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

business,

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

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

and inflation;

changes in

laws, regulations

or government

policies affecting

our business,

including but

not limited

to current

and

potentially

new

tariffs;

uncertainties

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 and negatively affect the Company’s

profitability,

condition,

prospects,

and

ability

to

comply

with

its

debt

covenants;

adverse

weather,

public

health

threats,

acts

of

war

or

aggression

or

similar

that

may

affect

our

merchandise supply chain,

sales or

operations; inventory risks

due to

shifts in

market demand, including

the

ability

to

liquidate

excess

at

anticipated

margins;

adverse

developments

or

volatility

affecting

the

services

industry

or

broader financial

markets;

and

other

factors

discussed

under

“Risk Factors” in

Part I, Item 1A

of our

Annual Report on Form

10-K for the

fiscal year ended

3, 2024

(“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

policies

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

accompanying

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 (Loss) as a

percentage of total retail sales:

Total retail sales

100.0

%

100.0

%

100.0

%

100.0

%

1.1

1.0

1.0

0.9

Total revenues

101.1

101.0

101.0

100.9

Cost of goods sold (exclusive of depreciation)

71.2

67.5

66.7

65.4

Selling, general and administrative (exclusive

of depreciation)

40.0

39.4

35.5

35.1

1.9

1.6

1.5

1.4

(1.8)

(1.0)

(2.1)

(0.7)

Loss before income taxes

(10.2)

(6.6)

(0.5)

(0.3)

(10.4)

(3.9)

(0.8)

(0.1)

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 three quarters of fiscal 2024, due

to

prolonged and

persistently higher

prices caused

by high

inflation rates,

especially related

to

housing,

groceries

and

fuel,

as

well

as

high

rates.

These

high

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

disposable

income.

Our

willingness

to

our

products may continue to be negatively impacted by these inflationary

pressures and high interest rates.

Although

rates

and

inflation

have

decreased,

we

believe

the

pressure

on

our

disposable

income adversely

impacted

the

first

three quarters

of

fiscal

and will

likely

continue to

have a

negative impact

on consumer

behavior and,

by extension,

our results

of

operations and

condition during the remainder of fiscal 2024.

Merchandise Supply Chain

A

amount

of

our

is

manufactured

overseas,

principally

in

Southeast

Asia,

and

traverses

through

the

Panama

Canal

or

the

Suez

Canal.

In

the

first

quarter

of

2024,

the

drought

experienced

in

the

region

surrounding

the

Panama

Canal

reduced

the

number

of

transits

by

approximately 37% and

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.

These

conditions improved as

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 in the

second quarter and back

to pre-drought

levels in

the third

quarter.

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.

The combination of

these situations

has negatively impacted

the first

of 2024.

In

addition,

the

third

quarter

was

impacted

by

later

shipments

in

part

due

to

congestion

at

certain

Asian

ports,

the

U.S.

port

strike

on

the

east

coast,

and

civil

unrest

in

some

Asian

countries

that

caused

merchandise to miss

its shipping windows.

Though conditions 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 Nine

Months ended November 2, 2024 with October

28, 2023

Total retail sales for the

third quarter were $144.6 million compared to

last year’s third quarter sales

of $156.7

million, an 8% decrease.

The Company’s sales

decrease in the third quarter

of fiscal 2024 was

primarily due

to

a

3%

decrease

in

sales

and

stores

closed

in

the

fourth

quarter

of

For

the

nine

months

ended

2,

2024,

total

retail

sales

were

$486.8

million

to

last

year’s

nine

month sales of

$528.2 million, an

8% decrease. The

decrease in sales

in the first

nine months of

fiscal 2024

was due

primarily to

a 4%

same-store sales

and store

closures.

Same-store sales

include stores

that have been open

more than 15 months.

Stores that have been

relocated or expanded are

also included in

the same-store sales

calculation after they

have been open

more than 15

months.

The method of

calculating

sales

varies across

the

retail industry.

As

a

result,

our

sales

may

not

be

comparable to similarly titled measures reported by other companies. E-commerce sales were less than 5% of

total sales for the nine months ended

November 2, 2024 and are included in

the same-store sales calculation.

Total

revenues,

comprised

of

retail

sales

and

other

revenue

(principally

finance

charges

and

late

fees

on

customer accounts

receivable and

layaway fees),

were $146.2

million and

$491.9 million

for the

nine months ended November 2, 2024, compared to $158.3 million and $533.2

million for the three and nine

months

ended

October

28,

2023,

The

Company

operated

1,167

stores

at

2,

to

1,245 stores

at

October

28,

During

the first

nine

fiscal

Company

opened one store

and closed

13 stores.

The Company currently

expects to

close approximately

65 stores

in

total in fiscal 2024.

Credit

revenue

of

$0.7

million

represented

0.5%

of

total

revenues

in

the

third

quarter

of

fiscal

2024,

compared to credit revenue of $0.7 million or 0.4% of total revenues in the third quarter of fiscal 2023. Credit

revenue is

comprised of

interest earned

on the

Company’s private

label credit

card portfolio

and related

fee

income.

Related expenses principally include

payroll, postage and other

administrative expenses and totaled

$0.4 million in the third quarter

of fiscal 2024, compared to

last year’s third quarter expense of

$0.4 million.

Other

revenue,

a

component

of

total

revenues,

was

$1.5

million

and

$5.0

million

for

the

three

and

nine

months ended November 2, 2024, respectively, compared to $1.6 million and $5.0 million for the prior year’s

comparable three

and nine

month periods.

The slight

for the

three months

ended

2,

was

due

to

decreases

in

e-commerce

shipping

revenue

and

finance

charges

with the Company’s proprietary credit

card, partially offset by an increase

in gift card breakage income.

Cost of

goods sold

was $103.0

million, or

71.2% of

retail sales

and $324.6

million, or

66.7% of retail

sales

for the three and

nine months ended November

2, 2024, respectively, compared

to $105.8 million, or

67.5%

of retail sales and $345.5 million, or 65.4% of retail sales for the comparable three and nine month periods of

fiscal 2023.

The overall increase in cost of goods sold as a percent of retail sales for the third

quarter and first

nine

months

of

fiscal

versus

the

three

and

nine

month

periods

of

fiscal

resulted

primarily from deleveraging of occupancy and buying costs and higher distribution and freight costs, partially

offset

by

higher

selling

margins.

Cost

of

goods

sold

includes

costs

(net

of

discounts

and

allowances),

buying

costs,

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

for

the

buying

departments

and

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

18.1% to $41.7 million for the third quarter

of fiscal 2024 and by

11.1%

to

$162.3

million

for

the

first

nine

months

of

fiscal

2024,

to

$50.9

million

and

$182.6

million for the

prior year’s comparable

three and nine

months of fiscal

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 $57.9 million, or 40.0% of retail sales and $172.8 million, or 35.5% of retail sales for the

third

quarter and first nine months of

fiscal 2024, respectively, compared to $61.8

million, or 39.4% of retail sales

and

$185.3

million,

or 35.1%

of retail

sales

for the

prior

year’s

comparable three

and

nine

month periods,

The decrease in SG&A

expenses for the third

quarter and first nine

months of fiscal 2024

was

primarily due to lower payroll,

advertising and insurance expenses, partially

offset by expenses related to the

startup of our distribution center automation project.

Depreciation expense was $2.7 million, or 1.9% of retail sales and $7.1 million, or 1.5% of

retail sales for the

third quarter

and first

2024, respectively,

$2.5 million,

or 1.6%

of retail

sales and $7.4 million or 1.4%

of retail sales for the comparable three

and nine month periods of fiscal

2023,

Interest and other

income was $2.6

million, or 1.8%

of retail sales

and $10.2 million,

or 2.1% of

retail sales

for the

ended November

respectively, compared to

$1.5 million,

or 1.0%

of

retail sales and $3.8 million,

or 0.7% of retail sales for the

comparable three and nine month periods

for the

third quarter

2024 compared

to fiscal

2023 was

due

to

a

gain

on

the

disposal

of

the

corporate

aircraft

and

higher

earned

on

the

Company’s investments.

for the

fiscal 2024

fiscal 2023

was

due

to

a

$3.2

million

net

gain

on

sale

of

land

held

for

investment,

gain

on

the

disposal

of

the

Company’s corporate aircraft and higher interest

earned on the Company’s investments.

Income tax expense was

$0.3 million and $1.6 million

for the third quarter

and first nine months of fiscal

2024, respectively,

a tax

benefit of

$4.3 million

and $0.8

million for

the comparable

three

and

nine

month

periods

of

fiscal

2023,

The

income

tax

rate

for

the

first

nine

months

of

fiscal

was

(67.5%)

to

60.4%

for

the

first

nine

months

of

fiscal

The

increase in tax expense in

2024 is primarily due to

the valuation allowance against net

deferred tax assets

attributable to

U.S. federal

net operating

loss carryforwards

recorded in

the fourth

quarter of

2023 and

a

smaller release of reserves for uncertain tax positions.

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 and expected capital

expenditures for the next 12

months.

Cash used in operating activities during the first nine months of fiscal 2024 was $13.3 million as compared

to

$11.7

million

in

the

first

nine

months

of

fiscal

The

in

cash

used

by

of

$25.0

million

for the

first

nine

fiscal

as

the

fiscal 2023 was primarily attributable to the

relative change in inventory from year-end to

the third quarter for

both

years

and

a

subtraction

of

net

income

for

non-operating

gains

on

sale

of

assets

held

for

investment,

partially offset by the relative change

of accounts payable from year-end to

the third quarter for both years.

At

2,

2024,

the

Company

had

working

capital

of

$60.7

million

to

$55.1

million

at

February 3,

in working

capital was

primarily attributable

to a

current lease

and

an

in

inventory,

partially

offset

by

a

decrease

in

short-term

investments,

cash

and

accounts receivable.

2024, the Company had

a revolving credit agreement,

which provides for borrowings of

up

to $35.0

million, less

the balance

of any

revocable letters

related to

purchase 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

minimum EBITDAR

ratio

to

add

back

certain

income

tax

in

the

of

the

ratio.

On

November 1, 2024, the Company

amended the revolving credit agreement

to lower the minimum EBITDAR

ratio

and

the

corresponding

minimum

cash

and

used

to

determine

the

EBITDAR

coverage ratio in exchange

for a secured position

in any future borrowings.

For the quarter ended

after giving

effect to

the amendments,

was in

compliance with

the credit

agreement.

There

were

no

borrowings

outstanding,

nor

any

letters

of

credit

that

reduced

availability, as of November 2, 2024.

The weighted average interest rate under

the credit facility was zero at

November 2, 2024 due to

no outstanding borrowings.

Expenditures

for

property

and

equipment

totaled

$6.5

million

in

the

first

nine

months

of

fiscal

2024,

$10.3 million

in last

fiscal year’s

months. The

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

by

investing

totaled

$21.5

million

in

the

first

nine

months

of

fiscal

to

$6.1

million

net

cash

in

the

period

of

The

in

net

cash

by

investing

in

was

due

to

the

sale

of

other

assets,

lower

purchases

of

short-term investments,

and lower capital

expenditure spending,

partially offset

by lower sales

of short-term

investments.

Net cash used in financing activities totaled $12.6 million in the first nine months of fiscal

2024 compared to

$12.7 million used in the comparable period of fiscal 2023.

The slight decrease in net cash used in financing

activities in fiscal 2024 was primarily

due to lower stock repurchases, partially offset

by dividends paid.

As of November

2, 2024, the Company

had 442,831 shares remaining

in open authorizations under

its share

repurchase program.

The Company does not use

derivative financial instruments.

The Company’s investment portfolio

was primarily invested in

corporate bonds and

U.S. Treasury/Agencies

notes and

bonds held

in managed

accounts with

underlying ratings

of A

or better

at November

2, 2024

and

The state, municipal and corporate bonds have contractual maturities which range from 13

days to 2.9 years. The U.S. Treasury/Agencies notes and bonds have contractual maturities which range from

days

to

2.7

years.

These

are

as

available-for-sale

and

are

as

Short-term

and

Other

assets

on

the

respective

Balance

Sheets.

These

assets

are

carried

at

fair

value

with

unrealized

gains

and

losses

net

of

taxes

in

other

comprehensive income.

At February

3,

Company

had $1.1

million

of corporate

equities and

deferred

plan

$8.6 million.

At November

had deferred

compensation plan

$9.1

During the nine

months ended November

2, 2024, the

Company sold its

corporate equities.

All of

these assets

are recorded

within

Other assets

in the

Balance

Sheets.

See

Note

7,

Fair Value Measurements.

RECENT ACCOUNTING PRONOUNCEMENTS:

See Note 8, Recent Accounting Pronouncements.

QUANTITATIVE

AND QUALITATIVE

DISCLOSURES ABOUT MARKET RISK

AND QUALITATIVE

DISCLOSURES ABOUT MARKET RISK:

The

Company

is

subject

to

market

rate

risk

from

exposure

to

changes

in

rates

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 November

2, 2024.

Based on this

evaluation, our Principal Executive Officer and Principal Financial Officer concluded that, as of November 2,

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

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

fiscal

quarter

ended

2,

that

has

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

adversely

affect

our

business,

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 November 2, 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)

August 2024

$

September 2024

35,407

4.49

35,407

October 2024

Total

35,407

$

4.49

35,407

442,831

(1)

Prices include trading costs.

(2)

As of August 3, 2024, the Company’s

share repurchase program had 478,238 shares remaining in

open authorizations. During the third quarter ended November 2, 2024, the Company repurchased

and

retired 35,407

shares under

this

program for

approximately $158,827

or

an average

market

price of $4.49 per share.

As of November 2, 2024, the Company had 442,831 shares remaining

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

2,

2024,

none

of

the

directors

or

officers

(as

defined

in

Rule 16a-1(f)

of

the

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.

10.1*

Fifth Amendment, dated as of November 1, 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.

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

26, 2024

/s/ John P.

D. Cato

Date

John P.

D. Cato

Chairman, President and

Chief Executive Officer

November 26, 2024

/s/ Charles D. Knight

Date

Charles D. Knight

Executive Vice President

Chief Financial Officer