Cato to Close 120 Stores as Inflation Squeezes Its Shoppers

The Cato Corporation will close 120 stores—more than 10% of its footprint—by the end of fiscal 2026, a sharp escalation from the 50 closures it originally planned.

The Charlotte, North Carolina-based company, which trades on the New York Stock Exchange under the ticker CATO, announced the expanded closures last week. The move includes 70 stores closing in the remaining two quarters of the fiscal year. Cato joins a wave of retail contraction this year that has already swept up hundreds of Eddie Bauer, Francesca's, GameStop, and Walgreens locations, as Fast Company reported last month.

A shrinking base

Cato operated 1,057 stores across 31 states as of August 1, down from 1,101 a year earlier. The company closed eight stores in its most recent quarter alone.

The Cato Corporation owns and operates three retail brands. Its flagship, Cato Fashions, is a women's apparel and accessories value retailer founded in 1946—making it 80 years old this year—operating in 30 states and competing with the likes of TJ Maxx. The company also runs Versona, an upscale boutique apparel, jewelry, and accessories brand with 90 U.S. locations, and It's Fashion and It's Fashion Metro, its junior retailers, which together have 119 U.S. stores. Its largest market is the southeastern United States.

Profit collapses in Q2

The accelerated closures follow a brutal second quarter. In August, Cato reported net income of just $1.1 million, down sharply from $6.8 million in the same period a year earlier. Sales fell from $174.7 million in Q2 2025 to $163.9 million this year.

CEO John Cato attributed the decline to pressures bearing directly on the company's core value-conscious customer base. The results were "in large part due to the continued pressure on our customers' discretionary income, which is being negatively impacted in part by persistent inflation, higher fuel prices and continued elevated interest rates," he said.

A break from past practice

The company's store-review process normally gives underperformers a reprieve. "Annually we review approximately one-third of our stores to exercise available lease options or negotiate an extension based on each store's performance including store sales trend and current and projected store profitability," Cato explained. "In years past, marginal stores were renewed for an additional year to give the store more time to improve its sales trend and profitability."

That playbook no longer holds. "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," Cato said. "As a result, we are closing more stores than expected this year."

The company did not disclose which locations will close, or how the closures will be distributed across its three brands.

Stock near three-decade lows

Investors have greeted the announcement with mild approval: CATO shares rose about 2% over the past five trading sessions, according to Yahoo Finance data.

The longer picture is far bleaker. The stock opened January at roughly $3.12 and closed yesterday at $2.43, a decline of about 21% since the start of the year. Since the Q2 results landed in August, the shares have fallen almost 13%. At $2.43, CATO stock now trades at levels not seen since the early 1990s.

The bet embedded in the closure plan is that shrinking faster will stop the bleeding. With inflation, fuel prices, and interest rates still weighing on the low-income shoppers who anchor Cato's business, the company's recovery depends less on its store count than on when its customers regain spending power.