Cato Corp. is shutting down approximately 120 stores across its national footprint by the end of fiscal 2026, with the women's apparel chain pointing directly at customers' shrinking discretionary spending as the driving force behind the cuts. The Charlotte, North Carolina-based retailer announced Sept. 18 that it would close roughly 70 additional underperforming locations in the third and fourth quarters, on top of 50 closures already planned earlier this year.
Discretionary Spending Squeeze Drives the Decision
Cato attributed the additional round of closures to what it described as negative pressure on customers' discretionary income, according to a company statement carried by Capital Press. As Cleveland.com reports, the company has broadly attributed the closures to a challenging financial environment in many of its core markets. The affected stores are at the end of their lease terms, and Cato said it will not be paying rent for those locations beyond 2026, per reporting from Yahoo Finance.
The retailer expects to incur between $1 million and $1.3 million in costs to exit the additional stores through the end of the year, the same Capital Press release noted. Company leadership expects the pain to pay off eventually — Cato said the closures should have a positive impact on operating results in fiscal 2027 and beyond, per the report carried by Yahoo Finance.
CEO Says Marginal Stores Aren't Bouncing Back
John Cato, chief executive of Cato Corp., said the company reviews approximately one-third of its stores annually to decide whether to exercise lease options or negotiate extensions based on performance, according to Cleveland.com. He said Cato does not expect marginal stores to improve appreciably because of the ongoing pressure on customers' discretionary income, the outlet reported.
The math behind the decision comes into sharper focus in Cato's latest financial results. The company posted second-quarter sales of $163.9 million, down about 6% from the same period a year earlier, while same-store sales fell 3.7% year over year, according to Cleveland.com. Net income for the quarter came in at just $1.1 million, a steep drop from $6.8 million a year earlier — a decline Fox Business also confirmed in its coverage. Cato closed eight stores during the second quarter alone, according to the News & Observer.
A Sprawling Footprint, Now Shrinking
Cato operates more than 1,000 women's apparel and accessories stores across 31 states, a footprint that also includes its Versona brand, an upscale apparel and accessories line with 90 U.S. locations, and its It's Fashion and It's Fashion Metro banners, which combine for 119 stores. The News & Observer, citing the company's own store list as of Aug. 1, put the total at 1,057 stores in 31 states — and calculated that the planned 120 closures represent 11.3% of Cato's entire network. Cato has not disclosed which specific locations will close.
The retreat is not happening in isolation. LSEG reported in an August retail scorecard that retailers nationwide continue to contend with weak consumer sentiment and increasingly value-conscious shoppers as elevated living costs pressure discretionary spending, a dynamic that lines up with Cato's own explanation for its store cuts. The Consumer Price Index rose 0.1% month over month in July and 3.4% year over year, according to Bureau of Labor Statistics data cited in the same LSEG scorecard.
Shoppers have responded by chasing deals, and retailers have obliged. Discount penetration among U.S. online retailers hit 38% in August, well above the 28% average seen in 2025, per the LSEG data. Average discount depth held relatively steady at 32% — described by LSEG as the lowest year-to-date average it has recorded since it began tracking the figure in 2019. Women's apparel prices themselves have barely budged, edging down just 0.1% from December 2024 through August 2026.
Other Women's Apparel Chains Facing Similar Pressure
Cato is far from the only women's apparel retailer trimming its store count this year. Francesca's filed for Chapter 11 bankruptcy protection in February and began court-approved closing sales across its roughly 450-store fleet, offering discounts of 25% to 40% on apparel and accessories, according to Retail TouchPoints.
Torrid, another mall-based apparel chain, announced in August 2025 that it had already closed 57 stores toward a plan to shutter 180 locations that year, according to a report from Yahoo News. That retailer's comparable sales dropped 8.3% in the third quarter, with the company describing the closures as part of a broader shift toward online retail. Cato has not framed its own closures around an e-commerce pivot, but the pattern across the sector points to the same underlying problem: shoppers with less to spend, and fewer excuses for retailers to keep marginal storefronts open.
