UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.

20549

FORM

10-Q

☑

QUARTERLY REPORT PURSUANT

TO SECTION

13 OR 15(d)

OF THE SECURITIES

EXCHANGE

ACT OF

1934

For the quarterly period ended

~~August~~November 32, 2024

☐

TRANSITION

REPORT PURSUANT

TO SECTION

13 OR 15(d)

OF THE SECURITIES

EXCHANGE

ACT OF

1934

For the transition period from ________________to__________________

Commission file number

1-31340

THE CATO CORPORATION

(Exact name of registrant as specified in its

charter)

Delaware

56-0484485

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

8100 Denmark Road

Charlotte

North Carolina

28273-5975

(Address of principal executive offices)

(Zip Code)

(704)

554-8510

(Registrant's telephone number, including area code)

Not Applicable

(Former name, former address and former fiscal year, if

changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Class A - Common Stock, par value $.033 per share

CATO

New York Stock Exchange

Indicate

by check

mark

whether

the

registrant

(1)

has

filed

all

reports

required

filed

by Section

15(d)

the

Securities

Exchange Act of 1934

during the preceding 12

months (or for such shorter

period that the registrant

was required to file such

reports),

and (2) has been subject to such filing requirements for the past 90 days.

Yes

Indicate

check

mark

whether

the

registrant

has

submitted

electronically

every

Interactive

Data

File

required

submitted

pursuant to Rule

405 of Regulation

S-T (§232.405

of this chapter)

during the preceding

12 months (or

for such shorter

period that the

registrant was required to submit such files).

Yes

Indicate by

check mark

whether the

registrant is

a large

accelerated filer,

an accelerated

filer, a

non-accelerated filer,

a smaller

reporting

company,

emerging

growth

company.

See

the

definitions

“large

accelerated

filer,”

“accelerated

filer,”

“smaller

reporting

company,” and “emerging growth

company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☐

Accelerated filer

☑

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

emerging

growth

company,

indicate

check

mark

the

registrant

has

elected

not

use

the

extended

transition

period

for

complying with any new or revised financial accounting standards provided

pursuant to Section 13(a) of the Exchange Act.

☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b

-2 of the Exchange Act). Yes

☐

☒

November

2024,

there

were

~~As of August 3~~18, ~~2024~~774, ~~there were~~ 124

Class A

common

stock

and

18,804,629

1,763,652

Class B

common

stock

outstanding.

THE CATO CORPORATION

FORM 10-Q

Quarter Ended ~~August~~November 32, 2024

Table

of Contents

Page No.

PART

I – FINANCIAL INFORMATION

(UNAUDITED)

Item 1.

Financial Statements (Unaudited):

Condensed Consolidated Statements of Income (Loss) and Comprehensive Income (Loss)

For the Three Months and Nine Months Ended November

2, 2024 and October 28,

2023

Condensed Consolidated Balance Sheets

At ~~August~~November 32, 2024 and February 3, 2024

Condensed Consolidated Statements of Cash Flows

For the Nine Months Ended November 2, 2024 and

October 28, 2023

Condensed Consolidated Statements of Stockholders’ Equity

5 – 6

For the Three Months and Nine Months Ended November

2, 2024 and October 28,

2023

Notes to Condensed Consolidated Financial Statements

7 – 21

For the Three Months and Nine Months Ended November

2, 2024 and October 28,

2023

Item 2.

Management’s Discussion and Analysis

of Financial Condition and

Results of Operations

22 – 2829

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

2930

Item 4.

Controls and Procedures

2930

PART

II – OTHER INFORMATION

Item 1.

Legal Proceedings

3031

Item 1A.

Risk Factors

3031

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

3031

Item 3.

Defaults Upon Senior Securities

3031

Item 4.

Mine Safety Disclosures

3132

Item 5.

Other Information

3132

Item 6.

Exhibits

Signatures

PART

I FINANCIAL INFORMATION

ITEM 1.

FINANCIAL STATEMENTS

THE CATO CORPORATION

CONDENSED CONSOLIDATED STATEMENTS

OF INCOME (LOSS) AND

COMPREHENSIVE INCOME (LOSS)

(UNAUDITED)

Three Months Ended

~~Six~~Nine Months Ended

~~August~~November 32, ~~2024~~

~~July~~2024 ~~29, 2023~~

~~August~~October 328, ~~2024~~

~~July 29,~~ 2023

November 2,

2024

October 28,

2023

(Dollars in thousands, except per share data)

REVENUES

Retail sales

~~166~~144,~~934~~642

~~181~~156,~~181~~682

~~342~~486,~~206~~848

~~371~~528,~~492~~174

Other revenue (principally finance charges, late fees and

layaway charges)

1,~~694~~528

1,~~690~~574

35,~~521~~049

35,~~429~~003

Total revenues

~~168~~146,~~628~~170

~~182~~158,~~871~~256

~~345~~491,~~727~~897

~~374~~533,~~921~~177

COSTS AND EXPENSES, NET

Cost of goods sold (exclusive of depreciation shown

below)

~~109~~102,~~122~~955

~~117~~105,~~617~~832

~~221~~324,~~627~~582

~~239~~345,~~704~~536

Selling, general and administrative (exclusive of

depreciation

shown below)

5857,~~181~~876

61,~~618~~792

~~114~~172,~~933~~809

~~123~~185,~~552~~344

Depreciation

2,~~329~~737

2,~~510~~504

47,~~369~~106

47,~~867~~371

Interest and other income

(12,~~742~~646)

(1,~~334~~523)

(710,~~563~~209)

(23,~~231~~754)

Costs and expenses, net

~~167~~160,~~890~~922

~~180~~168,~~411~~605

~~333~~494,~~366~~288

~~365~~534,~~892~~497

~~Income~~Loss before income taxes

~~738~~(14,752)

2(10,~~460~~349)

12(2,~~361~~391)

9(1,~~029~~320)

Income tax (benefit) expense

~~643~~322

1(4,~~333~~272)

1,~~292~~614

~~3,475~~(797)

Net ~~income~~loss

95(15,074)

1(6,~~127~~077)

11(4,~~069~~005)

~~5,554~~(523)

Basic ~~earnings~~loss per share

(0.0179)

(0.0630)

(0.5424)

(0.2702)

Diluted ~~earnings~~loss per share

(0.0179)

(0.0630)

(0.5424)

(0.2702)

Comprehensive income:

Net ~~income~~loss

95(15,074)

1(6,~~127~~077)

11(4,~~069~~005)

~~5,554~~(523)

Unrealized gain (loss) on available-for-sale securities, net of

deferred income taxes of $

5060

and $

~~156~~217

for

the three and nine months ended October 28, 2023,

respectively

~~676~~(151)

~~167~~201

(72223)

~~522~~723

Comprehensive income (loss)

~~771~~(15,225)

1(5,~~294~~876)

10(4,~~997~~228)

~~6,076~~200

See notes to condensed consolidated financial statements (unaudited).

THE CATO CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

~~August~~November 32, 2024

February 3, 2024

ASSETS

(Dollars in thousands)

Current Assets:

Cash and cash equivalents

3020,~~764~~216

23,940

Short-term investments

7365,~~902~~994

79,012

Restricted cash

3,~~562~~355

3,973

Accounts receivable, net of allowance for customer credit losses of

~~674~~670

and $

705

at November 2, 2024 and February 3, 2024, respectively

2924,~~772~~776

29,751

Merchandise inventories

95107,~~972~~159

98,603

Prepaid expenses and other current assets

98,~~506~~705

7,783

Total Current Assets

~~243~~230,~~478~~205

243,062

Property and equipment – net

6362,~~975~~648

64,022

Other assets

2219,~~340~~783

25,047

Right-of-Use assets – net

~~125~~111,~~779~~769

154,686

Total Assets

~~455~~424,~~572~~405

486,817

LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:

Accounts payable

84,~~623~~169

87,821

Accrued expenses

3638,~~207~~158

37,404

Accrued employee benefits and bonus

1,~~022~~370

1,675

646

Current lease liability

5145,~~091~~836

61,108

Total Current Liabilities

~~173~~169,~~589~~533

188,008

Other noncurrent liabilities

14,~~573~~555

14,475

Lease liability

7263,~~348~~218

92,013

Stockholders' Equity:

Preferred stock, $

100

par value per share,

100,000

authorized,

none

issued

Class A common stock, $

0.033

par value per share,

50,000,000

shares authorized;

18,~~804~~774,~~629~~124

shares and

18,802,742

issued at November 2, 2024 and February 3, 2024, respectively

634

635

Convertible Class B common stock, $

0.033

par value per share,

15,000,000

shares authorized;

1,763,652

issued at November 2, 2024 and February 3, 2024

Additional paid-in capital

~~127~~128,~~951~~827

126,953

Retained earnings

6647,~~094~~407

64,279

Accumulated other comprehensive income

~~323~~172

395

Total Stockholders' Equity

~~195~~177,~~062~~099

192,321

Total Liabilities and Stockholders' Equity

~~455~~424,~~572~~405

486,817

See notes to condensed consolidated financial statements (unaudited).

THE CATO CORPORATION

CONDENSED CONSOLIDATED STATEMENTS

OF CASH FLOWS

(UNAUDITED)

~~Six~~Nine Months Ended

~~August~~November 32, 2024

~~July~~October 2928, 2023

(Dollars in thousands)

Operating Activities:

Net ~~income~~loss

11(4,~~069~~005)

~~5,554~~(523)

Adjustments to reconcile net ~~income~~loss to net cash (used in) provided

by operating activities:

Depreciation

47,~~369~~106

47,~~867~~371

Provision for customer credit losses

~~338~~492

~~248~~397

Purchase premium and discount accretion of investments

(~~577~~848)

(97226)

Gain on sale of assets held for investment

(45,~~223~~350)

Share-based compensation

~~840~~1,581

23,~~192~~189

Deferred income taxes

(~~832~~1,981)

Loss on disposal of property and equipment

96116

113

Changes in operating assets and liabilities which provided

(used) cash:

Accounts receivable

1,~~041~~283

(~~666~~1,815)

Merchandise inventories

2(8,~~631~~556)

1913,~~338~~184

Prepaid and other assets

(1,~~891~~315)

(~~667~~1,716)

Operating lease right-of-use assets and liabilities

(~~775~~1,151)

(1,~~001~~499)

Accrued income taxes

~~646~~-

21,~~948~~375

Accounts payable, accrued expenses and other liabilities

(42,~~728~~619)

(106,~~306~~099)

Net cash (used in) provided by operating activities

8(13,~~836~~266)

2111,~~579~~670

Investing Activities:

Expenditures for property and equipment

(46,~~799~~509)

(810,~~470~~271)

Purchase of short-term investments

(3138,~~396~~659)

(1444,~~497~~595)

Sales of short-term investments

3752,~~703~~994

4660,~~777~~999

Sales of other assets

513,~~165~~674

Net cash provided by investing activities

621,~~673~~500

236,~~810~~133

Financing Activities:

Dividends paid

(710,~~050~~516)

(610,~~962~~457)

Repurchase of common stock

(2,~~237~~398)

(2,563)

Proceeds from employee stock purchase plan

~~191~~338

~~198~~357

Net cash used in financing activities

(912,~~096~~576)

(912,~~327~~663)

Net (decrease) increase in cash, cash equivalents, and restricted cash

6(4,~~413~~342)

365,~~062~~140

Cash, cash equivalents, and restricted cash at beginning of period

27,913

23,792

Cash, cash equivalents, and restricted cash at end of period

3423,~~326~~571

5928,~~854~~932

Non-cash activity:

Accrued other assets and property and equipment expenditures

~~721~~440

~~572~~1,100

See notes to condensed consolidated financial statements (unaudited).

THE CATO CORPORATION

CONDENSED CONSOLIDATED STATEMENTS

OF STOCKHOLDERS’ EQUITY

(UNAUDITED)

Accumulated

Additional

Other

Total

Common

Paid-in

Retained

Comprehensive

Stockholders'

Stock

Capital

Earnings

Income

Equity

(Dollars in thousands, except per share data)

Balance — February 3, 2024

694

126,953

64,279

395

192,321

Comprehensive income:

Net income

10,974

Unrealized net losses on available-for-sale securities, net of

deferred income tax expense of $0

(748)

Dividends paid ($

0.17

per share)

(3,523)

Class A common stock sold through employee stock purchase

plan

189

190

Share-based compensation issuances and exercises

Share-based compensation expense

(84)

Repurchase and retirement of treasury shares

(14)

(2,223)

(2,237)

Balance — May 4, 2024

694

127,058

69,512

(353)

196,911

Comprehensive income:

Net income

Unrealized net gains on available-for-sale securities, net of

deferred income tax expense of $0

676

Dividends paid ($

0.17

per share)

(3,527)

Class A common stock sold through employee stock purchase

plan

Share-based compensation issuances and exercises

Share-based compensation expense

858

872

Repurchase and retirement of treasury shares

Balance — August 3, 2024

694

127,951

66,094

323

195,062

Comprehensive income:

Net loss

(15,074)

Unrealized net losses on available-for-sale securities, net of

deferred income tax expense of $0

(151)

Dividends paid ($

0.17

per share)

(3,466)

Class A common stock sold through employee stock purchase

plan

172

173

Share-based compensation expense

(1)

704

714

Repurchase and retirement of treasury shares

(1)

(158)

(159)

Balance — November 2, 2024

693

128,827

47,407

172

177,099

See notes to condensed consolidated financial statements (unaudited).

THE CATO CORPORATION

CONDENSED CONSOLIDATED STATEMENTS

OF STOCKHOLDERS’ EQUITY

(UNAUDITED)

Accumulated

Additional

Other

Total

Common

Paid-in

Retained

Comprehensive

Stockholders'

Stock

Capital

Earnings

Income

Equity

(Dollars in thousands, except per share data)

Balance — January 28, 2023

691

122,431

104,709

(1,238)

226,593

Comprehensive income:

Net income

4,428

Unrealized net gains on available-for-sale securities, net of

deferred income tax expense of $

107

355

Dividends paid ($

0.17

per share)

(3,455)

Class A common stock sold through employee stock purchase

plan

195

Share-based compensation issuances and exercises

Share-based compensation expense

929

Repurchase and retirement of treasury shares

(8)

(2,259)

(2,267)

Balance — April 29, 2023

683

123,555

103,426

(883)

226,781

Comprehensive income:

Net income

1,127

Unrealized net gains on available-for-sale securities, net of

deferred income tax expense of $

167

Dividends paid ($

0.17

per share)

(3,507)

Class A common stock sold through employee stock purchase

plan

Share-based compensation expense

1,212

1,227

Repurchase and retirement of treasury shares

(1)

(293)

(294)

Balance — July 29, 2023

695

124,798

100,756

(716)

225,533

Comprehensive income:

Net loss

(6,077)

Unrealized net gains on available-for-sale securities, net of

deferred income tax expense of $

201

Dividends paid ($

0.17

per share)

(3,495)

Class A common stock sold through employee stock purchase

plan

188

189

Share-based compensation expense

(1)

963

967

Balance — October 28, 2023

695

125,949

91,189

(515)

217,318

See notes to condensed consolidated financial statements (unaudited).

THE CATO CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

FOR THE THREE MONTHS AND NINE MONTHS ENDED

NOVEMBER 2, 2024 AND

OCTOBER 28, 2023

NOTE 1 - GENERAL

The

condensed

consolidated

financial

statements

November

2024

and

for

the

three

and

nine

months ended

November 2, 2024

and October 28,

2023 have been

prepared from the

accounting records

of The Cato

Corporation and its wholly-owned subsidiaries

(the “Company”), and all

amounts shown are

unaudited.

In the opinion of management, all adjustments considered necessary for a fair statement of the

financial statements

have been

included.

All such

adjustments

are

normal, recurring

nature

unless

otherwise noted.

The results

of the

interim period

may not

be indicative

of the

results expected

for the

entire year.

The interim financial

statements should be read

in conjunction with

the consolidated financial statements

and

notes

thereto,

included

the

Company’s

Annual

Report

Form

10-K

for

the

fiscal

year

ended

February 3, 2024.

Amounts as of February 3, 2024 have been derived from the audited balance sheet, but

do not include all disclosures required by

accounting principles generally accepted in the United States of

America.

On February 16, 2024, the Company closed on the sale of land held for investment.

The sale resulted in a

net gain

of $

3.2

million and

was included

in Interest

and other

income in

the accompanying

Condensed

Consolidated Statements of Income

(Loss) and Comprehensive

Income (Loss) for

the nine months

ended

November 2, 2024.

During the current quarter of the fiscal year,

the Company received $

8.6

million from the insurance claim

~~insurance claim~~ settlement and sale of its corporate jet.

0.17

THE CATO CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

FOR THE THREE MONTHS AND NINE MONTHS ENDED

NOVEMBER 2, 2024 AND

OCTOBER 28, 2023

NOTE 2 - EARNINGS PER SHARE:

Accounting Standard Codification (“ASC”) 260 –

Earnings Per Share

requires dual presentation of basic and

diluted Earnings Per Share

(“EPS”) on the face of

all income statements for

all entities with complex

capital

structures.

The Company has presented one basic EPS and one diluted EPS amount for all common shares in

the accompanying Condensed Consolidated Statements of Income (Loss) and Comprehensive Income (Loss).

While

the

Company’s

certificate

incorporation

provides

the

right

for

the

Board

Directors

declare

~~Purchase~~dividends ~~Plan.~~on Class A shares without declaration of commensurate dividends on Class B shares, the Company

has historically paid the same dividends to both Class A and Class B shareholders

and the Board of Directors

has resolved to continue this

practice.

Accordingly, the Company’s allocation

of income for purposes

of the

EPS

computation

the

same

for

Class

and

Class

and

the

EPS

amounts

reported

herein

are

applicable to both Class A and Class

B shares.

Basic EPS

is computed

as net

income (loss)

less earnings

allocated to

non-vested equity

awards divided

the

weighted

average

number

common

outstanding

for

the

period.

Diluted

EPS

reflects

the

potential

dilution

that

could

occur

from

common

issuable

through

stock

options

and

the

Employee

Stock Purchase Plan.

Three Months Ended

~~Six~~Nine Months Ended

~~August~~November 32, ~~2024~~

~~July~~2024 ~~29, 2023~~

~~August~~October 328, ~~2024~~

~~July 29,~~ 2023

~~(Dollars~~November in2, ~~thousands)~~

2024

October 28,

2023

(Dollars in thousands, except per share data)

Numerator

Net ~~earnings~~loss

95(15,074)

1(6,~~127~~077)

11(4,~~069~~005)

~~5,554~~(523)

Earnings (loss) allocated to non-vested equity awards

9(200)

~~(54)~~346

(~~583~~548)

~~(292)~~49

Net ~~earnings~~loss available to common stockholders

~~104~~(15,274)

1(5,~~073~~731)

10(4,~~486~~553)

~~5,262~~(474)

Denominator

Basic weighted average common shares outstanding

19,~~297~~302,~~484~~107

19,~~395~~421,~~484~~701

19,~~327~~318,~~137~~794

19,~~349~~373,~~266~~411

Diluted weighted average common shares outstanding

19,~~297~~302,~~484~~107

19,~~395~~421,~~484~~701

19,~~327~~318,~~137~~794

19,~~349~~373,~~266~~411

Net ~~income~~loss per common share

Basic ~~earnings~~loss per share

(0.0179)

(0.0630)

(0.5424)

(0.2702)

Diluted ~~earnings~~loss per share

(0.0179)

(0.0630)

(0.5424)

(0.2702)

THE CATO CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

FOR THE THREE MONTHS AND NINE MONTHS ENDED

NOVEMBER 2, 2024 AND

OCTOBER 28, 2023

NOTE 3 – ACCUMULATED OTHER COMPREHENSIVE INCOME:

The

following

table

sets

forth

information

regarding

the

reclassification

out

Accumulated

other

comprehensive income (in thousands) for the

three months ended November 2, 2024:

Changes in Accumulated Other

Comprehensive Income (a)

Unrealized Gains

and (Losses) on

Available-for-Sale

Securities

Beginning Balance at ~~May~~August 43, 2024

(353)

776

100

Net current-period other comprehensive income

676

Ending Balance at August 3, 2024

323

Other comprehensive income (loss) before

reclassification

(151)

Amounts reclassified from accumulated

other comprehensive income to net income

Net current-period other comprehensive income (loss)

(151)

Ending Balance at November 2, 2024

172

(a) All amounts are net-of-tax. Amounts in parentheses indicate a debit/reduction to accumulated other comprehensive income.

The

following

table

sets

forth

information

regarding

the

reclassification

out

Accumulated

other

comprehensive income (in thousands) for the

nine months ended November 2, 2024:

Changes in Accumulated Other

(b) Includes $

130

income for net realized gains on available-for-sale securities. The tax impact of this reclassification was $

Comprehensive Income (a)

Unrealized Gains

and (Losses) on

Available-for-Sale

Securities

Beginning Balance at February 3, 2024

395

Other comprehensive income (loss) before

reclassification

~~714~~563

Amounts reclassified from accumulated

other comprehensive income to net income (b)

(786)

Net current-period other comprehensive income (loss)

(72223)

Ending Balance at ~~August~~November 32, 2024

~~323~~172

(a) All amounts are net-of-tax. Amounts in parentheses indicate a debit/reduction to accumulated other comprehensive income.

(b) Includes

$1,022

impact of Accumulated other comprehensive income reclassifications into Interest and other

income for net realized gains on available-for-sale securities. The tax impact of this reclassification was $

236

THE CATO CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

FOR THE THREE MONTHS AND NINE MONTHS ENDED

NOVEMBER 2, 2024 AND

OCTOBER 28, 2023

NOTE 3 – ACCUMULATED OTHER COMPREHENSIVE INCOME

(CONTINUED):

The

following

table

sets

forth

information

regarding

the

reclassification

out

Accumulated

other

comprehensive income (in thousands) for the

three months ended October 28, 2023:

Changes in Accumulated Other

Comprehensive Income (a)

Unrealized Gains

and (Losses) on

Available-for-Sale

Securities

Beginning Balance at ~~April~~July 29, 2023

(883)

164

Net current-period other comprehensive income

167

Ending Balance at July 29, 2023

(716)

Other comprehensive income (loss) before

reclassification

185

Amounts reclassified from accumulated

other comprehensive income to net income (b)

Net current-period other comprehensive income (loss)

201

Ending Balance at October 28, 2023

(515)

(a) All amounts are net-of-tax. Amounts in parentheses indicate a debit/reduction to accumulated other comprehensive income.

(b) Includes $

420

impact of Accumulated other comprehensive income reclassifications into Interest and other

income for net realized gains on available-for-sale securities. The tax impact of this reclassification was $

The

following

table

sets

forth

information

regarding

the

reclassification

out

Accumulated

other

comprehensive income (in thousands) for the

nine months ended October 28, 2023:

Changes in Accumulated Other

Comprehensive Income (a)

Unrealized Gains

and (Losses) on

Available-for-Sale

Securities

Beginning Balance at January 28, 2023

(1,238)

Other comprehensive income (loss) before

reclassification

~~519~~704

Amounts reclassified from accumulated

other comprehensive income to net income (b)

319

Net current-period other comprehensive income (loss)

~~522~~723

Ending Balance at ~~July~~October 2928, 2023

(~~716~~515)

(a) All amounts are net-of-tax. Amounts in parentheses indicate a debit/reduction to accumulated other comprehensive income.

(b) Includes $

424

impact of Accumulated other comprehensive income reclassifications into Interest and other

income for net realized gains on available-for-sale securities. The tax impact of this reclassification was $

THE CATO CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

FOR THE THREE MONTHS AND NINE MONTHS ENDED

NOVEMBER 2, 2024 AND

OCTOBER 28, 2023

NOTE 4 – FINANCING ARRANGEMENTS:

At November 2,

2024, the Company had

a revolving credit agreement,

which provides for borrowings of

to $

35.0

million, less

the balance

of any

revocable letters

of credit

related to

purchase commitments,

and is

committed

through

May

2027.

The

credit

agreement

contains

various

financial

covenants

and

limitations,

including

the

maintenance

specific

financial

ratios.

April

25,

2024,

the

Company

amended

the

revolving credit

agreement to

modify a

definition used

in calculating

the Company’s

minimum EBITDAR

coverage

ratio

add

back

certain

income

tax

receivables

included

the

calculation

the

ratio.

November 1, 2024, the Company

amended the revolving credit agreement

to lower the minimum EBITDAR

coverage

ratio

and

the

corresponding

minimum

cash

and

investments

used

determine

the

EBITDAR

coverage ratio in exchange

for a secured position

in any future borrowings.

For the quarter ended

November

2, 2024,

after giving

effect to

the amendments,

the Company

was in

compliance with

the credit

agreement.

There

were

minimum EBITDAR coverage ratio to add back certain income tax receivables included in the calculation of

borrowings

outstanding,

any

outstanding

letters

credit

that

reduced

borrowing

availability, as of November 2, 2024.

The weighted average interest rate under

the credit facility was

credit facility was

zero

November 2, 2024 due to

outstanding borrowings.

NOTE 5 – REPORTABLE SEGMENT INFORMATION:

The

Company

has

determined

that

has

four

operating

segments,

defined

under

ASC

280

–

Segment

Reporting

, including Cato,

It’s Fashion, Versona

and Credit.

As outlined in

ASC 280-10, the Company

has

two

reportable segments: Retail and Credit.

The Company has aggregated its

three

retail operating segments,

including

e-commerce,

based

on the

aggregation

criteria

outlined in

ASC

280-10, which

states that

two

more operating segments may be aggregated into a single reportable segment if aggregation is consistent with

the

objective

and

basic

principles

ASC

280-10,

which

require

the

segments

have

similar

economic

characteristics, products, production processes, clients and

methods of distribution.

The

Company’s

retail

operating

segments

have

similar

economic

characteristics

and

similar

operating,

financial and

competitive risks.

The products

sold in each

retail operating

segment are

similar in

nature, as

they

all

offer

women’s

apparel,

shoes

and

accessories.

Merchandise

inventory

the

Company’s

retail

operating

segments

sourced

from

the

same

countries

and

some

the

same

vendors,

using

similar

production processes.

Merchandise for the Company’s retail operating segments is distributed to retail stores

in a similar manner through

the Company’s single distribution center and is

subsequently sold to customers in

a similar

manner.

The Company

operates

its women’s

fashion specialty

retail stores

states as

November 2,

2024,

principally in the southeastern United States. The Company offers its own credit card to its customers and

all

credit

authorizations,

payment

processing

and

collection

efforts

are

performed

separate

wholly-

owned subsidiaries of the Company.

THE CATO CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

FOR THE THREE MONTHS AND NINE MONTHS ENDED

NOVEMBER 2, 2024 AND

OCTOBER 28, 2023

NOTE 5 – REPORTABLE SEGMENT INFORMATION

(CONTINUED):

The following schedule summarizes certain segment

information (in thousands):

Three Months Ended

~~Six~~Nine Months Ended

~~August~~November 32, 2024

Retail

Credit

Total

~~August~~November 32, 2024

Retail

Credit

Total

Revenues

$~~167~~145,~~954~~508

$~~674~~662

$~~168~~146,~~628~~170

Revenues

$~~344~~489,~~384~~893

$12,~~343~~004

$~~345~~491,~~727~~897

Depreciation

2,~~328~~737

2,~~329~~737

Depreciation

47,~~368~~105

47,~~369~~106

Interest and other income

(12,~~742~~646)

Interest and other income

(710,~~563~~209)

Income (loss) before

income taxes

~~485~~(14,992)

~~253~~240

~~738~~(14,752)

Income (loss) before

income taxes

11(3,~~859~~132)

~~502~~741

12(2,~~361~~391)

Capital expenditures

1,~~536~~710

Capital expenditures

46,~~799~~509

Three Months Ended

~~Six~~Nine Months Ended

~~July~~October 2928, 2023

Retail

Credit

Total

~~July~~October 2928, 2023

Retail

Credit

Total

Revenues

$~~182~~157,~~213~~595

$~~658~~661

$~~182~~158,~~871~~256

Revenues

$~~373~~531,~~648~~243

$1,~~273~~934

$~~374~~533,~~921~~177

Depreciation

2,~~509~~504

2,~~510~~504

Depreciation

47,~~866~~370

47,~~867~~371

Interest and other income

(1,~~334~~523)

Interest and other income

(23,~~231~~754)

Income (loss) before

income taxes

2(10,~~207~~604)

~~253~~255

2(10,~~460~~349)

Income (loss) before

income taxes

8(2,~~590~~014)

~~439~~694

9(1,~~029~~320)

Capital expenditures

21,~~300~~801

Capital expenditures

810,~~470~~271

Retail

Credit

Total

Total assets as of ~~August~~November 32, 2024

$~~417~~386,~~112~~664

$3837,~~460~~741

$~~455~~424,~~572~~405

Total assets as of February 3, 2024

448,488

38,329

486,817

The Company evaluates segment performance based on

income before income taxes.

The Company does not

allocate certain corporate expenses or

income taxes to the credit segment.

The following schedule summarizes the direct expenses

of the credit segment, which are

reflected in Selling,

general and administrative expenses (in

thousands):

Three Months Ended

~~Six~~Nine Months Ended

~~August~~November 32, ~~2024~~

~~July~~2024 ~~29, 2023~~

~~August~~October 328, ~~2024~~

~~July 29,~~ 2023

November 2,

2024

October 28,

2023

Payroll

~~161~~152

~~142~~135

~~314~~466

~~276~~411

Postage

~~115~~113

~~109~~111

~~217~~330

~~210~~321

Other expenses

~~144~~157

~~154~~160

~~309~~466

~~348~~507

Total expenses

~~420~~422

~~405~~406

~~840~~1,262

~~834~~1,239

THE CATO CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

FOR THE THREE MONTHS AND NINE MONTHS ENDED

NOVEMBER 2, 2024 AND

OCTOBER 28, 2023

NOTE 6 – STOCK-BASED COMPENSATION:

November

2024,

the

Company’s

2018

Incentive

Compensation

Plan

allows

for

the

granting

various

forms

equity-based

awards,

including

restricted

stock

and

stock

options

for

grant

officers,

directors and key employees.

The

following

table

presents

the

number

options

and

restricted

stock

initially

authorized

and

available for grant under this plan as

of November 2, 2024:

2018

Plan

Options and/or restricted stock initially authorized

4,725,000

Options and/or restricted stock available for grant

2,~~753~~782,~~001~~782

accordance

with

ASC

718

–

Compensation–Stock Compensation

the

fair

value

current

restricted

stock awards

is estimated

on the

date of

grant based

on the

market price

of the

Company’s

stock and

amortized

compensation

expense

straight-line

basis

over

the

vesting

periods.

November

2024

and

February

2024,

there

was

98,~~148~~212,000

and

9,334,000

respectively,

total

unrecognized compensation expense

related to nonvested

restricted stock awards,

which had a

remaining

~~2.4~~weighted-average vesting period of

2.2

years and

2.1

years, respectively. The

total compensation expense

during the

three and

nine months

ended November

2, 2024

was $

~~872~~714,000

and $

~~806~~1,520,000

1,~~230~~ respectively,~~000~~

compared

total

compensation

expense

2967,~~158,~~000

and

~~administrative expenses in the Condensed Consolidated Statements of Income~~3,126,000

for

the

three

and

nine

months

ended

October

28,

2023,

respectively.

These

compensation

expenses

are

classified

component

Selling,

general

and

administrative

expenses

the

Condensed

Consolidated

Statements

Income

(Loss).

The following summary

shows the changes

in the number

of shares of

unvested restricted stock

outstanding

during the nine months ended November 2, 2024:

Weighted Average

Number of

Grant Date Fair

Value

Per Share

Restricted stock awards at February 3, 2024

1,123,873

11.32

Granted

386,900

4.80

Vested

(232,696)

13.22

Forfeited or expired

(1848,~~296~~077)

9.1751

Restricted stock awards at ~~August~~November 32, 2024

1,~~259~~230,~~781~~000

8.9897

THE CATO CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

FOR THE THREE MONTHS AND NINE MONTHS ENDED

NOVEMBER 2, 2024 AND

OCTOBER 28, 2023

NOTE 6 – STOCK BASED-COMPENSATION (CONTINUED):

The

Company’s

Employee

Stock

Purchase

Plan

allows

eligible

full-time

employees

purchase

limited

number of

of the

Company’s

Class

Common Stock

during each

semi-annual offering

period

% discount through payroll deductions. During the nine

months ended November 2, 2024

and October 28,

2023, the

Company sold

3873,~~910~~593

and

2650,~~127~~540

shares to

employees at

an average

discount of

0.8781

and $

1.3123

per share, respectively,

under the Employee

Stock Purchase Plan.

The compensation expense

recognized for

the

discount

given

under

the

Employee

Stock

Purchase

Plan

was

3460,000

and

~~Selling~~62, ~~general and administrative expenses.~~000

for

the

nine

months

ended

November

2024

and

October

28,

2023,

respectively.

These

expenses

are

classified

component of Selling, general and administrative expenses.

NOTE 7

– FAIR VALUE MEASUREMENTS:

The following

tables

set forth

information regarding

the

Company’s financial

assets and

liabilities that

are

measured at fair value (in thousands)

as of November 2, 2024 and February

3, 2024:

Quoted

Prices in

Active

Significant

Markets for

Other

Significant

Identical

Observable

Unobservable

~~August~~November 32, 2024

Assets

Inputs

Description

Level 1

Level 2

Level 3

Assets:

State/Municipal Bonds

32,~~943~~253

Corporate Bonds

5052,~~558~~649

U.S. Treasury/Agencies Notes and Bonds

1810,~~430~~578

Cash Surrender Value of Life Insurance

89,~~886~~109

Asset-backed Securities (ABS)

~~971~~514

Total Assets

8275,~~788~~103

7365,~~902~~994

89,~~886~~109

Liabilities:

Deferred Compensation

(8,~~604~~886)

Total Liabilities

(8,~~604~~886)

THE CATO CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

FOR THE THREE MONTHS AND NINE MONTHS ENDED

NOVEMBER 2, 2024 AND

OCTOBER 28, 2023

Quoted

Prices in

Active

Significant

Markets for

Other

Significant

Identical

Observable

Unobservable

February 3, 2024

Assets

Inputs

Description

Level 1

Level 2

Level 3

Assets:

State/Municipal Bonds

12,540

Corporate Bonds

45,400

U.S. Treasury/Agencies Notes and Bonds

18,114

Cash Surrender Value of Life Insurance

8,586

Asset-backed Securities (ABS)

2,958

Corporate Equities

1,084

Total Assets

88,682

1,084

79,012

8,586

Liabilities:

Deferred Compensation

(8,654)

Total Liabilities

(8,654)

The Company’s investment portfolio

was primarily invested in

corporate bonds and

U.S. Treasury/Agencies

notes and

bonds held

in managed

accounts with

underlying ratings

of A

or better

at November

2, 2024

and

February 3, 2024.

The state, municipal and corporate bonds have contractual maturities which range from

~~contractual~~13 ~~maturities which range from~~

~~six~~ days

2.9

years. The U.S. Treasury/Agencies notes and bonds have contractual maturities which range from

143 days

32.07

years.

These

securities

are

classified

available-for-sale

and

are

recorded

Short-term

investments

and

Other

assets

the

respective

Condensed

Consolidated

Balance

Sheets.

These

assets

are

carried

fair

value

with

unrealized

gains

and

losses

reported

net

taxes

Accumulated

other

~~Capital~~comprehensive ~~One, and Discover~~income.

At February

2024, the

Company

had $

1.1

million

of corporate

equities and

deferred compensation

plan

assets of

8.6

million.

At November 2,

2024, the Company

had deferred compensation

plan assets of

8.9.1

million.

During the nine

months ended November

2, 2024, the

Company sold its

corporate equities.

All of

these assets are recorded within Other

assets in the Condensed Consolidated Balance

Sheets.

Level 1 category securities are measured

at fair value using quoted active

market prices.

Level 2 investment

securities

include

corporate,

state

and

municipal

bonds

for

which

quoted

prices

may

not

available

active exchanges for identical instruments.

Their fair value is principally based on market values determined

by management with the assistance of a third-party pricing service.

Since quoted prices in active markets for

identical assets are

not available, these

prices are determined

by the pricing

service using observable

market

information

such

quotes

from

less

active

markets

and/or

quoted

prices

securities

with

similar

characteristics, among other factors.

Deferred compensation plan

assets consist of

life insurance policies.

These life insurance

policies are valued

based on the cash surrender value of the insurance contract, which is determined based on

such factors as the

fair value of the underlying assets and discounted cash flow and are therefore classified within Level 3

of the

valuation

hierarchy.

The

Level

liability

associated

with

the

life

insurance

policies

represents

deferred

compensation obligation,

the value

of which

is tracked

via underlying

insurance funds’

net asset

values, as

recorded

Other

noncurrent

liabilities

the

Condensed

Consolidated

Balance

Sheet.

These

funds

are

designed to mirror mutual funds and money

market funds that are observable and

actively traded.

THE CATO CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

FOR THE THREE MONTHS AND NINE MONTHS ENDED

NOVEMBER 2, 2024 AND

OCTOBER 28, 2023

The

following

tables

summarize

the

change

fair

value

the

Company’s

financial

assets

and

liabilities

measured using Level 3 inputs

for the nine months ended November

2, 2024 and the year ended

February 3,

2024

(in thousands):

Fair Value

Measurements Using

Significant Unobservable

Asset Inputs (Level 3)

Cash Surrender Value

Beginning Balance at February 3, 2024

8,586

Redemptions

Additions

Total gains or (losses):

Included in interest and other income (or

changes in net assets)

~~300~~523

Ending Balance at ~~August~~November 32, 2024

89,~~886~~109

Fair Value

Measurements Using

Significant Unobservable

Liability Inputs (Level 3)

Deferred Compensation

Beginning Balance at February 3, 2024

(8,654)

Redemptions

~~543~~573

Additions

(~~121~~175)

Total (gains) or losses:

Included in interest and other income (or

changes in net assets)

(~~372~~630)

Ending Balance at ~~August~~November 32, 2024

(8,~~604~~886)

THE CATO CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

FOR THE THREE MONTHS AND NINE MONTHS ENDED

NOVEMBER 2, 2024 AND

OCTOBER 28, 2023

Fair Value

Measurements Using

Significant Unobservable

Asset Inputs (Level 3)

Cash Surrender Value

Beginning Balance at January 28, 2023

9,274

Redemptions

(1,168)

Additions

Total gains or (losses):

Included in interest and other income (or

changes in net assets)

480

Ending Balance at February 3, 2024

8,586

Fair Value

Measurements Using

Significant Unobservable

Liability Inputs (Level 3)

Deferred Compensation

Beginning Balance at January 28, 2023

(8,903)

Redemptions

1,119

Additions

(292)

Total (gains) or losses:

Included in interest and other income (or

changes in net assets)

(578)

Ending Balance at February 3, 2024

(8,654)

THE CATO CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

FOR THE THREE MONTHS AND NINE MONTHS ENDED

NOVEMBER 2, 2024 AND

OCTOBER 28, 2023

NOTE 8 – RECENT ACCOUNTING PRONOUNCEMENTS:

November

2023,

the

Financial

Accounting

Standards

Board

(“FASB”)

issued

Accounting

Standards

Update

(“ASU”)

2023-07,

“Segment

Reporting

(Topic

280):

Improvements

Reportable

Segment

Disclosures,”

which

modifies

disclosure

requirements

for

all

public

entities

that

are

required

report

segment

information.

The update

will change

the

reporting of

segments by

adding

significant

segment

expenses,

other

segment

items,

title

and

position

the

chief

operating

decision

maker

(“CODM”) and

how

the

CODM

uses

the

reported

measures

make

decisions.

The

update

also

requires

all

annual

disclosures

about

reportable

segment’s

profit

loss

and

assets

interim

periods.

This

guidance

effective

for

fiscal

years

beginning

after

December

15,

2023

and

interim

periods

within

fiscal

years

beginning

after

December

15,

2024.

Early

adoption

permitted,

and

the

guidance

applicable

retrospectively to all prior periods presented

in the financial statements.

The Company is currently in the

process of

evaluating the

potential impact

of adoption

of this

new guidance

on its

consolidated financial

statements and related disclosures.

December

2023,

the

FASB

issued

ASU

2023-09,

“Income

Taxes

(Topic

740):

Improvements

Income

Tax

Disclosures,”

which

modifies

the

requirements

income

tax

disclosures

require

disaggregated

information

about

reporting

entity’s

effective

tax

rate

reconciliation

well

information on

income taxes

paid.

This guidance

is effective

for fiscal

years beginning

after December

15, 2024 for all public

business entities, with early adoption and retrospective application

permitted.

The

Company is

currently in

the process

of evaluating

the potential

impact of

adoption of

this new

guidance

on its consolidated financial statements and related disclosures.

November

2024,

the

FASB

issued

ASU

2024-03,

“Income

Statement—Reporting

Comprehensive

Income—Expense

Disaggregation

Disclosures

(Subtopic

220-40):

Disaggregation

Income

Statement

Expenses,”

which

requires

public

entities

disclose,

annual

and

interim

basis,

disaggregated

information

the

footnotes

about

specified

information

certain

costs

and

expenses.

This

guidance is effective for annual periods beginning after December 15, 2026 and interim periods beginning

after

December

15,

2027,

with

early

adoption

permitted.

The

Company

currently

the

process

evaluating the

potential impact

of adoption

of this

new guidance

on its

consolidated financial statements

and related disclosures.

NOTE 9 – INCOME TAXES:

The

Company

had

effective

tax

rate

for

the

first

nine

months

2024

(

1067.5

compared

effective tax

rate of

~~% compared to~~ 60.4

% for the

first nine months

of fiscal 2023.

Income tax expense

for the first

nine

~~38.5~~months increased to $

~~% for~~ 1.6

million in fiscal 2024 from an

income tax benefit of $

10.38

million in fiscal 2023.

The increase

in tax

expense in

2024 is

primarily due

to the

valuation allowance

against net

deferred tax

assets attributable

to U.S.

federal net operating

loss carryforwards recorded

in the fourth

quarter of 2023

~~fiscal~~and ~~2024~~a ~~from~~smaller $release of reserves for uncertain tax positions.

3.5

the impact of the foreign rate differential and lower state income taxes.

NOTE 10 – COMMITMENTS AND CONTINGENCIES:

The Company is, from time to time, involved in routine litigation incidental to the conduct of its business,

including

litigation

regarding

the

merchandise

that

sells,

litigation

regarding

intellectual

property,

litigation instituted by persons injured upon premises under the Company’s control, litigation with respect

litigation with present or former employees.

deemed probable and reasonably estimable.

THE CATO CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

FOR THE THREE MONTHS AND NINE MONTHS ENDED

NOVEMBER 2, 2024 AND

OCTOBER 28, 2023

various

employment

matters,

including

alleged

discrimination

and

wage

and

hour

litigation,

and

litigation with

present or former employees.

Although such

litigation is

routine and

incidental to

the conduct

of the

Company’s business,

as with

any

business

its

size

with

significant

number

employees

and

significant

merchandise

sales,

such

litigation could

result in

large

monetary awards.

Based on

information currently

available, management

does

not

believe

that

any

reasonably

possible

losses

arising

from current

pending litigation

will

have

material adverse

effect

on the

Company’s

condensed consolidated

financial statements.

However,

given

the

inherent uncertainties

involved in

such

matters, an

adverse outcome

one or

more of

such

matters

could

materially and

adversely affect

the

Company’s

financial condition,

results of

operations and

cash

flows

any

particular

reporting

period.

The

Company

accrues

for

these

matters

when

the

liability

deemed probable and reasonably estimable.

NOTE 11 – REVENUE RECOGNITION:

The

Company

recognizes

sales

the

point

purchase

when

the

customer

takes

possession

the

merchandise

and

pays

for

the

purchase,

generally

with

cash

credit.

Sales

from

purchases

made

with

Cato

credit,

gift

cards

and

layaway

sales

from

stores

are

also

recorded

when

the

customer

takes

possession of

the merchandise. E-commerce

sales are

recorded when the

risk of

loss is

transferred to the

customer.

Gift cards

are recorded

as deferred

revenue until they

are redeemed

or forfeited.

Gift cards

not have expiration dates. Layaway transactions are recorded as

deferred revenue until the customer takes

possession or

forfeits the

merchandise. A

provision is

made for

estimated merchandise

returns based

sales

volumes

and

the

Company’s

experience;

actual

returns

have

not

varied

materially

from

historical

amounts.

provision

made

for

estimated

write-offs

associated

with

sales

made

with

the

Company’s

proprietary

credit

card.

Amounts

shipping

and

handling

billed

customers

sales

transaction are

classified as

Other revenue

and the

costs related

to shipping

product to

customers (billed

and accrued) are classified as Cost of goods sold.

The Company

offers its

own proprietary

credit card

to customers.

All credit

activity is

performed by

the

Company’s wholly-owned

subsidiaries.

None

of the credit

card receivables are

secured. During the

three

and

nine

months ended

November 2,

2024, the

Company estimated

customer

credit

losses

~~166~~154,000

and

492,000

respectively,

compared

149,000

and

421,000

for

the

three

and

nine

months

ended

October 28,

2023, respectively.

Sales purchased

on the

Company’s

proprietary credit

card for

the three

and nine months ended November 2, 2024 were $

5.1

million and $

16.4

million, respectively, compared to

~~338,000~~5.7

million and $

~~151,000~~17.4

million for the three and nine months ended October 28, 2023,

respectively.

The

following

table

provides

information

about

receivables

and

contract

liabilities

from

contracts

with

272,000

5.6

11.3

5.9

million and $

11.7

customers (in thousands):

Balance as of

~~August~~November 32, 2024

February 3, 2024

Proprietary Credit Card Receivables, net

10,~~788~~716

10,909

Gift Card Liability

6,~~534~~266

8,143

THE CATO CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

FOR THE THREE MONTHS AND NINE MONTHS ENDED

NOVEMBER 2, 2024 AND

OCTOBER 28, 2023

NOTE 12 – LEASES:

The

Company determines

whether

arrangement is

lease

inception.

The

Company

has

operating

leases for

stores, offices,

warehouse space

and equipment.

Its leases have

remaining lease terms

of up

years based on

the estimated likelihood

of renewal. Some

include options to

extend the lease

term for

up to

five years

, and some include options to terminate the lease

within one year

. The Company considers

these

options in

determining the

lease

term

used

establish

its

right-of-use

assets

and

lease

liabilities.

The

Company’s

lease

agreements

not

contain

any

material

residual

value

guarantees

material

restrictive covenants.

most

the

Company’s

leases

not

provide

implicit

rate,

the

Company

uses

its

estimated

incremental

borrowing

rate

based

the

information

available

commencement

date

the

lease

determining the present value of lease payments.

The components of lease cost are shown below (in thousands):

Three Months Ended

~~August~~November 32, 2024

~~July~~October 2928, 2023

Operating lease cost (a)

16,~~808~~755

17,~~597~~498

Variable

lease cost (b)

~~463~~490

~~504~~544

(a) Includes right-of-use asset amortization of ($

0.2

) million and ($

0.3

) million for the three months ended ~~August~~November 32, 2024 and ~~July~~

29October 28, 2023, respectively.

(b) Primarily related to monthly percentage rent for stores not presented on the condensed consolidated balance sheets.

~~Six~~Nine Months Ended

~~August~~November 32, 2024

~~July~~October 2928, 2023

Operating lease cost (a)

3350,~~810~~565

3553,~~675~~174

Variable

lease cost (b)

~~960~~1,450

1,~~098~~642

(a) Includes right-of-use asset amortization of ($

0.4

) million and ($

0.6

) million ~~for the six months ended August 3, 2024~~ and ~~July 29,~~ ($

~~2023, respectively~~0. 9

) million for the nine months ended November 2, 2024 and

October 28, 2023, respectively.

(b) Primarily related to monthly percentage rent for stores not presented on the condensed consolidated balance sheets.

THE CATO CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

FOR THE THREE MONTHS AND NINE MONTHS ENDED

NOVEMBER 2, 2024 AND

OCTOBER 28, 2023

Supplemental cash flow

information and non-cash

activity related to

the Company’s

operating leases are

as follows (in thousands):

Operating cash flow information:

Three Months Ended

~~August~~November 32, 2024

~~July~~October 2928, 2023

Cash paid for amounts included in the measurement of lease liabilities

15,~~481~~584

16,~~679~~671

Non-cash activity:

Right-of-use assets obtained in exchange for lease obligations

~~913~~1,207

~~999~~(1,468)

~~Six~~Nine Months Ended

~~August~~November 32, 2024

~~July~~October 2928, 2023

Cash paid for amounts included in the measurement of lease liabilities

3146,~~088~~672

3450,~~024~~696

Non-cash activity:

Right-of-use assets obtained in exchange for lease obligations

12,~~357~~564

21,~~903~~435

Weighted-average

remaining

lease

term

and

discount

rate

for

the

Company’s

operating

leases

are

follows:

As of

~~August~~November 32, 2024

~~July~~October 2928, 2023

Weighted-average remaining lease term

1.7

years

1.8

years

2.0

Weighted-average discount rate

4.7484%

3.2630%

Maturities

lease

liabilities

fiscal

year

for

the

Company’s

operating

leases

are

follows

(in

thousands):

Fiscal Year

2024 (a)

3215,~~232~~226

2025

45,~~606~~680

2026

29,~~710~~745

2027

1617,~~962~~027

2028

8,~~034~~843

Thereafter

~~892~~1,171

Total lease payments

~~133~~117,~~436~~692

Less: Imputed interest

98,~~997~~638

Present value of lease liabilities

~~123~~109,~~439~~054

(a) Excluding the ~~six~~nine months ended ~~August~~November 32, 2024

THE CATO CORPORATION

ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

FORWARD-LOOKING INFORMATION:

The

information

contained

“Management’s

Discussion

and

Analysis

Financial

Condition

and

Results

Operations”

should

read

along

with

the

unaudited

Condensed

Consolidated

Financial

Statements,

including

the

accompanying

Notes

appearing

this

report.

Any

the

following

are

“forward-looking”

statements

within

the

meaning

Section 27A

the

Securities

Act

1933,

amended,

and

Section 21E

the

Securities

Exchange

Act

1934,

amended:

(1) statements

this

Form 10-Q

that

reflect

projections

expectations

our

future

financial

economic

performance;

(2) statements

that

are

not

historical

information;

(3) statements

our

beliefs,

intentions,

plans

and

objectives for future operations,

including those contained in

“Management’s Discussion and

Analysis of

Financial Condition and

Results of Operations”;

(4) statements relating to

our operations or

activities for

our

fiscal

year

ending

February

2025

(“fiscal

2024”)

and

beyond,

including,

but

not

limited

to,

statements regarding expected

amounts of

capital expenditures and

store openings, relocations,

remodels

and closures, and

statements regarding the

potential impact of

supply chain disruptions,

extreme weather

conditions,

inflationary

pressures

and

other

economic

market

conditions

our

business,

results

operations and financial condition and

statements of plans or

intentions regarding new store development

store

closures;

and

(5)

statements

relating

our

future

contingencies.

When

possible,

have

attempted to identify forward-looking statements

by using words such

as “will,” “expects,” “anticipates,”

“approximates,” “believes,” “estimates,” “hopes,” “intends,”

“may,” “plans,”

“could,” “would,” “should”

and

any

variations

negative

formations

such

words

and

similar

expressions.

can

give

assurance

that actual

results or

events

will not

differ

materially from

those

expressed or

implied in

any

such

forward-looking

statements.

Forward-looking

statements

included

this

report

are

based

information available

to us

as of

the filing

date of

this report,

but subject

to known

and unknown

risks,

uncertainties and other factors that could cause actual results

to differ materially from those contemplated

by the forward-looking statements.

Such factors include, but

are not limited to,

the following: any actual

perceived

deterioration

in,

continuation

negative

trends

in,

the

conditions

that

drive

consumer

confidence and

spending, including,

but

not limited

to, prevailing

social, economic,

political

and public

health conditions and

uncertainties, levels of

unemployment, fuel, energy

and food

costs, wage rates,

tax

rates, interest

rates, home

values, consumer

net worth,

the availability

of credit

and inflation;

changes in

laws, regulations

or government

policies affecting

our business,

including but

not limited

to current

and

potentially

new

tariffs;

uncertainties

regarding

the

impact

any

governmental

action

regarding,

responses

to,

the

foregoing

conditions;

competitive

factors

and

pricing

pressures;

our

ability

predict

and respond

to rapidly changing

fashion trends

and consumer demands;

our ability to

increase new

store

openings and

the ability

of any

such new

stores to

grow and

perform as

expected; underperformance

other factors that may lead to, or affect the

volume of, store closures and negatively affect the Company’s

profitability,

financial

condition,

prospects,

and

ability

comply

with

its

debt

covenants;

adverse

weather,

public

health

threats,

acts

war

aggression

similar

conditions

that

may

affect

our

merchandise supply chain,

sales or

operations; inventory risks

due to

shifts in

market demand, including

the

ability

liquidate

excess

inventory

anticipated

margins;

adverse

developments

volatility

affecting

the

financial

services

industry

broader financial

markets;

and

other

factors

discussed

under

“Risk Factors” in

Part I, Item 1A

of our

Annual Report on Form

10-K for the

fiscal year ended

February

3, 2024

(“fiscal 2023”),

as amended

or supplemented,

and in

other reports

we file

with or

furnish to

the

Securities and

Exchange Commission

(“SEC”) from

time to

time.

do not

undertake, and

expressly

decline, any

obligation to

update any such

forward-looking information contained

in this

report, whether

~~changing~~as ~~fashion~~a ~~trends~~result ~~and~~of ~~consumer demands; our ability to increase~~ new ~~store~~information, ~~openings~~future ~~and~~events, ~~the~~or ~~ability~~otherwise.

of any such new stores to grow and perform as expected; underperformance or other factors that may lead

to, or affect the volume of, store closures; adverse weather, public health threats, acts of war or aggression

THE CATO CORPORATION

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

(CONTINUED)

CRITICAL ACCOUNTING POLICIES AND ESTIMATES:

The

Company’s

critical

accounting

policies

and

estimates

are

fully

described

“Management’s

Discussion and Analysis of Financial Condition and Results of Operations” in the

Company’s Annual Report

Form

10-K

for

the

fiscal

year

ended

February

2024.

The

preparation

the

Company’s

financial

statements

conformity

with

generally

accepted

accounting

principles

the

United

States

(“GAAP”)

requires management to make estimates and assumptions about future events that affect the amounts reported

the

financial

statements

and

accompanying

notes.

Future

events

and

their

effects

cannot

determined

with absolute

certainty. Therefore,

the determination

of estimates

requires the

exercise of

judgment. Actual

results

inevitably

will

differ

from

those

estimates,

and

such

differences

may

material

the

financial

statements. The most significant accounting estimates

inherent in the preparation of the

Company’s financial

statements include

the calculation

of potential

asset impairment,

income tax

valuation allowances,

reserves

relating

self-insured

health

insurance,

workers’

compensation,

general

and

auto

insurance

liabilities,

uncertain tax positions, the allowance for

customer credit losses, and inventory shrinkage.

The Company’s critical accounting policies and

estimates are discussed with the Audit Committee.

THE CATO CORPORATION

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

(CONTINUED)

RESULTS OF OPERATIONS:

The following table sets forth, for the periods indicated, certain items in

the Company's unaudited Condensed

Consolidated Statements of Income (Loss) as a

percentage of total retail sales:

Three Months Ended

~~Six~~Nine Months Ended

~~August~~November 32, 2024

~~July~~October 2928, 2023

~~August~~November 32, 2024

~~July~~October 2928, 2023

Total retail sales

100.0

Other revenue

1.1

1.0

0.9

1.0

0.9

Total revenues

101.1

101.0

100.9

101.0

100.9

Cost of goods sold (exclusive of depreciation)

71.2

67.5

66.7

65.4

64.9

64.8

64.5

Selling, general and administrative (exclusive

of depreciation)

3440.90

3439.04

3335.65

3335.31

Depreciation

1.9

1.6

1.5

1.4

1.3

Interest and other income

(1.8)

(1.0)

(2.1)

(0.7)

~~(2.2)~~Loss before income taxes

(010.62)

~~Income~~(6.6) ~~before income taxes~~

(0.45)

1(0.43)

~~3.6~~Net loss

2(10.4)

~~Net~~(3.9) ~~income~~

(0.18)

(0.61)

3.2

1.5

THE CATO CORPORATION

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

(CONTINUED)

RESULTS OF OPERATIONS

(CONTINUED):

Management’s

Discussion

and

Analysis

Financial

Condition

and

Results

Operations

(“MD&A”)

intended

provide

information

assist

readers

better

understanding

and

evaluating

our

financial

condition and results of

operations. We recommend reading

this MD&A in conjunction

with our Condensed

Consolidated Financial

Statements and

the Notes

to those

statements included in

the “Financial

Statements”

section of this Quarterly Report on

Form 10-Q, as well as our 2023

Annual Report on Form 10-K.

Recent Developments

Inflationary Cost Pressure and High Interest Rates

The pressure on our customers’ disposable income continued in the

first three quarters of fiscal 2024, due

prolonged and

persistently higher

prices caused

by high

inflation rates,

especially related

housing,

groceries

and

fuel,

well

high

interest

rates.

These

high

interest

rates

have

adversely

affected

the

availability and cost of credit for our customers, including

revolving credit and auto loans, and continue to

negatively

impact

our

customers’

disposable

income.

Our

customers’

willingness

purchase

our

products may continue to be negatively impacted by these inflationary

pressures and high interest rates.

Although

interest

rates

and

inflation

have

decreased,

believe

the

pressure

our

customers’

disposable

income adversely

impacted

the

first

three quarters

fiscal

2024

and will

likely

continue to

have a

negative impact

on consumer

behavior and,

by extension,

our results

operations and

financial

~~impacted~~condition byduring ~~these~~the ~~inflationary~~remainder ~~pressures~~of ~~and~~fiscal ~~high interest rates~~2024.

operations and financial condition during the remainder of fiscal 2024.

Merchandise Supply Chain

significant

amount

our

merchandise

manufactured

overseas,

principally

Southeast

Asia,

and

traverses

through

the

Panama

Canal

the

Suez

Canal.

the

first

quarter

2024,

the

drought

conditions

experienced

the

region

surrounding

the

Panama

Canal

reduced

the

number

transits

approximately 37% and

also reduced the

permissible draft of

vessels transiting the

Panama Canal, which

reduced the volume

and number of

containers carried by container

ships and increased

our costs.

These

conditions improved as

the Panama

Canal authority

increased the

daily transits

and the

permissible draft

of vessels, raising the number of

transits to 95% of pre-drought operations in the

second quarter and back

to pre-drought

levels in

the third

quarter.

The hostilities

affecting the

region surrounding the

Suez Canal

are causing container ships to

travel longer distances around the

Cape of Good Hope,

which is increasing

lead times for merchandise and

our costs to ship these

goods, as well as decreasing the

pool of containers

available.

The combination of

these situations

has negatively impacted

the first

nine months

of 2024.

addition,

the

third

quarter

was

impacted

later

shipments

part

due

congestion

certain

Asian

ports,

the

U.S.

port

strike

the

east

coast,

and

civil

unrest

some

Asian

countries

that

caused

merchandise to miss

its shipping windows.

Though conditions have

incrementally improved, we believe

the totality of

these conditions will

likely continue to

have a negative

impact on our

results of operations

~~six~~and ~~months~~financial ofcondition ~~2024.~~for ~~Though conditions in~~ the ~~Panama~~foreseeable ~~Canal~~future. ~~have incrementally improved, we believe the~~

Comparison of the Three and Nine

Months ended November 2, 2024 with October

28, 2023

Total retail sales for the

third quarter were $144.6 million compared to

last year’s third quarter sales

of $156.7

million, an 8% decrease.

The Company’s sales

decrease in the third quarter

of fiscal 2024 was

primarily due

decrease

same-store

sales

and

stores

closed

the

fourth

quarter

2023.

For

the

nine

months

ended

November

2024,

total

retail

sales

were

$486.8

million

compared

last

year’s

comparable

nine

financial condition for the foreseeable future.

4% decrease in same-store sales and store closures. Same-store sales include stores that have been open more

THE CATO CORPORATION

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

(CONTINUED)

month sales of

$528.2 million, an

8% decrease. The

decrease in sales

in the first

nine months of

fiscal 2024

was due

primarily to

a 4%

decrease in

same-store sales

and store

closures.

Same-store sales

include stores

that have been open

more than 15 months.

Stores that have been

relocated or expanded are

also included in

the same-store sales

calculation after they

have been open

more than 15

months.

The method of

calculating

same-store

sales

varies across

the

retail industry.

result,

our

same-store

sales

calculation

may

not

comparable to ~~those~~similarly oftitled measures reported by other ~~entities~~companies. E-commerce sales were less than 5% of

total sales for the nine months ended

November 2, 2024 and are included in

the same-store sales calculation.

Total

revenues,

comprised

retail

sales

and

other

revenue

(principally

finance

charges

and

late

fees

customer accounts

receivable and

layaway fees),

were $146.2

million and

$491.9 million

for the

three and

nine months ended November 2, 2024, compared to $158.3 million and $533.2

million for the three and nine

months

ended

October

28,

2023,

respectively.

The

Company

operated

1,167

stores

November

2024

compared

1,245 stores

October

28,

2023.

During

the first

nine

months of

fiscal

2024, the

Company

opened one store

and closed

13 stores.

The Company currently

expects to

close approximately

65 stores

total in fiscal 2024.

Credit

revenue

$0.7

million

represented

0.5%

total

revenues

the

third

quarter

fiscal

2024,

compared to credit revenue of $0.7 million or 0.4% of total revenues in the third quarter of fiscal 2023. Credit

revenue is

comprised of

interest earned

on the

Company’s private

label credit

card portfolio

and related

fee

income.

Related expenses principally include

payroll, postage and other

administrative expenses and totaled

$0.4 million in the third quarter

of fiscal 2024, compared to

last year’s third quarter expense of

$0.4 million.

Other

revenue,

component

total

revenues,

was

$1.5

million

and

$5.0

million

for

the

three

and

nine

months ended November 2, 2024, respectively, compared to $1.6 million and $5.0 million for the prior year’s

comparable three

and nine

month periods.

The slight

decrease in

Other revenue

for the

three months

ended

November

2024

was

due

decreases

e-commerce

shipping

revenue

and

finance

charges

associated

with the Company’s proprietary credit

card, partially offset by an increase

in gift card breakage income.

Cost of

goods sold

was $103.0

million, or

71.2% of

retail sales

and $324.6

million, or

66.7% of retail

sales

for the three and

nine months ended November

2, 2024, respectively, compared

to $105.8 million, or

67.5%

of retail sales and $345.5 million, or 65.4% of retail sales for the comparable three and nine month periods of

fiscal 2023.

The overall increase in cost of goods sold as a percent of retail sales for the third

quarter and first

nine

months

fiscal

2024

versus

the

comparable

three

and

nine

month

periods

fiscal

2023

resulted

primarily from deleveraging of occupancy and buying costs and higher distribution and freight costs, partially

offset

higher

selling

margins.

Cost

goods

sold

includes

merchandise

costs

(net

discounts

and

allowances),

buying

costs,

distribution

costs,

occupancy

costs,

freight

and

inventory

shrinkage.

Net

merchandise

costs

and

in-bound

freight

are

capitalized

inventory

costs.

Buying

and

distribution

costs

include

payroll,

payroll-related

costs

and

operating

expenses

for

the

buying

departments

and

distribution

center.

Occupancy

costs include

rent,

real

estate taxes,

insurance, common

area

maintenance, utilities

and

maintenance for

stores and

distribution facilities.

Total gross

margin

dollars (retail

sales less

cost of

goods

sold exclusive of depreciation) decreased by

18.1% to $41.7 million for the third quarter

of fiscal 2024 and by

11.1%

$162.3

million

for

the

first

nine

months

fiscal

2024,

compared

$50.9

million

and

$182.6

million for the

prior year’s comparable

three and nine

months of fiscal

2023, respectively.

Gross margin as

presented may not be comparable to those

of other entities.

Selling, general and administrative expenses (“SG&A”) primarily include corporate and store payroll, related

payroll

taxes

and

benefits,

insurance,

supplies,

advertising,

bank

and

credit

card

processing

fees.

SG&A

expenses were $57.9 million, or 40.0% of retail sales and $172.8 million, or 35.5% of retail sales for the

third

quarter and first nine months of

fiscal 2024, respectively, compared to $61.8

million, or 39.4% of retail sales

and

$185.3

million,

or 35.1%

of retail

sales

for the

prior

year’s

comparable three

and

nine

month periods,

the third quarter.

THE CATO CORPORATION

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

(CONTINUED)

respectively.

The decrease in SG&A

expenses for the third

quarter and first nine

months of fiscal 2024

was

primarily due to lower payroll,

advertising and insurance expenses, partially

offset by expenses related to the

~~Interest~~startup ~~and other income was $1.7 million, or 1.0%~~ of ~~retail~~our ~~sales~~distribution ~~and~~center ~~$7.6~~automation ~~million, or 2~~project.2% ~~of retail sales for~~

Depreciation expense was $2.7 million, or 1.9% of retail sales and $7.1 million, or 1.5% of

retail sales for the

third quarter

and first

nine months

of fiscal

2024, respectively,

compared to

$2.5 million,

or 1.6%

of retail

sales and $7.4 million or 1.4%

of retail sales for the comparable three

and nine month periods of fiscal

2023,

respectively.

Interest and other

income was $2.6

million, or 1.8%

of retail sales

and $10.2 million,

or 2.1% of

retail sales

for the

three and

nine months

ended November

2, 2024,

respectively, compared to

$1.5 million,

or 1.0%

retail sales and $3.8 million,

or 0.7% of retail sales for the

comparable three and nine month periods

of fiscal

2023, respectively.

The increase

for the

third quarter

of fiscal

2024 compared

to fiscal

2023 was

primarily

due

gain

the

disposal

the

Company’s

corporate

aircraft

and

higher

interest

earned

the

Company’s investments.

The increase

for the

first nine

months of

fiscal 2024

compared to

fiscal 2023

was

primarily

due

$3.2

million

net

gain

sale

land

held

for

investment,

gain

the

disposal

the

Company’s corporate aircraft and higher interest

earned on the Company’s investments.

Income tax expense was

$0.3 million and $1.6 million

for the third quarter

and first nine months of fiscal

2024, respectively,

compared to

a tax

benefit of

$4.3 million

and $0.8

million for

the comparable

three

and

nine

month

periods

fiscal

2023,

respectively.

The

effective

income

tax

rate

for

the

first

nine

months

fiscal

2024

was

(67.5%)

compared

60.4%

for

the

first

nine

months

fiscal

2023.

The

increase in tax expense in

2024 is primarily due to

the valuation allowance against net

deferred tax assets

attributable to

U.S. federal

net operating

loss carryforwards

recorded in

the fourth

quarter of

2023 and

smaller release of reserves for uncertain tax positions.

LIQUIDITY, CAPITAL

RESOURCES

AND MARKET

RISK:

The Company

believes that

its cash,

cash equivalents

and short-term

investments, together

with cash

flows

~~Income~~from ~~tax~~operations, ~~expense~~will ~~was~~be ~~$0.6~~adequate ~~million~~to ~~and~~fund ~~$1.3~~the ~~million~~Company’s ~~for~~regular ~~the~~operating ~~second~~requirements ~~quarter~~ and ~~first~~expected ~~six~~capital ~~months of fiscal~~

expenditures for the next 12

months.

Cash used in operating activities during the first nine months of fiscal 2024 was $13.3 million as compared

$11.7

million

provided

the

first

nine

months

fiscal

2023.

The

increase

cash

used

operating

activities

$25.0

million

for the

first

nine

months of

fiscal

2024

compared to

the

first nine

months of

fiscal 2023 was primarily attributable to the

relative change in inventory from year-end to

the third quarter for

both

years

and

subtraction

net

income

for

non-operating

gains

sale

assets

held

for

investment,

partially offset by the relative change

of accounts payable from year-end to

the third quarter for both years.

November

2024,

the

Company

had

working

capital

$60.7

million

compared

$55.1

million

February 3,

2024.

The increase

in working

capital was

primarily attributable

to a

decrease in

current lease

liability

and

increase

inventory,

partially

offset

decrease

short-term

investments,

cash

and

~~Cash~~accounts ~~provided by operating activities during the first six months of fiscal 2024 was $8~~receivable.8 ~~million as compared~~

At November 2,

2024, the Company had

a revolving credit agreement,

which provides for borrowings of

to $35.0

million, less

the balance

of any

revocable letters

of credit

related to

purchase commitments,

and is

committed

through

May

2027.

The

credit

agreement

contains

various

financial

covenants

and

limitations,

including

the

maintenance

specific

financial

ratios.

April

25,

2024,

the

Company

amended

the

quarter for both years.

3, 2024.

The increase in working capital was primarily attributable to a decrease in current lease liability and

minimum EBITDAR coverage ratio to add back certain income tax receivables included in the calculation of

THE CATO CORPORATION

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

(CONTINUED)

revolving credit

agreement to

modify a

definition used

in calculating

the Company’s

minimum EBITDAR

coverage

ratio

add

back

certain

income

tax

receivables

included

the

calculation

the

ratio.

November 1, 2024, the Company

amended the revolving credit agreement

to lower the minimum EBITDAR

coverage

ratio

and

the

corresponding

minimum

cash

and

investments

used

determine

the

EBITDAR

coverage ratio in exchange

for a secured position

in any future borrowings.

For the quarter ended

November

2, 2024,

after giving

effect to

the amendments,

the Company

was in

compliance with

the credit

agreement.

There

were

borrowings

outstanding,

nor

any

outstanding

letters

credit

that

reduced

borrowing

availability, as of November 2, 2024.

The weighted average interest rate under

the credit facility was zero at

November 2, 2024 due to

no outstanding borrowings.

Expenditures

for

property

and

equipment

totaled

$6.5

million

the

first

nine

months

fiscal

2024,

compared to

$10.3 million

in last

fiscal year’s

first nine

months. The

decrease in

expenditures for

property

and equipment

was

primarily

due to

finishing

projects related

to investments

in the

distribution center

and

information

technology.

For

the

full

fiscal

2024

year,

the

Company

expects

invest

approximately

$7.0

~~Expenditures~~million for ~~property~~capital ~~and equipment totaled $4~~expenditures.8 ~~million in the first six months of fiscal 2024, compared~~

Net

cash

provided

investing

activities

totaled

$21.5

million

the

first

nine

months

fiscal

2024

compared

$6.1

million

net

cash

provided

the

comparable

period

2023.

The

increase

net

cash

provided

investing

activities

2024

was

primarily

due

the

sale

other

assets,

lower

purchases

short-term investments,

and lower capital

expenditure spending,

partially offset

by lower sales

of short-term

~~capital expenditures~~investments.

Net cash used in financing activities totaled $12.6 million in the first nine months of fiscal

2024 compared to

$12.7 million used in the comparable period of fiscal 2023.

The slight decrease in net cash used in financing

activities in fiscal 2024 was primarily

due to lower stock repurchases, partially offset

by dividends paid.

As of November

2, 2024, the Company

had 442,831 shares remaining

in open authorizations under

its share

repurchase program.

The Company does not use

derivative financial instruments.

The Company’s investment portfolio

was primarily invested in

corporate bonds and

U.S. Treasury/Agencies

notes and

bonds held

in managed

accounts with

underlying ratings

of A

or better

at November

2, 2024

and

February 3, 2024.

The state, municipal and corporate bonds have contractual maturities which range from 13

~~Capital~~days ~~One,~~to ~~and~~2.9 ~~Discover~~years. The U.S. Treasury/Agencies notes and bonds have contractual maturities which range from

days

2.7

years.

These

securities

are

classified

available-for-sale

and

are

recorded

Short-term

investments

and

Other

assets

the

respective

Condensed

Consolidated

Balance

Sheets.

These

assets

are

carried

fair

value

with

unrealized

gains

and

losses

reported

net

taxes

Accumulated

other

comprehensive income.

At February

2024, the

Company

had $1.1

million

of corporate

equities and

deferred

compensation

plan

assets of

$8.6 million.

At November

2, 2024,

the Company

had deferred

compensation plan

assets of

$9.1

million.

During the nine

months ended November

2, 2024, the

Company sold its

corporate equities.

All of

these assets

are recorded

within

Other assets

in the

Condensed

Consolidated

Balance

Sheets.

See

Note

Fair Value Measurements.

See Note 8, Recent Accounting Pronouncements.

THE CATO CORPORATION

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

(CONTINUED)

RECENT ACCOUNTING PRONOUNCEMENTS:

See Note 8, Recent Accounting Pronouncements.

THE CATO CORPORATION

QUANTITATIVE

AND QUALITATIVE

DISCLOSURES ABOUT MARKET RISK

ITEM 3. QUANTITATIVE

AND QUALITATIVE

DISCLOSURES ABOUT MARKET RISK:

The

Company

subject

market

rate

risk

from

exposure

changes

interest

rates

based

its

financing, investing and

cash management activities,

but the Company

does not

believe such exposure

material.

ITEM 4. CONTROLS AND PROCEDURES:

We carried out an evaluation, with the

participation of our Principal Executive Officer and

Principal Financial

Officer, of the effectiveness of

our disclosure controls and procedures as of November

2, 2024.

Based on this

evaluation, our Principal Executive Officer and Principal Financial Officer concluded that, as of November 2,

2024, our

disclosure controls

and

procedures,

as defined

Rule

13a-15(e), under

the

Securities

Exchange

Act of 1934 (the “Exchange

Act”), were effective to ensure that

information we are required to disclose

in the

reports

that

file

submit

under

the

Exchange

Act

recorded,

processed,

summarized

and

reported

within the time periods

specified in the SEC’s

rules and forms and

that such information is

accumulated and

communicated to our management, including our Principal Executive Officer and Principal Financial Officer,

as appropriate to allow timely decisions

regarding required disclosure.

CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING:

No change in the Company’s internal control

over financial reporting (as defined in

Exchange Act Rule 13a-

15(f))

has

occurred

during

the

Company’s

fiscal

quarter

ended

November

2024

that

has

materially

affected, or is

reasonably likely to

materially affect, the

Company’s internal control

over financial reporting.

15(f)) has occurred during the Company’s fiscal quarter ended August 3, 2024 that has materially affected, or

THE CATO CORPORATION

PART II OTHER

INFORMATION

3031

ITEM 1.

LEGAL PROCEEDINGS:

Not Applicable.

ITEM 1A.

RISK FACTORS:

In addition to the other information

in this report, you should carefully

consider the factors discussed in

Part I,

“Item

1A.

Risk

Factors”

our

Annual

Report

Form

10-K

for

our

fiscal

year

ended

February

2024.

These risks

could materially

affect our

business, financial

condition or

future results;

however, they

are not

the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem

immaterial

may

also

materially

adversely

affect

our

business,

financial

condition

results

operations.

ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES

AND USE OF PROCEEDS:

The following table summarizes the Company’s purchases of its common stock for the three months

ended ~~August~~November 32, 2024:

ISSUER PURCHASES OF EQUITY SECURITIES

Total Number of

Maximum Number

Shares Purchased as

(or Approximate Dollar

Total Number

Average

Part of Publicly

Value)

of Shares that may

Fiscal

of Shares

Price Paid

Announced Plans or

Yet be Purchased

Under

Period

Purchased

per Share (1)

Programs (2)

The Plans or Programs (2)

~~May~~August 2024

~~June~~September 2024

35,407

4.49

35,407

October 2024

July 2024

Total

-35,407

-4.49

-35,407

~~478~~442,~~238~~831

(1)

Prices include trading costs.

(2)

As of August 3, 2024, the Company’s

share repurchase program had 478,238 shares remaining in

~~Company’s~~open ~~repurchase program~~authorizations. During the third quarter ended November 2, 2024, the Company repurchased

and

retired 35,407

shares under

this

program for

approximately $158,827

an average

market

price of $4.49 per share.

As of November 2, 2024, the Company had 442,831 shares remaining

open authorizations. There is no specified expiration date for the Company’s repurchase program.

ITEM 3.

DEFAULTS

UPON SENIOR SECURITIES:

Not Applicable.

THE CATO CORPORATION

PART II OTHER

INFORMATION

3132

ITEM 4.

MINE SAFETY DISCLOSURES:

No matters requiring disclosure.

ITEM 5.

OTHER INFORMATION:

During

the

three

months

ended

November

2024,

none

the

Company’s

directors

officers

(as

defined

Rule 16a-1(f)

the

Securities

Exchange Act

1934,

amended)

During the three months ended August 3, 2024, none of the Company’s directors or officers (as defined in

Rule 16a-1(f) of the Securities Exchange Act of 1934, as amended)

adopted

terminated

“Rule

10b5-1

trading

arrangement”

“

trading arrangement” or a “

non-Rule

10b5-1

trading

arrangement”

(as

such

terms

are

defined in Item 408 of Regulation S-K).

ITEM 6.

EXHIBITS:

Exhibit No.

Item

3.1

Registrant’s Amended and Restated Certificate of Incorporation, incorporated by

reference to Exhibit 3.1 to Form 10-Q of the Registrant for the quarter ended May

2, 2020.

3.2

Registrant’s Amended and Restated By-Laws, incorporated by reference to Exhibit

3.2 to Form 10-Q of the Registrant for the quarter ended May 2, 2020.

10.1*

Fifth Amendment, dated as of November 1, 2024, to Credit Agreement, dated as

of May 19, 2022, among the Registrant, the banks party thereto and Wells Fargo

Bank, National Association.

31.1*

Rule 13a-14(a)/15d-14(a) Certification of Principal Executive Officer.

31.2*

Rule 13a-14(a)/15d-14(a) Certification of Principal Financial Officer.

32.1*

Section 1350 Certification of Principal Executive Officer.

32.2*

Section 1350 Certification of Principal Financial Officer.

101.INS

Inline XBRL Instance Document

101.SCH

Inline XBRL Taxonomy Extension Schema Document

101.CAL

Inline XBRL Taxonomy Extension Calculation Linkbase

Document

101.DEF

Inline XBRL Taxonomy Extension Definitions Linkbase

Document

101.LAB

Inline XBRL Taxonomy Extension Label

Linkbase Document

101.PRE

Inline XBRL Taxonomy Extension Presentation Linkbase

Document

104.1

Cover Page

Interactive Data

File

(Formatted in

Inline

XBRL

and

contained

the Interactive Data Files submitted as Exhibit 101.1*)

* Submitted electronically herewith.

THE CATO CORPORATION

PART II OTHER

INFORMATION

3233

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the

Registrant has duly caused this

report to be signed on its behalf by the undersigned thereunto duly

authorized.

THE CATO

CORPORATION

November

26, 2024

/s/ John P.

D. Cato

August 29, 2024

Date

John P.

D. Cato

Chairman, President and

Chief Executive Officer

~~August~~November 2926, 2024

/s/ Charles D. Knight

Date

Charles D. Knight

Executive Vice President

Chief Financial Officer

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