Value-led women's fashion retailer The Cato Corporation is forecasting a possible fourth-quarter loss after reporting a 51% drop in third-quarter net income.

The US company posted net income of US$2.9m for the three months ended 3 November, on the back of sales of $181.9m, down 3% on the same period in 2006.

Comparable store sales fell 5%. For the first nine months of the fiscal year, Cato posted a 12% drop in net income to $34.1m, with sales 1% down to $625m and comparable store sales down 3%.

"Third quarter results reflect the difficult retail environment we continue to face," said John Cato, chairman, president and CEO.

"Due to lower sales and additional markdowns, we expect fourth-quarter results will be in the range of a loss of ($0.08) to $0.00 per diluted share, versus $0.40 last year."

Cato said this was based on a fourth-quarter comparable store sales fall of 4-7%. Full-year diluted EPS is forecast to hit $0.99-1.07, compared to $1.62 the year before.