Cato Q1 profit rises to $9.3 million, aided by tariff refund

Cato (NYSE:CATO) reported a substantial increase in its first-quarter net income for fiscal 2026, significantly bolstered by a millions-of-dollars tariff refund, even as management cautioned that macroeconomic pressures are weighing on its consumer base.

The Charlotte, North Carolina-based fashion retailer reported net income of $9.3 million, or $0.47 per diluted share, for the quarter ended May 2, 2026.

This marks a notable rise from the net income of $3.3 million, or $0.17 per diluted share, posted in the first quarter of the prior year.

Total sales for the period ticked up 0.7% to $169.5 million, compared to $168.4 million a year earlier, while same-store sales grew by 3%.

Cato’s gross margin improved to 37.2% of sales, up from 35.1% in the prior year quarter.

The margin expansion was primarily driven by a pre-tax $5.7 million tariff refund claim linked to the International Emergency Economic Powers Act.

However, the gains from the refund were partially offset by compression in underlying merchandise contribution, which management attributed to a higher volume of marked-down goods.

Operating expenses declined during the quarter, with selling, general, and administrative (SG&A) expenses falling to $53.9 million from $55.3 million in the same period last year.

As a percentage of sales, SG&A expenses dropped to 31.8% from 32.8% due to reductions in corporate payroll, insurance costs, and equipment maintenance, which overcame elevated incentive compensation expenses.

During the first quarter, the company continued its capital return program, repurchasing 107,823 shares of common stock.

Cato concluded the period operating a retail footprint of 1,065 stores.