TRADE INSTRUCTIONS
Date: March 17, 2017
Name: Cato Corporation
Symbol: CATO
Type: Close
Limit: Sell at market 

TRADE RATIONALE

Cato’s quarterly and year-end earnings report released Thursday morning was decidedly unimpressive, triggering our stop price so we are closing out this position. The company reported a loss for the fourth quarter and a 28% decline in earnings per share for the entire year compared to 2015.

And just in case anyone was holding out hope that things might start improving soon, the company’s CEO included this quote regarding his outlook for 2017: “Due to the continued volatility and overall difficulty in the retail environment, we believe 2017 will be another challenging year for Cato,… we expect our negative sales trends to continue through the quarter and expect our first quarter earnings to be significantly below last year.”

Surprisingly, the stock is showing some resilience in the face of what can only be regarded as bad news. After dropping near $21 in early morning trading, CATO rallied to close at $22.36 for a drop of less than 3% for the day. That may be due to its 5.8% dividend yield, which is great for income investors but not for traders like us.