Cato will close about 120 stores this year, all at lease end; its filings show why the list more than doubled

The Cato Corporation, the Charlotte, N.C., parent of Cato Fashions, plans to close about 120 stores in its fiscal 2026, up from the roughly 50 it had planned, the company said in a release filed with the SEC. The plan was first announced on Sept. 18 and drew fresh attention on Friday when Fox Business reported it. Cato shares closed Friday at $2.46, according to Nasdaq.com.

"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," Chairman and CEO John Cato said in the release.

What the filings add

The company's latest quarterly report shows the pressure behind the decision.

There is a detail the headline numbers hide. Cato's six-month profit was actually slightly higher than a year ago, $10.5 million against $10.1 million. But that includes a $5.7 million tariff refund booked as lower cost of goods in the first quarter, after the Supreme Court struck down the IEEPA tariffs; the company says it has now received the full payment. Without that one-time credit, first-half profit would have been well below last year's. The second quarter, with no refund in it, earned $0.06 a share against $0.35.

The store math: Cato had closed 14 stores and opened two in the first half, and it planned up to 10 openings for the year. Closing about 120 in total means roughly 106 more shut in the second half. On the 1,057 stores it ran in August, that is about one in ten.

The rent simply stops, which moves the problem to landlords

The release is specific on one point that matters to anyone who owns or leases retail space nearby. Every one of the roughly 70 added closures is a store at the end of its lease, and the company "will not be paying rent for these locations beyond 2026." Exit costs are small, $1.0 million to $1.3 million, mostly for signs, fixtures and returning systems. Cato reviews about a third of its leases each year, and in past years it renewed weak stores for one more year. This year it is not.

That means no lease buyouts and no bankruptcy court. The landlords of about 70 more units learn they will have a dark space in January with no settlement to cushion it.

For the independent shops in those centers, a closing apparel store means less foot traffic. It can also give a small tenant leverage at its next renewal, especially where a lease has a co-tenancy clause tied to occupancy.

112,779 independent retail stores are listed on CheckThisBiz, a directory of 7,704,724 independent US businesses, including 14,307 in CA, 9,799 in TX, 9,064 in NY. Chains and franchises are excluded from that count, so these are the owner-operated businesses that actually apply for funding.

A dress shop or boutique competing for the same price-conscious shopper gains room when a chain unit closes. But the reason Cato gave, pressure on its customers' discretionary income, is the same pressure a local store is facing.

Sources: Cato Corp. press release (Form 8-K), Cato Corp. Form 10-Q, Fox Business, Nasdaq.com, CheckThisBiz. Second-half closure count is a Chronicle calculation from company figures. This is market information, not investment advice.