0.06 from $0.35. Gross margin contracted to 32.8% from 36.2%. Sales fell by $10.8 million while profit fell by $5.7 million, so the damage ran well past the top line.

The quarter ended on 1 August 2026, before the expanded closure plan was announced on 18 September. Cato attributed the additional closures to the consumer environment and the outlook for marginal stores.

Reports on same-store sales conflict. The Globe and Mail reported a 3.70% decline, while Zacks said comparable-store sales were flat. Cato cited pressure on customers' discretionary income from inflation, higher fuel prices and elevated interest rates.

The lease review behind the cuts

Cato reviews about one-third of its stores each year to exercise lease options or negotiate extensions based on each store's performance, chief executive John Cato said.

"In light of the current economic environment, especially with the negative pressure on our customers' discretionary income, we do not expect these marginal stores to improve appreciably," chief executive John Cato said.

He said Cato had renewed marginal stores for an extra year in the past to give them time to improve sales and profitability.

"As a result, we are closing more stores than expected this year," John Cato said. "We believe that closing these additional stores will have a positive impact on our operating results in fiscal 2027 and beyond."

What the market is pricing

Cato stock was last at $2.39 on the NYSE on 5 October 2026, down 0.42%. That left it $0.09 above its 52-week low of $2.30, with a market capitalization of $43.5 million.

Zacks put the three-month decline at 30.5%, against an 8.1% fall for the industry, a 3.2% decline for the Zacks Retail-Wholesale sector and a 3.3% gain for the S&P 500. Volume on 5 October was 50,641 shares.

The pressure is not confined to one quarter. First-half retail sales fell 2.9% to $333.3 million from $343.1 million. Cost of goods sold rose to 65% of retail sales from 64.4%, and gross margin dollars dropped 4.5% to $116.8 million. Retail segment pretax income slipped to $7.3 million from $7.9 million. Zacks said first-half earnings benefited from a $5.7 million tariff refund and higher interest income.

Total first-half revenues declined to $336.6 million from $346.8 million.

The closure plan cuts occupancy cost. It does not rebuild full-price sell-through, and Zacks flagged heavier markdowns as a drag on merchandise margins.

What happens next

Cato plans to close the additional stores during the third and fourth quarters of fiscal 2026. The fiscal year ends on 30 January 2027.

The next checkpoint is whether lower occupancy costs show up against the sales and margin pressure reported in the August quarter. The company has said the closures should help from fiscal 2027, which starts the day after the current year ends.

Until then, 120 is a plan, not a result. Cato still has to run the remaining stores through a consumer environment its own chief executive describes as pressured.