Cato’s 120-Store Retreat Exposes Cracks in Off-Price Retail as Ross and TJ Maxx Surge

The Cato Corporation has seen better days. An 80-year-old chain once known for affordable women’s apparel in smaller markets now plans to shutter 120 stores. That’s roughly 15% of its footprint. The move comes as sales slide and profits evaporate.

But the explanation from executives raises eyebrows. They point to their own customers. Shoppers, the company suggests, simply aren’t showing up like they used to. Foot traffic has dried up. Purchases have shrunk. The result? A second-quarter net income of just $1.1 million. A year earlier that figure stood at $6.8 million.

The Widening Gap in Off-Price Performance

This isn’t the story across the entire sector. Far from it. While Cato struggles, its larger rivals post strong gains. Ross Stores saw sales jump 13% in its latest quarter. Comparable store sales rose 10%. Traffic drove much of that increase. The Street reported visits to Ross Dress for Less stores climbed 16.4% year over year according to Placer.ai data.

TJX Companies, parent of TJ Maxx and Marshalls, reported more modest but still positive results. Same-store sales edged up 1%. Overall sales grew 3%. Traffic at its banners held steady even as traditional apparel retailers saw visits fall 3.5%. The contrast couldn’t be starker.

Cato isn’t alone in its troubles. Smaller players in the value apparel space have faced similar headwinds for years. Yet the scale of this closure plan stands out. The company first identified underperforming locations. It then expanded that list by 70 stores. All must close by the end of its fiscal fourth quarter. Many sit in strip centers and malls in the Southeast and Midwest. These are markets where Cato built its name decades ago.

But. The stores no longer pull in the crowds. Merchandise fails to excite. Pricing, once a strength, no longer suffices when competitors offer fresher selections at similar or better prices. Cato executives have cited changing customer habits. Shoppers demand more. They seek trendy items. They expect an experience closer to what Ross and TJ Maxx deliver.

And the data backs this up. Placer.ai figures show off-price apparel held firm in the second quarter of 2026. Ross led the pack. Its dd’s DISCOUNTS banner grew visits 8.4%. TJ Maxx and Marshalls stayed flat. That performance still beat the broader category. Cato, however, lagged badly.

The chain’s challenges run deeper than one bad quarter. Sales have declined over multiple periods. Inventory turnover slowed. The assortment, long focused on moderate women’s clothing, lost relevance as fast fashion and online options proliferated. Even in an environment where consumers hunt for deals, Cato couldn’t capture enough of them.

Ross took a different path. It expanded aggressively into new territories. The company opened dozens of stores in 2025 and continued that pace into 2026. It entered the New York metro area and Puerto Rico. It deepened its presence in California, Florida and Texas. By the end of its fiscal 2025, Ross operated more than 2,200 stores. Plans call for hundreds more over time.

TJX follows a similar script. The company ended its 2026 fiscal year with over 5,200 stores globally. It sees room for 7,000. U.S. growth remains a priority even as it adds locations in Europe and Australia. Its buyers hunt for brand-name goods at steep discounts. That treasure-hunt model still resonates. Shoppers return often. They leave with bags full.

Cato never matched that scale or sophistication. Its supply chain lacks the breadth. Its marketing doesn’t generate the same excitement. As a result, it finds itself squeezed between dollar stores below and the off-price giants above.

Recent industry reports highlight the divide. Retail Dive noted on September 18, 2026 that Ross had become the clear leader in the segment. Its 10% comparable sales increase in the second quarter stood in sharp contrast to TJX’s softer results. Analysts suggest Ross has taken share even from its bigger rival. New customers. Returning lapsed shoppers. Higher frequency from existing ones. All contributed.

So what happens next for Cato? The closures will reduce overhead. They may improve profitability at the remaining locations. Yet the company must still find a way to attract shoppers back. That task grows harder as stronger competitors open nearby. Ross continues to announce new sites. Recent additions on Long Island and in the Midwest put pressure on smaller chains.

Broader retail trends offer little comfort. Department stores continue their long decline. Some off-price players benefit from the excess inventory those closures create. Others don’t. Cato appears to fall into the latter group. Its buyers haven’t secured the same quality or quantity of desirable goods.

Consumer behavior adds another layer. Many households remain cautious. They prioritize value. But value now means more than low prices. It includes convenience, selection and discovery. Ross and TJ Maxx excel at the thrill of the find. Cato stores increasingly feel dated by comparison.

Executives at the healthier companies sound optimistic. Ross raised its store opening target for the year. It now expects about 115 new locations. Traffic remains healthy. Margins hold up despite cost pressures from tariffs and supply chain issues. TJX similarly continues to expand its square footage even after selective closures of a handful of underperforming sites.

Cato’s announcement, by contrast, signals contraction. The company didn’t provide a detailed turnaround plan alongside the closure news. It pointed instead to customer shifts. That framing may reflect internal frustrations. It also risks alienating the very base it needs to rebuild.

The off-price sector isn’t dying. It’s consolidating. Winners invest in data, real estate and merchandising systems. They adapt quickly to changing tastes. Laggards close doors. Cato’s situation echoes past struggles at chains like Tuesday Morning, which filed for bankruptcy years ago after failing to evolve.

Investors have taken notice. Ross shares have performed well on the back of strong results. TJX maintains a premium valuation based on its size and consistency. Cato’s stock, already depressed, faces further pressure from the downsizing news.

Retail real estate players watch closely. The 120 Cato locations will create vacancies. Some may suit dollar stores or other value concepts. Others could sit empty for months. Landlords in smaller markets already grapple with store closures across categories. This round adds to the pain.

Yet opportunity exists for the strong. Ross and TJX have shown they can absorb market share. Their models work even in uncertain economic times. Consumers still want nice things. They just refuse to pay full price. That fundamental truth sustains the off-price format.

Cato must now decide its future. Does it shrink to a smaller, more focused operation? Does it attempt a major merchandising overhaul? Or does it become another name on the list of retailers that couldn’t keep pace? The next few quarters will tell.

For now, the tale of two segments within off-price retail grows clearer. One group expands. The other contracts. Success hinges less on price alone and more on traffic, relevance and execution. Cato learned that lesson the hard way. Its rivals hope to avoid the same fate.