CATO CORP

(4) statements relating to

our operations or

activities for

our

fiscal

year

ending

January

30,

(“fiscal

2026”)

and

beyond,

including,

but

not

limited

to,

statements regarding expected

amounts of

capital expenditures and

store openings, relocations,

remodels

and closures, statements

regarding the potential

impact of public

health threats and

related 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

conditions

on

our

results

of

operations

and

and

new

store

development

strategy;

and

(5)

relating

to

our

future

risks

or

contingencies.

When

possible,

we

have

attempted

to

identify

forward-looking

by

using

words

such

as

“will,”

“expects,”

“anticipates,”

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

“may,” “plans,”

“could,” “would,” “should”

and

any

variations

or

negative

formations

of

such

words

and

similar

expressions.

We

can

give

no

assurance

that actual

results or

events

will not

differ

materially from

those

expressed or

implied in

any

such

forward-looking

Forward-looking

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

to differ materially from those contemplated

by the forward-looking statements.

Such factors include, but are not limited to, the following:

any actual

or 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,

war

or

similar

hostilities

and

their

collateral

effects,

levels

of

unemployment,

fuel,

energy

and

food

costs,

inflation,

wage

rates,

tax

rates,

rates,

home

values,

consumer

net

worth

and

the

of

credit;

changes

in

laws,

regulations

or

government

affecting

our

but

not

limited to

tariffs

and taxes;

uncertainties regarding

the impact

of

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

open

new stores in attractive locations and

the ability of any such new

stores to grow and perform as

expected;

underperformance or

other

factors

that

may lead

to

a

continuation

or

acceleration

of

store

closures

and

negatively

affect

the

profitability,

or

prospects;

adverse

weather,

public

health

threats, acts

of

war or

aggression

or

similar

conditions and

related consequences

that

may affect

our sales

or operations;

inventory risks

due to

shifts in

market demand,

including the

ability to

liquidate

excess

at

anticipated

margins;

adverse

developments

or

volatility

affecting

the

services industry or broader

financial markets; and other

factors discussed under “Risk Factors”

in Part I,

Item

1A

of

the

Annual

Report

on

Form

10-K

for

the

fiscal

year

ended

January

31,

(“fiscal 2025”), as amended or supplemented, and in other reports

we file with or furnish to the

and Exchange Commission (“SEC”) from

time to time.

We

do not undertake, and expressly

decline, any

obligation to update any such

forward-looking information contained in this report,

whether as a result of

new information, future events, or otherwise.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES:

The

critical

and

are

more

fully

in

“Management’s

Discussion

and

Analysis

of

Condition

and

Results

of

Operations”

in

Part

II,

Item

in

the

Company’s Annual Report on

Form 10-K for the

fiscal year ended January

31, 2026. The preparation

of the

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

be

with

absolute

certainty.

Therefore,

the

determination

of

requires

the

exercise

of

judgment. Actual results

inevitably will differ

from those estimates,

and such differences

may be material

to

the

The

most

inherent

in

the

preparation

of

the

Company’s financial

statements include

the calculation

of potential

asset impairment,

income tax

valuation

allowances,

reserves

relating

to

self-insured

health

insurance,

workers’

compensation,

general

and

auto

insurance

liabilities,

uncertain

tax

positions,

the

allowance

for

credit

losses,

and

shrinkage.

The Company’s critical accounting policies and

estimates are discussed with the Audit Committee.

RESULTS OF OPERATIONS:

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

the Company's unaudited Condensed

Consolidated Statements of Income as a

percentage of total retail sales:

Total retail sales

100.0

%

100.0

%

Other revenue

1.0

1.1

Total revenues

101.0

101.1

Cost of goods sold (exclusive of depreciation)

62.8

64.9

Selling, general and administrative (exclusive of depreciation)

31.8

32.8

1.3

1.5

Interest and other income

(0.7)

(0.7)

5.8

2.5

5.5

2.0

RESULTS OF OPERATIONS

Management’s

Discussion and

Analysis of

Financial Condition

and Results

of Operations

(“MD&A”) is

intended

to

provide

to

assist

readers

in

better

understanding

and

evaluating

our

and

results

of

operations.

We

recommend

reading

this

MD&A

in

conjunction

with

our

Statements

and

the

Notes

to

those

in

the

“Financial Statements”

section of

this Quarterly

Report on

Form 10-Q,

as well

as our

Annual Report

on

Form 10-K for fiscal 2025.

Recent Developments

Tariff Issues

There remains a

significant degree of

uncertainty regarding the

status of U.S.

trade policy and

the types and

amount of tariffs to

which the Company will

be subject.

On February 20, 2026,

the Supreme Court issued

a

ruling

that

struck

down

the

series

of

tariffs

that

had

been

imposed

under

the

Economic

Emergency Powers Act (“IEEPA”) beginning in February

In response, the administration transitioned

under

Section

of

the

Trade

Act

of

(the

“Trade

Act”)

to

a

new

10%

baseline

global

tariff

that

is

scheduled to expire in July 2026 unless otherwise extended by Congress.

On May 7, 2026, the U.S. Court of

Trade

issued

a

ruling

finding

that

these

Section

tariffs

are

unlawful,

but

limited

its

permanent injunction to

the specific plaintiffs

in that case,

and these tariffs

continue to be

collected from all

other

importers,

the

Company.

The

administration

has

appealed

this

decision,

and

it

remains

uncertain whether these duties will remain

in effect or possibly be replaced

by other tariffs.

On March 11, 2026, the U.S. Trade

Representative announced investigations under Section 301

of the Trade

Act

into

various

countries,

countries

where

much

of

our

products

are

manufactured,

that

could

result

in

the

imposition

of

increased

tariffs.

Beginning

in

May

2026,

the

U.S.

Trade

Representative

held

Section 301

hearings for

certain countries,

including countries

where we

source most

of our

product.

The

extent to which

these hearings will

result in increased

tariffs is currently

unknown.

Our acquisition costs

in

future periods will

be negatively impacted

to the extent

that any tariffs

imposed due to

Section 301 findings

are greater than the current

Section 122 tariffs.

In

April

2026,

the

Supreme

Court’s

invalidation

of

the

IEEPA

tariffs

and

the

establishment

of

procedures for processing

tariff refunds, the

Company submitted a

refund claim and

recorded a $5.7

million

reduction in cost of goods sold in the first quarter of fiscal 2026.

On May 15, 2026, the Company received a

$2.6 million

partial payment

for its

tariff refund

claim. The

Company anticipates

receiving payment

for the

balance of its tariff refund claim

by the end of the second

Pricing

Pressures

The pressure

on our

customers’ discretionary

income continued

in the

of 2026

with increasing

fuel

prices.

the

Core

Price

Index

(CPI)

rose

in

April,

further

pressuring

our

customers’

discretionary income both now and into the foreseeable future.

We believe these additional pricing pressures

will cause

our

customers to

be

more

cautious

with their

discretionary

spending.

In addition,

our ability

to

pass through costs

caused by rising

fuel prices and

potential increased tariff

costs will be

limited due in

part

to the pressure on our customers’ discretionary spending.

Comparison of First Quarter of 2026

with 2025

Total retail sales for the first quarter

were $169.4 million compared to

last year’s first quarter sales of

$168.4

Sales increased due

to a same-store

sales increase of

3%, partially offset

by stores that

were closed

in the past 12 months.

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.

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 4.0%

of sales for the first quarter of

fiscal 2026 and are included

in the

same-store sales

calculation.

Total revenues,

comprised of

retail sales

and other

revenue (principally

finance

charges

and

late

fees

on

accounts

receivable,

shipping

charged

to

customers

for

e-

commerce

and

layaway

fees),

were

$171.1

million

for

the

first

quarter

ended

May

2,

2026,

compared to $170.2

million for

quarter ended May

3, 2025. The

Company operated

1,065 stores

at

May 2, 2026 compared

to 1,109 stores at

the end of last fiscal

year’s first quarter.

For the first three

months

of

fiscal

2026,

the

Company

opened

two

stores

and

closed

six

stores.

The

Company

currently

expects

to

open up to 15 new stores

and close approximately 35 stores in

fiscal 2026.

Other revenue, a component of

total revenues, was $1.7 million for the first

quarter of fiscal 2026, compared

to $1.8

million for

the prior

year’s comparable

first quarter.

Included in

Other revenue

is credit

revenue of

$0.7 million

which represented

0.4% of

total revenues

in the

2026, flat

both in

dollars

and percentage compared

to 2025.

Credit revenue is comprised

of interest earned on

the Company’s private

label credit card

portfolio and related

fee income.

Related expenses include

principally payroll, postage

and

other administrative expenses,

and totaled $0.4

million in the

first quarter of

2026, flat to

the first quarter

of

Cost of goods

sold was $106.3

million, or 62.8%

of retail sales for

the first quarter of

fiscal 2026, compared

to $109.3

million, or

64.9% of

retail sales

in the

The decrease

in cost

of goods

sold as

a percent

of sales

was due

in part

to a

pre-tax tariff

refund claim

of $5.7

million and

lower freight

costs,

partially

offset

by

increased

sales

of

marked

down

goods.

Cost

of

goods

sold

includes

costs

(net

of

discounts

and

allowances),

buying

costs,

costs,

occupancy

costs,

freight

and

inventory shrinkage.

Net merchandise costs and

in-bound freight are capitalized

as inventory costs.

Buying

and

costs

include

payroll,

payroll-related

costs

and

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 6.8% to $63.1 million for the first quarter

2026 compared

to $59.1

million in the

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,

and bank and credit card processing fees.

SG&A

expenses were

$53.9 million,

or 31.8%

of retail

sales for

fiscal 2026,

compared to

$55.3

or

32.8%

of

retail

sales

in

the

first

quarter

of

fiscal

SG&A

expense

was

lower

in

the

first

fiscal 2026

compared to

fiscal 2025

primarily due

to lower

corporate payroll

expense, insurance costs and

equipment maintenance, partially offset

by increases in incentive compensation

expense.

Depreciation expense was $2.2 million, or 1.3% of retail sales for the first quarter of fiscal 2026, compared to

$2.6 million, or

1.5% of retail

sales for the

first quarter of

fiscal 2025. The

decrease in depreciation

expense

was due to fully depreciated older

stores.

Interest

and

other

income

was

$1.2

or

0.7%

of

retail

sales

for

the

first

quarter

of

fiscal

2026,

compared to $1.2 million, or 0.7% of

retail sales for the first

quarter of fiscal 2025.

Income tax expense

was $0.5 million or

0.3% of retail sales

for the first quarter

of fiscal 2026, compared

to

income

tax

expense

of

$0.9

or

0.6%

of

retail

sales

for

the

first

quarter

of

fiscal

The

income

tax

rate

for

the

first

quarter

of

fiscal

was

5.3%

to

21.9%

for

the

first

quarter of fiscal 2025. The decrease in tax expense was primarily due to lower

foreign income taxes.

LIQUIDITY, CAPITAL

RESOURCES

AND MARKET

RISK:

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

requirements

and expected

capital expenditures

for the

next

months

from the

issuance of

this

quarterly report on Form 10-Q.

Cash

by

activities

for

the

first

three

months

of

fiscal

was

primarily

generated

by

earnings

adjusted

for

depreciation

and

changes

in

working

capital.

The

in

cash

of

$4.2

million

for

the

first

three

months

of

fiscal

as

to

the

first

three

months

of

fiscal

was

primarily attributable to

higher net income

and the relative

change in accounts

payable from year-end

to the

for both

years, partially

offset by

an increase

in accounts

receivable and

the relative

change in

inventory from year-end to the first

quarter for both years.

At May 2, 2026, the Company had working capital of $49.0 million compared to $37.4 million at January 31,

The

was

primarily

attributable

to

an

in

cash,

and

accounts

receivable,

partially offset by higher accounts payable.

The ABL

Credit Agreement

(“ABL Facility”)

of up

to

$35.0 million

is committed

through March

and is secured primarily by inventory and

third-party credit card receivables. The proceeds from the

ABL

Facility

may

be

used

to

provide

funding

for

ongoing

working

capital

and

general

purposes.

There

were

no

borrowings

and

the

under

the

facility

was

$30.0

million

before

giving

effect

to

a

$3.0

million

letter

of

credit

that

reduced

borrowing

to

$27.0

million

as

of

May

2,

and

January

31,

The

weighted

average

rate

under

the

credit

facility was zero at May 2, 2026 and January 31, 2026 due to no outstanding

borrowings.

Expenditures

for

property

and

equipment

totaled

$1.1

million

in

the

first

three

months

of

fiscal

2026,

compared to $1.0

million in last

fiscal year’s first

three months.

For the full

fiscal 2026 year,

the Company

expects to invest approximately $7.4 million in

capital expenditures.

Net

cash

by

investing

activities

totaled

$0.8

million

in

the

first

three

months

of

fiscal

compared to $7.9

million provided in

the comparable period

of fiscal 2025.

The decrease was

primarily due

to an increase in purchases of short-term

investments, partially offset by a

decrease in the sales of

short-term

investments.

Net cash used in

financing activities totaled $0.2

million in the first

three months of fiscal

2026 compared to

$0.9

m

illion used in the comparable period of fiscal 2025. The decrease

was primarily

due to

lower stock

repurchases.

The Company purchased

107,823 shares in

the first quarter

of 2026.

As of May

2, 2026, the

Company had

572,917 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

held in

managed accounts

with

underlying

ratings

of

A

or

better

at

May

2,

and

January

31,

The

bonds

have

contractual maturities which range from 13 days

to 2.9 years.

at

May

2,

2026,

the

Company

had

plan

assets

of

$9.8

At

January

31,

2026,

the

Company

had

plan

assets

of

$9.7

These

assets

are

within

Other

assets

in

the

Balance

Sheets.

See

Note

7,

Fair

Value

Measurements.

RECENT ACCOUNTING PRONOUNCEMENTS:

See Note 8, Recent Accounting Pronouncements.

QUANTITATIVE

AND QUALITATIVE

DISCLOSURES ABOUT MARKET RISK

AND QUALITATIVE

DISCLOSURES ABOUT MARKET RISK:

The

Company

is

subject

to

market

rate

risk

from

exposure

to

changes

in

rates

related

to

its

financing, investing and

cash management activities,

but the Company

does not

believe such exposure

is

material.

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

May

2,

Based

on

this

evaluation, our Principal Executive Officer and Principal

Financial Officer concluded that, as of May

2, 2026,

our disclosure

controls and

procedures, as

defined in

Rule 13a-15(e),

under the

Securities Exchange

Act of

(the

“Exchange

Act”),

were

to

ensure

that

we

are

to

disclose

in

the

reports

that

we

file

or

submit

under

the

Exchange

Act

is

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 May 2, 2026 that has

materially affected, or is

reasonably

likely

to

affect,

the

internal

control

over

reporting.

PART

LEGAL PROCEEDINGS:

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”

in

our

Annual

Report

on

Form

10-K

for

our

fiscal

year

ended

January

31,

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

to

be

immaterial

may

also

adversely

affect

our

or

results

of

operations.

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 May 2, 2026:

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

of Shares

Price Paid

Announced Plans or

Yet be Purchased

Under

Period

Purchased

per Share (1)

Programs (2)

The Plans or Programs (2)

February 2026

$

March 2026

62,599

2.85

62,599

April 2026

45,224

2.86

45,224

Total

107,823

$

2.85

107,823

572,917

(1)

Prices include trading costs.

(2)

As of January

31, 2026, the

Company’s share

repurchase program had

680,740 shares remaining

in

open authorizations.

During

the

first

quarter

ended

May

2,

2026,

the

Company repurchased

and retired

107,823 shares under

this program

for approximately

$307,697 or

an average

market

price of $2.85 per share.

As of May 2, 2026, the Company had 572,917 shares remaining in open

authorizations.

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

DEFAULTS

UPON SENIOR SECURITIES:

PART

MINE SAFETY DISCLOSURES:

No matters requiring disclosure.

OTHER INFORMATION:

During the

three months

ended May

2, 2026,

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

or

terminated

a “Rule10b5-1

trading arrangement” or

a “

non-Rule

10b5-1

trading arrangement” (as

such terms are

defined in Item

of Regulation S-K).

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

101.DEF

Inline XBRL Taxonomy Extension Definitions Linkbase

101.LAB

Inline XBRL Taxonomy Extension Label

Linkbase Document

101.PRE

Inline XBRL Taxonomy Extension Presentation Linkbase

104.1

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Page

Interactive

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File

(Formatted

in

Inline

XBRL

and

contained in the Interactive Data Files submitted as Exhibit 101.1*)

• Submitted electronically herewith.

PART

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

May 28, 2026

/s/ John P.

D. Cato

Date

John P.

D. Cato

Chairman, President and

Chief Executive Officer

May 28, 2026

/s/ Charles D. Knight

Date

Charles D. Knight

Executive Vice President

Chief Financial Officer