CATO CORP

Forward-looking Information

The

should

be

read

along

with

the

including the

accompanying Notes

appearing in

this report.

Any of

the following

are “forward-looking”

statements within the meaning of Section 27A of the Securities Act of 1933, as amended,

and Section 21E

of the Securities Exchange Act of 1934, as amended: (1) statements in this Form 10-K and any documents

by

that

reflect

projections

or

expectations

of

our

future

or

performance;

(2) statements

that

are

not

historical information;

(3) statements

of

our

beliefs,

intentions,

plans

and

objectives for

future operations,

including those

contained in

“Management’s

Discussion and

Analysis of

Financial Condition

and Results

of

Operations”; (4) statements

relating to

our operations

or

activities for our fiscal year ended February 3, 2024 (“fiscal 2023”) and beyond, including,

but not limited

to,

amounts

of

capital

and

store

openings,

relocations,

remodels and closures,

statements regarding the

potential impact of

the COVID-19 pandemic and

related

responses

and

mitigation

efforts,

as

well

as

the

impact

of

supply

chain

disruptions,

extreme

weather

inflationary

pressures

and

other

on

our

results

of

and

and

new

store

strategy;

and

(5) statements relating to our future contingencies. When possible, we have attempted to identify forward-

looking statements

by using

words

such

as

“will,” “expects,”

“anticipates,” “approximates,”

“believes,”

“estimates,”

“hopes,”

“intends,”

“may,”

“plans,”

“could,”

“would,”

“should”

and

any

variations

or

negative formations

of such

words and

similar expressions.

We

can give

no assurance

that actual

results

or

events

will

not

differ

from

those

expressed

or

implied

in

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

known and

unknown risks,

uncertainties and

other factors

that

could

cause

actual

results

to

differ

from

those

contemplated

by

the

forward-looking

Such

factors

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

and

uncertainties,

levels

of

unemployment, fuel,

energy

and

food

costs, inflation,

wage rates,

tax

rates, interest

rates, home

values,

net

worth

and

the

of

credit;

changes

in

laws,

or

government

our

but

not

limited

to

tariffs;

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 implement our

new store development

strategy to increase

new store openings

and our

ability of

any such

new stores

to grow

and perform

as expected;

adverse weather,

public health

threats

(including

the

global

COVID-19

pandemic)

or

similar

that

may

affect

our

sales

or

operations;

risks

due

to

shifts

in

market

demand,

the

ability

to

liquidate

excess

at

anticipated

margins;

adverse

or

volatility

the

industry or broader financial markets; and

other factors discussed under “Risk Factors”

in Part I, Item 1A

of this annual report on Form 10-K for the fiscal year ended February 3, 2024 (“fiscal 2023”), as amended

or supplemented, and in

other reports we file

with or furnish to

the Securities and Exchange

(“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.

As used herein,

the terms “we,”

“our,”

“us,” the “Company”

or “Cato”

include The Cato

Corporation

and

its

subsidiaries,

unless

the

context

indicates

another

meaning

and

except

that

when

used

with

to

common

stock

or

other

herein

and

in

describing

the

held

by

management of

the Company,

such terms

include only

The Cato

Corporation.

Our website

is located

at

www.catofashions.com

where

we

make

available,

free

of

charge,

our

annual

reports

on

Form 10-K,

reports

on

Form 10-Q,

current

reports

on

Form 8-K,

proxy

and

other

reports

(including amendments

to

these

reports) filed

or

furnished

pursuant to

Section 13(a) or

15(d)

under

the

Act of

1934. These

reports are

available as

soon as

reasonably practicable

after we

electronically file

these

materials with

the

SEC. We

also post

on our

website the

charters of

our

Audit,

and

and

Nominating

Committees;

our

Guidelines; Code of Business Conduct and Ethics and

Code of Ethics for the

Principal Executive Officer,

Principal Financial Officer

and Principal Accounting

Officer and

any amendments or

waivers thereto for

any of our directors or executive officers; and any other publicly available corporate governance materials

contemplated

by

SEC

or

New

York

Stock

regulations.

The

on

our

website, www.catofashions.com,

is not,

and should in

no way be

construed as, a

part of this

or any other

report that we filed with or furnished to the SEC.

PART

I

Background

The

founded

in

1946,

1,178

fashion

stores

at

3,

2024,

in

states,

in

the

United

States,

under

the

names

“Cato,”

“Cato

Fashions,”

“Cato

Plus,”

Fashion,”

Fashion

Metro”

and

“Versona.”

The

Cato

concept

seeks

to

offer

quality

fashion

apparel

and

accessories

at

low

prices

every

day,

in

junior/missy

and

plus

sizes.

The

Cato

concept’s stores and e-commerce website feature a broad assortment of apparel and accessories, including

dressy,

career,

and

casual

sportswear,

dresses,

coats,

shoes,

lingerie,

costume

jewelry

and

handbags.

A

major portion of the Cato concept’s

merchandise is sold under its private label and is produced by various

vendors

in

with

the

concept’s

specifications.

The

It’s

Fashion

and

It’s

Fashion

Metro

concepts offer fashion with a focus on the latest trendy styles for the entire family at low prices every day.

The

Versona

concept’s

stores

and

e-commerce website

offer

quality fashion

apparel items,

jewelry

and

accessories at

exceptional values

every day.

The

stores

range in

size from

2,400 to

19,000

square

feet

and

are

located

in

strip

centers

anchored

by

discounters

or

market-dominant

grocery

stores.

The

Company

emphasizes

friendly

service

and

coordinated

presentations

in

an

appealing

store

environment.

The

Company

offers

its

own

credit

card

and layaway

plan. Credit

and layaway

sales under

plan represented

6% of

retail sales

in

fiscal

See

Note

to

the

Statements, “Reportable

Segment

Information,”

for a discussion of information regarding the Company’s two reportable segments: Retail and Credit.

The

Company

has

Cato-branded

retail

stores

for

years.

The

Company

originated as a family-owned business and

made its first initial public offering

of stock in 1968.

In 1980,

the Company went private and in 1987 again conducted an initial public

offering.

Business Strategy

primary objective

is to

be the

leading fashion

specialty retailer

for fashion

and value

in its

markets. Management believes the

Company’s success

is dependent upon

its ability to

differentiate

its stores

from department

stores, mass

merchandise discount

competing specialty

stores. The

key elements of the Company’s business strategy are:

Assortment.

The

stores

offer

a

wide

assortment

of

on-trend

apparel

and

accessory items in primarily junior/missy,

plus sizes, men and kids sizes, toddler to

boys size 20 and girls

size 16 with

an emphasis on color,

product coordination and selection.

Colors and styles are

coordinated

and presented so that outfit selection is easily made.

Value

Pricing.

The

Company offers

quality

merchandise that

is

generally priced

below comparable

offered

by

department

stores

and

mall

apparel

chains,

but

is

more

fashionable

than

offered

by

discount

stores.

believes

that

the

Company

has

positioned itself as the every day low price leader in its market

segment.

Strip

Shopping

Center

Locations.

The

Company

locates

its

stores

in

convenient

strip

centers anchored by

national discounters or

market-dominant grocery stores

that attract large

numbers of

potential customers.

Customer Service.

Store managers

and sales

associates are

trained

to

provide prompt

and courteous

service and to assist customers in merchandise selection and wardrobe

coordination.

Credit and

Layaway Programs

.

The Company offers

its own credit

card and a

layaway plan to

make

the purchase of its merchandise more convenient for its customers.

Merchandising

Merchandising

The

Company

seeks

to

offer

a

broad

selection

of

high

quality

and

exceptional

value

apparel

and

accessories

to

suit

the

various

lifestyles

of

fashion

and

value-conscious

In

the

Company strives to offer on-trend fashion in exciting colors with consistent fit and

quality.

The Company’s merchandise lines

include dressy, career,

and casual sportswear, dresses,

coats, shoes,

lingerie, costume

jewelry,

handbags, men’s

wear and

lines for

kids and

infants. The

Company primarily

offers exclusive

merchandise with

fashion and

quality comparable

to mall

specialty stores

at low

prices,

every day.

The Company believes that the collaboration of its merchandising and design teams with an expanded

in-house

product

and

direct

sourcing

function

has

offerings

and

delivers quality,

exclusive on-trend

styles at

lower prices.

The product

development and

direct sourcing

operations provide

research on

emerging fashion

and color

trends, technical

services and

direct sourcing

options.

As a

part of

its merchandising

members of

merchandising and

design staff

visit selected

stores to

monitor the

merchandise offerings

of other

retailers, regularly

communicate with

store operations

associates and frequently

confer with

key vendors.

also takes

aggressive

markdowns

on

slow-selling

and

typically

does

not

carry

over

to

the

next

season.

Purchasing, Allocation and Distribution

the

Company

from

suppliers,

most

of

its

merchandise is

purchased from

approximately 100

primary vendors.

In

fiscal

2023,

purchases from

the

largest

vendor

accounted

for

13%

of

the

total

purchases.

The

not dependent

on its

largest vendor

or any

other vendor

for merchandise

purchases, and

the

loss of any single vendor or group of

vendors would not have a material adverse effect on

operating results or financial condition. A substantial portion of the Company’s merchandise is sold under

its

private

labels

and

is

by

various

vendors

in

with

the

strict

specifications. The Company sources a majority of its

merchandise directly from manufacturers overseas,

primarily in

Southeast Asia.

These manufacturers

are dependent

on materials

that are

primarily sourced

from

China. The

Company purchases

its

remaining merchandise

from

domestic importers

and

vendors,

which typically

minimizes the

time necessary to

purchase and

obtain shipments; however,

these vendors

are

dependent

on

materials

sourced

from

China.

The

Company

opened

its

own

overseas

sourcing operations in the fall of 2014, replacing the Company’s former sourcing agent in 2015. Although

a

portion

of

the

is

manufactured

overseas,

in

Southeast

Asia, the Company does

not expect that any

economic, political, public health or

social unrest in any

one

country

would

have

a

adverse

effect

on

the

ability

to

obtain

adequate

supplies

of

However,

the

Company

can

give

no

that

any

changes

or

in

its

merchandise supply

chain would

not materially

and adversely

affect the

See “Risk

Factors –

Risks Relating to Our Business – Because we source a significant portion of our merchandise directly and

indirectly from overseas,

we are

subject to risks

associated with changes,

disruptions, increased costs

or

other problems

affecting the

merchandise supply

chain; the

risks of

conducting international

and

risks

that

affect

the

prevailing

social,

economic,

political,

public

health

and

other

in

the

areas

from

which

we

source

have

and

could

to

and

adversely affect the Company’s business, results of operations and financial condition.”

An

of

the

strategy

is

the

allocation

of

to

stores

based

on

an

analysis

of

sales

trends

by

category,

profiles

and

climatic

A

control

system

current

on

the

sales

activity

of

each

style

in

each

of

the

stores.

Point-of-sale

terminals

in

the

stores

collect

and

transmit sales and inventory information to the Company’s central database, permitting timely response to

sales trends on a store-by-store basis.

All merchandise is shipped directly to the Company’s distribution

center in Charlotte, North Carolina,

where it

is inspected

and then

allocated by

the merchandise

distribution staff

for shipment

to individual

stores. The flow

of merchandise from

receipt at

the distribution center

to shipment to

stores is controlled

by

an

online

system.

Shipments

are

made

by

common

carrier,

and

each

store

receives

at

least

one

shipment per

week.

The centralization

of the

distribution process

also subjects

it to

risks in

the

event

of

damage

to

or

destruction

of

its

facility

or

other

the

center

or

the

flow

of

goods

into

or

out

of

Charlotte,

North

Carolina.

See

“Risk

Factors

–

Risks

to

Our

Technology,

Related

Systems

and

–

A

or

shutdown of

our centralized

distribution center

or transportation

network could

materially and

affect our business and results of operations.”

The

Company

uses

television,

in-store

signage,

graphics,

a

Company

website,

two

websites

and

social

media

as

its

primary

advertising

media.

The

total

advertising

were

1.0%,

1.0%

and

0.9%

of

retail

sales

for

fiscal

years

2023,

and

2021, respectively.

Store Operations

store operations

management team

consists of

four territorial

managers, 11

regional

managers and 104 district managers. Regional managers receive

a salary plus a bonus based

on achieving

targeted goals

for sales

and payroll.

District managers

receive a

salary plus

a bonus

achieving

targeted

objectives for

district sales

increases. Stores

are typically

staffed

with a

manager,

two assistant

managers

and

sales

depending

on

the

size

of

the

store

and

personnel needs.

In general,

store managers

are paid

a salary

or on

an hourly

basis as

are all

other store

personnel.

Store

managers,

assistant

managers

and

sales

are

for

monthly

and

semi-

annual bonuses based on achieving targeted goals for their respective store’s sales increases.

Store Locations

Most

of

the

stores

are

located

in

the

United

States in

a

markets

ranging

from

small

towns

to

large

metropolitan

areas

with

trade

area

populations

of

20,000

or

more.

Stores average approximately 4,500 square feet in size.

All of the

Company’s stores

are leased. Approximately 93% are

located in strip shopping

centers and

7% in enclosed

shopping malls. The

Company typically locates stores

in strip shopping

centers anchored

by

a

discounter,

Walmart

Supercenters,

or

market-dominant

grocery

stores.

The

Company’s strip center locations provide ample parking and shopping convenience for its customers.

The

store

consist

of

opening

new

stores

in

new

and

markets,

relocating

selected

stores

to

more

desirable

locations

in

the

same

market

area

and

closing underperforming stores. The following table sets forth information

with respect to the Company’s

development activities since fiscal 2019:

Store Development

Number of Stores

Beginning of

Number

Number

Number of Stores

Year

Opened

Closed

End of Year

2019………………….……...………….

1,311

1,281

2020………………….……...………….

1,281

1,330

2021……………………….……...…….

1,330

1,311

2022…………....………….……...…….

1,311

1,280

2023………….………...….……...…….

1,280

1,178

The Company periodically

reviews its store

base to determine

whether any particular

store should be

closed based on its sales

trends and profitability.

The Company intends to continue this

review process to

identify underperforming stores.

Credit and Layaway

Credit Card Program

The Company offers its own credit card, which accounted for 3.4%, 3.1% and 2.5% of

retail sales in

fiscal 2023, 2022 and 2021, respectively. The Company’s net bad debt expense was 3.6%, 2.0% and 3.0%

of credit sales in fiscal 2023, 2022 and 2021, respectively.

Customers applying for the Company’s credit card are approved for credit if

they have a satisfactory

credit

record

and

the

Company

has

considered

the

customer’s

ability

to

make

the

minimum

payment.

Customers are required

to make minimum

monthly payments based

on their account

balances.

If

the

balance

is

not

paid

in

full

each

month,

the

Company

the

a

finance

charge.

If

payments are not received on time, the customer is assessed a late

fee subject to regulatory limits.

The

Company

introduced

its

loyalty

program

in

October

The

loyalty

program

credits

the

customer points based on their purchases of

merchandise using the Company’s proprietary

credit card.

A

point is earned for every dollar spent on merchandise purchases.

A

$5.00 rewards card is earned for every

points

by

the

customer.

The

rewards

card

expires

days

after

the

rewards

card

is

issued.

The fiscal 2023 loyalty program impact is immaterial to the fiscal 2023 financial statements.

The

loyalty

program

is

accounted

for

in

with

ASU

2014-09,

Revenue

from

Contracts

with

Customers (Topic 606)

.

Layaway Plan

Under

the

layaway

plan,

is

set

aside

for

who

agree

to

make

periodic

payments.

The

Company adds

a

nonrefundable

fee

to

each

layaway

sale.

If

no

payment is made within four weeks,

the customer is considered to have

defaulted, and the merchandise is

returned

to

the

selling floor

and again

offered

for

sale, often

at

a reduced

price. All

payments made

by

customers who subsequently default on their layaway purchase are returned to the customer upon request,

less the administrative fee and a restocking fee.

The Company defers recognition of layaway sales to the accounting period when the customer picks

up

and

completely pays

for

layaway

Administrative fees

are

in

the

period

in

which the

layaway is

initiated.

Recognition of

restocking fees occurs

in the

accounting period

when the

defaults

on

the

layaway

purchase.

Layaway

sales

represented

3.0%,

2.7%

and

2.7% of retail sales in fiscal 2023, 2022 and 2021, respectively.

Information Technology Systems

The

systems

provide

daily

and

merchandising

that

is

used

by

management to

enhance

the

timeliness

and

of

purchasing and

pricing

uses

a

daily

report

comparing

actual

sales

with

planned

sales

and

a

weekly

ranking

report

to

monitor

and

control

purchasing

Weekly

reports

are

also

which reflect

sales, weeks

of

supply of

inventory and

other critical

data by

product categories,

by store

and by various levels of

responsibility reporting. Purchases are made based

on projected sales, but can

be

modified to accommodate unexpected increases or decreases in demand

for a particular item.

Sales information

is projected

by merchandise

category and,

in

some cases,

is

further projected

and

actual

performance measured

by

stock

keeping

unit

(SKU).

allocation

models

are

used

to

distribute

to

stores

based

upon

sales

trends,

climatic

customer demographics and targeted inventory turnover rates.

Competition

The women’s

retail apparel

industry is

highly competitive.

believes that

the principal

competitive factors

in its

industry include

merchandise assortment

and presentation,

fashion, price,

store

location

and

service. The

Company competes

with

retail

chains that

operate similar

apparel specialty stores. In addition, the Company competes with

mass merchandise chains, discount store

chains, major

department stores, off

-price retailers

and internet-based

retailers.

Although we

believe we

compete favorably

with respect

to the

principal competitive

factors described

above, many

of our

direct

and

indirect

competitors

are

well-established

national,

regional

or

local

chains,

and

some

have

substantially greater

financial, marketing

resources.

expects its

stores in

larger

cities and metropolitan areas to face more intense competition.

Seasonality

Due

to

the

nature

of

the

retail

the

Company

has

historically

and

expects to continue to

experience seasonal fluctuations in its

revenues, operating income and net

income.

Our stores

typically generate a

higher percentage of

our annual net

sales and

profitability in the

first and

second quarters of

our fiscal year compared to

other quarters.

Results of a

period shorter than a

full year

may

not

be

indicative

of

results

for

the

entire

year.

Furthermore,

the

nature

of

our

business may affect comparisons between periods.

Regulation

The

and

subject

it

to

a

wide

range

of

local,

state,

and

international laws

and regulations

in a

areas, including

but not

limited to,

trade, licensing

and

permit

import

and

export

privacy

and

data

protection,

credit

regulation,

recordkeeping

and

tariffs,

taxes,

and anti-corruption.

Though compliance with these

laws and regulations has

not had a

material effect on

our capital

expenditures, results

or competitive

position in

fiscal 2023,

faces

ongoing

risks

related

to

its

efforts

to

comply

with

these

laws

and

and

risks

related

to

noncompliance,

as

below

throughout

the

“Risk

Factors”

section

and

in

under

Our business operations subject

us

to

legal

compliance and

risks, as

well as

regulations and

regulatory enforcement

priorities,

which

could

result

in

costs

or

divert

our

attention

or

adversely affect our business, results of operations and financial condition.”

Human Capital

As

of

3,

2024,

the

Company

7,300

and

associates. The

Company also

employs additional

part-time associates

during the

peak retailing

seasons.

The

are

engaged

in

various

executive,

operating,

and

functions in

the Home

Office

and distribution

center and

the remainder

are engaged

in store

The Company is

not a party

to any

collective bargaining agreements

and considers its

associate relations

to

be

good.

The

Company

offers

a

broad

range

of

Company-paid

to

its

medical and

dental plans,

paid vacation,

a 401(k)

plan, Employee

Stock Purchase

Plan, Employee

Stock

Ownership

Plan,

disability

associate

assistance

programs,

life

and

an

associate

discount.

The

level

of

and

eligibility

vary

depending

on

the

associate’s

or

status, date

of hire,

length of

service and

level of

pay.

endeavors to

promote diversity,

to

provide

opportunities

for

advancement,

and

to

treat

all

of

its

with

dignity

and

respect.

The

Company constantly

strives

to

improve

its

programs

to

develop

associates.

Over

80%

of

store

and field

management are promoted from

within, allowing the

Company to internally

staff its

store base.

The

Company

has

programs

at

each

level

of

store

The

Company

also

performs

ongoing

reviews

of

its

safety

protocols,

to

promote

the

health

and

safety

of

its

associates.

An investment in our common stock involves numerous types of risks.

You

should carefully consider

the

risk

in

addition

to

the

other

in

this

report,

the

under

“Forward-looking

Information”

above

in

evaluating

our

Company

and

any

in

our

common

stock.

If

any

of

the

risks

or

occur

or

persist,

our

business, financial condition and

operating results could

be materially and

adversely affected, the

trading

price

of

our

common

stock

could

decline

and

you

could

lose

all

or

a

part

of

your

in

our

common

stock.

The

risks

and

in

this

section

are

not

the

only

ones

facing

us.

Additional risks

and uncertainties

not presently

known to

us or

that we

currently deem

immaterial

may

also materially

and adversely

affect

our business,

operating results,

financial condition

and value

of our

Risks Relating to Our Business:

Continued high interest rates and inflationary conditions have and

may continue to adversely

impact our customers’ discretionary income or willingness to purchase

discretionary items, which

may adversely affect our business, margins, results of operations and financial

Continued high interest rates have adversely affected our customers’ discretionary income, in part due

to increased

interest costs

associated with

credit accounts

including revolving

credit accounts,

car loans,

mortgage loans and other credit accounts.

In addition, the increased payments due to

higher interest rates

deter our

customers from

purchasing discretionary

items such

as apparel,

shoes and

jewelry.

Continued

inflationary pressures

limit our

customers’ willingness

to purchase

apparel, shoe

or jewelry

products, as

prices associated

with non-discretionary

items, including

food, fuel

and shelter

costs increase

or remain

high,

reducing

our

income.

Any

in

our

spending on our products could

erode our sales volume and

adversely affect our results

of operations and

Because we source a significant portion of our merchandise directly

and indirectly from overseas,

we are subject to risks associated with changes, disruptions, increased

costs or other problems

affecting the Company’s merchandise supply chain; the risks of conducting international

operations and risks that affect the prevailing social, economic, political, public health

conditions in the areas from which we source merchandise have

and could continue to materially

and adversely affect the Company’s business, results of operations and financial condition.

A significant amount of our merchandise is manufactured overseas, principally in Southeast Asia. We

are

subject

to

supply

chain

transit

times

and

costs,

issues

related

to

a

sustained drought

in Panama

that is

causing longer

transit times

through the

Panama Canal

and limiting

the number of containers on a vessel due to vessel draft restrictions.

We

also face disruptions from issues

vessels transiting the

Suez Canal and

Red Sea, which

are being forced

to travel

a much

longer

distance around the

Cape of Good

Hope due to

the hostilities in

the Middle East.

These continued issues

have and

may continue to

drive up our

ocean freight costs,

delay merchandise deliveries,

and impact our

ability to access the already limited supply of

ocean container shipping capacity that we require.

We

also

are

subject

to

supply

chain

disruptions,

lack

of

intermodal

transportation

(trucks

and

drivers),

port

congestion,

dwell

times

for

incoming

container

ships, lack

of container

yard capacity

and lack

of available

drayage from

the ports

that impact our domestic

supply chain.

These supply chain risks

have and may continue

to result in

both

higher costs to transport our merchandise and delayed merchandise arrivals to our stores, which adversely

affect our ability to sell this merchandise and increase markdowns of it.

We

directly import

some of

this merchandise

and indirectly

import the

remaining merchandise

from

domestic vendors who acquire the merchandise from foreign

sources. Further, our third-party

vendors are

dependent on materials

primarily sourced from China.

As a result,

we are subject

to numerous risks

that

can cause significant delays or interruptions in the supply of our merchandise

or increase our costs.

These

risks

include

political

unrest,

labor

disputes,

terrorism,

war,

public

health

threats,

but

not

limited

to

communicable

diseases

(such

as

COVID-19),

or

other

forms

of

instability

or

other

events

resulting in

the

of

trade

from

our

supply

chain,

requirements for imported

merchandise, or the

imposition of, or

changes in, laws,

regulations or changes

in duties,

quotas, tariffs,

taxes or

governmental policies

regarding or

responses to

these matters

factors

the

or

cost

of

imports.

In

geopolitical

tensions,

sanctions,

prohibitions,

tariffs,

and

have

in

costs

with

in

certain

regions.

Any

new

sanctions,

tariffs

and

requirements enacted in

the future may

further increase our

costs associated with

sourcing products from

those

regions

or

limit

our

ability

to

procure

the

we

source,

and

our

ability

to

source

these

products from other regions may be limited or result in increased sourcing

costs.

Our costs are

also affected by currency

fluctuations, and changes in

the value of the

dollar relative to

foreign currencies have impacted and may continue to impact our cost of goods sold. Any of these

factors

can materially

and adversely affect

our business

and results

of operations.

increased energy

and transportation

costs have

caused

us significant

cost increases

from time

to

time, and

future adverse

changes

in

these

costs

or

the

of

the

means

by

which

is

transported

to

us

could

cause additional

cost increases

or interruptions

of our

supply chain,

which could

be significant.

we are subject to

increased costs or potential disruptions

impacting any port or

trade route through which

our products

move, or we

may be

increased costs

and delays if

forced to route

freight through

different

ports

than

the

ones

through

which

our

typically

move.

If

we

are

forced

to

source

merchandise from

other countries

domestic vendors

with foreign

sources in

different

countries,

those goods may be more expensive or of a different or inferior quality from the ones we

now sell.

The operation of our sourcing offices in Asia presents increased operational and

legal risks.

In October

2014, we

established our

own sourcing

offices in

Asia. If

our sourcing

offices are

unable

to successfully oversee merchandise production to ensure

that product is produced on time and

within the

specifications,

our

brand,

reputation,

costs,

results

of

and

condition could be materially and adversely affected.

In addition, the current business environment, including geopolitical issues, make operating in

certain

Asian

markets

challenging.

To

the

extent

we

explore

other

to

source

our

product

or

explore

the

amount

of

product

sourced

from

current

countries,

we

may

be

subject

to

legal

and

operational risks

with

doing

in

new

or

increasing our

business in other countries.

the

conducted

by

our

sourcing

offices

outside

the

United

States

subject

us

to

foreign operational risks,

as well as

U.S. and international regulations

and compliance risks, as

elsewhere

in

this

“Risk

Factors”

section,

in

below

under

“Risk

Factors

–

Risks

to

and

Legal

Matters

Our

subject

us

to

legal

and

risks, as well as regulations and regulatory enforcement priorities, which could result in increased costs or

divert

our

attention

or

affect

our

results

of

operations and financial condition.”

Any actual or perceived deterioration in the conditions that drive

consumer confidence and

spending have and may continue to materially and adversely affect consumer demand

for our

apparel and accessories and our results of operations.

Consumer spending habits, including spending for our apparel

and accessories, are affected by, among

other things, prevailing social, economic,

political and public health conditions

and uncertainties (such as

matters under debate in the U.S. from time to

time regarding budgetary, spending and

tax policies), levels

of

employment,

fuel,

inflation,

rates,

energy

and

food

costs,

salaries

and

wage

rates

and

other

sources

of

income,

tax

rates,

home

values,

net

worth,

the

of

credit,

confidence

and

perceptions

of

adverse

changes

in

or

trends

any

of

these

Any perception that these conditions may be worsening or continuing to trend negatively may

significantly

weaken

many

of

these

drivers

of

consumer spending

habits.

Adverse

perceptions

of

these

or

them

also

cause

consumers

to

defer

of

discretionary items, such

as our

merchandise, or

to purchase

cheaper alternatives to

our merchandise,

all

of which may also

adversely affect our

net sales and

In addition, numerous events,

whether or not related to

actual economic conditions, such as downturns

in the stock markets, acts

of war

or terrorism, political unrest

or natural disasters, outbreaks of

disease or similar events,

may also dampen

consumer confidence,

and accordingly,

lead

to

reduced consumer

spending.

Any of

these

events could

have a material adverse effect on our business, results of operations and financial

Increased product costs, freight costs, wage increases and operating

costs due to inflation and

other factors, as well as limitations in our ability to offset these cost increases by increasing

the

retail prices of our products or otherwise, have and may continue to adversely

affect our business,

margins, results of operations and financial condition.

Tight

labor markets

have caused

wages to

at the

store, distribution

center and

home office

levels, as well

as making it

more difficult to

hire new associates

and retain existing associates.

The tight

labor

market

and

continued

also

are

driving

up

our

costs.

In

inflationary

pressures on labor and raw materials

used to make our products may continue

to increase the cost we

pay

for

our

products.

If

we

are

unable

to

offset

the

effects

of

these

costs

to

our

by

increasing the

retail prices

of our

products, reducing other

expenses or

otherwise, our business,

margins,

results of operations and financial condition may be adversely affected.

Our

ability

to

raise

retail

prices

in

to

these

cost

is

limited,

in

part

due

to

our

unwillingness

to

pay

higher

prices

for

items

in

light

of

actual

or

perceived

effects

of

in

our

cost

of

essential

items

and

diminishing

disposable income, sentiment or financial outlook.

Moreover, the persistence or worsening of inflationary

and

high

rates

could

also

lead

our

to

reduce

their

amount

of

current

spending

on

our

even

in

the

absence

of

price

increases,

which

could

erode

our

sales volume and adversely affect our results of operations and financial condition.

Adverse

the

or

events

or

concerns

involving

liquidity,

defaults

or

non-performance

by

institutions

or

transactional

counterparties

could adversely affect our business, financial condition or results of operations.

Actual

events

involving limited

liquidity,

defaults,

non-performance or

other

adverse

that affect

financial institutions,

transactional counterparties

companies in

the financial

or

the

generally,

or

concerns

or

rumors

about

any

events

of

these

kinds

or

other

similar

risks,

have

in

the

past

and

may

in

the

future

lead

to

sporadic

or

market-wide

liquidity problems that

could adversely affect

us.

If any of

our transactional counterparties,

such as

our

merchandise vendors

and their

factors, our

landlords, our

payment processors

including credit

card, gift

card and checks, our transportation vendors and other vendors that provide services and supplies to us, are

unable to

access funds

or lending

arrangements with

such

a financial

institution, such

parties’ ability

to

pay their obligations could be adversely affected.

If this occurred we could be

adversely impacted by not

receiving

the

product

we

ordered

or

the

by

our

sales,

by

not

being

able

to

receive

products to our distribution center or

our stores in a timely

manner or at all, or

by not being able to

retain

services from

third parties

that we

require.

These impacts

may adversely

affect our

financial condition,

results

of

and

our

ability

to

execute

our

strategy.

Furthermore,

these

adverse

developments affecting the financial services or related perceptions may negatively

impact our customers’

discretionary income or

our customers’

willingness to purchase

apparel, shoes or

jewelry products.

Any

in

our

spending

on

our

could

erode

our

sales

volume

and

adversely affect our results of operations and financial condition.

Extreme weather, natural disasters, impacts of climate change, public health threats or similar

events have and may continue to adversely affect our sales or operations from time

to time.

Extreme

changes

in

weather,

natural

disasters,

impacts

of

climate

change,

public

health

threats or similar

events can influence

customer trends and

shopping habits.

For example, heavy rainfall

or other extreme weather conditions, including but

not limited to winter weather over a

prolonged period,

might

make

it

difficult

for

our

to

travel

to

our

stores

and

thereby

reduce

our

sales

and

profitability.

Our business is also susceptible to unseasonable weather conditions.

For example, extended

periods of unseasonably

warm temperatures during the

winter season or

cool weather during

the summer

season can

render a

portion of

our inventory incompatible

with those unseasonable

Reduced

sales

from extreme

or

prolonged unseasonable

weather

would

our

The occurrence or

threat of extreme

weather, natural

disasters, power outages, terrorist

acts, outbreaks of

flu

or

other

communicable

diseases

(such

as

COVID-19)

or

other

catastrophic

events

could

reduce

traffic

in

our

stores

and

likewise

disrupt

our

ability

to

conduct

which

would

materially and adversely affect us.

The

long-term

impacts

of

global

climate

change

are

to

be

unpredictable

and

widespread.

The

impacts

of

climate

change

present

a

variety

of

risks.

The

effects

of

climate

change

such

as

extreme

weather

and

drought

could

affect

our

results

of

including disrupting our

supply chain, the

costs of our

products and negatively

impacting our workforce.

In

the

impacts

of

climate

change

present

transition

risks

and

reputational

risks.

The

cost

of

with

any

future

may

substantially

increase our

costs. For

example, the

use of

certain commodities

in the

manufacture of

our products

and

energy

we

use

in

our

may

face

regulation

due

to

climate

change

or

other

environmental concerns, which could

increase our costs.

Furthermore, any failure of

or perceived failure

by us

to comply

with any

potential future

climate change

regulatory requirements

including stakeholder

expectations regarding the environment, could adversely affect our reputation and

Our ability to attract consumers and grow our revenues is dependent

on the success of our store

location strategy and our ability to successfully open new stores as planned.

Our sales are

dependent in part

on the location

of our stores in

shopping centers and malls

where we

believe our

consumers and

potential consumers

shop.

to grow

our

revenues has

been substantially dependent on our ability to secure space for and open new stores in attractive locations.

Shopping centers

and malls

where we

currently operate

existing stores

or seek

to

open new

stores have

been and

may continue

to be

adversely affected

by,

among other

things, general

economic downturns

or

those

particularly affecting

the

commercial real

estate industry,

the

closing of

anchor

stores, changes

in

tenant

mix

and

changes

in

preferences,

but

not

limited

to

an

in

preference for online versus in-person shopping.

To take

advantage of consumer traffic and the

preferences

of

our

consumers,

we

need

to

and

acquire

stores

in

desirable

locations

where

competition for suitable

store locations is

intense. A decline

in customer popularity

of the

strip shopping

centers where we

generally locate our

stores or in

availability of space in

desirable centers and

locations,

or an increase in the cost of such desired space, has limited and could further limit our ability to open new

stores,

traffic

and

reducing

our

sales

and

net

or

our

operating costs.

Our ability

to open

and operate

new stores

depends on

many factors,

some of

which are

beyond our

control.

These

factors

but

are

not

limited

to,

our

ability

to

suitable

store

locations,

negotiate acceptable lease terms, secure

necessary governmental permits and approvals and

hire and train

appropriate store personnel.

In addition, our

continued expansion into

new regions of

the country

where

we

have

not

done

before

may

present

new

challenges

in

and

merchandising as we enter these new markets. Our failure to successfully and timely

execute our plans for

opening new stores

or the failure

of these stores

to perform up

to our expectations

could adversely affect

our business, results of operations and financial condition.

If we are unable to anticipate, identify and respond to rapidly changing

fashion trends and

customer demands in a timely manner, our business and results of operations could materially

suffer.

Customer

tastes

and

fashion

trends,

particularly

for

apparel,

are

volatile,

tend

to

change

rapidly

and

cannot

be

predicted

with

certainty.

Our

success

depends

in

part

upon

our

ability

to

consistently anticipate, design and respond to changing merchandise trends and consumer preferences in a

timely

manner.

Accordingly,

any

failure

by

us

to

anticipate,

identify,

design

and

respond

to

fashion

trends

could

affect

acceptance

of

our

merchandise,

which

in

turn

could

adversely affect our business, results

of operations and our image with our

If we miscalculate

either the

market for

our merchandise

or our

customers’ tastes or

purchasing habits, we

may be required

to sell a significant amount of inventory at below-average markups over

cost, or below cost, which would

adversely affect our margins and results of operations.

The inability of third-party vendors to produce goods on time and to

the Company’s specification

may adversely affect the Company’s business, results of operations and financial condition.

Our

dependence

on

vendors

to

manufacture

and

supply

our

subjects

us

to

numerous risks that

our vendors will

fail to perform

as we expect.

For example, the

deterioration in any

of

our key

vendors’ financial

condition, their

failure to

ship merchandise

in a

timely manner

that meets

our specifications,

failures to

follow our

vendor guidelines

or comply

with applicable

laws and

compliant

labor,

practices

and

product

safety,

could

expose

us

to

operational, quality,

competitive, reputational and

legal risks.

If we

are not

able to

timely or

adequately

replace the merchandise we currently

source with merchandise produced elsewhere,

or if our vendors fail

to

perform as

we

expect,

our

business, results

of

and

could

be

affected.

Activities

conducted

by

us

or

on

our

behalf

outside

the

United

States

further

subject

us

to

numerous

U.S.

and

international

and

risks,

as

below

under

“Risk

Factors –

Risks Relating

to Accounting

and Legal

Matters -

Our business

operations subject

us to

legal

compliance and litigation

risks, as well

as regulations and

regulatory enforcement priorities, which

could

result in increased costs or liabilities,

divert our management’s attention

or otherwise adversely affect our

business, results of operations and financial condition.”

Existing and increased competition in the women’s retail apparel industry may negatively impact

our business, results of operations, financial condition and

market share.

The

retail

apparel

is

highly

competitive.

We

compete

with

discount

stores,

mass

merchandisers,

department

stores,

off-price

retailers,

stores

and

internet-based

retailers, many of which have substantially greater financial, marketing and other resources

than we have.

Many

of

our

competitors offer

frequent

promotions and

reduce

their

selling prices.

In some

cases,

our

competitors are expanding into

markets in which we

have a significant market

presence.

In addition, our

competitors

also

compete

for

the

same

retail

store

space.

As

a

result

of

this

we

may

experience

pricing

pressures,

marketing

expenditures,

costs

to

open

new

stores,

as

well

as

loss

of

market

share,

which

could

and

affect

our

results

of

Our inability to effectively manage inventory has impacted and may continue

to negatively impact

our gross margin and our overall results of operations.

Factors

sales

include

fashion

trends,

preferences,

calendar

and

holiday

shifts,

weather,

supply

chain

issues,

actual

or

public

health

threats

and

conditions, including

but not

limited to

continued high

interest rates

and persistent

inflation. In

must

be

ordered

well

in

advance

of

the

selling

season

and

before

trends

are

confirmed by sales.

If we are

not able to

accurately predict customers’

preferences for our

fashion items,

we may have too

much inventory, which

may cause excessive markdowns. If we

are unable to accurately

predict demand

for our

merchandise, we may

end up

with inventory shortages,

resulting in

missed sales.

Our

inability

to

effectively

manage

may

affect

our

gross

margin

and

results

of

Failure to attract, train, and retain skilled personnel could adversely affect our business

and our

Like most

retailers, we

experience significant

associate turnover rates,

particularly among store

sales

associates and

managers.

Moreover,

attracting and

retaining skilled

personnel has

become increasingly

challenging in

the tight

labor market

that has

persisted since

the onset

of the

COVID-19 pandemic.

To

offset this

turnover as

well as

support new

store growth,

we must

continually attract,

hire and

train new

store

to

meet

our

staffing

needs.

A

in

the

turnover

rate

among

our

store

sales associates and managers would increase our recruiting and training costs, as well as possibly cause a

decrease in our store

operating efficiency and productivity.

We

compete for qualified store associates, as

well

as

personnel,

with

other

companies

in

our

or

other

industries,

many of whom have greater financial resources than we do.

In

we

depend

on

key

personnel

to

oversee

the

operational

divisions

of

the

Company

for

the

support

of

our

and

future

expansion.

The

success

of

executing

our

business strategy

depends in

large part

on retaining

key management.

We

compete for

key management

personnel

with

other

retailers, and

our

inability

to

attract

and

retain

qualified personnel

could

limit

our

ability to continue to grow.

If

we

are

unable

to

retain

our

key

and

store

or

attract,

train,

or

retain

other

skilled

personnel in

the

future,

we

may not

be

able

to

service

our

customers effectively

or

execute

our

business strategy, which could adversely affect our business, operating results and financial condition.

The currently

competitive environment

for

hiring new

associates and

retaining existing

associates is

causing

wages

to

increase,

which

has

affected

and

could

to

affect

our

margins, operating results and financial condition if we cannot offset these cost increases.

Fluctuations in the price, availability and quality of inventory have and

may continue to result in

higher cost of goods, which the Company may not be able to pass on

to its customers.

The price and availability of raw

materials may be impacted by demand, regulation,

weather and crop

yields, currency

value fluctuations,

inflation, as

well as

other factors.

manufacturers have

and may continue to have increases in other manufacturing costs, such as transportation, labor and benefit

costs. These increases in production costs may result in higher merchandise costs to the Company.

Due to

the

limited

flexibility

in

price

point,

the

Company

may

not

be

able

to

pass

on

those

cost

to

the

consumer,

which

could

have

a

adverse

effect

on

our

margins,

results

of

If the Company is unable to successfully integrate new businesses into

its existing business, the

Company’s financial condition and results of operations will be adversely affected.

long-term business

strategy includes

opportunistic growth

through the

of

new

store

concepts.

This

growth

may

require

capital

and

attention. The Company may not

realize any of the

anticipated benefits of a

new business and integration

costs

may

exceed

anticipated

amounts.

We

have

incurred

substantial

commitments

and

fixed

costs related to our retail stores that we

will not be able to recover if our stores

are not successful and that

have

in

and

could

result

in

future

charges.

If

we

cannot

successfully

execute

our

growth strategies, our financial condition and results of operations may

be adversely impacted.

Risks Relating to Our Information Technology, Related Systems and Cybersecurity:

A

failure or disruption relating to our information technology systems could

adversely affect our

We

rely

on

our

systems

for

merchandise planning,

replenishment, pricing, ordering,

markdowns and

product life

cycle management.

In addition to

merchandise operations, we utilize

our information technology systems for

our distribution

processes,

as

well

as

our

payable,

general

ledger,

receivable, sales,

banking, inventory

and fixed

assets.

Despite the

precautions we

take, our

systems are or may be vulnerable to disruption

or failure from numerous events, including but not limited

to, natural disasters,

severe weather conditions,

power outages, technical malfunctions,

cyberattacks, acts

of

war

or

terrorism,

similar

catastrophic

events

or

other

causes

beyond

our

control

or

that

we

fail

to

anticipate. Any disruption or failure in the operation of our information technology systems, our failure to

to

upgrade

or

improve

such

or

the

cost

with

maintaining,

repairing

or

improving

these

could

affect

our

results

of

and

condition. Modifications and/or upgrades to

our current information technology systems may also

disrupt

our operations.

A security breach that results in unauthorized access to or disclosure of

employee, Company or

customer information or a ransomware attack could adversely affect our costs,

reputation and

results of operations, and efforts to mitigate these risks may continue to

increase our costs.

The

protection

of

Company and

data

is

critical

to

the

Any

breach, mishandling, human or programming error or other event that results in the misappropriation, loss

or

other

unauthorized

of

Company

or

but

not

limited

to

credit

card

data

or

other

personally

identifiable

could

severely

damage

the

Company's reputation, expose it to

remediation and other costs

and the risks of legal

proceedings, disrupt

its

and

affect

the

and

The

security of certain of

this information also depends on

the ability of third-party

service providers, such as

those

we

use

to

process

credit

and

debit

card

as

below

under

“We

are

subject

to

payment-related

risks,”

to

properly

handle

and

protect

such

Our

systems

and

those of our

third-party service providers are

subject to ongoing and

persistent cybersecurity threats from

those seeking unauthorized

access through means

which are

continually evolving and

may be difficult

to

anticipate or detect for long periods

of time.

Despite measures the Company takes

to protect confidential

information against

unauthorized access

or disclosure, which

measures are

ongoing and

may continue

to

our

costs,

there

is

no

that

such

will

prevent

the

compromise

of

such

information. If

our measures

are unsuccessful

due to

cyberattacks or

otherwise, it

could have

a material

adverse

effect

on

the

reputation,

results,

and

cash

flows.

In addition, the

Company may be

subject to ransomware

attacks, which if

successful could result

in

to

the

and

expose

it

to

remediation

and

other

costs,

risks

of

legal

proceedings,

damage the

reputation

and

otherwise adversely

affect

the

Company's business

and financial condition.

A disruption or shutdown of our centralized distribution center

or transportation network could

materially and adversely affect our business and results of operations.

The distribution

of our

products is

centralized in

one distribution

center in

Charlotte, North

and

distributed

through

our

network

of

freight

carriers.

The

we

is

shipped directly to

our distribution center,

where it is

prepared for shipment

to the appropriate

subsequently delivered

to

the

stores

by our

third-party freight

carriers.

If the

center or

our

third-party freight carriers were

to be shut down

or lose significant capacity

for any reason, including but

not limited to, any of the causes described above under “A failure or disruption

relating to our information

systems

could

affect

our

our

would

likely

be

seriously

disrupted.

Such problems could occur as the result of any loss, destruction or impairment of our ability to

use

our

distribution center,

as

well

as

any broader

problem generally

the ability

to

ship

goods

into our distribution center or deliver goods

to our stores.

As a result, we could incur significantly higher

costs and longer lead

times associated with distributing our

products to our stores

during the time it

takes

for us to reopen or

replace the distribution center and/or our transportation network. Any such

occurrence

could adversely affect our business, results of operations and financial condition.

The Company’s failure to successfully operate its e-commerce websites or fulfill customer

expectations could adversely impact customer satisfaction, our reputation

and our business.

the

Company's e-commerce

platform provides

another channel

to

drive

sales,

provide existing customers the online shopping experience and introduce the Company to a new customer

base,

it

also

exposes

us

to

numerous

risks.

We

are

subject

to

failures

in

the

efficient

and

uninterrupted

operation

of

our

websites,

contact

center

or

our

center,

system

failures

caused

by

telecommunication

system

providers,

order

volumes

that

exceed

our

present

system capabilities, electrical outages,

mechanical problems and human error.

Our e-commerce platform

may also expose us

to greater potential for

security or data

breaches involving the unauthorized access

to

or

of

as

above

under

“A

breach

that

results

in

unauthorized

access

to

or

of

Company

or

or

a

ransomware

attack could

our costs,

reputation and

results of

operations, and

efforts to

mitigate these

risks may

continue to

increase our

costs.” We

are also

risk related

to delays

or failures

in the

performance of third parties, such as shipping companies, including

delays associated with labor strikes or

slowdowns or

adverse weather

conditions. If

successfully meet

the challenges

of

websites

or

fulfilling

expectations,

the

and

sales

could be adversely affected.

We are subject to payment-related risks.

We

accept payments

using a

methods, including

third-party credit

cards, our

own branded

credit

card,

debit

cards,

gift

cards

and

and

electronic

bank

checks.

For

and

future

payment methods we offer to our customers, we are subject to fraud risk and

to additional regulations and

(including

to

implement

authentication

processes

that

could

result

in

costs

and

reduce

the

ease

of

use

of

certain

payment

methods).

For

certain

payment

methods,

credit

and

debit

cards,

we

pay

interchange

and

other

fees,

which

have

from

time

to

time

and

may

to

over

time,

raising

our

costs

and

lowering profitability. We

rely on third-party service providers for payment processing

services, including

the

processing

of

credit

and

debit

cards.

In

each

case,

it

could

disrupt

our

business if

these

service

providers

become

unwilling

or

unable

to

provide

these

to

us.

We

are

also

subject

to

payment

card

association

rules,

data

rules,

certification

and

rules governing

electronic funds

transfers, which

could change

or be

reinterpreted to

make it

difficult or

impossible for us

to comply.

If we fail

to comply with

these rules or

requirements, or if

our data security

systems are breached or compromised, we may be liable for card-issuing

banks’ costs, subject to fines and

higher transaction fees. In addition, we may lose our ability to accept credit and debit card payments from

our

and

process

electronic

funds

transfers

or

facilitate

other

types

of

payments,

and

our

business and operating results could be adversely affected.

Risks Relating to Accounting and Legal Matters:

Continued scrutiny and changing

expectations surrounding environmental, social and governance

(“ESG”)

matters

from

investors,

customers,

government

regulators

and

other

stakeholders

may

impose additional reporting requirements, additional costs and compliance

risks.

Public companies from

across all

industries are facing

increasing scrutiny from

investors, customers,

government regulators and other stakeholders concerning ESG matters.

In the U.S., there are various new

rules

or

proposals

for

new

or

climate

emissions,

sustainability,

workforce

diversity

and

other

human

capital

resources

metrics,

among

other

topics.

Complying

with

these

complex

obligations or

expectations

may

our

costs

with compliance, disclosure and reporting.

Furthermore, evolving ESG laws, regulations and stakeholder

expectations may

uncertain and

potentially burdensome

reporting requirements

as stakeholders,

agencies and government authorities adjust

their expectations or change laws

and regulations, such as the

new rules regarding climate emissions reporting and

auditing requirements.

Failure to comply with all

of

the

new

rules

and

and

proposed

regulatory requirements

in

a

timely

manner

may

affect our reputation, business and financial performance.

Changes to accounting rules and regulations may adversely affect our reported

results of

U.S.

Generally

Accepted

Principles

and

SEC

accounting,

and

changes are

common and have

become more frequent

and significant

in the

past several years.

Changes

in

rules,

or

and

varying

interpretations

of

rules,

disclosures and regulations have significantly affected our reported financial statements and those of other

participants in

the retail

industry in

the past

and may

continue to

do so

in

the future.

Future changes

to

rules,

or

regulations may

affect

our

results

of

operations and

financial position or perceptions of our performance and financial condition.

If

we

fail

to

protect

our

and

other

rights

or

infringe

the

rights

of

others,

our

brand

image,

growth

results

of

operations and financial condition could be adversely affected.

We

believe

that

our

“Cato”,

Fashion”,

Fashion

Metro”,

“Versona”,

“Cache”

and

“Body

Central”

are

integral

to

our

store

designs,

brand

recognition

and

our

ability

to

successfully

build

loyalty.

we

have

registered

these

with

the

U.S.

Patent

and

Trademark Office

(“PTO”) and

have also

registered, or

applied for

registration of,

additional trademarks

with

the

PTO

that

we

believe

are

to

our

we

cannot

give

that

these

registrations

will

prevent

imitation

of

our

trademarks,

merchandising

concepts,

store

designs

or

private

label merchandise or

the infringement of

our other intellectual

property rights by

others. Infringement of

our

names,

concepts,

store

designs

or

generally,

or

particularly

in

a

manner

that

projects

lesser quality or carries a negative connotation of

our image could adversely affect our business, financial

condition and results of operations.

we cannot

give assurance

that others will

not try

to block

the manufacture

or sale

of our

private label merchandise by claiming

that our merchandise violates

their trademarks or other

rights.

In

the

event

of

such

a

conflict,

we

could

be

subject

to

lawsuits

or

other

actions,

the

ultimate

resolution of

cannot predict;

however,

such a

controversy could

our business,

financial condition and results of operations.

Our business operations subject us to legal compliance and litigation risks, as

well as regulations

and regulatory enforcement priorities, which could result in increased

costs or liabilities, divert our

management’s attention or otherwise adversely affect our business, results of operations and

Our operations

are subject

to federal,

state and

local laws,

rules and

regulations, as

well as

U.S. and

foreign

laws

and

to

our

in

foreign

from

which

we

source

our

and

operate our

sourcing offices.

Our

business is

also

subject

to

regulatory and

risk in

all of

these jurisdictions, including

foreign jurisdictions

that may

lack well-established

or reliable

legal

systems

for

resolving

legal

disputes.

Compliance

risks

and

claims

have

arisen

and

may

to

arise

in

the

ordinary

course

of

our

and

among

other

issues,

issues,

employment

issues,

commercial

disputes,

product-oriented

tax,

relations and personal injury claims. International

activities subject us to numerous U.S.

and international

regulations, including but not limited to, restrictions on trade, license and permit requirements, import and

export

license

privacy

and

data

protection

laws,

laws,

records

and

tariffs

and

taxes

and

anti-corruption

laws,

such

as

the

Foreign

Corrupt Practices Act, violations

of which by employees

or persons acting on

behalf may

significant investigation

costs, severe

criminal or

civil sanctions

and reputational

harm.

These

and

other

to

may

be

subject

could

affect

our

results

and financial condition. These matters frequently raise complex factual and legal issues, which are subject

to

risks

and

and

could

divert

time.

The

Company

may

also

be

subject

to

review

and

audits,

the

results

of

which

could

and

affect

our

business, results of

In addition, governing laws,

rules and regulations,

and interpretations

of existing

laws

are subject

to

change from

time to

time.

Compliance and

matters

could

result

in

unexpected

and

liability,

as

well

as

have

an

adverse

effect

on

our

operations and our reputation.

New

legislation

or

regulation

and

interpretation

of

laws

and

those

related

to

data

privacy,

climate

change

or

ESG

matters

could

our

costs

of

compliance,

technology and business operations. The interpretation of existing or new laws

to existing technology and

business practices can be uncertain and may lead to additional compliance

risk and cost.

Adverse litigation matters may adversely affect our business and our financial

From

time

to

time

the

Company

is

in

and

other

claims

against

our

Primarily these arise in the

normal course of business but are

subject to risks and uncertainties, and

could

require

time.

The

periodic

evaluation

of

litigation-related

matters

may change our assessment in

light of the discovery of

facts with respect to legal

actions pending against

us, not

presently known to

us or

by determination of

judges, juries

finders of

fact. We

may also

be

subjected

to

legal

matters

not

yet

known

to

us.

Adverse

decisions

or

settlements

of

disputes

may

negatively impact our business, reputation and financial condition.

Maintaining and improving our internal control over financial reporting

and other requirements

necessary to operate as a public company may strain our resources, and

any material failure in

these controls may negatively impact our business, the price of our common

stock and market

confidence in our reported financial information.

As a public

company, we

are subject to

the reporting requirements

of the Securities

Exchange Act of

1934, the

Sarbanes-Oxley Act

of 2002,

the rules

of the

SEC and

New York

Stock Exchange

and certain

aspects of the Dodd-Frank Wall

Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) and

related rule-making that

has been and

may continue to

be implemented over

the next several

years under

the mandates of the Dodd-Frank Act. The

requirements of these rules and regulations have increased, and

may continue to increase, our compliance costs and

place significant strain on our personnel, systems and

resources.

To

satisfy

the

SEC’s

rules

implementing

the

of

Section

of

the

Sarbanes-

Oxley Act

of

2002, we

must continue

to

document, test,

monitor and

enhance our

over

financial reporting, which is

a costly and time-consuming effort

that must be re-evaluated

frequently. We

cannot give

assurance that

our disclosure

controls and

procedures and

our internal

control over

reporting, as

defined by applicable

SEC rules,

will be adequate

in the future.

Any failure

to maintain the

of

control

over

or

to

comply

with

the

other

various

laws

and

regulations to

are and

will continue

to be

subject, or

to

may become

subject in

the

future,

as

a

public

company

could

have

an

adverse

impact

on

our

our

condition and

the price

of our

our efforts

to comply

with these

existing and

new requirements could significantly increase our compliance costs.

Risks Relating to Our Investments and Liquidity:

We may experience market conditions or other events that could adversely impact the valuation

and liquidity of, and our ability to access, our short-term investments,

cash and cash equivalents

and our revolving line of credit.

Our

short-term investments

and

cash

equivalents are

comprised of

investments in

federal,

state, municipal

and corporate

debt securities.

The value

of those

securities may

be adversely

impacted

by factors relating to these securities,

similar securities or the broader credit

markets in general.

Many of

these factors

are beyond our

control, and include

but are

not limited to

changes to credit

ratings, rates of

default, collateral

value, discount

rates, and

strength and

quality of

market credit

and liquidity,

disruptions in the capital

markets and changes in the

underlying economic, financial and other

that drive these

factors.

As federal, state

and municipal entities

struggle with declining

tax revenues and

budget deficits,

we cannot

be

assured of

to timely

access these

investments if

the market

for

these issues declines.

Similarly,

the default by

issuers of the

debt securities we

hold or similar

could impair

the

value or

liquidity of

our investments.

The development

or persistence

of

any of

these

conditions could

our financial

condition, results

and ability

to execute

our

strategy.

In

we

have

amounts

of

cash

and

cash

equivalents

at

institutions that

are in

excess of

the federally

insured limits.

An economic

downturn or

development of

adverse

the

sector

and

stability

of

institutions

could

cause

us

to

experience losses on our deposits.

Our ability

to access

credit markets

and our

revolving line

of credit,

either generally

or on

favorable

market terms, may be

impacted by the

factors discussed in

the preceding paragraph, as

well as continued

compliance with covenants under

our revolving credit agreement. The

development or persistence of

any

of these

adverse factors or

failure to

comply with covenants

on which our

borrowing is conditioned

may

our financial

condition, results

and our

ability to

access our

revolving line

of credit and to execute our business strategy.

Risks Relating to the Market Value of Our Common Stock:

The interests of our principal shareholder may limit the ability of other

shareholders to influence

the direction of the Company and otherwise affect our corporate governance and

the market price

of our common stock.

As of March 27, 2024, John P. D. Cato, Chairman, President and Chief Executive Officer, beneficially

owned approximately 51.9%

of the combined

voting power of

our common stock.

As a result,

Mr.

Cato

has the ability to substantially influence or determine the outcome of all matters requiring approval by the

shareholders,

the

election

of

and

the

approval

of

mergers

and

other

combinations

or

other

Company

transactions.

Mr.

Cato

may

have

interests

that

differ

from

those of other shareholders, and

may vote in a

way with which other shareholders disagree

or perceive as

adverse to their interests.

The concentration of voting power held by Mr.

Cato could discourage potential

investors from acquiring our

common stock and could

also have the effect

of preventing, discouraging or

deferring a change in control of the Company or other fundamental transaction,

all of which could depress

the market price of our common stock.

In addition, Mr.

Cato has the ability to control the

management of

the

Company

as

a

result

of

his

as

Chief

Officer.

We

qualify

for

exemption

as

a

“controlled

company”

from

with

certain

New

York

Stock

governance

rules,

the

that

we

have

a

majority

of

on

our

Board,

an

committee

and

an

governance

and

nominating

committee.

If we

elected to

utilize these

“controlled company” exceptions,

our other shareholders

could

lose the

benefit of

these corporate

governance requirements

and the

market value

of

our common

stock

could be adversely affected.

There can be no assurance that we will choose to declare or be able

to declare cash dividends in

the future.

The declaration and payment of any dividend is subject to the approval of our Board of Directors.

Our

Board of

Directors regularly

evaluates

to

pay a

dividend based

on many

such as

but

not

limited

to,

legal

the

of

the

restrictions

and

our

capital

allocation strategy.

There

can

be

no

that a

cash

dividend

will

be

declared in the future in any particular amount, or at all.

Our operating results are subject to seasonal and quarterly fluctuations,

which could adversely

affect the market price of our common stock.

Our business

varies with

general seasonal

trends that

are characteristic

of the

retail apparel

industry.

As a

result, our

stores typically

generate a

higher percentage

of our

annual net

sales and

profitability in

the

first

and second

quarters of

our

fiscal

year

compared to

other

quarters.

Accordingly,

our

results for

any one

fiscal period

are not

necessarily indicative

of results

to

be expected

from any

future

period,

and

such

and

fluctuations

could

affect

the

market

price

of

our

Conditions in the stock market generally, or particularly relating to our industry, Company or

common stock, may materially and adversely affect the market price of our common

stock and

make its trading price more volatile.

The trading

price of

our common

stock at

times has

been, and

is likely

to continue

to be,

significant volatility.

A variety of

factors may cause

the price of

our common stock to

fluctuate, perhaps

substantially,

including,

but

not

limited

to,

those

elsewhere

in

this

report,

as

well

as

the

following: low

trading volume;

general market

fluctuations resulting

from factors

not directly

our operations or the inherent value of

our common stock; announcements of developments related to our

business; fluctuations in our reported operating results; general conditions or trends affecting or perceived

to affect

the fashion and

retail industry; conditions or

trends affecting or

perceived to affect

the domestic

or global

economy or

the domestic

or global

credit or

capital markets;

changes in

financial estimates

or

the scope

of coverage

given to

our Company

by securities

analysts; negative

commentary regarding

our

Company

and

corresponding

short-selling

market

behavior;

adverse

relations

developments;

significant changes

in our

senior management

team; and

Over the

past several

years

the stock

market in

general, and the

market for shares

of equity

securities of many

retailers in

particular,

have

extreme

price

fluctuations

that

have

at

times

been

unrelated

to

the

performance of

those companies.

Such fluctuations

and market

volatility based

on these

factors

may materially and adversely affect the market price of our common stock.

None.

Risk Management Strategy

We

recognize

the

importance

of

effectively

managing

risk

in

protecting

our

and

employees,

and

we

manage

risk

as

part

of

our

overall

risk

system

and

processes.

We

a

process

designed

to

identify,

assess

and

manage

risks

from

threats,

risks

to

theft

of

data,

payment cards, disruption

to business operations

or financial reporting

systems, fraud, extortion,

harm to

employee

data

and

violation

of

privacy

laws.

In

recent

years,

we

have

our

in

risk

management within

our

environment and

have

developed an

enterprise

program designed

to

detect, identify,

classify and

mitigate cybersecurity

data security

threats.

This

program classifies

potential threats

by

risk

levels,

and

we

typically prioritize

our

threat

mitigation

efforts

based

on those

risk classifications.

In the

event

we

identify a

potential cybersecurity,

privacy or

other data security issue,

we have defined procedures for

responding to such issues,

including procedures

that

address

when

and

how

to

engage

with

Company

executives,

our

Board

of

Directors,

other

stakeholders and

law enforcement

when responding

to

such

issues. Additionally,

various aspects

of

our

cybersecurity program,

particularly compliance

Payment Card

Industry standards,

are regularly

reviewed by independent third

parties. We

also maintain cybersecurity insurance, which

we believe to

be

commensurate

with

our

size

and

the

nature

of

our

as

part

of

our

portfolio.

We

utilize

intrusion

detection

and

prevention

systems

and

vulnerability

and

penetration

testing to

monitor our

environment. We

also use

third-party software

to test

our employees' responses

to

suspicious emails and to

inform targeted cyber

awareness training.

Our information security and

privacy

are

informed

by

and

are

reviewed

periodically

for

and

alignment

with

current

state

and

federal

laws

and

regulations.

We

comply

with

standards,

including the

Payment Card

Industry

Data

Security

Standard (“PCI

DSS”).

Because

we

are

aware

of

the

risks

with

service

providers,

we

also

have

implemented

processes

to

oversee

and manage

these

risks.

We

conduct

assessments

of

providers

before

engagement

and

maintain ongoing

monitoring to

help

ensure

compliance with

our

standards.

we

a

incident

plan,

which

is

reviewed

regularly,

and

a

framework

for

handling

and

escalating

incidents

based

on

the

severity

of

the

incident and facilitates cross-functional coordination across the Company.

Through the

processes described

above,

we

did

not

risks

during the

year

ended

2024 from current or

past cybersecurity threats or cybersecurity

incidents that have materially affected

or

are

likely

to

affect

our

results

of

or

However,

we

face

ongoing

risks

from

certain

threats

that,

if

realized,

are

reasonably likely

to

materially affect

our

business strategy,

results

of

operations, or

See

the

risk

factors

under

the

heading,

“Risk

Factors

—

Risks

to

Our

Technology,

Related Systems and Cybersecurity” for further information.

Our

Board

of

Directors

recognizes

the

roles

that

and

mitigating

cybersecurity and other data security threats

play in our efforts

to protect and maintain the

confidentiality

and security of

customer, employee and

vendor information, as

well as non-public

information about our

the

Board

as

a

whole

is

ultimately

responsible

for

the

oversight

of

our

risk

function,

the

Board

has

delegated

to

its

Audit

primary

responsibility

for

oversight

of

risk

assessment

and

risk

risks

related

to

and

other

issues.

The

Audit

also

oversees

the

control

over

reporting, including

with respect

to financial

reporting-related information

systems. The

Chief Financial

Officer (CFO) and Chief

Accounting Officer (CAO) meet regularly

with the Audit Committee and

Board

of Directors.

The

Audit

reviews

our

activities,

review

of

annual

external assessment

results, training

results, and

discussion of

cybersecurity risks

and resolutions,

and is

responsible for elevating

significant matters to

the Board as

events arise.

The Audit

Committee receives

reports

from

our

Chief

Officer

(CIO)

annually

our

framework,

as

well as our plans to mitigate cybersecurity risks and respond to any data breaches.

From

a

perspective,

our

enterprise

is

overseen

by

our

committee, which is chaired by our

CFO and includes our CAO, CIO, Chief

Information Security Officer

(CISO),

as

well

as

key

members

of

and

audit.

Our

cybersecurity infrastructure

is

overseen by

our

CISO, who

reports

to

our

CIO.

Our

CIO reports

to

our

CFO

and

has

served

in

various

roles

in

and

for

over

years.

distribution center

and general

offices

are located

in a

Company-owned building

of

552,000

square

feet

located

on

a

15-acre

tract

in

Charlotte,

North

Carolina.

The

automated

handling

and

occupy

418,000

square

feet

of

this

building

and

its

general

offices

and

center

are

located

in

the

remaining 134,000

square feet.

A building

of approximately

24,000 square

feet located

on a

2-acre tract

adjacent

to

the

location is

used

for

storage.

The

Company also

owns

acres

of

land

in

York

County,

South

as

a

new

site

for

our

distribution center.

From time

to time,

claims are

asserted against

arising out

in the

ordinary

course

of

The

Company

currently

is

not

a

party

to

any

pending

that

it

believes

is

likely to have a

material adverse effect on

financial position, results of

operations or cash

flows. See Note 15, “Commitments and Contingencies,” for more

Executive Officers of the Registrant:

The executive officers of the Company and their ages as of March 27, 2024

are as follows:

Name

Age

Position

John P.

D. Cato............................

Chairman, President and Chief Executive Officer

Charles D. Knight........................

Executive Vice President, Chief Financial Officer

Gordon Smith

..............................

Executive Vice President, Chief Real Estate and

Store Development Officer

John P.

D. Cato

has been employed

as an officer

of the Company since

1981 and has

been a director

of

the

Company

since

Since

January

2004,

he

has

served

as

Chairman,

President

and

Chief

Executive Officer.

From May 1999 to

January 2004, he served

as President, Vice

Board

and Chief Executive Officer.

From June 1997 to May 1999,

he served as President, Vice

Board and

Chief Operating Officer.

From August 1996

to June

1997, he served

as Vice

Board

and Chief

Operating Officer.

From 1989

to

1996, he

managed the

off-price

concept,

serving

as

President

and

as

President and

General Manager

of

the

It’s

Fashion

concept

from 1993

to

August 1996.

Mr. Cato

is

a former

director of

Harris Teeter

Supermarkets, Inc.,

formerly

Ruddick Corporation.

Charles

D.

Knight

has

been

as

Vice

President,

Chief

Officer

by

the

Company

since

January

of

From

to

2020,

he

served

in

various

roles

with

The

Vitamin

Shoppe,

first

as

Senior

Vice

President,

Chief

Officer

from

to

2019,

and

then

as

President, Chief Financial

Officer from 2019

to 2020.

Prior to

that, he served

in various

roles with Toys

“R” Us for 28

years, including as Senior Vice

President, Corporate Controller from 2010

to 2018.

Gordon

Smith

has

been

by

the

Company

since

Since

July

2011,

he

has

served

as

President, Chief

Real

Estate and

Store Development

Officer.

From February

2008 until

July 2011,

Mr. Smith served as

Senior Vice President, Real

Estate. From October 1989 to February 2008,

Mr. Smith served as Assistant Vice President, Corporate Real Estate.

No matters requiring disclosure.

PART

II

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of

Equity Securities:

Market & Dividend Information

The

Class A Common

Stock

trades

on the

New York

Stock

Exchange (“NYSE”) under

the symbol CATO.

As of March 25, 2024, the approximate number of record holders of the Company’s Class A Common

Stock was 5,000 and there were 2 record holders of the Company’s Class B Common Stock.

Stock Performance Graph

The

graph

compares

the

yearly

change

in

the

cumulative

total

shareholder

return on

Common Stock (which

includes Class

A Stock

and Class

B Stock)

for each

of

the

last

five

fiscal

years

with

(i)

the

Dow

Jones

U.S.

Retailers,

Apparel

Index

and

(ii)

the

Russell 2000 Index.

THE CATO

CORPORATION

STOCK PERFOMANCE TABLE

(BASE 100 – IN DOLLARS)

LAST TRADING DAY

OF THE FISCAL YEAR

THE CATO

CORPORATION

DOW JONES U.S.

RETAILERS,

APPL

INDEX

RUSSELL 2000

INDEX

2/1/2019

1/31/2020

1/29/2021

1/28/2022

1/27/2023

2/2/2024

The graph assumes an initial investment of $100 on February 1, 2019,

the last trading day prior to the

commencement of the Company’s 2019 fiscal year, and that all dividends were reinvested.

Issuer Purchases of Equity Securities

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

ended February 3, 2024:

Total Number of

Maximum Number

Shares Purchased as

(or Approximate Dollar

Total Number

Part of Publicly

Value) of Shares that may

of Shares

Average Price

Announced Plans or

yet be Purchased Under

Period

Purchased

Paid per Share (1)

Programs (2)

the Plans or Programs (2)

November 2023

$

December 2023

January 2024

Total

$

909,653

(1)

Prices include trading costs.

(2)

During

the

fourth

quarter

ended

3,

2024,

the

Company

did

not

repurchase

or

retire

any

shares under

this program.

As of

909,653 shares

remaining in

open authorizations. There is no

specified expiration date for the Company’s

repurchase program.

of Operations:

Management’s

Discussion and

Analysis of

Financial Condition

and Results

of Operations

is intended

to provide information to assist readers in better

understanding and evaluating our financial condition and

results

of

The

should

be

read

in

conjunction

with

the

Financial Statements, including the accompanying Notes appearing in

Part II, Item 8 of this

annual report

on Form 10-K.

This section of the annual report

on Form 10-K generally discusses fiscal 2023

and fiscal

and

year-to-year

comparisons

between

fiscal

and

fiscal

2022,

as

well

as

certain

fiscal

items.

Discussions

of

fiscal

items

and

year-to-year

comparisons

between

fiscal

and

fiscal

2021 that are not included

in this Form 10-K can

be found in “Management’s

Discussion and Analysis of

Condition

and

Results

of

Operations”

in

Part

II,

Item

of

the

annual

report

on

Form 10-K for the fiscal year ended January 28, 2023.

Recent Developments

Inflationary Cost Pressure and High Interest Rates

Our

disposable

income

was

impacted

by

high

rates

and

continued

inflation related to

fuel, food, housing,

including rent, and

other consumable products

and a flattening

of

wage rates in 2023. The

persistence of high interest rates and

inflation negatively affected our customers’

willingness to purchase discretionary items such as apparel, jewelry

and shoes.

Though the Federal Reserve paused

raising rates in the

fall of 2023, it

has indicated it is

committed to

maintaining

rates

at

or

near

these

elevated

levels

until

subsides

to

its

targeted

levels.

These high interest rates have adversely affected the availability and cost of credit for both businesses and

our

Increasing

costs

related

to

credit,

auto

loans

and

mortgages

to

impact

our

income.

Our

willingness

to

our

products may continue to be negatively impacted by these inflationary

pressures and high interest rates.

We

believe continued

inflation and

high interest

rates negatively

impacted fiscal

will likely

continue to have a negative impact on

consumer behavior and, by extension, our results of

operations and

financial condition during fiscal 2024.

Merchandise Supply Chain

A

amount

of

our

is

manufactured

overseas,

Southeast

Asia,

and

traverses through the Panama Canal or

the Suez Canal.

Due to a sustained regional

drought, the Panama

Canal

has

reduced

the

number

of

transits

by

37%

and

has

also

reduced

the

permissible

draft of vessels

transiting the Panama Canal,

which reduces the volume

and number of

containers carried

by container

ships and

increases our

costs.

The recent

hostilities affecting

the Red

Sea and

Suez Canal

are

causing

container

ships

to

travel

a

much

longer

distance

around

the

Cape

of

Good

Hope,

which

is

increasing both lead times for merchandise during our key selling times and our costs to ship

these goods.

Both of these situations have negatively impacted 2023 and will likely continue to have a negative impact

on our results of operations and financial condition during fiscal 2024.

The table below sets forth certain financial data of the Company

expressed as a percentage of

retail sales for the years indicated:

Retail sales …………………………………………………………..

100.0

%

100.0

%

Other revenue…………………………………………………………

1.1

0.9

Total revenues ……………………………………………………….

101.1

100.9

Cost of goods sold …………………………………………………..

66.3

67.7

Selling, general and administrative………………………………….

36.1

32.3

Depreciation …………………………………………………………

1.4

1.5

Interest and other income ……………………………………………

0.7

0.8

Income (loss) before income taxes …………………………………………

(2.0)

0.2

Net income (loss)…………………………………………………………..

(3.4)

%

%

Fiscal 2023 Compared to Fiscal 2022

Retail sales

decreased by

6.9% to

$700.3 million

to $752.4

fiscal

2022. The decrease in

retail sales in fiscal

2023 was primarily due

to a 5.9% decrease

in same-store sales

and

sales from

closed stores

in

and

stores

closed

in

the

first

half

of

2023,

by

an

week of sales

in 2023 and a

small increase in

sales from stores opened in 2023. Fiscal

2023 had

53 weeks

versus 52

weeks in

fiscal 2022.

Same-store sales

for the

fiscal year

2023 decreased

due

to

lower

transactions,

offset

by

fewer

returns

and

slightly

higher

average

sales

per

transaction. Same-store

sales includes

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

months.

In

fiscal

fiscal

2022,

e-commerce sales

were less

than

5%

and

6%

of

total sales and same-store sales, respectively.

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

by

other

companies.

Total

revenues,

comprised

of

retail

sales

and

other

revenue

(principally finance

charges and

late

fees

on

customer accounts

receivable, gift

card

breakage, shipping

charges for e-commerce purchases

and layaway fees), decreased by 6.7%

to $708.1

to

$759.3

million

in

fiscal

The

Company

1,178

stores

at

3,

compared to 1,280 stores operated at January 28, 2023.

In fiscal 2023, the Company opened nine new stores and closed 111 stores.

Other

revenue,

a

of

total

revenues,

to

$7.7

million

in

fiscal

from

$6.9

million

in

fiscal

The

was

due

to

in

gift

card

breakage

and

finance

charges

with

the

credit

card,

offset

by

decreases

in

shipping revenue.

Credit

revenue

of

$2.6

million

represented

0.4%

of

total

revenue

in

fiscal

2023,

a

$0.4

million

increase compared to fiscal 2022 credit

revenue of $2.2 million or 0.3% of

total revenue.

The increase in

credit revenue was

primarily due to

increases in finance

charges and late

fee income as

a result of

higher

accounts receivable

balances.

Credit revenue

is comprised

of interest

earned on

private

label credit

card portfolio

and related

fee income.

Related expenses

include

principally payroll,

postage

and

other

and

totaled

$1.7

million

in

fiscal

to

$1.7

million

in

fiscal

See

Note 13

to

the

“Reportable Segment

Information”

for

a schedule

of

credit-related expenses.

Total

credit segment

income before

taxes

was $0.9

fiscal 2023 and $0.6 million in fiscal 2022.

Cost

of

goods sold

was $464.3

million, or

66.3% of

retail

sales, in

fiscal

to

$509.7

million, or 67.7% of retail sales, in fiscal 2022. The decrease in cost of goods sold as a percentage of sales

from

lower

ocean

freight

costs

and

sales

of

regular

priced

goods,

offset

by deleveraging

of

occupancy and

buying costs.

Cost of

goods sold

includes

merchandise costs,

net

of

and

allowances,

buying

costs,

costs,

occupancy

costs,

and

freight

and

shrinkage.

Net

costs

and

in-bound

freight

are

as

costs.

Buying and distribution costs include

payroll, payroll-related costs and operating expenses for

the buying

departments

and

center.

Occupancy

include

rent,

real

estate

taxes,

common

area

maintenance,

utilities

and

for

stores

and

facilities.

Total

gross

margin

dollars

(retail

sales

less

cost

of

goods

sold

and

excluding

depreciation)

decreased

by

2.8%

to

$236.0 million

2023 from

$242.7 million

2022. Gross

margin as

presented may

not be

comparable to that of other companies.

Selling, general

and administrative expenses

(“SG&A”), which

primarily include corporate

and store

payroll,

related

payroll

taxes

and

benefits,

supplies,

advertising,

bank

and

credit

card

processing fees were $252.8 million in fiscal

2023 compared to $242.6 million in fiscal

2022, an increase

of 4.2%. As a percent of retail sales, SG&A was 36.1% compared to 32.3% in the prior year. The increase

in SG&A

expense in

was primarily

attributable to

higher payroll,

insurance and

closed store

expenses.

expense

was

$9.9

million

in

fiscal

to

$11.1

million

in

fiscal

expense

decreased

from

fiscal

due

to

fully

depreciated

older

stores

and

prior

period

impairments

of

leasehold

improvements

and

fixtures,

offset

by

store

and

information technology expenditures.

Interest and

other income

decreased to

$5.1 million

to $5.9

fiscal

The

decrease

is

to

receiving

a

Recovery

Grant

from

the

State

of

North

in

fiscal

2022,

offset

by

higher

amounts

earned

on

due

to

higher

interest rates.

Income tax expense was

$10.1 million, or 1.4%

of retail sales in

fiscal 2023 compared to

income tax

expense

of

$1.7

or

0.2%

of

retail

sales

in

fiscal

The

income

tax

expense

was

primarily due to a valuation allowance

recorded against U.S. federal and state

deferred tax assets due to

a

pre-tax loss,

by foreign

rate differential.

The effective

tax rate

was (73.5%)

(Expense) in

fiscal

to

98.4%

in

fiscal

See

Note

to

the

Statements, “Income Taxes,” for further details.

Off-Balance Sheet Arrangements

None.

Critical Accounting Policies and Estimates

accounting policies are

more fully described

in Note

1 to the

Statements.

As

disclosed

in

Note

to

the

the

preparation

of

the

in

conformity

with

accepted

principles

in

the

United

States

(“GAAP”)

to

make

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

the

exercise

of

judgment.

Actual

results

inevitably

will

differ

from

those

estimates,

and

such

may

be

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,

positions, the

allowance for

credit losses, and inventory shrinkage.

The Company’s critical accounting policies and estimates are discussed with the Audit Committee.

Allowance for Customer Credit Losses

The Company evaluates

the collectability

of customer

accounts receivable

and records

an allowance

for customer

credit losses

the accounts

receivable aging and

estimates of

actual write-offs.

The

allowance is

reviewed for

adequacy and

adjusted, as

necessary,

on a

quarterly basis.

also

for

uncollectible

late

fees

charged

based

on

write-offs.

The

financial results

can be

impacted by

changes in

customer loss

write-off experience

and the

aging of

the

accounts receivable portfolio.

Merchandise Inventories

inventory is

valued using

the weighted-average

cost method

and is

stated at

the net

realizable value. Physical inventories

are conducted throughout the

year to calculate actual

shrinkage and

inventory on

hand. Estimates

actual shrinkage results

are used

to estimate

inventory shrinkage,

which is

accrued for

the period

between the

last physical

inventory and

the financial

reporting date.

The

Company

regularly

reviews

its

levels

to

slow

moving

and

uses

markdowns to clear slow moving inventory.

Lease Accounting

The Company determines whether an arrangement is a lease at inception. The Company has operating

leases for

stores,

offices,

warehouse space

and equipment.

Its leases

have remaining

lease terms

of

one

year to 10 years, some of which

include options to extend the lease term for

up to five years, and some of

which

include

options

to

terminate

the

lease

within

one

year.

The

Company considers

these

options

in

the

lease term

used

to

establish its

right-of-use assets

and lease

liabilities. The

lease agreements do not contain any material residual value guarantees or material

restrictive covenants.

As

most

of

the

leases

do

not

provide

an

implicit

rate,

the

Company

uses

its

borrowing

rate

based

on

the

at

commencement

date

of

the

lease

in

determining the present

value of lease

payments.

See Note 11

to the

“Leases” for further information.

Impairment of Long-Lived Assets

The

Company invests

in

leaseholds,

right-of use

assets

and

equipment primarily

in

connection

with

the opening and remodeling of stores

and in computer software and hardware. The

Company periodically

reviews its store

locations and estimates

the recoverability of

its long-lived assets,

which primarily relate

to

Fixtures

and

equipment,

Leasehold

improvements,

Right-of-use

assets

net

of

Lease

and

and

software.

An

charge

is

for

the

amount

by

which the

carrying value

exceeds the

estimated fair

value when

determines that

cash flows associated with those long-lived assets will not be sufficient to recover the carrying value.

This

determination is based on a

number of factors, including the store’s

historical operating results and future

projected cash flows, which include contribution margin projections. The Company assesses the fair value

of each lease

by considering market

rents and

any lease terms

that may adjust

market rents under

certain

conditions, such as the loss of

an anchor tenant or a leased

space in a shopping center not

meeting certain

criteria. Further,

in determining when

to close a

store, the Company considers

real estate development

in

the

area and

perceived local

market conditions,

which can

be difficult

to

predict and

may be

subject

to

change.

Insurance Liabilities

The

Company

is

for

healthcare,

and

general

costs. These costs are

significant primarily due to the

large number of the

Company’s retail locations

and

associates. The Company’s

self-insurance liabilities are

based on the

total estimated costs

of claims filed

and

of

claims

incurred

but

not

reported,

less

amounts

paid

against

such

claims,

and

are

not

discounted.

reviews

current

and

claims

data

in

developing

its

The

Company

also

uses

by

outside

actuaries

with

respect

to

healthcare,

compensation and general liability claims.

If the underlying facts and

circumstances of the claims change

or

the

experience

upon

which

provisions

are

is

not

indicative

of

future

trends, then

may be

make adjustments

to the

provision for

insurance costs

that

could

be

to

the

financial condition

and

results

of

Historically,

actual results have not significantly deviated from estimates.

Uncertain Tax Positions

The Company records

liabilities for

positions primarily

state income

taxes as

of the balance sheet

date.

These liabilities reflect the

Company’s best

estimate of its ultimate

income tax

based

on

the

tax

codes,

and

pronouncements

of

the

jurisdictions

in

which

we

do

Estimating our ultimate tax liability involves significant judgments regarding the

application of

complex tax

regulations across

many jurisdictions.

Despite the

belief that

the estimates

and

judgments

are

reasonable,

between

the

and

actual

tax

can

and

do

exist

from time to time.

These differences may arise from settlements

of tax audits, expiration of the statute of

limitations, and the evolution and application of the

various jurisdictional tax codes and regulations.

Any

differences will

be recorded

in the

period in

which they become

known and

could have

a material

effect

on the results of operations in the period the adjustment is recorded.

Deferred Tax Valuation

Allowance

The

Company

the

likelihood

that

tax

assets

will

be

in

light

of

the

current

performance

and

future

performance.

Based

on

this

assessment, the

Company then

determines if

a valuation

allowance should

be recorded.

If the

Company

concludes

that

it

is

more

likely

than

not

that

the

Company

will

not

be

able

to

realize

its

tax

assets, a valuation allowance is recorded for the proportion of the deferred tax asset it

determines may not

be realized.

Liquidity, Capital Resources and Market Risk

believes that

its cash,

cash equivalents

and short-term

investments, together

with cash

flows from operations, will be

adequate to fund the Company’s

regular operating requirements, including

$66.9

million

of

lease

and

planned

of

$8.7

million

of

capital

expenditures,

for

fiscal 2024 and for the foreseeable future.

Cash

by

during

fiscal

was

$0.5

million

as

to

$13.4 million in

fiscal 2022

and $59.8

2021. Cash

provided by

operating activities

during 2023

was primarily attributable to net income adjusted for depreciation, share-based compensation, impairment

and changes in

working capital. The

decrease of $12.9

million for fiscal

2023 compared to

fiscal 2022 is

due

to

lower

net

income

offset

by

a

decrease

in

inventories

and

deferred taxes.

At

2024,

the

working

capital

of

$55.1 million compared

to

$74.7 million

and

$111.5

million

at

January

28,

and

January

29,

2022,

The

decrease in

working

capital

to

the

prior

year

is

due

to

lower

and

lower

inventory,

partially offset by lower accounts payable

and current lease liability.

At February 3,

2024, the Company

had an

unsecured revolving credit

agreement, which provided

for

borrowings of

up to

$35.0 million less

the

balance of

any revocable

letters of

credit related

to

commitments,

and

was

committed

through

May

The

credit

contains

various

covenants and limitations, including the maintenance of specific financial

ratios with which the Company

was in

compliance as

of

2024. There

were no

borrowings outstanding,

nor

any outstanding

letters of

credit that

reduced borrowing

availability,

under this

as of

February 3, 2024 or the fiscal year ended January 28, 2023.

The

Company

had

no

revocable

letters

of

credit

to

commitments

at

February 3, 2024 or at January 28, 2023.

Expenditures

for

and

totaled

$12.5

$19.4

million

and

$4.1

million

in

fiscal 2023,

2022 and

2021, respectively.

The

expenditures for

were primarily

for additional

investments in nine new stores, our

distribution center and information technology.

Net

cash

by

investing

totaled

$19.8

million

for

fiscal

to

$16.0

million provided

2022 and

$25.3 million

used in

fiscal 2021.

In fiscal

2023, the

cash provided

was primarily

attributable to

the net

sales of

short-term investments,

by expenditures

for

property and equipment.

Net cash used in financing activities totaled

$16.1 million in fiscal 2023 compared to

net cash used of

$29.3

million

for

fiscal

and

$31.8

million

for

fiscal

The decrease in

cash used during

fiscal

2023 was primarily due to lower

share repurchase amounts.

The Company does not use derivative financial instruments.

See

Note

to

the

“Fair

Value

Measurements,”

for

regarding the Company’s financial assets that are measured at fair value.

The

was

in

bonds

and

taxable

governmental debt securities held in managed accounts

with underlying ratings of A or

better at February

3, 2024. The state,

municipal and corporate bonds and

asset-backed securities have contractual maturities

which

range

from

seven

days

to

3.1

years.

The

U.S.

Treasury

Notes

have

which