Cato store closings: 120 stores in 2026, and what the numbers show

Cato is closing 120 stores in 2026, up from the 50 it first planned, and the company has said exactly why. The Cato store closings announcement on September 18, 2026 added about 70 more locations in the third and fourth quarters. For a chain with 1,057 stores across 31 states at the end of its second quarter, that is more than one store in ten.

What Cato announced

In its September 18 press release, The Cato Corporation said it plans to close approximately 70 additional underperforming stores in the third and fourth quarters, bringing the total to roughly 120 for fiscal 2026. It expects exit costs of between USD 1.0 million and USD 1.3 million through the end of 2026, mostly for disposing of exterior signage and fixtures and returning store systems to headquarters.

All of the affected stores are at the end of their lease terms, so Cato will not pay rent on them beyond 2026. The company says it reevaluates about one third of its store portfolio each year, and that it expects the closures to have a positive effect on operating results in fiscal 2027 and beyond.

Chairman, President and CEO John Cato gave the reason: "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."

The quarter behind the decision

The closures follow a weak second quarter. In its second quarter results for the period ended August 1, 2026, Cato reported net income of USD 1.1 million, or USD 0.06 per diluted share, against USD 6.8 million, or USD 0.35, a year earlier. Sales fell 6 percent to USD 163.9 million from USD 174.7 million, with same-store sales down 3.7 percent.

Gross margin dropped to 32.8 percent from 36.2 percent. Selling, general and administrative expenses ran at 33.0 percent of sales, which means the chain spent more than a third of each sales dollar on overhead and still ended the quarter barely profitable.

The six-month picture is steadier. Net income for the first half was USD 10.5 million, compared with USD 10.1 million last year, on sales of USD 333.3 million, down 2.9 percent. The first quarter carried the half; the second quarter is the signal.

What the CEO said about the customer

The second quarter release put the pressure on shoppers in plain terms. John Cato said: "Our results are largely due to continued pressure on customers' discretionary income, impacted by persistent inflation, higher fuel prices and elevated interest rates." The company also said it expects negative pressure to continue for the foreseeable future and anticipates the back half of 2026 to be challenging.

That is a notable admission from a value retailer. Cato sells low-priced women's apparel and accessories, the segment that is supposed to hold up when budgets tighten. Management is saying the squeeze is reaching the shopper who was already counting dollars.

The fleet, by the numbers

Cato had 1,057 stores at the end of the second quarter, compared with 1,101 a year earlier. It closed only 8 stores in that quarter, so the bulk of the 120 closures is still ahead. As Fox Business reported on September 25, 2026, the company also runs the Versona banner, with 90 locations, and It's Fashion and It's Fashion Metro, with 119. The closures are not limited to one banner in the company's own announcement, but the release does not list individual locations, so a shopper should check with a specific store or the company before assuming any given location is affected.

Reading the closure math

There are two honest readings. The generous one is that the company is pruning stores that were going to lose money anyway and that, with leases ending, the exit cost is small. The USD 1.0 million to USD 1.3 million cost estimate supports that: closing 70 stores for that sum works out to under USD 20,000 a store, because the leases simply expire.

The harder reading is that a smaller fleet shrinks the sales base, and fewer stores means less volume to absorb fixed costs. Cato's own words, "we do not expect these marginal stores to improve appreciably," concede that the stores were not recovering. Whether the remaining 900 or so locations perform better is the real test, and the company has said fiscal 2027 is when it expects to see the benefit.

What this does not tell you

A store count is not a bankruptcy filing. Nothing in Cato's releases suggests insolvency, and the company has not said it is seeking creditor protection. Closure announcements from retailers also vary in how many stores actually close; the official figure is a plan, not a completed count. And the release gives no store list, so lists circulating online are the work of outlets and should be treated as reporting, not Cato's own data.

Our take

Cato is doing what a retailer does when the arithmetic changes: letting weak leases lapse and spending very little to leave. The more telling detail is the second quarter margin drop of 3.4 percentage points and a CEO who expects a hard back half. Watch the third quarter report for two figures: the store count against 1,057 and the gross margin against 32.8 percent. If margin stabilizes as the fleet shrinks, the plan is working. If it does not, closures alone will not fix the problem.