Cato Corporation
Competitive Advantage
Cato Corporation has a durable competitive advantage. This happens when a company has a way of doing things that are unique and can’t be duplicated and be profitable over a long period of time ("Warren Buffett and a durable competitive advantage | Stock Discussion Forums"). The company as basically found its niche. Many smaller business have a durable competitive advantage.
These are things Cato Corporation have to do for investors to maintain their advantage:
• The product or services the company offers have to restrict entry into the niche of the market share they have.
• Offer merchandise that is its own brand and no one else can carry.
• The products should be unique, have a patent and secure the…show more content… Plus the quick ratio of the company is 1.63, which means they can cover short-term liquidity needs ("Cato Corp. Cl A CATO (U.S.: NYSE)"). o Economy of scale has been increased by installing a software system to monitor what is being sold and order only what is needed.
• Due to the high sales growth rate, CATO's revenue growth has slightly outpaced the industry average of 7.3%. Since the same quarter one year prior, revenues slightly increased by 0.5%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share. In addition, CATO CORP has also vastly surpassed the industry average cash flow growth rate of -19.02%. The company’s gross profit margin is 36.91% ("Cato Corp. Cl A CATO (U.S.: NYSE)"). This is considered strong.
Weaknesses
• This corporation is small. They only have 1320 stores. When a business is small they can only reach a small amount of the market. Cato’s stores are only located in the Northeast and Southeast.
• Low productivity of worker’s has been a weakness in the Cato Corporation. The technology has just been updated and internet shopping has been added to help increase