NEW YORK — Cato Corp. expects its plus-size business to lead to big gains this year.
The company is opening a string of new, bigger stores, and is broadening its overall product lines, with a concentration on large sizes.
Linda McFarland, president and chief operating officer of the 575-store chain, said Cato projects comparable-store sales growth of 5 to 6 percent for the year. The company expects to add 75 stores in 1994. Speaking at an analysts’ luncheon here sponsored by Johnson Redbook Service, she said the new stores will carry Cato and Cato-Plus, and will average 6,500 square feet. Now, the stores are about 4,000 to 6,000 square feet.
Plus-size offerings currently make up 30 percent of sales, and Cato has been successfully building that business. Last year, comparable-store sales in plus sizes were more than double the same-store sales in all categories for nearly every month, according to V. Hollis Scott, senior vice president and treasurer.
Cato has also introduced apparel for girls ages 4 to 14 in 94 stores. Based on better-than-expected results, the chain will stock girls’ wear in 114 units by the end of spring. Cato is also exploring lingerie and socks and McFarland hinted the company might eventually add a young men’s business.
“There has been a wonderful reaction to new women’s offerings for spring,” she noted, with baby doll dresses, leggings, denim, shoes, coats and hats selling strongly. McFarland said aggressive promotions, customer service, a charge-card program and tailoring assortments to individual stores all contribute to the strong momentum.
Cato is working to develop a multiple-sales strategy, McFarland said, with the goal of increasing average sales to $67 an hour this year from $62 in 1993. The “head-to-toe offerings,” which are color-coordinated, encourage multiple-item sales. Associates are urged to show customers how to coordinate outfits. This strategy is part of the company’s push to market accessories with apparel.
McFarland said Cato did $11 million in coat sales in 1993, more than $11 million in shoes and $3.5 million in millinery.
The company’s charge-card business is booming, McFarland said, noting 27 percent of 1993 business was charged on its own credit card. Another 9 percent is generated from third-party credit cards, like Visa and Discover. Wiley added the average charge purchase is $47 against $25 for a cash purchase. He said interest charges on Cato cards are at the maximum rate in most states. Bad debts are only 2 percent, he said.
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Wiley noted the company is currently debt-free and is working on improving margins.
Alan Wiley, executive vice president and chief financial officer, said estimated capital expenditures for 1994 are nearly $29 million against $17.2 million in 1993. The bulk of the increase will go into store development and automation.
Tuesday, Cato, which is based in Charlotte, N.C., reported earnings declined 1.4 percent in the fourth quarter but were up 34 percent in the year ended Jan. 29.
In the quarter, earnings totaled $5.1 million, or 17 cents a share, against $5.2 million, or 19 cents a year ago. Earnings per share have been adjusted to reflect a three-for-two stock split on June 28, 1993.
Sales, including income from finance and layaway charges, jumped 23.1 percent to $127.3 million from $103.4 million. Same-store sales were up 7 percent.
In the year, earnings rose to $24.8 million, or 84 cents, from $18.5 million, or 71 cents. Year-ago earnings include a charge of $657,000 for early payment of debt.
Revenues in the year rose 23.2 percent to $419.9 million from $340.8 million, and same-store sales were up 8 percent.
Tuesday, Cato’s stock closed down 1 7/8 to 17 5/8 in over-the-counter trading.
The company opened 86 new stores and closed 16 units. Through new store openings, it increased selling space by about 21 percent. The planned growth of 75 stores this year should expand selling space by another 18 percent.
Cato stores are generally near big discounters. Wal-Mart anchors half the centers where Cato has stores, and Kmart anchors 30 percent, McFarland said. Eighty percent of the firm’s merchandise is private label and the executives expect to maintain that level.