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

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

for

our

fiscal

year

ending

January

31,

(“fiscal

2025”)

and

beyond,

including,

but

not

limited to, statements regarding expected amounts of capital expenditures and store openings, relocations,

remodels

and

closures,

statements regarding

the

impact

of

the

COVID-19 or

other

pandemics

and related

responses and

mitigation efforts,

as well

as the

potential impact

of supply

chain disruptions,

extreme weather

conditions, trade

policies, inflationary

pressures and

other economic

conditions on

our

results

of

and

and

statements regarding

new

store

strategy;

and

(5) statements

to

our

future

contingencies.

When

possible,

we

have

attempted

to

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

that actual

results or

events

will not

differ

materially from

those

expressed or

implied in

any

such

Forward-looking

in

this

report

are

based

on

information available

to us

as of

the filing

date of

this report,

but subject

to known

and unknown

risks,

uncertainties and other factors that could cause actual results

to differ materially from those contemplated

by the forward-looking statements.

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

any actual

or perceived

deterioration in

the conditions

that drive

consumer confidence

and spending,

including, but

not limited to, prevailing social,

economic, political and public health

conditions 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

affecting our business, including

but not limited to

tariffs and taxes; uncertainties

regarding the impact of

any

governmental

action

regarding,

or

responses

to,

the

foregoing

conditions;

competitive

factors

and

pricing

pressures;

our

ability

to

predict

and

respond

to

rapidly

fashion

trends

and

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

COVID-19

or

other

pandemics)

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

developments

or

volatility

the

services industry or broader

financial markets; and other

factors discussed under “Risk

Factors” in Part I,

Form 10-K for the fiscal year ended February 1,

2025 (“fiscal 2024”), as

amended

or

supplemented,

and

in

other

reports

we

file

with

or

furnish

to

the

and

Commission (“SEC”)

from time

to time.

We

do not

undertake, and

expressly decline,

any obligation

to

update

any

such

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

unless

the

context

indicates

another

meaning

and

except

that

when

used

with

to

common

stock

or

other

herein

and

in

describing

the

positions

held

by

management of

such terms

include only

The Cato

Corporation.

Our website

is located

at

www.catofashions.com

where

we

make

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

Securities Exchange

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,

1,117

fashion

stores

at

1,

2025,

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

plan. Credit

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,

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

customers.

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

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

strategy,

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

2024,

purchases from

the

largest

vendor

accounted

for

14%

of

the

total

purchases.

The

Company is

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

sourced

from

China.

The

Company

opened

its

own

overseas

in

a

portion

of

the

is

manufactured

in

Southeast

Asia,

the

Company

does

not

expect

that

any

economic,

political,

public

health

or

social

unrest in

any

one

country

would

have

a

on

the

ability

to

obtain

adequate

supplies

of

However,

the

Company

can

give

no

that

any

changes

or

in

its

supply

chain

would

not

and

adversely affect the

See “Risk Factors –

Risks Relating to Our

source

a

portion

of

our

directly

and

indirectly

from

we

are

subject

to

risks

with

changes,

disruptions,

costs

or

other

problems

the

supply

chain,

risks

with

trade

policies,

costs

and

as

the

result of

actual or

threatened tariffs,

the risks

of conducting

international operations

and risks

that affect

the prevailing

social, economic,

political, public

health and

other conditions

in the

areas from

source

These

risks

have

and

could

to

and

affect

the

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

An

of

the

strategy

is

the

of

to

stores

based

on

an

analysis

of

sales

trends

by

category,

profiles

and

climatic

conditions.

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

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

disruption

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

0.8%,

1.0%

and

1.0%

of

retail

sales

for

fiscal

years

2024,

and

Store Operations

The

store

team

consists

of

four

territorial

managers,

eight

regional

managers and

70 district

managers. Regional

managers receive

a salary

plus

a

bonus based

on

achieving targeted

goals for

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

and

sales

depending

on

the

size

of

the

store

and

needs.

In

general,

store

are

paid

a

salary

or

on

an

hourly

basis

as

are

all

other

store

personnel.

Store

managers,

assistant

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

variety of

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 2020:

Store Development

Number of Stores

Beginning of

Number

Number

Number of Stores

Year

Opened

Closed

End of Year

2020………………….……...………….

1,281

1,330

2021………………….……...………….

1,330

1,311

2022……………………….……...…….

1,311

1,280

2023…………....………….……...…….

1,280

1,178

2024………….………...….……...…….

1,178

1,117

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%, 3.4% and 3.1% of

retail sales in

fiscal 2024,

2023 and

bad debt

expense,

net of

recovery,

was 3.9%,

3.6% and 2.0% of credit sales in fiscal 2024, 2023 and 2022, respectively.

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

they have a satisfactory

credit

record

and

the

Company

has

positively

assessed

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

assesses

the

a

finance

charge.

If

are

not

on

time,

the

is

assessed

a

late

fee

subject

to

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

impact

of

the

loyalty

program

is

immaterial

to

the

fiscal

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

2.8%,

3.0%

and

2.7% of retail sales in fiscal 2024, 2023 and 2022, respectively.

Information Technology Systems

The

systems

provide

daily

and

merchandising

that

is

used

by

management to

enhance

the

timeliness

and

of

purchasing

and

pricing

decisions.

uses

a

daily

report

comparing

actual

sales

with

planned

sales

and

a

weekly

ranking

report

to

monitor

and

control

purchasing

decisions.

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).

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. The Company 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

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

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

variety of

areas, including

but not

limited to,

trade, licensing

and

permit

import

and

export

privacy

and

data

protection,

credit

regulation,

recordkeeping

and

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 2024,

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

or

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

Human Capital

As

of

1,

2025,

the

Company

7,000

and

associates. The

Company also

employs additional

part-time associates

peak retailing

seasons.

The

are

engaged

in

various

executive,

operating,

and

functions in

the Home

Office

and distribution

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.

The

Company

endeavors

to

promote

an

environment where all associates can develop and flourish, 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

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,

including measures 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

factors,

in

to

the

other

in

this

report,

the

under

“Forward-looking

Information”

above

in

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,

and value

of our

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 Company’s merchandise supply chain, risks associated with trade policies, including

costs and uncertainties as the result of actual or threatened tariffs, the risks of conducting

international operations and risks that affect the prevailing social, economic, political,

public

health and other conditions in the areas from which we source

merchandise. These risks have and

could continue to materially and adversely affect the Company’s business, results of operations

We

do

not

own

or

operate

any

manufacturing

As

a

result,

the

success

of

our

is

tied

to

our

timely

receipt

of

quality

from

third

party

manufacturers

at

a

reasonable

cost.

A

amount

of

our

is

manufactured

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 related

to 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

issues

have

and

may

to

drive

up

our

ocean

freight

costs,

delay

deliveries,

and

impact

our

ability

to

access

the

already

limited

supply

of

ocean

container

capacity that

we require.

we may

be subject

to additional

costs related

to our

supply chain

such as

increased facility fees,

fuel, peak surcharg

es and

other additional charges

to transport

our goods,

which may increase our costs. We

also are subject to domestic supply chain disruptions, including 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 and

other conditions that impact our

domestic supply chain. These supply chain

risks have

and

may

to

result

in

both

higher

costs

to

transport

our

merchandise and

delayed

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

sourced

from

China,

and

our

costs

for

these

are

likely

to

increase as

a result

of newly implemented

tariffs on

Chinese products. We

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, including but

not

limited

to

communicable diseases

(such

as

COVID-19 or

other

pandemics), financial

or

other

forms

of

instability or

other events

resulting in

the

disruption of

trade from

affecting our

supply chain,

for

imported

or

the

imposition

of,

or

changes

in,

laws,

regulations or

duties, quotas, tariffs,

taxes or

governmental policies regarding

or responses

to

these

matters

or

other

factors

the

or

cost

of

imports.

In

geopolitical

tensions,

sanctions,

prohibitions,

actual

or

threatened

and

have resulted

in

costs

with

in

certain

regions.

Any new sanctions, tariffs and reporting requirements enacted in the future may further

increase our costs

with

from

those

regions

or

limit

our

ability

to

procure

the

we

source, and

to source

these products

from other

regions may

be limited

or result

in increased

sourcing costs. If we are unable to

pass these increased sourcing costs onto our vendors or

our customers,

it may adversely impact our results of operations.

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

habits,

for

our

apparel

and

accessories,

are

by,

among other

things, prevailing

social, economic,

political and

public health

conditions and

(such

as

matters

under

debate

in

the

U.S.

from

time

to

time

budgetary,

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

affecting any of these conditions. 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 conditions

or

uncertainties regarding

them also

generally cause

consumers to

defer

of

items,

such

as

our

or

to

cheaper

alternatives

to

our

merchandise, all

of which

our

net sales

and results

of operations.

numerous events,

whether or

not

actual

economic conditions,

such

as downturns

in

the

stock

markets,

acts

of

war

or

terrorism,

geopolitical

uncertainty

or

unrest

or

natural

disasters,

outbreaks

of

disease

or

similar

events,

may

also

dampen

confidence,

and

accordingly,

lead

to

reduced

consumer spending.

Any of

these events

on our

business, results

of

Continued high interest rates 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 condition.

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,

combined

with

inflationary

pressures

on

non-discretionary

items,

food,

fuel

and

shelter reduce

our customers’

discretionary income

and their

willingness to

purchase discretionary items

such as apparel, shoes or jewelry products. Any reduction in our customers’ discretionary

spending on our

could

erode

our

sales

volume

and

affect

our

results

of

and

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

home office

levels, as

well as

making it more

difficult to

hire new

associates and

retain existing associates.

The tight

labor

market

and

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

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.

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,

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.

Further, the activities conducted by

our sourcing offices outside the

United States subject us to foreign

operational

risks,

as

well

as

U.S.

and

international

and

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

or

affect

our

results

of

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

conditions. 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 potential cost of compliance with any future regulations 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

concerns, which could increase our costs. Furthermore, any failure of or perceived failure by us to comply

with

any

future

climate

change

stakeholder

regarding the environment, could adversely affect our reputation and results of operations.

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

consumers

shop.

In

our

ability

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

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 shopping

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

beyond our

control.

These

factors

include,

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.

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

the Company’s specifications

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,

or

other

failures

to

follow

our

vendor

guidelines

or

comply

with

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.”

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,

for

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,

design

and

respond

to

fashion

trends

could

affect

acceptance

of

our

which

in

turn

could

adversely affect our

business, results of

operations and our

image with our

customers. 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.

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

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

also

compete

for

the

same

retail

store

space.

As

a

result

of

this

we

may

pricing

pressures,

marketing

expenditures,

costs

to

open

new

stores,

as

well

as

loss

of

market

share,

which

could

and

affect

our

results

of

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, tariffs,

weather

and

crop

yields,

currency

value

fluctuations,

inflation,

as

well

as

other

factors.

manufacturers

have

and

may

to

have

in

other

manufacturing

costs,

such

as

transportation,

labor

and

benefit

costs.

These

in

production

costs

may

result

in

higher

merchandise costs to the Company.

Due to the Company’s

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 operations and financial condition.

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.

When

we

are

not

able

to

accurately predict

customers’ preferences

for

our

fashion

items, we may have too

much inventory, which

may cause excessive markdowns. When we

are unable to

accurately

predict

demand

for

our

we

may

end

up

with

shortages,

resulting

in

missed

sales.

Our

inability

to

effectively

manage

may

to

affect

our

gross

margin and results of operations.

Adverse developments affecting the financial services industry or events or concerns

involving

liquidity, defaults or non-performance by financial 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

developments

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

generated

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

from third

parties that

we

require. These

impacts

may adversely

affect

our

financial condition,

results

of

and

our

ability

to

execute

our

Furthermore,

these

adverse

developments affecting

the

financial services

industry or

related perceptions

may negatively

impact our

income

or

our

willingness

to

shoes

or

jewelry

products. Any

reduction in

our customers’

discretionary spending

on our

products could

erode our

sales

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

The competitive hiring environment and our failure to attract, train,

and retain skilled personnel

has and could continue to adversely affect our business and our financial condition.

Like most

retailers, we experience

significant associate turnover

rates, particularly among

store sales

and

managers.

Moreover,

attracting

and

retaining

skilled

has

been

and

could

to

be

challenging.

To

offset

this

turnover

as

well

as

support

new

store

growth,

we

must

continually attract, hire and train new store associates to meet our staffing needs.

A significant increase in

the

turnover

rate

among

our

store

sales

and

would

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 industry or other industries, many of whom

have greater financial resources than we do.

In

we

depend

on

key

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

with

other

retailers, and

our

inability

to

attract

and

retain

qualified personnel

could

limit

our

ability to grow.

If

we

are

unable

to

retain

our

key management

and

store

associates 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

and

could

to

affect

our

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

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

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

resulted

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,

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

information.

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

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

to

our

costs,

there

is

no

that

such

measures

will

prevent

the

compromise

of

such

information. If

our measures

are unsuccessful

due to

cyberattacks or

otherwise, it

adverse

effect

on

the

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

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 Carolina

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

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.

Although the

Company's e-commerce

platform provides

another channel

to

drive incremental

sales,

the

online

and

introduces

the

Company

to

a

new

customer base,

it also

exposes us

to numerous

risks. We

to potential

failures in

the efficient

and uninterrupted operation

of our

websites, customer contact center

or our distribution

center, including

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

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 variety

of 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

and subject to fines

and higher transaction

fees. In addition,

we may lose

our ability to

accept credit and

debit card payments

from our

customers 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:

If we fail to protect our trademarks and other intellectual property

rights or infringe the

intellectual property rights of others, our business, brand image,

growth strategy, 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

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.

The

Company

is

from

time

to

time

subject

to

claims

that

its

products,

processes,

advertising,

or

infringe

the

rights

of

others.

The

defense

of

these

claims,

even

if

ultimately successful, may result in costly litigation, and if the Company is not successful in its defense, it

could be subject to

injunctions and liability for

damages or royalty obligations,

and the Company’s

sales,

profitability, cash flows, financial condition and reputation could be adversely affected.

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

to federal,

local laws,

rules and

regulations, as

well as

U.S. and

foreign

laws

and

to

our

in

foreign

from

which

we

source

our

merchandise and operate our sourcing offices. Our business is also subject to regulatory and litigation 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 litigation claims have

arisen and may continue

to

arise

in

the

ordinary

course

of

our

and

include,

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

but

not

limited

to,

restrictions

on

trade,

license

and

permit

import

and

export

license

privacy

and

data

protection

laws,

laws,

records

and

management regulations, tariffs

and taxes

and anti-corruption

laws, violations

of which

by employees or

persons acting

on the

behalf may

result

in significant

investigation costs,

severe criminal

or

civil

sanctions

and

reputational

harm.

These

and

other

to

which

we

may

be

subject

could

negatively

affect

our

results

and

These

matters

frequently

raise

complex factual and

legal issues, which

are subject to

risks and uncertainties

and could divert

time.

The

Company

may

also

be

subject

to

reviews

and

audits,

the

results

of

which could materially and adversely

affect our business, results of

operations and financial condition. In

addition, governing laws,

rules and regulations,

and interpretations of

existing laws are

subject to change

from time to time.

Compliance and litigation matters could result

in unexpected expenses 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

data privacy

or sustainability

could increase

our costs

of compliance,

technology and

business operations.

The interpretation

of existing

or new

laws to

existing and

evolving 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

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.

Continued scrutiny and changing expectations surrounding sustainability

matters from investors,

customers, government regulators and other stakeholders may impose additional

requirements, additional costs and compliance risks.

Public companies

from across

all industries

have and

to

face scrutiny

from investors,

customers,

regulators

and

other

stakeholders

concerning

sustainability

matters.

In

the

U.S.,

there

have

been

various

new

rules

or

proposals

for

new

or

climate

emissions,

sustainability,

workforce

composition

and

related

metrics,

among

other

topics.

Complying

with

these

complex

or

could

our

costs

with

compliance, disclosure and reporting. Furthermore, evolving laws, regulations or stakeholder expectations

may

result

in

uncertain,

potentially

burdensome,

and

or

expectations,

and

our

failure

to

comply

with

such

or

may

affect

our

business or financial performance.

Changes to accounting rules and regulations may adversely affect our reported

results of

Changes

to

U.S.

Generally

Accepted

Principles

and

SEC

accounting,

and

rules

are

common

and

have

become

more

frequent

and

in

the

past

several

years.

Changes in accounting rules, disclosures

or regulations and varying interpretations of

existing accounting

rules, disclosures

and regulations

have significantly

our reported

financial statements

and those

of

other

participants

in

the

retail

in

the

past

and

may

to

do

so

in

the

future.

Future

changes

to

rules,

or

may

affect

our

results

of

operations and financial position or perceptions of our performance and

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

internal control

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.

Changes in tax and accounting laws and the mix and level of earnings

in any of the jurisdictions in

which we operate and the outcome of tax audits can cause fluctuations in

our overall tax rate,

which impact our reported earnings.

We

are subject to income

taxes in the

United States and numerous

domestic states, as well

as foreign

jurisdictions. In

addition, our

products are

import and

excise duties

and/or sales,

consumption

or value-added taxes in many jurisdictions. Significant judgment is required to determine and estimate tax

and

there

are

many

transactions

and

calculations

where

the

ultimate

tax

termination

is

uncertain. We

record tax

expense based

on our

estimates of

future payments,

which include

reserves for

estimates of probable settlements of domestic

and foreign tax audits. At any

one time, many tax years

are

subject

to

audit

by

various

taxing

jurisdictions.

Adverse

determinations

in

these

audits

may

have

an

on our

reported financial results

in the

period such

determinations are

made, as

well as

in

future periods.

In addition, our

effective tax

rate may be

materially impacted by

changes in tax

rates and

duties,

the

mix

and

level

of

or

losses

by

taxing

jurisdictions,

or

by

changes

to

accounting rules

or

regulations. As

a result,

we

expect

that throughout

the

year there

could

be

ongoing

variability in

our quarterly

tax rates

as events

occur and

exposures are

evaluated. Changes

to foreign

or

domestic tax

and accounting laws

and regulations, the

outcome of

tax audits and

changes in the

mix and

level

of

by

jurisdictions

could

have

a

impact

on

our

tax

rate,

condition, results of operations or cash flows.

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

primarily comprised

of investments

in

federal,

state, municipal and corporate debt securities. The value of those securities may be adversely impacted by

factors

to

these

securities,

similar

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,

municipal entities

struggle with

declining tax

revenues and

budget deficits,

we cannot

be assured

of our

ability 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

The

or

persistence of

any

of

these

conditions could

our financial

condition, results

and ability

to execute

our

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 of

operations and

to access

our revolving

line

of credit and to execute our business strategy.

The terms of our asset-based revolving credit facility (“ABL Facility”)

restrict our operations and

financial flexibility, which could adversely affect our ability to respond to changes in our business

and to manage our operations.

We

are

subject

to

the

terms

of

our

ABL

which

is

limited

by

a

base

consisting of certain eligible accounts

receivable and eligible inventory,

reduced by specified reserves, as

follows:

●

90% of eligible credit card receivables, plus

●

90% of the

net recovery percentage

of eligible inventory

multiplied by the

most recent appraised

value of such inventory, calculated at the lower of (a) cost computed on a first-in first-out basis or

(b) market value (net of intercompany profits and certain other adjustments),

minus

●

applicable reserves.

In

the

prohibits

minimum excess

availability at

any time

to

be

less than

the

greater of

(i) 10%

of the

loan cap

(defined as

the lesser

of (A)

the borrowing

base at

such time

and (B)

$35 million (as of the date hereof)) and (ii) $5 million.

In addition, the covenants under

our ABL Facility include

restrictions that, among other things,

limit

to incur

additional indebtedness,

create liens

on assets,

make investments,

loans or

advances,

engage in mergers, consolidations, sell assets,

make acquisitions, pay dividends and make other restricted

payments,

and

enter

in

to

transactions

with

affiliates.

A

failure

by

us

to

comply

with

these

covenants

could result

in an

event of

default, which

could adversely

affect our

ability to

respond to

our

business and

manage our

operations. Upon the

occurrence of

of default,

the lenders

could elect

to declare all

amounts outstanding to

be immediately due

and payable and

exercise other remedies

as set

forth under

our ABL

including without

limitation foreclosing

on the

collateral pledged

to

such

lenders. If

the indebtedness

under our

was to

be accelerated,

our future

could be materially adversely affected.

Risks Relating to the Market Value of Our Common Stock:

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

profitability in

the

first

and

second

quarters

of

our

fiscal

year

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

We cannot provide assurance that we will pay dividends, or that if paid, any dividend payments will

be consistent with historical levels.

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

Our

Directors regularly

evaluates

to

pay a

dividend based

on many

factors,

such as

but

not

limited

to,

legal

the

position

of

the

contractual

restrictions

and

our

capital

Our

Board

of

most

recently

suspended

the

payment of quarterly dividends in November 2024 and may continue to suspend the

payment of dividends

if it deems such an action to

be in the best interests of the

Company and its shareholders. There can be no

assurance that a cash dividend will be declared in the future in any particular

amount, or at all.

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;

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 legal proceedings.

Over the past several years the

stock market in general, and the market for shares of equity securities of many retailers in particular,

have

experienced extreme price

fluctuations that

have at times

been unrelated to

the operating performance

of

those companies.

Such fluctuations

and market

volatility based

on these

factors may

and adversely

affect the

market price

of our

securities class

action litigation

has

often

been

initiated

against

companies

periods

of

volatility

in

their

stock

price.

This

type

of

litigation,

should

it

materialize,

could

result

in

substantial

costs

and

divert

our

and

resources,

and

could

also

require

us

to

make subst

antial

to

justify

judgments

or

to

settle

litigation. The threat of class action litigation could also cause the price of

our common stock to decline.

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.

Our common stock

consists of two

classes: Class

A and

Class B.

Holders of

Class A common

stock

are entitled to one vote per share, and holders of Class B common stock are entitled to

10 votes per share,

on all matters to be voted on by our common shareholders. All of the shares of Class B common stock are

beneficially owned by

John P.

D. Cato. As

a result, Mr.

Cato owns a

significant economic interest in

the

Company and

the

majority

of

the

total

voting

power

of

our

common

stock

at

53.3%

as

of

March

24,

In

Mr.

Cato

serves

as

Chairman

of

the

Board

of

Directors,

and

Chief Executive

As a

result, Mr.

Cato has

the ability

to substantially

influence or

outcome of all

matters requiring approval by

the shareholders, including the

election of directors

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

even if

the

change in

control might

benefit the

shareholders generally.

This ownership

concentration may adversely

impact the trading

of our

Class A common stock

because of

perceptions of a

conflict of interest,

thereby

depressing

the

value

of

our

Class

A

common

stock.

Mr.

Cato

also

has

the

ability

to

control

the

management of

as a

result

of his

position as

Chief Executive

we qualify

for

exemption

as

a

“controlled

company”

from

with

certain

New

York

Stock

governance

listing

the

that

we

have

a

majority

of

directors

on

our

Board,

an

committee

and

an

governance

and

nominating

committee.

we

intend

to

to

comply

with these listing

standards even though

we are a

controlled company,

there can be

no assurance that

we

will continue

to comply

with these

optional listing

standards in

the future.

If we

elected to

utilize these

“controlled

company”

exceptions,

our

other

shareholders

could

lose

the

benefit

of

these

governance requirements and the market value of our common

stock could be adversely affected.

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

strategy

and

processes.

We

a

process

designed

to

assess

and

manage

risks

from

threats,

risks

to

theft

of

data,

payment cards, disruption to

business operations or

financial reporting systems, fraud,

extortion, external

exposure

of

employee

data

and

violation

of

privacy

laws.

In

recent

years,

we

have

our

in

cybersecurity risk

management and

have developed

an

enterprise cybersecurity

program

designed

to

detect,

classify

and

mitigate

and

other

data

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

issue,

we

have

defined

procedures

for

responding

to

such

issues,

procedures

that

address

when and

how to

engage with

Company executives,

our

Directors, other

stakeholders

and law

enforcement when

responding to

such issues.

various aspects

of our

program,

with

the

Payment

Card

Industry

are

regularly

reviewed

by

third

parties.

We

also

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

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

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 maintain and

regularly review a

cybersecurity incident response

plan that

provides a

framework for

handling and

escalating cybersecurity

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

year

ended

2025 from current or

past cybersecurity threats or cybersecurity

incidents that have materially affected

or

are

likely

to

affect

our

strategy,

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

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

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

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

Carolina

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

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

information.

Executive Officers of the Registrant:

The executive officers of the Company and their ages as of March 31, 2025

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,

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

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

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 24, 2025,

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

1/31/2020

1/29/2021

1/28/2022

1/27/2023

2/2/2024

1/31/2025

The graph assumes an initial investment of $100 on January 31, 2020,

the last trading day prior to the

commencement of the Company’s 2020 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 1, 2025:

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 2024

96,306

$

3.32

96,306

December 2024

320,271

3.35

320,271

January 2025

28,799

3.50

28,799

Total

445,376

$

3.35

445,376

997,455

(1)

Prices include trading costs.

(2)

During

the

fourth

quarter

ended

1,

2025,

the

Company

repurchased

and

retired

445,376

shares

under

this

program

for

$1,491,984

or

an

average

market

price

of

$3.35

per

share. As of the

fourth quarter ended February

1, 2025, the Company

had 997,455 shares remaining

in open authorizations. There is no specified expiration date

for the Company’s repurchase program.

The

Board

of

authorized

an

of

1,000,000

shares

in

the

share

repurchase program on December 23, 2024.

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 2024

and fiscal

and

year-to-year

comparisons

between

fiscal

and

fiscal

2023,

as

well

as

certain

fiscal

items.

Discussions

of

fiscal

items

and

year-to-year

comparisons

between

fiscal

and

fiscal

2022 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 February 3, 2024.

Recent Developments

Inflationary Cost Pressure and High Interest Rates

The

pressure

on

our

disposable

income

in

fiscal

2024,

due

to

prolonged

and

persistently high prices caused by high inflation

rates, especially related to housing, groceries 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

be

negatively impacted by these inflationary pressures and high interest

rates.

rates

and

have

decreased,

we

believe

the

pressure

on

our

disposable income

adversely impacted

fiscal 2024

and will

likely continue

to have

a negative

impact on

consumer behavior and, by extension, our results of operations and financial condition during

at least part

of fiscal 2025.

Merchandise Supply Chain and Tariff Pressures

A significant amount of

our merchandise 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

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

and fourth

quarters. 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

fiscal

In

the

third

and

fourth

quarters

were

impacted

by

later

shipments

in

part

due

to

congestion

at

certain Asian

ports. In

the third

quarter,

our shipments

were negatively

impacted by

the U.S.

port strike

on

the

east coast

and civil

unrest in

some Asian

countries that

caused

merchandise to

miss its

windows.

Though

incrementally

improved

in

the

fourth

quarter,

we

believe

the

totality

of

these conditions

will likely

have a

negative impact on

our results

and financial

condition for the foreseeable future.

In

to

the

supply

chain

issues,

the

newly

implemented

provisional

tariffs

on

Chinese products may have several impacts on the results

of our financial operations. Our costs associated

with products made in China are likely to increase. These cost increases will negatively impact our results

of

and

unless

we

are

able

to

mitigate

these

costs

by

having

our

vendors

share

the

costs

of

retail

pricing

or

move

production

to

another

county.

Certain

product

categories

such

as

shoes

and

handbags

will

be

difficult

to

source

in

other

countries.

These

provisional

tariffs

cause supply

chain issues,

as companies

move production

from China.

Potential supply

chain

issues

such

as

products being

late

due

to

port congestion,

longer

transit times

and

dwell

times

at

port,

and

container

may

impact

the

costs

we

pay

for

ocean

freight

or

the

timeliness

of

our

product deliveries, any of which may

negatively impact our results of operations

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…………………………………………………………

1.2

1.1

Total revenues ……………………………………………………….

101.2

101.1

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

68.0

66.3

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

36.1

36.1

Depreciation …………………………………………………………

1.5

1.4

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

1.8

0.7

Loss before income taxes …………………………………………

(2.5)

(2.0)

Net loss…………………………………………………………..

(2.8)

%

(3.4)

%

Fiscal 2024 Compared to Fiscal 2023

Retail sales

decreased by

8.3% to

$642.1 million

to $700.3

million in

fiscal

2023. Fiscal 2024 had 52 weeks versus 53 weeks in fiscal 2023. The decrease in retail sales

in fiscal 2024

was

due

to

a

3.2%

decrease

in

same-store sales,

from closed stores in

and

an

week

of

sales

in

Same-store

sales

for

the

fiscal

year

decreased

due

to

lower

transactions, partially offset by fewer returns and slightly higher average sales per transaction. Same-store

sales

includes

stores

that

have

been

open

more

than

months.

Stores

that

have

been

relocated

or

expanded

are

also

included in

the

same-store sales

after

they

have

been

open

more

than

months.

In fiscal 2024 and fiscal 2023, e-commerce sales were less than 5%

of total sales and same-store

sales. The

method of

calculating same-store sales

varies across the

retail industry.

As a

result, our same-

store sales

calculation may

not be

comparable to

similarly titled

measures reported

by other

companies.

Total

revenues, comprised of

retail sales

revenue (principally finance

charges and

late fees

on

customer accounts receivable,

gift card breakage, shipping

charges for e-commerce purchases

fees), decreased by 8.2% to

$649.8 million in

fiscal 2024 compared to

$708.1 million in

fiscal 2023. The

Company

1,117

stores

at

1,

to

1,178

stores

at

3,

In fiscal 2024, the Company opened five new stores and closed 66

stores.

Other revenue,

a component

of total

revenues, remained

flat at

$7.7 million

to fiscal 2023.

Credit

revenue

of

$2.7

million

represented

0.4%

of

total

revenue

in

fiscal

2024,

a

$0.1

million

increase compared to fiscal 2023 credit

revenue of $2.6 million or 0.4% 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

receivable

balances.

Credit

revenue

is

comprised

of

earned

on

the

private

label credit

card portfolio

and related

fee income.

Related expenses

include

principally payroll,

postage

and

other

and

totaled

$1.6

million

in

fiscal

to

$1.6

million

in

Total credit

segment income before taxes was $2.2 million in fiscal

2024 and $1.7 million in

Cost

of

goods sold

was $436.4

million, or

68.0% of

retail

sales, in

fiscal

to

$464.3

million, or 66.3% of retail sales, in fiscal 2023. The increase in cost of goods sold as a percentage of sales

resulted primarily

from higher

distribution and

freight costs,

increased sales

of markdown

priced goods,

and 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

maintenance

for

stores

and

Total

gross

margin

dollars

(retail sales

less cost

of goods

sold and excluding

depreciation) decreased by

12.8% to

$205.7 million in

fiscal 2024 from $236.0

million in fiscal

2023. 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

$231.5 million in

fiscal 2024 compared

to $252.8 million

in fiscal 2023,

a decrease

of

8.4%.

As

a

percent

of

retail

sales,

SG&A

was

36.1%

to

36.1%

in

the

prior

year.

The

decrease in SG&A expense in fiscal 2024 was primarily attributable to decreased incentive compensation,

insurance, closed store and impairment expenses, partially offset by increased professional

fees.

expense

was

$9.8

million

in

fiscal

to

$9.9

million

in

fiscal

Depreciation expense

decreased slightly

from fiscal

2023 due

to fully

depreciated older

prior

period impairments of leasehold improvements and fixtures,

partially offset by the distribution

information technology expenditures.

Interest and other

income increased to

$11.8 million

in fiscal 2024

compared to $5.1

million in fiscal

2023. The increase is

primarily attributable to a $3.2

million net gain on

sale of land held

for investment,

gains on

the disposal

of the

corporate aircraft

and certain

equity securities,

as well

as higher

interest earned on the Company’s investments.

Income tax

expense was

$1.9 million,

or 0.3%

of retail

sales in

fiscal 2024

compared to

expense

of

$10.1

million, or

1.4%

of

retail

sales

in

fiscal

The

income

tax

expense

decrease

was

primarily due

to a

valuation allowance

recorded against

U.S. federal

and state

assets in

the

prior

fiscal

year

due to

a

pre-tax loss,

partially offset

by foreign

rate

differential. The

tax

rate

was (12.1%)

(Expense) in fiscal

2024 compared to

(73.5%)

(Expense) in fiscal

2023. See Note

12 to

the

Consolidated Financial 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

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. 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