CATO CORP

(4) statements relating to

our operations or

activities for

our

fiscal

year

ending

1,

(“fiscal

2024”)

and

beyond,

including,

but

not

limited

to,

statements regarding expected

amounts of

capital expenditures and

store openings, relocations,

remodels

and closures, and

statements regarding the

potential impact of

supply chain disruptions,

extreme weather

conditions,

inflationary

pressures

and

other

or

market

on

our

results

of

operations and financial condition and

statements of plans or

intentions regarding new store development

or

store

closures;

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

in

this

report

are

based

on

information available

to us

as of

the filing

date of

this report,

but subject

to known

and unknown

risks,

uncertainties and other factors that could cause actual results

to differ materially from those contemplated

by the forward-looking statements.

Such factors include, but

are not limited to,

the following: any actual

or

perceived

deterioration

in,

or

continuation

of

negative

trends

in,

the

that

drive

consumer

confidence and

spending, including,

but

not limited

to, prevailing

social, economic,

political

and public

health conditions and

uncertainties, levels of

unemployment, fuel, energy

and food

costs, wage rates,

tax

rates, interest

rates, home

values, consumer

net worth,

the availability

of credit

and inflation;

changes in

laws,

regulations

or

government

affecting

our

but

not

limited

to

tariffs;

uncertainties regarding

the impact

of

any governmental

action regarding,

or

responses to,

the

foregoing

conditions;

competitive

factors

and

pricing

pressures;

our

ability

to

predict

and

respond

to

rapidly

changing

fashion

trends

and

consumer

demands;

our

ability

to

successfully

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; underperformance

or

other factors

that may

lead

to,

or

affect

the volume

of,

store

closures; adverse

weather,

public health

threats (including

the global

COVID-19 pandemic),

acts of

war

or

aggression

or

similar

that

may

affect

our

supply

chain,

sales

or

operations;

risks

due

to

shifts

in

market

demand,

the

ability

to

liquidate

excess

at

anticipated

margins;

adverse

developments

or

volatility

affecting

the

services

industry

or

broader

markets;

and

other

factors

discussed

under

“Risk

Factors”

in

Part

I,

Item

1A

of

our

annual

report

on

Form 10-K

for

the

fiscal

year

ended February

3,

(“fiscal

2023”),

as

amended or

supplemented,

and in

other reports

we

file

with

or

furnish

to

the

Securities and

Commission

(“SEC”)

from time

to

time.

We

do

not

undertake, and

expressly

decline,

any obligation

to

update

any

such forward-looking information contained

in this report,

whether as a

result of new

information, future

events, or otherwise.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES:

The

critical

and

estimates

are

more

fully

described

in

“Management’s

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

Company’s Annual Report

on

Form

10-K

for

the

fiscal

year

ended

3,

The

preparation

of

the

in

conformity

with

generally

accepted

principles

in

the

United

States

(“GAAP”)

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

in

the

and

notes.

Future

events

and

their

effects

cannot

be

with absolute

certainty. Therefore,

the determination

of estimates

requires the

exercise of

judgment. Actual

results

inevitably

will

differ

from

those

estimates,

and

such

differences

may

be

material

to

the

statements. The most significant accounting estimates

inherent in the preparation of the

Company’s financial

statements include

the calculation

of potential

asset impairment,

valuation allowances,

reserves

relating

to

self-insured

health

insurance,

workers’

compensation,

general

and

auto

insurance

liabilities,

uncertain tax positions, the allowance for

customer credit losses, and inventory shrinkage.

The Company’s critical accounting policies and

estimates are discussed with the Audit Committee.

RESULTS OF OPERATIONS:

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

the Company's unaudited Condensed

Consolidated Statements of Income as a

percentage of total retail sales:

Total retail sales

100.0

%

100.0

%

Other revenue

1.0

0.9

Total revenues

101.0

100.9

Cost of goods sold (exclusive of depreciation)

64.2

64.2

Selling, general and administrative (exclusive of depreciation)

32.4

32.5

1.2

1.2

(3.3)

(0.5)

Income before income taxes

6.6

3.5

6.3

2.3

RESULTS OF OPERATIONS

(CONTINUED):

Management’s

Discussion and

Analysis of

Financial Condition

and Results

of Operations

(“MD&A”) is

intended

to

provide

to

assist

readers

in

better

understanding

and

evaluating

our

condition

and

results

of

operations.

We

recommend

reading

this

MD&A

in

conjunction

with

our

Statements

and

the

Notes

to

those

in

the

“Financial Statements” section of this Quarterly Report on Form 10-Q, as well as our 2023

Annual Report

on Form 10-K.

Recent Developments

Inflationary Cost Pressure and High Interest Rates

The

pressure

on

our

disposable

income

continued

in

the

first

quarter

of

fiscal

2024,

due

to

prolonged and persistently high

inflation rates, especially related

to housing and

fuel, as well as

high interest

rates.

These high

interest rates

have adversely

affected the

availability and cost

of credit for

our customers,

credit

and

auto

loans,

and

continue

to

negatively

impact

our

disposable

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 the first

will

likely continue

to have

a negative

impact on

consumer behavior and,

by extension, our

results of operations

and financial condition during the remainder of

fiscal 2024.

Merchandise Supply Chain

A significant amount of our merchandise is

manufactured overseas, principally Southeast Asia,

and traverses

through the

Panama

Canal or

the

Suez

Canal.

The regional

drought conditions

experienced

in the

region

surrounding the

Panama Canal

reduced the

transits by

approximately 37%

and has

also reduced

the

permissible

draft

of

vessels

transiting

the

Panama

Canal,

which

reduced

the

volume

and

number

of

containers carried by container

ships and increased our

costs in the first quarter.

During the second quarter,

the Panama

Canal authority

plans to increase

the daily

transits by

33% and

increase the

permissible draft

of

vessels depending on weather

conditions. The hostilities affecting

the region surrounding

the Suez Canal are

causing container

ships to

travel longer

distances around

the Cape

of Good

Hope, which

is increasing

lead

times for merchandise and our costs

to ship these goods as well as

decreasing the pool of containers available.

Both

of

these

situations

have

negatively

impacted

Though

in

the

Panama

Canal

could

incrementally improve

if weather

conditions allow

the easing

of existing

restrictions, we

believe the

totality

of these

conditions will

likely continue

to have

a negative

impact on

our results

of operations

and financial

condition for the foreseeable future.

Comparison of First Quarter of 2024

with 2023

Total retail sales for the first quarter

were $175.3 million compared to

last year’s first quarter sales of

$190.3

Sales

decreased

due

to

a

in

sales

and

sales

from

stores

that

were

closed in the past 12 months, partially offset by sales from stores opened in the past 12

months. The decrease

in

sales

is

from

fewer

transactions

due

to

the

aforementioned

pressures

on

our

customers’ disposable income, as well

as lower average sales per transaction. Same

store sales include stores

that have been open

more than 15 months.

Stores that have been

relocated or expanded are

also included in

the same store

sales calculation after

they have been

open more than

15 months.

The method of

same store

sales

varies

across the

retail industry.

As a

result, our

same

store sales

calculation

may

not

be

comparable to similarly titled measures reported by

other companies. E-commerce sales were

less than 5.0%

of

sales

for

the

first

quarter

of

fiscal

and

are

in

the

sales

calculation.

Total

revenues, comprised

of retail sales

and other revenue

(principally finance

charges and late

fees on

accounts

receivable,

shipping

charged

to

customers

for

e-commerce

purchases

and

layaway

fees),

were

$177.1 million for the first quarter ended May 4, 2024, compared to $192.1 million for the first

quarter ended

April 29,

2023. The Company

operated 1,171

stores at May

4, 2024

compared to 1,264

stores at the

end of

last

fiscal

year’s

first

quarter.

For

the

first

three

months

of

fiscal

2024,

the

Company

permanently

closed

seven stores.

The Company currently anticipates closing approximately 75

stores in fiscal 2024.

Credit revenue of $0.7 million represented 0.4% of total revenues in the first quarter of fiscal 2024,

to

credit

revenue

of

$0.6

million

or

0.3%

of

total

revenues.

Credit

revenue

is

comprised

of

interest

earned on the Company’s private label credit card portfolio and related fee income.

Related expenses include

principally payroll, postage and

other administrative expenses, and

totaled $0.4 million in

the first quarter of

2024, compared to last year’s

first quarter expenses of $0.4 million.

Other revenue, a component of

total revenues, was $1.8 million for the first

quarter of fiscal 2024, compared

to $1.7

million for the

prior year’s

comparable first

quarter.

The slight increase

was due

to higher

gift card

breakage income and late charges, partially

offset by lower e-commerce shipping revenue

and layaway fees.

Cost of goods

sold was $112.5

million, or 64.2%

of retail sales for

the first quarter of

fiscal 2024, compared

to

$122.1

or

64.2%

of

retail

sales

in

the

first

quarter

of

fiscal

Cost

of

goods

sold

includes

merchandise costs (net of discounts and

allowances), buying costs, distribution costs, occupancy costs,

freight

and

shrinkage.

Net

costs

and

in-bound

freight

are

capitalized

as

costs.

Buying

and

costs

include

payroll,

payroll-related

costs

and

expenses

for

the

buying

departments and distribution center.

Occupancy costs include rent, real estate taxes, insurance, common area

maintenance, utilities and maintenance for stores

and distribution facilities.

Total gross margin dollars (retail

sales

less

cost

of

goods

sold

exclusive

of

depreciation)

decreased

by

8.0%

to

$62.8

million

for

the

first

quarter of fiscal 2024 compared to $68.2 million in the first quarter of fiscal 2023.

Gross margin as presented

may not be comparable to

those of other entities.

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

payroll taxes and benefits, insurance, supplies, advertising,

and bank and credit card processing fees.

SG&A

expenses were

32.4% of

retail sales for

fiscal 2024,

compared to

32.5% of

retail sales

in

the first quarter of fiscal 2023. SG&A expense is lower in the first quarter of fiscal 2024 compared

to the first

quarter of fiscal

2023 primarily due

to lower equity

compensation, advertising and

store expenses, including

payroll, partially offset by an increase

in insurance expense.

Depreciation expense was $2.0 million, or 1.2% of retail sales for the first quarter of fiscal 2024, compared to

$2.4 million, or

1.2% of retail

sales for the

fiscal 2023. The

decrease in depreciation

expense

was attributable to older stores being

fully depreciated.

Interest

and

other

income

was

$5.8

or

3.3%

of

retail

sales

for

the

first

quarter

of

fiscal

2024,

to

$0.9

or

0.5%

of

retail

sales

for

the

first

quarter

of

fiscal

The

increase

was

primarily due to a $3.2 million net

gain on sale of land held for

investment.

Income tax expense was 0.6 million or 0.4% of retail sales for the first quarter of fiscal 2024, compared to

income tax expense of 2.1 million, or 1.1% of retail sales

for the first quarter of fiscal 2023. The effective

rate for

fiscal 2024

was 5.6%

compared to

32.6%

for

The

in

tax

expense

is

due

to

the

valuation

allowance against

net

deferred

tax

assets

attributable

to

U.S.

federal

net

loss

carryforwards

and

the

impact

of

the

foreign

rate

differential and lower state income taxes.

LIQUIDITY, CAPITAL

RESOURCES

AND MARKET

RISK:

The Company

believes that

its cash,

cash equivalents

and short-term

investments, together

with cash

flows

from operations

and borrowings available

under its revolving

credit agreement,

will be

adequate to fund

the

Company’s regular operating requirements and expected

capital expenditures for the next

12 months.

Cash

by

activities

for

the

first

three

months

of

fiscal

was

by

earnings

adjusted

for

depreciation

and

changes

in

working

capital.

The

in

cash

of

$4.2

million

for

the

first

three

months

of

fiscal

as

to

the

first

three

months

of

fiscal

was

primarily attributable to the relative change

in inventory from year-end to the

first quarter for both years and

a

decrease to first quarter 2024 net

income for non-operating gain on sale of

assets held for investment.

At May 4, 2024, the Company had working capital of $65.8 million compared to $55.1 million at February 3,

The increase is

primarily attributable to

an increase in

cash and cash

equivalents, inventory, accounts

receivable and lower current lease liability,

partially offset by lower short-term

investments.

At

May

4,

2024,

the

Company

had

an

unsecured

credit

agreement,

which

for

borrowings of

up to

$35.0 million

less the

balance of

any revocable

letters of

credit related

to purchase

commitments,

and

is

committed

through

May

The

credit

contains

various

covenants and

limitations, including

the maintenance

of specific

financial ratios.

On April

25, 2024,

the

Company

amended

the

credit

to

modify

a

definition

used

in

the

minimum EBITDAR

coverage ratio

to

add back

certain

receivables included

in

the calculation of

the ratio. For

the quarter ended

May 4, 2024,

after giving effect

to the

amendment, the

Company was

in compliance

with the

credit agreement.

There were

no borrowings

outstanding, nor

any

letters

of

credit

that

reduced

availability,

as

of

May

4,

The

weighted

average interest rate under the credit facility was zero at May 4, 2024

due to no outstanding borrowings.

Expenditures

for

property

and

equipment

totaled

$3.3

million

in

the

first

three

months

of

fiscal

2024,

to

$6.2

million

in

last

year’s

first

three

months.

The

in

expenditures

for

property

and

equipment

was

due

to

lower

capital

in

technology

and

the

center, as well

as no new

store openings in

the first quarter

of fiscal 2024.

For the full

fiscal 2024 year,

the

Company expects

to invest

approximately $9.0

capital expenditures,

including distribution

center

automation projects.

Net

cash

by

investing

activities

totaled

$14.6

million

in

the

first

three

months

of

fiscal

compared to $15.3 million provided in the comparable period of fiscal 2023. The decrease is primarily due

to

an increase in purchases of short-term investments and a decrease in sales of short-term investments, partially

offset by the sale of other

assets and a decrease in capital expenditures.

Net cash

used in

financing activities

totaled $5.6

three months

of fiscal

fiscal

On May 23, 2024, the Board of

Directors maintained the quarterly dividend at

0.17 per share.

As

of

May

4,

2024,

the

Company

had

478,238

shares

in

open

authorizations

under

its

share

repurchase program.

The Company does not use

derivative financial instruments.

The Company’s

investment portfolio

was primarily

invested in

corporate bonds and

tax-exempt and taxable

governmental debt securities held in managed accounts with underlying ratings of A or better at May 4, 2024

and February 3, 2024.

The state, municipal and corporate bonds and asset-backed securities have contractual

maturities

which

range

from

seven

days

to

3.0

years.

The

U.S.

Treasury/Agencies

Notes

and

Bonds

have

contractual maturities which range from 2 months

to 1.8 years. These securities

are classified as available-for-

sale

and

are

as

Short-term

and

Other

assets

on

the

Consolidated Balance Sheets. These

assets are carried

at fair value

with unrealized gains and

losses reported

net of

taxes in

Accumulated other

comprehensive income.

The asset-backed

securities are

bonds comprised

of auto loans and

bank credit cards that

carry AAA ratings. The

auto loan asset-backed securities

are backed

by static pools of auto loans that were originated and serviced

by captive auto finance units, banks or finance

companies.

The

bank

credit

card

asset-backed

are

backed

by

pools

of

credit

card

by

account

holders

of

cards

from

American

Express,

Citibank,

JPMorgan

Chase,

Capital One, and Discover.

Additionally, at May 4, 2024, the Company had $0.1 million of

corporate equities and deferred compensation

plan assets

of $8.7

At February

3, 2024,

the Company

had $1.1

million of

corporate equities

and

deferred compensation plan assets

of $8.6 million. All

of these assets are recorded

within Other assets in

the

Condensed Consolidated Balance Sheets. See Note 7, Fair

Value Measurements.

RECENT ACCOUNTING PRONOUNCEMENTS:

See Note 8, Recent Accounting Pronouncements.

QUANTITATIVE

AND QUALITATIVE

DISCLOSURES ABOUT MARKET RISK

AND QUALITATIVE

DISCLOSURES ABOUT MARKET RISK:

The

Company

is

subject

to

market

rate

risk

from

exposure

to

changes

in

interest

rates

related

to

its

financing, investing and

cash management activities,

but the Company

does not

believe such exposure

is

material.

We carried out an evaluation, with the

participation of our Principal Executive Officer and

Principal Financial

Officer,

of

the

effectiveness

of

our

disclosure

controls

and

procedures

as

of

May

4,

Based

on

this

evaluation, our Principal Executive Officer and Principal

Financial Officer concluded that, as of May

4, 2024,

our disclosure

controls and

procedures, as

defined in

Rule 13a-15(e),

under the

Securities Exchange

Act of

(the

“Exchange

Act”),

were

effective

to

ensure

that

we

are

to

disclose

in

the

reports

that

we

file

or

submit

under

the

Act

is

recorded,

processed,

summarized

and

reported

within the time periods

specified in the SEC’s

rules and forms and

that such information is

accumulated and

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

as appropriate to allow timely decisions

regarding required disclosure.

CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING:

No change in the Company’s internal control

over financial reporting (as defined in

Exchange Act Rule 13a-

15(f)) has occurred during the Company’s fiscal quarter ended May 4, 2024 that has

materially affected, or is

reasonably

likely

to

affect,

the

internal

control

over

reporting.

PART

LEGAL PROCEEDINGS:

RISK FACTORS:

In addition to the other information

in this report, you should carefully

consider the factors discussed in

Part I,

“Item

1A.

Risk

Factors”

in

our

Annual

Report

on

Form

10-K

for

our

fiscal

year

ended

3,

These risks

could materially

affect our

business, financial

condition or

future results;

however, they

are not

the only risks we face.

Additional risks and uncertainties not currently known to

us or that we currently deem

to

be

immaterial

may

also

adversely

affect

our

condition

or

results

of

operations.

UNREGISTERED SALES OF EQUITY SECURITIES

AND USE OF PROCEEDS:

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

ended May 4, 2024:

ISSUER PURCHASES OF EQUITY SECURITIES

Total Number of

Maximum Number

Shares Purchased as

(or Approximate Dollar

Total Number

Average

Part of Publicly

Value)

of Shares that may

of Shares

Price Paid

Announced Plans or

Yet be Purchased

Under

Period

Purchased

per Share (1)

Programs (2)

The Plans or Programs (2)

February 2024

$

March 2024

134,209

5.41

134,209

April 2024

297,206

5.05

297,206

Total

431,415

$

5.16

431,415

478,238

(1)

Prices include trading costs.

(2)

As of February

3, 2024, the

Company’s share

repurchase program had

909,653 shares remaining

in

open authorizations.

During

the

first

quarter

ended

May

4,

2024,

the

Company repurchased

and retired 431,415 shares under this program for approximately $2,227,608

or an average market

price of $5.16 per share.

As of May 4, 2024, the Company had 478,238 shares remaining in open

authorizations.

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

DEFAULTS

UPON SENIOR SECURITIES:

PART

MINE SAFETY DISCLOSURES:

No matters requiring disclosure.

OTHER INFORMATION:

During the

three months

ended May

4, 2024,

none of

directors or

officers (as

defined in

Rule 16a-1(f) of the

Securities Exchange Act of 1934,

as amended)

adopted

or

terminated

a “Rule10b5-1

trading arrangement” or

a “

non-Rule

10b5-1

trading arrangement” (as

such terms are

defined in Item

of Regulation S-K).

EXHIBITS:

Exhibit No.

Item

3.1

Registrant’s Amended and Restated Certificate of Incorporation,

incorporated by reference to Exhibit 3.1 to Form 10-Q of the Registrant

for the quarter ended May 2, 2020.

3.2

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

reference to Exhibit 3.2 to Form 10-Q of the Registrant for the quarter

ended May 2, 2020.

10.1*

Fourth Amendment, dated as of April 25, 2024, to Credit

Agreement, dated as of May 19 2022, among the Registrant, the

banks party thereto and Wells Fargo Bank, National Association.

31.1*

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

31.2*

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

32.1*

Section 1350 Certification of Principal Executive Officer.

32.2*

Section 1350 Certification of Principal Financial Officer.

101.INS

Inline XBRL Instance Document

101.SCH

Inline XBRL Taxonomy Extension Schema Document

101.CAL

Inline XBRL Taxonomy Extension Calculation Linkbase

101.DEF

Inline XBRL Taxonomy Extension Definitions Linkbase

101.LAB

Inline XBRL Taxonomy Extension Label

Linkbase Document

101.PRE

Inline XBRL Taxonomy Extension Presentation Linkbase

104.1

Cover

Page

Interactive

Data

File

(Formatted

in

Inline

XBRL

and

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

• Submitted electronically herewith.

PART

SIGNATURES

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

Registrant has duly caused this

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

authorized.

THE CATO

CORPORATION

May 30, 2024

/s/ John P.

D. Cato

Date

John P.

D. Cato

Chairman, President and

Chief Executive Officer

May 30, 2024

/s/ Charles D. Knight

Date

Charles D. Knight

Executive Vice President

Chief Financial Officer