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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

November 1, 2025

☐

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

check

mark

whether

the

registrant

(1)

has

filed

all

reports

required

filed

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

2025,

there

were

17,984,954

Class A

common

stock

and

1,763,652

Class B

common

stock

utstanding.

THE CATO CORPORATION

FORM 10-Q

Quarter Ended November 1, 2025

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

1, 2025 and November

2, 2024

Condensed Consolidated Balance Sheets

At November 1, 2025 and February 1, 2025

Condensed Consolidated Statements of Cash Flows

For the Nine Months Ended November 1, 2025

and November 2, 2024

Condensed Consolidated Statements of Stockholders’ Equity

5 – 6

For the Three Months and Nine Months Ended November

1, 2025 and November

2, 2024

Notes to Condensed Consolidated Financial Statements

7 – 21

Item 2.

Management’s Discussion and Analysis

of Financial Condition and

Results of Operations

22 – 29

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

Item 4.

Controls and Procedures

PART

II – OTHER INFORMATION

Item 1.

Legal Proceedings

Item 1A.

Risk Factors

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

Item 3.

Defaults Upon Senior Securities

Item 4.

Mine Safety Disclosures

Item 5.

Other Information

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

Nine Months Ended

November 1,

2025

November 2,

2024

November 1,

2025

November 2,

2024

(Dollars in thousands, except per share data)

REVENUES

Retail sales

153,739

144,642

496,811

486,848

Other revenue (principally finance charges, late fees and

layaway charges)

1,663

1,528

5,342

5,049

Total revenues

155,402

146,170

502,153

491,897

COSTS AND EXPENSES, NET

Cost of goods sold (exclusive of depreciation shown

below)

104,517

102,955

325,302

324,582

Selling, general and administrative (exclusive of depreciation

shown below)

56,974

57,876

169,670

172,809

Depreciation

2,444

2,737

7,532

7,106

Interest and other income

(2,181)

(2,646)

(4,775)

(10,209)

Costs and expenses, net

161,754

160,922

497,729

494,288

(Loss) income before income taxes

(6,352)

(14,752)

4,424

(2,391)

Income tax (benefit) expense

(1,163)

322

(528)

1,614

Net (loss) income

(5,189)

(15,074)

4,952

(4,005)

Basic (loss) earnings per share

(0.28)

(0.79)

0.25

(0.24)

Diluted (loss) earnings per share

(0.28)

(0.79)

0.25

(0.24)

Comprehensive income:

Net (loss) income

(5,189)

(15,074)

4,952

(4,005)

Net unrealized gain (loss) on available-for-sale securities

for each of the three and nine months ended

November 1, 2025 and November 2, 2024, respectively

(151)

125

(223)

Comprehensive (loss) income

(5,170)

(15,225)

5,077

(4,228)

ee notes to condensed consolidated financial statements (unaudited).

THE CATO CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

November 1, 2025

February 1, 2025

ASSETS

(Dollars in thousands)

Current Assets:

Cash and cash equivalents

22,769

20,279

Short-term investments

56,204

57,423

Restricted cash

2,675

2,799

Accounts receivable, net of allowance for customer credit losses of

683

and $

581

at November 1, 2025 and February 1, 2025, respectively

26,093

24,540

Merchandise inventories

94,065

110,739

Prepaid expenses and other current assets

8,603

7,406

Total Current Assets

210,409

223,186

Property and equipment – net

55,912

60,326

Other assets

20,650

19,979

Right-of-Use assets – net

163,261

148,870

Total Assets

450,232

452,361

LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:

Accounts payable

72,531

88,641

Accrued expenses

36,960

41,717

Accrued employee benefits and bonus

326

Accrued income taxes

Current lease liability

42,262

57,555

Total Current Liabilities

152,087

188,239

Other noncurrent liabilities

12,782

13,485

Lease liability

117,719

88,341

Commitments and contingencies (Note 10)

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;

17,984,954

shares and

18,313,929

issued at November 1, 2025 and February 1, 2025, respectively

608

619

Convertible Class B common stock, $

0.033

par value per share,

15,000,000

shares authorized;

1,763,652

issued at November 1, 2025 and February 1, 2025

Additional paid-in capital

130,812

129,530

Retained earnings

35,887

31,935

Accumulated other comprehensive income

278

153

Total Stockholders' Equity

167,644

162,296

Total Liabilities and Stockholders' Equity

450,232

452,361

ee notes to condensed consolidated financial statements (unaudited).

THE CATO CORPORATION

CONDENSED CONSOLIDATED STATEMENTS

OF CASH FLOWS

(UNAUDITED)

Nine Months Ended

November 1, 2025

November 2, 2024

(Dollars in thousands)

Operating Activities:

Net income (loss)

4,952

(4,005)

Adjustments to reconcile net income (loss) to net cash provided

(used) in operating activities:

Depreciation

7,532

7,106

Provision for customer credit losses

655

492

Purchase premium and premium amortization of investments

(655)

(848)

Gain on sale of assets held for investment

(34)

(5,350)

Share-based compensation

1,137

1,581

(Gain) loss on disposal of property and equipment

(843)

116

Changes in operating assets and liabilities which provided

(used) cash:

Accounts receivable

(2,208)

1,283

Merchandise inventories

16,674

(8,556)

Prepaid and other assets

(1,868)

(1,315)

Operating lease right-of-use assets and liabilities

(306)

(1,151)

Accounts payable, accrued expenses and other liabilities

(21,791)

(2,619)

Net cash provided (used) in operating activities

3,245

(13,266)

Investing Activities:

Expenditures for property and equipment

(2,892)

(6,509)

Purchase of short-term investments

(19,761)

(38,659)

Sales of short-term investments

21,761

52,994

Sales of other assets

864

13,674

Net cash (used) provided by investing activities

(28)

21,500

Financing Activities:

Dividends paid

(10,516)

Repurchase of common stock

(995)

(2,398)

Proceeds from employee stock purchase plan

144

338

Net cash used in financing activities

(851)

(12,576)

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

2,366

(4,342)

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

23,078

27,913

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

25,444

23,571

Non-cash activity:

Accrued other assets and property and equipment expenditures

541

440

ee 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 1, 2025

678

129,530

31,935

153

162,296

Comprehensive income:

Net income

3,309

Unrealized net gain on available-for-sale securities, net

deferred income tax benefit of $

Class A common stock sold through employee stock purchase

plan

Other

(73)

Share-based compensation issuances and exercises

(2)

Share-based compensation expense

184

Repurchase and retirement of treasury shares

(10)

(897)

(907)

Balance — May 3, 2025

666

129,786

34,274

191

164,917

Comprehensive income:

Net income

6,832

Unrealized net gain on available-for-sale securities, net

deferred income tax expense of $

Other

Share-based compensation expense

394

Repurchase and retirement of treasury shares

(60)

Balance — August 2, 2025

666

130,180

41,076

259

172,181

Comprehensive income:

Net loss

(5,189)

Unrealized net gain on available-for-sale securities, net

deferred income tax benefit of $

Class A common stock sold through employee stock purchase

plan

Share-based compensation expense

536

Balance — November 1, 2025

667

130,812

35,887

278

167,644

ee 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 loss on available-for-sale securities, net of

deferred income tax benefit of $

(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 gain on available-for-sale securities, net

deferred income tax expense of $

676

Dividends paid ($

0.17

per share)

(3,527)

Class A common stock sold through employee stock purchase

plan

Share-based compensation expense

858

872

Balance — August 3, 2024

694

127,951

66,094

323

195,062

Comprehensive income:

Net loss

(15,074)

Unrealized net gain on available-for-sale securities, net

deferred income tax expense of $

(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

ee notes to condensed consolidated financial statements (unaudited).

THE CATO CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE 1 - GENERAL

The

condensed

consolidated

financial

statements

November

2025

and

for

the

three

and

nine

months ended November 1, 2025 and November 2,

2024 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 periods

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 1,

2025.

Amounts as

of February 1,

2025 have been

derived from the

audited annual

financial

statements, 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 which

is 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

third

quarter

fiscal

2024,

the

Company

received

8.6

million

from

the

insurance

claim

settlement and sale of its corporate jet.

THE CATO CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

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

dividends 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, of which there were none

for the periods presented below.

Three Months Ended

Nine Months Ended

November 1,

2025

November 2,

2024

November 1,

2025

November 2,

2024

(Dollars in thousands, except per share data)

Numerator

Net earnings (loss)

(5,189)

(15,074)

4,952

(4,005)

Less: Earnings allocated to non-vested equity awards

(200)

(250)

(548)

Net earnings (loss) available to common stockholders

(5,189)

(15,274)

4,702

(4,553)

Denominator

Basic weighted average common shares outstanding

18,814,510

19,302,107

18,769,570

19,318,794

Diluted weighted average common shares outstanding

18,814,510

19,302,107

18,769,570

19,318,794

Net income per common share

Basic earnings (loss) per share

(0.28)

(0.79)

0.25

(0.24)

Diluted earnings (loss) per share

(0.28)

(0.79)

0.25

(0.24)

THE CATO CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE 3 – ACCUMULATED OTHER COMPREHENSIVE INCOME:

The

following

table

sets

forth

information

regarding

the

changes

Accumulated

other

comprehensive

income (in thousands) for the

three months ended November 1, 2025:

Changes in Accumulated Other

Comprehensive Income (a)

Unrealized Gains

and (Losses) on

Available-for-Sale

Securities

Beginning Balance at August 2, 2025

259

Other comprehensive income before

reclassification

Amounts reclassified from accumulated

other comprehensive income to net income

Net current-period other comprehensive income

Ending Balance at November 1, 2025

278

(a) All amounts are net-of-tax.

The

following

table

sets

forth

information

regarding

the

changes

Accumulated

other

comprehensive

income (in thousands) for the

nine months ended November 1, 2025:

Changes in Accumulated Other

Comprehensive Income (a)

Unrealized Gains

and (Losses) on

Available-for-Sale

Securities

Beginning Balance at February 1, 2025

153

Other comprehensive income before

reclassification

159

Amounts reclassified from accumulated

other comprehensive income to net income (b)

(34)

Net current-period other comprehensive income

125

Ending Balance at November 1, 2025

278

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

(b) Includes $

impact of Accumulated other comprehensive income reclassifications into Interest and other

ncome 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)

NOTE 3 – ACCUMULATED OTHER COMPREHENSIVE INCOME

(CONTINUED):

The

following

table

sets

forth

information

regarding

the

changes

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 August 3, 2024

323

Other comprehensive income before

reclassification

(151)

Amounts reclassified from accumulated

other comprehensive income

Net current-period other comprehensive income

(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

changes

Accumulated

other

comprehensive

income (in thousands) for the

nine months ended November 2, 2024:

Changes in Accumulated Other

Comprehensive Income (a)

Unrealized Gains

and (Losses) on

Available-for-Sale

Securities

Beginning Balance at February 3, 2024

395

Other comprehensive income before

reclassification

563

Amounts reclassified from accumulated

other comprehensive income (b)

(786)

Net current-period other comprehensive loss

(223)

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.

(b) Includes

$1,022

impact of Accumulated other comprehensive income reclassifications into Interest and other

ncome 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)

NOTE 4 – FINANCING ARRANGEMENTS:

On March

13,

2025, the

Company, as

borrower, and

certain

other domestic

subsidiaries, as

borrowers

and

guarantors, entered

into a

Credit Agreement

(the “ABL

Credit Agreement”)

and related

loan documents,

and

among

the

Company,

certain

other

the

Company’s

domestic

subsidiaries,

and

Wells

Fargo

Bank,

National Association,

as the

lender (the

“Lender”), to

establish an

asset-based revolving

credit facility

(the

“ABL

Facility”)

amount

35.0

million.

The

proceeds

from

the

ABL

Facility

may

used

provide funding for ongoing working capital

and general corporate purposes.

The ABL Credit Agreement is committed through

May 2027

and is secured primarily by inventory and third-

party

credit

card

receivables.

There

were

borrowings

outstanding

and

the

availability

under

the

facility

was $

30.0

million before

giving effect

to a

3.0

million outstanding

letter of

credit that

reduced borrowing

availability

27.0

million

as of

November

2025.

The

weighted average

interest rate

under the

credit

facility was

zero

at November 1, 2025 due to

outstanding borrowings.

NOTE 5 – REPORTABLE SEGMENT INFORMATION:

The

Company

has

determined

that

has

four

operating

segments,

defined

under

ASC

280

–

Segment

Reporting

(“ASC 280”), including Cato, It’s

Fashion, Versona and Credit.

The Company has

two

reportable

segments: Retail

and Credit.

The Company

has aggregated

its

three

retail operating

segments, including

commerce, based on the aggregation criteria outlined in ASC 280-10, which states

that two or 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

similar

manner

through

the

Company’s

single

distribution

center

and

subsequently

distributed

customers in a

similar manner. The

Company

operates

its

women’s

fashion

specialty

retail

stores

states as of November 1, 2025, 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 by

a wholly-owned

subsidiary of

the Company.

The Company

does

not allocate certain corporate expenses to the Credit segment.

The Company’s

President and

Chief Executive

Officer is

the Company’s

chief operating

decision maker

(“CODM”).

The structure

described

above reflects

the

manner

which

the

CODM regularly

assesses

information

for

decision-making

purposes,

including

the

allocation

resources.

The

Company

also

provides corporate

services, including

finance, information

technology,

and corporate

administration, to

its segments which are fully allocated to the retail segment. Interest and other income from assets held for

investment and

sale are

not included

in assessing

the segments’

performance and

therefore not

allocated

to either segment.

The

CODM

manages

and

evaluates

the

segments’

operating

performance

based

segment

sales,

xpenses, and

profit or

loss from

operations before

income taxes

as presented

in the

Company’s

annual

THE CATO CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

budget and forecasting

process, as well as

monthly analyses of budget-to-actual

and prior year

variances.

Segment

expenses

and

other

items

primarily

include

cost

goods

sold,

selling,

general

and

administrative

expenses,

depreciation

and

interest

and

other

income.

Assessment

and

approval

all

capital

expenditures

are

determined

support

and

based

the

needs

the

retail

segment;

however,

the

CODM

does

not

evaluate

performance

allocate

resources

based

segment

asset

balances

and,

therefore,

total

segment

assets

are

not

presented

the

tables

below.

The

measure

segment assets is reported on the balance sheet as total consolidated

assets.

The accounting

policies of

the segments

are the

same as

those described

in the

Summary of

Significant

Accounting Policies in Note 1 of the consolidated financial statements included in the Company’s

Annual

Report

Form

10-K

for

the

fiscal

year

ended

February

2025.

The

Company

evaluates

segment

performance based on segment income before income taxes.

The following schedule summarizes certain segment

information (in thousands):

Three Months Ended

November 1, 2025

Retail

Credit

Total

Revenues

154,740

662

155,402

Cost of goods sold

104,517

Selling, general, and administrative (a)

39,955

410

40,365

Corporate overhead

16,609

Depreciation

2,444

Interest and other income

(88)

(286)

(374)

Segment income (loss) before income taxes

(8,697)

538

(8,159)

Corporate interest and other income

(1,807)

Loss before income taxes

(6,352)

Capital expenditures

530

Nine Months Ended

November 1, 2025

Retail

Credit

Total

Revenues

500,173

1,980

502,153

Cost of goods sold

325,302

Selling, general, and administrative (a)

119,244

1,211

120,455

Corporate overhead

49,215

Depreciation

7,532

Interest and other income

(282)

(877)

(1,159)

Segment income (loss) before income taxes

(838)

1,646

808

Corporate interest and other income

(3,616)

Income before income taxes

4,424

Capital expenditures

2,892

(a) Selling, general, and administrative expense include corporate

and store payroll, related payroll taxes and

benefits, insurance, supplies, advertising, bank and credit

card processing fees.

THE CATO CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE 5 – REPORTABLE SEGMENT INFORMATION

(CONTINUED):

Three Months Ended

November 2, 2024

Retail

Credit

Total

Revenues

145,508

662

146,170

Cost of goods sold

102,955

Selling, general, and administrative (a)

40,683

406

41,089

Corporate overhead

16,787

Depreciation

2,737

Interest and other income

(105)

(319)

(424)

Segment income (loss) before income taxes

(17,549)

575

(16,974)

Corporate interest and other income

(2,222)

Loss before income taxes

(14,752)

Capital expenditures

1,710

Nine Months Ended

November 2, 2024

Retail

Credit

Total

Revenues

489,892

2,005

491,897

Cost of goods sold

324,582

Selling, general, and administrative (a)

122,597

1,230

123,827

Corporate overhead

48,982

Depreciation

7,105

7,106

Interest and other income

(292)

(838)

(1,130)

Segment income (loss) before income taxes

(13,082)

1,612

(11,470)

Corporate interest and other income

(9,079)

Loss before income taxes

(2,391)

Capital expenditures

6,509

(a) Selling, general, and administrative expense include corporate

and store payroll, related payroll taxes and

benefits, insurance, supplies, advertising, bank and credit

card processing fees.

THE CATO CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE 6 – STOCK-BASED COMPENSATION:

November

2025,

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 1, 2025:

2018

Plan

Options and/or restricted stock initially authorized

4,725,000

Options and/or restricted stock available for grant

2,861,706

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

2025

and

February

2025,

there

was

4,813,000

and

7,276,000

respectively,

total

unrecognized compensation expense

related to nonvested

restricted stock awards,

which had a

remaining

weighted-average vesting period of

1.6

years and

1.9

years, respectively. The

total compensation expense

during the

three and

nine months

ended November

1, 2025

was $

536,000

and $

1,114,000

, respectively,

compared

total

compensation

expense

714,000

and

1,520,000

for

the

three

and

nine

months

ended

November

2024,

respectively.

This

compensation

activity

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

1, 2025:

Weighted Average

Number of

Grant Date Fair

Value

Per Share

Restricted stock awards at February 1, 2025

1,215,181

8.98

Granted

Vested

(225,924)

12.89

Forfeited or expired

(76,105)

8.29

estricted stock awards at November 1, 2025

913,152

8.06

THE CATO CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

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 1, 2025

and November

2, 2024, the Company sold

51,845

and

73,593

shares to employees at an average discount of $

0.49

and $

0.81

per share, respectively,

under the Employee

Stock Purchase Plan.

The compensation expense

recognized for

the

discount

given

under

the

Employee

Stock

Purchase

Plan

was

25,000

and

60,000

for

the

nine

months

ended

November

2025

and

November

2024,

respectively.

These

expenses

are

classified

component

Selling,

general

and

administrative

expenses

the

Condensed

Consolidated

Statements

Income (Loss).

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 1, 2025 and February

1, 2025:

Quoted

Prices in

Active

Significant

Markets for

Other

Significant

Identical

Observable

Unobservable

November 1,

2025

Assets

Inputs

Description

Level 1

Level 2

Level 3

Assets:

Corporate Bonds

52,941

U.S. Treasury/Agencies Notes and Bonds

2,018

Cash Surrender Value of Life Insurance

9,842

Commercial Paper

1,245

Total Assets

66,046

56,204

9,842

Liabilities:

Deferred Compensation

(8,677)

Total Liabilities

(8,677)

THE CATO CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE 7

– FAIR VALUE MEASUREMENTS

(CONTINUED):

Quoted

Prices in

Active

Significant

Markets for

Other

Significant

Identical

Observable

Unobservable

February 1, 2025

Assets

Inputs

Description

Level 1

Level 2

Level 3

Assets:

State/Municipal Bonds

1,244

Corporate Bonds

51,326

U.S. Treasury/Agencies Notes and Bonds

4,624

Cash Surrender Value of Life Insurance

9,301

Asset-backed Securities (ABS)

229

Total Assets

66,724

57,423

9,301

Liabilities:

Deferred Compensation

(8,548)

Total Liabilities

(8,548)

The

Company’s

investment

portfolio

was

primarily

invested

corporate

bonds

and

taxable

governmental

debt

securities

held

managed

accounts

with

underlying

ratings

better

November

2025

and

February

2025.

The

state,

municipal

and

corporate

bonds

and

asset-backed

securities

have

contractual

maturities which

range from

1.1 months

2.9

years. The

U.S. Treasury/Agencies

notes and

bonds have

contractual maturity of up to

3.5 months

Additionally, at November

1, 2025, the

Company had deferred

compensation plan assets

of $

9.8

million. At

February 1,

2025, the

Company had

deferred compensation

plan assets

of $

9.3

million.

These assets

are

recorded within Other assets in the Condensed

Consolidated Balance Sheets.

Level 2 investment

securities include

corporate, state

and municipal bonds

for which

quoted prices may

not

be available

on 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 as quotes from less active markets and/or quoted prices

of 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

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

1, 2025 and the year ended

February 1,

025 (in thousands):

THE CATO CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE 7

– FAIR VALUE MEASUREMENTS

(CONTINUED):

Fair Value

Measurements Using

Significant Unobservable

Asset Inputs (Level 3)

Cash Surrender Value

Beginning Balance at February 1, 2025

9,301

Total gains or (losses):

Included in interest and other income (or

changes in net assets)

541

Ending Balance at November 1, 2025

9,842

Fair Value

Measurements Using

Significant Unobservable

Liability Inputs (Level 3)

Deferred Compensation

Beginning Balance at February 1, 2025

(8,548)

Redemptions

672

Additions

(167)

Total (gains) or losses:

Included in interest and other income (or

changes in net assets)

(634)

Ending Balance at November 1, 2025

(8,677)

Fair Value

Measurements Using

Significant Unobservable

Asset Inputs (Level 3)

Cash Surrender Value

Beginning Balance at February 3, 2024

8,586

Total gains or (losses):

Included in interest and other income (or

changes in net assets)

715

Ending Balance at February 1, 2025

9,301

Fair Value

Measurements Using

Significant Unobservable

Liability Inputs (Level 3)

Deferred Compensation

Beginning Balance at February 3, 2024

(8,654)

Redemptions

1,175

Additions

(220)

Total (gains) or losses:

Included in interest and other income (or

changes in net assets)

(849)

nding Balance at February 1, 2025

(8,548)

THE CATO CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE 8 – RECENT ACCOUNTING PRONOUNCEMENTS:

In December 2023,

the FASB

issued ASU 2023-09,

Income Taxes

(Topic

740): Improvements

to Income

Tax

Disclosures

which

modifies

the

requirements

income

tax

disclosures

require

disaggregated

information about

a reporting

entity’s

effective

tax rate

reconciliation as

well as

information on

income

taxes paid.

This guidance

is effective

for fiscal

years beginning

after December

15, 2024

for all

public

business entities.

The Company is currently

in the process of

evaluating the potential impact of

adoption

this new

guidance on

its income

tax related

disclosures. The

required disclosures

will be

included in

our 2025 Annual Report on Form 10-K.

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 for interim periods within

fiscal years beginning after December 15, 2027, with early adoption permitted.

The Company is currently

the

process

evaluating

the

potential

impact

adoption

this

new

guidance

its

consolidated

financial statements and related disclosures.

NOTE 9 – INCOME TAXES:

The

Company

had

effective

tax

rate

for

the

first

nine

months

2025

(

11.9

compared

effective tax rate

of (

67.5

%) for the first

nine months of fiscal 2024.

Income tax benefit for the

first nine

months

was

0.5

million in

fiscal

2025

versus income

tax

expense of

1.6

million in

fiscal

2024.

The

income

tax

benefit

fiscal

2025

primarily

due

reduction

foreign

income

taxes

and

larger

release

reserves

expired

statute

limitations

for

uncertain

tax

positions

compared

the

prior

year.

On July

4, 2025,

the

One Big

Beautiful Bill

Act (the

“OBBBA”) was

signed into

law.

The

Company considered the impact of the

OBBBA in the second quarter of

fiscal 2025.

The changes do not

have a material impact

on the Company’s

effective tax rate.

The Company continues to

monitor impacts

moving forward.

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

its control,

litigation with

respect to

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 in

one or

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

eemed probable and reasonably estimable.

THE CATO CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

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

the

credit

card

receivables

are

secured.

The

Company

estimated

customer

credit

losses

213,000

and

655,000

for

the

three

and

nine

months

ended

November

2025,

respectively,

compared

154,000

and

492,000

for

the

three

and

nine

months

ended November 2, 2024, respectively.

Sales purchased on the Company’s

proprietary credit card for the

three

and

nine

months

ended

November

2025

were

5.3

million

and

16.4

million,

respectively,

compared

5.1

million

and

16.4

million

for

the

three

and

nine

months

ended

November

2024,

respectively.

The

following

table

provides

information

about

receivables

and

contract

liabilities

from

contracts

with

customers (in thousands):

Balance as of

November 1, 2025

February 1, 2025

Proprietary Credit Card Receivables, net

10,848

ift Card Liability

5,280

7,541

THE CATO CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

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

one

10 years

, some of

which include options to

extend the lease term

for

up to five years

, and some of

which

include

options

terminate

the

lease

within one year

The

Company

considers

these

options

determining

the

lease term

used

establish its

right-of-use assets

and lease

liabilities.

The

Company’s

lease agreements do not contain any material residual value guarantees or

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

November 1, 2025

November 2, 2024

Operating lease cost

16,570

16,755

Variable lease cost (a)

571

490

(a) Primarily related to monthly percentage rent for stores not presented on the balance sheet.

Nine Months Ended

November 1, 2025

November 2, 2024

Operating lease cost

49,654

50,565

Variable lease cost (a)

1,429

1,450

(a) Primarily related to monthly percentage rent for stores not presented on the balance sheet.

THE CATO CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE 12 – LEASES (CONTINUED:

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

November 1, 2025

November 2, 2024

Cash paid for amounts included in the measurement of lease liabilities

14,839

15,584

Non-cash activity:

Right-of-use assets obtained in exchange for lease obligations, net of rent violations

44,795

1,207

Nine Months Ended

November 1, 2025

November 2, 2024

Cash paid for amounts included in the measurement of lease liabilities

44,202

46,672

Non-cash activity:

Right-of-use assets obtained in exchange for lease obligations, net of rent violations

58,225

2,564

Weighted-average

remaining

lease

term

and

discount

rate

for

the

Company’s

operating

leases

are

follows:

As of

November 1, 2025

November 2, 2024

Weighted-average remaining lease term

2.5

years

1.7

years

Weighted-average discount rate

5.43%

4.84%

November

2025,

the

maturities

lease

liabilities

fiscal

year

for

the

Company’s

operating

leases are as follows (in thousands):

Fiscal Year

2025 (a)

14,907

2026

62,470

2027

44,319

2028

30,028

2029

18,154

Thereafter

10,135

Total lease payments

180,013

Less: Imputed interest

20,032

Present value of lease liabilities

159,981

(a) Excluding the nine months ended November 1, 2025

THE CATO CORPORATION

ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

FORWARD-LOOKING INFORMATION:

The

following

information

should

read

along

with

the

unaudited

Condensed

Consolidated

Financial

Statements,

including

the

accompanying

Notes

appearing

this

Form

10-Q.

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 or

expectations of

our

future financial

economic performance;

(2)

statements

that

are

not

historical

information;

(3)

statements

our

beliefs,

intentions,

plans

and

objectives for

future operations;

(4) statements

relating to

our operations

or activities

for our

fiscal year

ending January

31, 2026

(“fiscal 2025”)

and beyond,

including, but

not limited

to, statements

regarding

expected

amounts

capital

expenditures

and

store

openings,

relocations,

remodels

and

closures,

statements

regarding

the

potential

impact

public

health

threats

and

responses

and

mitigation

efforts, as well as the potential impact of supply chain disruptions, extreme weather conditions, tariffs and

other

trade

policies,

inflationary

pressures

and

other

economic

conditions

our

business,

results

operations

and

financial

condition

and

statements

regarding

new

store

development

strategy;

and

(5)

statements

relating

our

future

contingencies. When

possible,

have

attempted

identify

forward-

looking

statements by

using words

such

“will,” “expects,”

“anticipates,” “approximates,”

“believes,”

“estimates,”

“hopes,”

“intends,”

“may,”

“plans,”

“could,”

“would,”

“should”

and

any

variations

negative formations

of such

words and

similar expressions.

can give

no assurance

that actual

results

events

will

not

differ

materially

from

those

expressed

implied

any

such

forward-looking

statements. Forward-looking statements included in this report are based on 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

differ

materially

from

those

contemplated

the

forward-looking

statements.

Such

factors

include,

but

are

not

limited

to,

the

following:

any

actual

perceived

deterioration in the conditions that drive consumer confidence and spending, including, but not limited to,

prevailing social, economic, political and public health threats and uncertainties, levels

of unemployment,

fuel, energy

and food

costs, inflation, wage

rates, tax

rates, tariffs,

interest rates, home

values, consumer

net worth and

the availability of credit;

changes in laws, regulations

or government policies affecting

our

business,

including

but

not

limited

tariffs

and

taxes;

uncertainties

regarding

the

impact

any

governmental action regarding,

or responses to,

the foregoing conditions; competitive

factors and pricing

pressures; our

ability to

predict and

respond to

rapidly changing

fashion trends

and consumer

demands;

our ability to

successfully implement our

new store development

strategy to increase

new store openings

and

our

ability

any

such

new

stores

grow

and

perform

expected;

underperformance

other

factors

that

may

lead

continuation

acceleration

store

closures

and

negatively

affect

the

Company’s

profitability,

financial

condition

and

prospects;

adverse

weather,

public

health

threats

(including the

COVID-19 or

other pandemics),

acts of

war or

aggression or

similar conditions

that may

affect

our

sales

operations;

inventory

risks

due

shifts

market

demand,

including

the

ability

liquidate

excess

inventory

anticipated

margins;

adverse

developments

volatility

affecting

the

financial services industry or

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 1,

2025 (“fiscal

2024”),

amended

supplemented, and

other

reports

file

with

furnish

the

Securities and

Exchange

Commission

(“SEC”)

from

time

time.

not

undertake,

and

expressly

decline,

any

obligation to update any such

forward-looking information contained in this report,

whether as a result of

ew information, future events, or otherwise.

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

Financial

Condition

and

Results

Operations”

Part

II,

Item

the

Company’s Annual Report on

Form 10-K for the

fiscal year ended February

1, 2025. The preparation

of the

Company’s

financial

statements in

conformity

with generally

accepted accounting

principles in

the

United

States (“GAAP”) requires management to make estimates and assumptions about future events that affect the

amounts reported in the

financial statements and accompanying

notes. Future events

and their effects cannot

determined

with

absolute

certainty.

Therefore,

the

determination

estimates

requires

the

exercise

judgment. Actual results

inevitably will differ

from those estimates,

and such differences

may be material

the

financial

statements.

The

most

significant

accounting

estimates

inherent

the

preparation

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.

he 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

Nine Months Ended

November 1, 2025

November 2, 2024

November 1, 2025

November 2, 2024

Total retail sales

100.0

Other revenue

1.1

1.0

Total revenues

101.1

101.0

Cost of goods sold (exclusive of

depreciation)

68.0

71.2

65.5

66.7

Selling, general and administrative

(exclusive of depreciation)

37.1

40.0

34.2

35.5

Depreciation

1.6

1.9

1.5

Interest and other income

(1.4)

(1.8)

(1.0)

(2.1)

Income (loss) before income taxes

(4.1)

(10.2)

0.9

(0.5)

et income (loss)

(3.4)

(10.4)

1.0

(0.8)

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

2024 Annual Report on Form 10-K.

Recent Developments

Tariff

Pressures

significant

quantity

our

products

are

made

China and

Southeast

Asia. The

products

from

these

countries are subject

to the newly

implemented reciprocal tariffs,

as well as

an additional Section

301 ad

valorem tariff on

Chinese products.

In the third quarter,

products from China were subject

to the Section

301

valorem

tariffs

and

products

sourced

from

all

other

countries

were

subject

reciprocal

tariffs.

During

the

quarter,

most

the

countries

from

which

source

product,

excluding

China

and

India,

finalized

trade

deals

with

the

U.S.

The

additional

tariffs

range

from

10%

20%

for

those

countries.

India’s tariffs

increased to 50% from 10% in

the quarter.

Though China’s tariffs

remained at 30% during

the

quarter,

effective

November

10,

2025

they

were

reduced

20%.

These

tariffs

increased

our

inventory

costs

associated

with

products

made

China

and

Southeast

Asia

the

third

quarter.

anticipate

that

our

product

acquisition

costs

for

the

remainder

the

fiscal

year

and

into

2026

will

negatively impacted by these additional costs.

These cost

increases will

continue to

negatively impact

our results

of operations

and financial

condition

unless we

are able

successfully mitigate

their effects

by increasing

retail pricing

without losing

sales

and/or sharing these

costs with

our vendors. Certain

product categories,

such as shoes

and handbags that

are predominately made in China, will be difficult to source in countries with lower

tariffs.

Comparison of the Three and Nine

Months ended November 1, 2025 with November

2, 2024

Total retail sales for the

third quarter were $153.7 million compared to

last year’s third quarter sales

of $144.6

million, a 6%

increase. The

Company’s sales increased

in the third

quarter of fiscal

2025 primarily due

to a

10% increase

in same-store

sales, partially

offset by

stores that

were closed

in the

past 12

months. For

the

nine

months

ended

November

2025,

total

retail

sales

were

$496.8

million

compared

last

year’s

comparable nine month sales

of $486.8 million, a

2% increase. The increase

in sales in the

first nine months

of fiscal

2025 was

due primarily

to a

6% increase

in same-store

sales, offset

mainly by

the impact

of 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

than 15 months.

The method of calculating same-store sales varies across the retail industry.

As a result, our

same-store sales calculation may not be comparable to similarly titled measures reported

by other companies.

E-commerce

sales

were

less

than

total

sales

for

the

nine

months

ended

November

2025

and

are

included

the

same-store

sales

calculation.

Total

revenues,

comprised

retail

sales

and

other

revenue

(principally finance

charges and

late fees

on customer

accounts receivable

and layaway

fees), were

$155.4

million

and

$502.2

million

for

the

three

and

nine

months

ended

November

2025,

compared

$146.2

million

and

$491.9

million

for

the

three

and

nine

months

ended

November

2024,

respectively.

The

Company operated 1,101 stores at November 1, 2025 compared to 1,167 stores at the end of last fiscal year’s

third quarter.

For the first

nine months of

fiscal 2025, the

Company permanently closed

16 stores.

In total,

he Company currently expects to close

approximately 50 stores in fiscal 2025.

THE CATO CORPORATION

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

(CONTINUED)

Other

revenue,

component

total

revenues,

was

$1.7

million

and

$5.3

million

for

the

three

and

nine

months ended November 1, 2025, respectively, compared to $1.5 million and $5.0 million for the prior

year’s

comparable three and nine month periods. Included in Other revenue is credit revenue of $0.7 million, which

represented

0.4%

total

revenues

the

third

quarter

fiscal

2025,

relatively

flat

both

dollars

and

percentage compared to fiscal 2024.

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

2025,

compared to

last

year’s third quarter expense of

$0.4 million.

Cost of

goods sold

was $104.5

million, or

68.0% of

retail sales

and $325.3 million,

or 65.5%

of retail

sales

for the three and

nine months ended November

1, 2025, respectively, compared

to $103.0 million, or

71.2%

of retail sales and $324.6 million, or 66.7% of retail sales for the comparable three and nine month periods of

fiscal 2024.

The overall

decrease in

cost of

goods sold

as a

percent of

retail sales

for the

third quarter

and

first nine

months of

fiscal 2025

versus the

comparable three

and nine

month periods

of fiscal

2024 resulted

primarily from lower

buying, distribution and

occupancy costs, partially

offset by increased

sales of marked

down goods.

Cost of goods sold includes merchandise costs (net of discounts and allowances), buying costs,

distribution

costs,

occupancy

costs,

freight

and

inventory

shrinkage.

Net

merchandise

costs

and

in-bound

freight are capitalized as

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)

increased

by 18.0% to $49.2 million for the third quarter of fiscal 2025 and by 5.7% to $171.5 million for the first

nine

months of

fiscal 2025,

compared to

$41.7 million

and $162.3

million for

the prior

year’s comparable

three

and nine months

of fiscal 2024,

respectively.

Gross margin as

presented may not

be comparable to

those of

other entities.

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

payroll taxes and

benefits, insurance, supplies,

advertising, and bank

and credit card

processing fees. SG&A

expenses were $57.0 million, or 37.1% of retail sales and $169.7 million, or 34.2% of retail sales

for the third

quarter and first nine months of fiscal 2025, respectively, compared to $57.9 million, or 40.0% of retail sales,

and

$172.8 million,

or 35.5%

of retail

sales

for the

prior

year’s

comparable three

and

nine month

periods,

respectively.

The decrease in SG&A

expenses for the third

quarter and first nine

months of fiscal 2025

was

primarily due to lower corporate and

field payroll expense, as well as

lower insurance costs.

Depreciation expense was $2.4 million, or 1.6% of retail sales and $7.5 million, or

1.5% of retail sales for the

third quarter

and first

nine months

of fiscal

2025, respectively,

compared to

$2.7 million,

or 1.9%

of retail

sales and $7.1 million, or 1.5% of retail sales for the comparable three and nine month periods of fiscal 2024,

respectively.

Interest and other income was $2.2 million, or 1.4% of retail sales and $4.8 million, or 1.0% of retail sales

for

the three and nine months ended November 1, 2025, respectively, compared to $2.6 million, or 1.8% of retail

sales

and

$10.2

million,

2.1%

retail

sales

for

the

comparable

three

and

nine

month

periods

fiscal

2024,

respectively.

The

decrease

for

the

first

nine

months

fiscal

2025

compared

fiscal

2024

was

primarily due to a net gain on the sale of land held for

investment and the sale of equity securities recorded in

the first quarter of 2024, as well as a net gain on the disposal of the Company’s corporate aircraft recorded in

the third quarter of 2024.

THE CATO CORPORATION

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

(CONTINUED)

Income tax

benefit was

$1.2 million

and $0.5

million for the

third quarter

and first

nine months of fiscal

2025, respectively, compared to tax expense of $0.3 million and $1.6 million for the comparable three and

nine month periods of fiscal 2024,

respectively.

The effective income tax

rate for the

first nine months of

fiscal

2025 was

(11.9%)

compared to

(67.5%)

for

the

first

nine months

fiscal

2024.

The income

tax

benefit

fiscal

2025

primarily

due

reduction

foreign

income

taxes

and

larger

release

reserves

expired

statute

limitations

for

uncertain

tax

positions

compared

the

prior

year.

July

2025,

the

One

Big

Beautiful

Bill

Act

(the

“OBBBA”)

was

signed

into

law.

The

Company

considered the

impact of

the

OBBBA in

the second

quarter

of fiscal

2025.

The changes

do not

have a

material impact on the Company’s effective tax rate.

The Company continues to monitor impacts moving

forward.

LIQUIDITY, CAPITAL

RESOURCES

AND MARKET

RISK:

The Company

believes that

its cash,

cash equivalents

and short-term

investments, together

with cash

flows

from operations and its asset-backed revolving line of credit, will be adequate to fund the Company’s

regular

operating

requirements

and

expected

capital

expenditures

for

the

months

from

the

issuance

these

financial statements.

Cash

provided

operating

activities

during

the

first

nine

months

fiscal

2025

was

$3.2

million

compared

$13.3

million

used

the

first

nine

months

fiscal

2024.

The

increase

cash

provided

operating

activities

$16.5

million

for

the

first

nine

months

fiscal

2025

compared

the

first

nine

months of

fiscal 2024

was primarily

attributable to

net income

for the

current fiscal

year compared

to a

net

loss for the prior fiscal year, the relative change in inventory from year-end to the third quarter for both years

and

non-operating

gain

sale

assets

held

for

investment

the

first

quarter

fiscal

2024,

partially

offset by the relative change of

accounts payable from year-end to

the third quarter for both

years.

November

2025,

the

Company

had

working

capital

$58.3

million

compared

$34.9

million

February 1, 2025.

The increase in working capital was

primarily attributable to an increase in

cash and cash

equivalents and decreases in accrued expenses, current lease liability and accounts payable, partially offset by

a decrease in inventories.

On March

13,

2025, the

Company, as

borrower, and

certain

other domestic

subsidiaries, as

borrowers

and

guarantors, entered

into a

Credit Agreement

(the “ABL

Credit Agreement”)

and related

loan documents,

and

among

the

Company,

certain

other

the

Company’s

domestic

subsidiaries,

and

Wells

Fargo

Bank,

National Association,

as the

lender (the

“Lender”), to

establish an

asset-based revolving

credit facility

(the

“ABL

Facility”)

amount

$35.0

million.

The

proceeds

from

the

ABL

Facility

may

used

provide funding for ongoing working capital

and general corporate purposes.

The ABL Credit Agreement is committed through May 2027 and is secured primarily by inventory and third-

party

credit

card

receivables.

There

were

borrowings

outstanding

and

the

availability

under

the

facility

was $30.0

million before

giving effect

to a

$3.0 million

outstanding letter

of credit

that reduced

borrowing

availability

$27.0 million

as of

November

2025.

The

weighted average

interest rate

under the

credit

facility was zero at November 1, 2025

due to no outstanding borrowings.

Expenditures

for

property

and

equipment

totaled

$2.9

million

the

first

nine

months

fiscal

2025,

compared to $6.5 million in last fiscal year’s first nine months. The decrease in expenditures for property and

equipment

was

primarily

due

finishing

projects

investments

the

distribution

center

and

nformation technology

during fiscal

2024, as

well as

no new

store openings

in the

first nine

months of

the

THE CATO CORPORATION

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

(CONTINUED)

current fiscal

year. For

the full

fiscal 2025

year, the

Company expects

to invest

approximately $5.9

million

for capital expenditures.

Net cash used in investing activities was negligible for the first nine months

of fiscal 2025 compared to $21.5

million net cash provided

in the comparable

period of 2024.

The decrease in net

cash provided by investing

activities

2025

was

primarily

due

decrease

the

sales

short-term

investments

and

other

assets,

partially offset by lower capital

expenditures.

Net cash used

in financing activities

totaled $0.9 million

in the first

nine months of

fiscal 2025 compared

$12.6

million

used

the

comparable

period

fiscal

2024.

The

decrease

net

cash

used

financing

activities in fiscal

2025 was

primarily due

to the elimination

of dividend

payments in

fiscal 2025

and lower

stock repurchases.

As of November

1, 2025, the Company

had 680,740 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

corporate

bonds

and

taxable

governmental

debt

securities

held

managed

accounts

with

underlying

ratings

better

November

2025

and

February

2025.

The

state,

municipal

and

corporate

bonds

and

asset-backed

securities

have

contractual

maturities which

range from

1.1 months

to 2.9

years. The

U.S. Treasury/Agencies

notes and

bonds have

contractual maturity of up to 3.5

months.

Additionally, at November 1, 2025, the

Company had deferred compensation plan assets

of $9.8 million.

February

2025,

the

Company

had

deferred

compensation

plan

assets

$9.3

million.

These

assets

are

recorded

within

Other

assets

the

Condensed

Consolidated

Balance

Sheets.

See

Note

Fair

Value

Measurements, included in Part 1, Item 1 Financial Statements (Unaudited) in this Quarterly Report on Form

0-Q.

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, included in Part 1, Item 1

Financial Statements

(

Unaudited) in this Quarterly Report on Form 10-Q.

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 is

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

1, 2025.

Based on this

evaluation, our Principal Executive Officer and Principal Financial Officer concluded that, as of November 1,

2025, 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

2025

that

has

materially

affected, or is reasonably likely to

materially affect, the Company’s internal

control over financial reporting.

THE CATO CORPORATION

PART II OTHER

INFORMATION

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

2025.

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 November 1, 2025:

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)

September 2025

October 2025

November 2025

Total

680,740

(1)

Prices include trading costs.

(2)

As of August 2, 2025, the Company’s

share repurchase program had 680,740 shares remaining in

open

authorizations.

During

the

third

quarter

ended

November

2025,

the

Company

did

not

repurchase or

retire any

shares under

this program.

As of

November 1,

2025, the

Company had

680,740

remaining

open

authorizations.

There

specified

expiration

date

for

the

Company’s repurchase program.

ITEM 3.

DEFAULTS

UPON SENIOR SECURITIES:

ot Applicable.

THE CATO CORPORATION

PART II OTHER

INFORMATION

ITEM 4.

MINE SAFETY DISCLOSURES:

No matters requiring disclosure.

ITEM 5.

OTHER INFORMATION:

During

the

three

months

ended

November

2025,

none

the

Company’s

directors

officers

(as

defined

Rule 16a-1(f)

the

Securities Exchange

Act

1934,

amended)

adopted

terminated

“Rule

10b5-1

trading

arrangement”

“

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.

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

Inline

XBRL

and

contained in

the Interactive Data Files submitted as Exhibit 101.1*)

* Submitted electronically herewith.

THE CATO CORPORATION

PART II OTHER

INFORMATION

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 25, 2025

/s/ John P.

D. Cato

Date

John P.

D. Cato

Chairman, President and

Chief Executive Officer

November 25, 2025

/s/ Charles D. Knight

Date

Charles D. Knight

Executive Vice President

Chief Financial Officer

CATO CORP 10-Q