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

conditions

on

our

results

of

operations and financial condition and

statements of plans or intentions

regarding new store development

or

store

closures;

and

(5)

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

materially 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

conditions

that

drive

consumer

confidence and

spending, including,

but

not limited

to, prevailing

social, economic,

political

and public

health conditions and

uncertainties, levels of

unemployment, fuel, energy

and food

costs, wage rates,

tax

rates, interest

rates, home

values, consumer

net worth,

the availability

of credit

and inflation;

changes in

laws,

regulations

or

government

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 increase new store openings and the 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, acts of war or aggression

or

similar conditions

that may

affect

our

merchandise supply

chain,

sales or

operations; inventory

risks

due to shifts

in market demand, including

the ability to

liquidate excess inventory at

anticipated margins;

adverse developments

or volatility

affecting the

financial services

industry

or broader

financial markets;

and other

factors discussed under

“Risk Factors” in

Part I, Item

1A of

our Annual

Report on

Form 10-K

for

the

fiscal

year

ended

3,

(“fiscal

2023”),

as

amended

or

supplemented,

and

in

other

reports

we file

with or

furnish to

the

Securities and

Exchange Commission

(“SEC”) from

time

to

time.

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

accounting

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

accounting

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

determined

with absolute

certainty. Therefore,

the determination

of estimates

requires the

exercise of

judgment. Actual

results

inevitably

will

differ

from

those

estimates,

and

such

differences

may

be

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,

income tax

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

%

100.0

%

100.0

%

Other revenue

1.0

0.9

1.0

0.9

Total revenues

101.0

100.9

101.0

100.9

Cost of goods sold (exclusive of depreciation)

65.4

64.9

64.8

64.5

Selling, general and administrative (exclusive

of depreciation)

34.9

34.0

33.6

33.3

1.4

1.4

1.3

1.3

(1.0)

(0.7)

(2.2)

(0.6)

Income before income taxes

0.4

1.4

3.6

2.4

0.1

0.6

3.2

1.5

RESULTS OF OPERATIONS

Management’s

Discussion

and

Analysis

of

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 Condensed

Consolidated Financial

Statements and

the Notes

to those

statements included in

the “Financial

Statements”

section of this Quarterly Report on

Form 10-Q, as well as our 2023

Annual Report on Form 10-K.

Recent Developments

Inflationary Cost Pressure and High Interest Rates

The

pressure

on

our

customers’

disposable

income

continued

in

the

first

half

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, including

revolving credit

and auto

loans, and

continue to

negatively impact

our

customers’

disposable income.

Our customers’

willingness to

purchase our

products may

continue to

be negatively

impacted by these inflationary pressures and high interest rates.

We

believe the

pressure on

our

customers’ disposable

income adversely

impacted the

first half

of

and 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

amount

of

our

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 number

of transits

by approximately

37% and

has

also reduced the

permissible draft of

vessels transiting the

Panama Canal, which reduced

the volume and

containers carried

by container

ships and

increased our

costs in

quarter.

During the

second

quarter,

the

Panama

Canal

authority

increased

the

daily

transits

and

the

permissible

draft

of

vessels,

raising

the

number

of

transits

to

95%

of

pre-drought

operations.

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 the first

six months of 2024. Though conditions in the Panama Canal have incrementally improved, 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 the Three and Six

Months ended August 3, 2024

with July 29, 2023

Total retail sales

for the second

quarter were

$166.9 million

compared to last

year’s second

quarter sales

of

$181.2

an

8%

decrease.

The

sales

decrease

in

the

second

quarter

of

fiscal

was

primarily due

to a

2% decrease

in same-store

sales and

store closures.

For the

ended August

3,

2024,

total

retail

sales

were

$342.2

million

to

last

six

month

sales

of

$371.5

million, an

8% decrease.

The decrease

in sales

in the

first six

fiscal 2024

was due

primarily to

a

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

than

months.

Stores

that

have

been

relocated

or

expanded

are

also

in

the

sales

calculation

after

they

have

been

open

more

than

months.

The

method

of

calculating

sales

varies

across

the

retail

industry.

As

a

result,

our

sales

calculation

may

not

be

to

similarly titled measures reported by other

companies. E-commerce sales were less than

5% of total sales for

the six

months ended

are included

in the

same-store sales

calculation.

Total revenues,

comprised of

retail sales

and other

revenue (principally

finance charges

and late

fees on

customer accounts

receivable

and

layaway

fees),

were

$168.6

million

and

$345.7

million

for

the

three

and

six

months

ended

August 3, 2024,

compared to $182.9

million and $374.9

million for the

three and six

months ended July

29,

2023, respectively. The

Company operated

1,166 stores

3, 2024

compared to 1,247

stores at

July

29, 2023.

During the first six months of fiscal 2024, the Company closed 12 stores.

The Company currently

expects to close approximately 65 stores

in total in fiscal 2024.

Credit

revenue

of

$0.7

million

represented

0.4%

of

total

revenues

in

the

second

quarter

of

fiscal

2024,

2023 credit

revenue of

$0.7 million

or 0.4%

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

principally include payroll,

postage and other

administrative expenses and

totaled $0.4 million

in the second

quarter of fiscal 2024, compared to

last year’s second quarter expense of

$0.4 million.

Other revenue, a component of total revenues, was $1.7 million and $3.5 million for the

three and six months

ended

August

3,

2024,

respectively,

to

$1.7

million

and

$3.4

million

for

the

prior

comparable three and six month periods. The slight increase in Other revenue for

the first six months was due

to increases

in gift

card breakage

income and

finance charges

and late

fees associated

with the

proprietary credit card, partially offset by a

decrease in e-commerce shipping revenue.

Cost of

goods sold

was $109.1

65.4% of

retail sales

and $221.6

64.8% of retail

sales

for the

three and

ended August

3, 2024,

respectively, compared

to $117.6

64.9% of

retail

sales and

$239.7

or 64.5%

of retail

sales

for the

comparable three

and six

month

periods of

The overall increase

in cost of

goods sold as

a percent of

retail sales for

the second quarter

and

first

six

months

of

fiscal

versus

the

three

and

six

month

periods

of

fiscal

resulted

primarily from

deleveraging of

occupancy and

buying costs

and higher

distribution costs,

partially offset

by

higher

selling

margins.

Cost

of

goods

sold

includes

costs

(net

of

discounts

and

allowances),

buying costs, distribution costs, occupancy costs, freight and inventory shrinkage.

Net merchandise costs and

in-bound freight

are

capitalized

as

inventory

costs.

Buying

and distribution

costs include

payroll,

payroll-

related

costs

and

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

9.1% to $57.8

million for the

by 8.5% to

$120.6 million

for

the

first

six

months

of

fiscal

2024,

to

$63.6

million

and

$131.8

million

for

the

prior

three

and

six

months

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,

bank

and

credit

card

processing

fees.

SG&A

expenses

were

$58.2

or

34.9%

of

retail

sales

and

$114.9

or

33.6%

of

retail

sales

for

the

second quarter and first six months of fiscal 2024, respectively, compared to $61.6 million, or

34.0% of retail

sales and $123.6 million, or 33.3% of retail sales for the prior year’s comparable three and

six month periods,

The decrease in SG&A expenses for the

second quarter and first six months of fiscal

2024 was

due

to

lower

payroll,

advertising

and

equity

expenses,

partially

offset

by

higher

insurance expense and expenses

related to the startup of

our DC automation

project which will continue

into

the third quarter.

Depreciation expense was $2.3 million, or 1.4% of retail sales and $4.4 million, or 1.3% of

retail sales for the

and first

2024, respectively,

$2.5 million,

or 1.4%

of retail

sales and $4.9

million or 1.3%

of retail sales

for the comparable

three and six

month periods of

fiscal 2023,

Interest and other income was $1.7 million, or 1.0% of retail sales and $7.6 million, or 2.2% of retail sales for

the three and six months ended August

3, 2024, respectively, compared to $1.3 million,

or 0.7% of retail sales

and

$2.2

or

0.6%

of

retail

sales

for

the

three

and

six

month

periods

of

fiscal

2023,

The increase for the second quarter of fiscal 2024 compared to fiscal 2023 was

primarily due to

higher

interest

earned

on

the

investments.

The

increase

for

the

first

six

months

of

fiscal

fiscal 2023

due to

a $3.2

million net

gain on

sale of

land held

for investment

in

addition to higher interest earned

on the Company’s investments.

Income tax expense was $0.6 million and $1.3 million for the second quarter and first six months of fiscal

2024, respectively,

a tax

expense of

$1.3 million

and $3.5

million for

the comparable

three

and six month

periods of

fiscal 2023,

The effective

income tax

rate for

of fiscal 2024

was 10.5% compared to

38.5% for the

first six months of

The decrease in

tax

expense

is

due

to

the

valuation

allowance

against

net

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 provided by operating activities during the first six months of fiscal 2024 was $8.8 million as compared

to $21.6

million provided

in the

first six

The decrease

in cash

provided by

activities of $12.8 million

for the first six

months of fiscal 2024

as compared to the

first six months of

fiscal

2023 was

primarily attributable

to the

relative change

in inventory

from year-end

to the

for

both years

and a

decrease to

2024 net income

for non-operating

gains on sale

of assets held

for investment,

partially offset by higher net income and the relative change of accounts payable from year-end to

the second

quarter for both years.

At August 3, 2024, the Company had working capital of $69.9 million compared to

$55.1 million at February

3, 2024.

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

an increase in cash, partially offset

by a decrease in inventory

and short-term investments.

At

August

3,

2024,

the

Company

had

an

unsecured

credit

agreement,

which

for

borrowings

of

up

to

$35.0

less

the

balance

of

any

revocable

letters

of

credit

related

to

commitments,

and

is

committed

through

May

The

credit

agreement

contains

various

covenants

and

limitations,

the

maintenance

of

specific

ratios.

On

April

25,

2024,

the

Company amended the

revolving credit agreement to

modify a definition used

in calculating the

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

the ratio.

For the

quarter ended

2024, after

giving effect

to the

amendment, the

Company was

in

compliance with the

credit agreement. There

were no borrowings

outstanding, nor any

outstanding letters of

credit that reduced borrowing availability, as of August 3, 2024.

The weighted average interest rate under the

credit facility was zero at August 3, 2024

due to no outstanding borrowings.

Expenditures for property and equipment totaled $4.8 million in the first six months of fiscal 2024, compared

to $8.5 million in last fiscal

year’s first six months. The decrease in

expenditures for property and equipment

was

due

to

finishing

projects

related

to

investments

in

the

distribution

center

and

technology.

For

the

full

fiscal

year,

the

Company

expects

to

invest

approximately

$7.0

million

for

capital expenditures.

Net cash provided by

investing activities totaled $6.7

million in the first six

months of fiscal 2024

to $23.8

million net

cash provided

in the comparable

period of

The decrease in

net cash

provided by

investing activities

in 2024

due to

higher purchases

of short-term

investments, partially

offset

by lower sales of short-term investments,

lower capital expenditures and sale

of other assets.

Net cash

used in

financing activities

totaled $9.1

million in

2024 compared

to

$9.3

million

used

in

the

period

of

fiscal

The

decrease

in

net

cash

used

in

financing

activities in fiscal 2024 was primarily

due to lower stock repurchases.

On August 29, 2024, the Board of

Directors maintained the quarterly dividend at $0.17

per share.

As

of

August

3,

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

invested in

corporate bonds and

tax-exempt and taxable

governmental debt

securities held

in managed

accounts with

underlying ratings

of A

or better

3,

and

3,

The

state,

and

corporate

bonds

and

have

contractual maturities which range from

six days to 2.9 years.

The U.S. Treasury/Agencies Notes and

Bonds

have

contractual

maturities

which

range

from

days

to

3.0

years.

These

are

as

available-for-sale and are

recorded as

and Other

assets on

the respective

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

are

backed

by

pools

of

credit

card

generated

by

account

holders

of

cards

from

American

Express,

Citibank,

JPMorgan

Chase,

Capital One, and Discover.

At February

3,

Company

had $1.1

million

of corporate

equities and

deferred compensation

plan

assets

of

$8.6

At

August

3,

2024,

the

Company

had

plan

assets

of

$8.9

During the six months ended August

3, 2024, the Company sold its

corporate equities.

All of these

assets

are

within

Other

assets

in

the

Balance

Sheets.

See

Note

7,

Fair

Value Measurements.

RECENT ACCOUNTING PRONOUNCEMENTS:

See Note 8, Recent Accounting Pronouncements.

QUANTITATIVE

AND QUALITATIVE

DISCLOSURES ABOUT MARKET RISK

AND QUALITATIVE

DISCLOSURES ABOUT MARKET RISK:

The

Company

is

subject

to

market

rate

risk

from

exposure

to

changes

in

interest

rates

based

on

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

Based on

this

evaluation, our

Principal Executive

Officer and

Principal Financial

Officer concluded

that, as

of

2024, our

disclosure controls

and

procedures,

as defined

in

Rule

13a-15(e), under

the

Act of 1934 (the “Exchange

Act”), were effective to ensure that

information we are required 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 August 3, 2024 that has materially affected, or

is reasonably likely to materially affect, the Company’s

internal control over financial reporting.

LEGAL PROCEEDINGS:

Not Applicable.

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

materially

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 August 3, 2024:

ISSUER PURCHASES OF EQUITY SECURITIES

Total Number of

Maximum Number

Shares Purchased as

(or Approximate Dollar

Total Number

Average

Part of Publicly

Value)

of Shares that may

Fiscal

of Shares

Price Paid

Announced Plans or

Yet be Purchased

Under

Period

Purchased

per Share (1)

Programs (2)

The Plans or Programs (2)

May 2024

$

June 2024

July 2024

Total

$

478,238

(1)

Prices include trading costs.

(2)

As

of

May 4,

share repurchase

program had

478,238

shares remaining

in

open

authorizations.

During

the

second

quarter

ended

August

3,

2024,

the

Company

did

not

repurchase

or

retire

any

shares

under

this

program.

As

of

August

3,

2024,

the

Company

had

478,238

shares

in

open

authorizations.

There

is

no

specified

expiration

date

for

the

Company’s repurchase program.

DEFAULTS

UPON SENIOR SECURITIES:

Not Applicable.

MINE SAFETY DISCLOSURES:

No matters requiring disclosure.

OTHER INFORMATION:

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

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

adopted

or

terminated

a “Rule 10b5-1

trading arrangement” or a “

non-Rule

10b5-1

trading arrangement” (as such terms are

defined in Item 408

of Regulation S-K).

EXHIBITS:

Exhibit No.

Item

3.1

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

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

2, 2020.

3.2

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

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

31.1*

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

31.2*

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

32.1*

Section 1350 Certification of Principal Executive Officer.

32.2*

Section 1350 Certification of Principal Financial Officer.

101.INS

Inline XBRL Instance Document

101.SCH

Inline XBRL Taxonomy Extension Schema Document

101.CAL

Inline XBRL Taxonomy Extension Calculation Linkbase

101.DEF

Inline XBRL Taxonomy Extension Definitions Linkbase

101.LAB

Inline XBRL Taxonomy Extension Label

Linkbase Document

101.PRE

Inline XBRL Taxonomy Extension Presentation Linkbase

104.1

Cover Page

Interactive Data

File

(Formatted in

Inline

XBRL

and

contained

in

the Interactive Data Files submitted as Exhibit 101.1*)

• Submitted electronically herewith.

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

August 29, 2024

/s/ John P.

D. Cato

Date

John P.

D. Cato

Chairman, President and

Chief Executive Officer

August 29, 2024

/s/ Charles D. Knight

Date

Charles D. Knight

Executive Vice President

Chief Financial Officer