Cato Corporation to Close 120 Stores Amid Inflation and Rising Costs

A hugely popular budget fashion brand is set to close 120 of its stores across dozens of states amid high inflation and fuel costs.

More than 10 per cent of the Cato Corporation’s stores are set to close by the end of the fiscal year. As the parent company of Cato Fashions, the company operates more than 1,000 clothing stores across 31 states.

“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 trends and current and projected store profitability,” John Cato, the company’s CEO, said in a statement.

“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,” he continued. “As a result, we are closing more stores than expected this year.”

Initially, the Cato Corporation had planned to close 50 of its stores before increasing this amount by 70 additional stores on September 18. The closures are expected to cost between $1 million and $1.3 million as operations wind down at each location.

John Cato says that he thinks the closures will benefit the company at large.

“We believe that closing these additional stores will have a positive impact on our operating results in fiscal 2027 and beyond,” he said.

The firm has been battling a decline in sales from Q2 in 2025 to Q2 in 2026, confirming in a press release that sales had fallen from $174.7 million in the previous period to $163.9 million in the latter. Overall, the company reported in August that its net income in Q2 2026 was just $1.1 million, compared to $6.8 million in the same period a year earlier.

“Our results in the quarter are 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,” John Cato said at the time.

The company is far from the first business to close locations as increased fuel prices and higher inflation put strain on household budgets. Other large chains have confirmed closures too, including fast-food giant Wendy’s, which stated in May that it wanted to shutter between 5 and 6 percent of its stores.

The Cato Corporation will continue to maintain its massive network of stores. In its August press release, the chain confirmed that it operated 1,057 stores across 31 states.

Cato Fashions is just one branch of the “value-priced” chain’s network, which also includes Versona and It’s Fashion.