CATO CORP

(4) statements relating to

our operations or

activities 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 potential

impact of the

COVID-19 or other

pandemics and related

responses

and

mitigation

efforts,

as

well

as

the

impact

of

supply

chain

disruptions,

extreme

weather conditions,

trade policies,

inflationary pressures and

other economic

conditions on

our business,

results

of

and

and

new

store

development

strategy;

and

(5)

relating

to

our

future

contingencies.

When

possible,

we

have

attempted

to

identify

forward-looking

by

using

words

such

as

“will,”

“expects,”

“anticipates,”

“approximates,”

“believes,”

“estimates,”

“hopes,”

“intends,”

“may,”

“plans,”

“could,”

“would,”

“should”

and

any

variations or

negative formations

of such

words and

similar expressions.

We

can give

no assurance

that

actual

results or

events will

not

differ

materially from

those

expressed

or

implied in

any such

forward-

looking statements. Forward-looking statements included 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,

tariffs,

rates,

home

values,

consumer

net

worth

and

the

availability

of

credit;

changes

in

laws,

regulations

or

government

policies affecting

our business,

including but

not limited

to tariffs

and taxes;

uncertainties regarding

the

impact

of

any

action

regarding,

or

responses

to,

the

foregoing

conditions;

competitive

factors

and

pricing

pressures;

our

ability to

predict

and

respond

to

rapidly

changing fashion

trends

and

consumer demands; our ability to

successfully implement our new store

development strategy to increase

new

store

openings

and

our

ability

of

any

such

new

stores

to

grow

and

perform

as

expected;

underperformance or

other

factors

that

may lead

to

a

continuation or

acceleration

of

store

closures

and

negatively affect

profitability,

financial condition

and prospects;

adverse weather,

public

health

threats

(including

the

COVID-19

or

other

pandemics),

acts

of

war

or

aggression

or

similar

conditions

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 affecting the financial services industry or broader financial markets; and other factors discussed

under

“Risk

Factors”

in

Part

I,

Item

1A

of

our

annual

report

on

Form

10-K

for

the

fiscal

year

ended

1,

(“fiscal

2024”),

as

amended

or

supplemented,

and

in

other

reports

we

file

with

or

furnish

to

the

Securities and

Exchange Commission

(“SEC”) from

time

to

time.

We

do not

undertake,

and

expressly decline,

any obligation

to

update any

such

forward-looking information

contained

in

this

report, whether as a result of new information, future events, or

otherwise.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES:

The

critical

and

are

more

fully

in

“Management’s

Discussion

and

Analysis

of

Condition

and

Results

of

Operations”

in

Part

II,

Item

in

the

Company’s Annual Report on

Form 10-K for the

fiscal year ended February

1, 2025. The preparation

of the

statements in

conformity

with

generally

accepted accounting

principles in

the

United

States (“GAAP”) requires management to make estimates and assumptions about future events that affect the

amounts reported in the

financial statements and accompanying

notes. Future events

and their effects cannot

be

with

absolute

certainty.

Therefore,

the

determination

of

requires

the

exercise

of

judgment. Actual results

inevitably will differ

from those estimates,

and such differences

may be material

to

the

statements.

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

liabilities,

uncertain

tax

positions,

the

allowance

for

credit

losses,

and

shrinkage.

The Company’s critical accounting policies and

estimates are discussed with the Audit Committee.

RESULTS OF OPERATIONS:

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

the Company's unaudited Condensed

Consolidated Statements of Income as a

percentage of total retail sales:

Total retail sales

100.0

%

100.0

%

1.1

1.0

Total revenues

101.1

101.0

Cost of goods sold (exclusive of depreciation)

64.9

64.2

Selling, general and administrative (exclusive of depreciation)

32.8

32.4

1.5

1.2

(0.7)

(3.3)

Income before income taxes

2.5

6.6

2.0

6.3

RESULTS OF OPERATIONS

Management’s

Discussion and

Analysis of

Financial Condition

and Results

of Operations

(“MD&A”) is

intended

to

provide

to

assist

readers

in

better

understanding

and

evaluating

our

and

results

of

operations.

We

recommend

reading

this

MD&A

in

conjunction

with

our

Statements

and

the

Notes

to

those

in

the

“Financial Statements” section of this Quarterly Report on Form 10-Q, as well as our 2024

Annual Report

on Form 10-K.

Recent Developments

Tariff Pressures

A

quantity

of

our

are

made

in

China

and

Southeast

Asia.

The

from

these

countries

are

subject

to

the

newly

implemented

reciprocal

tariffs,

as

well

as

an

additional

Section

ad

valorem tariff on Chinese products.

In the quarter, only products from China were subject to the

Section 301

ad

valorem

tariffs.

These

tariffs

increased

our

costs

with

receipted

made

in

these

countries in the latter half of

the first quarter and will continue

to do so in the

second quarter.

These

cost increases

will

negatively impact

our results

of operations

and financial

unless

we

are

able to successfully mitigate their effects by increasing retail pricing without losing sales and/or sharing these

costs with

our vendors.

Certain product

categories such as

shoes and

handbags will

be difficult

to source

in

countries with lower tariffs.

Additionally, our supply

chain may be impacted

in the second quarter

as the flow of

Chinese products to the

United States

was reduced

due to

the high

reciprocal tariffs

that were

only recently

decreased in

mid-May.

Potential supply chain

issues such as

products delivered late

due to port

congestion, longer transit

times and

dwell times at port, and container availability 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

and

condition.

Pricing

Pressures

The pressure on our customers’ discretionary income continued into fiscal 2025.

As the cost of tariffs begins

to

impact

retail

pricing,

our

may

become

more

cautious

with

their

discretionary

spending.

The

customers’

caution

in

regard

to

their

discretionary

spending

will

put

additional

pressure

on

our

ability

to

mitigate the cost increases caused by

tariffs.

Comparison of First Quarter of 2025

with 2024

Total retail sales for the first quarter

were $168.4 million compared to

last year’s first quarter sales of

$175.3

Sales

decreased

due

to

stores

that

were

closed

in

the

past

months.

Same-store

sales

were flat

for the

quarter. Same

store sales

include stores

that have

been open

more than

15 months.

Stores

that have been relocated or expanded

are also included in the same

store sales calculation after they have been

open more than 15 months.

The method of calculating same store sales varies across the retail industry.

As a

result, our same

store sales calculation

may not be

comparable to similarly

titled measures reported

by other

companies. E-commerce sales were less than 5.0%

of sales for the first quarter of

fiscal 2025 and are included

in the

same-store sales

calculation.

Total revenues,

comprised of

and other

revenue (principally

finance

charges

and

late

fees

on

accounts

receivable,

shipping

charged

to

for

e-

commerce

purchases

and

layaway

fees),

were

$170.2

million

for

the

first

quarter

ended

May

3,

2025,

compared to $177.1

million for

quarter ended May

4, 2024. The

Company operated

1,109 stores

at

May 3, 2025 compared

to 1,171 stores at

the end of last fiscal

year’s first quarter.

For the first three

months

of

fiscal

2025,

the

Company

permanently

closed

eight

stores.

The

Company

currently

expects

to

close

approximately 50 stores in fiscal 2025.

Other revenue, a component of

total revenues, was $1.8 million for the first

quarter of fiscal 2025, compared

to $1.8

million for

the prior

year’s comparable

first quarter.

Included in

is credit

revenue of

$0.7 million

which represented

0.4% of

total revenues

in the

first quarter

of fiscal

2025, flat

both in

dollars

and percentage compared

to 2024.

Credit revenue is comprised

of interest earned on

the Company’s private

label credit card

portfolio and related

fee income.

Related expenses include

principally payroll, postage

and

other administrative

expenses, and

totaled $0.4

2025, compared

to last

year’s

first quarter expenses of $0.4 million.

Cost of goods

sold was $109.3

million, or 64.9%

of retail sales for

the first quarter of

fiscal 2025, compared

to $112.5

million, or

64.2% of

in the

first quarter

of fiscal

The increase

in cost

of goods

sold as a

percent of sales

was due to increased

sales of marked down

goods, partially offset by

lower buying

and freight

costs. Cost

of goods

sold includes

merchandise costs

(net of

discounts and

allowances), buying

costs,

costs,

occupancy

costs,

freight

and

shrinkage.

Net

costs

and

in-

bound freight are capitalized as inventory

costs.

Buying and distribution costs include payroll, payroll-related

costs and

operating expenses

for the

buying departments

and distribution

center.

Occupancy costs

include

rent,

real

estate

taxes,

insurance,

common

area

maintenance,

utilities

and

maintenance

for

stores

and

facilities.

Total

gross

margin

dollars

(retail

sales

less

cost

of

goods

sold

exclusive

of

depreciation)

decreased

by

5.8%

to

$59.1

million

for

the

first

quarter

of

fiscal

to

$62.8

million in the first quarter of fiscal 2024.

Gross margin as presented may not be comparable to those of other

entities.

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

payroll taxes and benefits, insurance, supplies, advertising,

and bank and credit card processing fees.

SG&A

expenses were

$55.3 million,

or 32.8%

of retail

sales for

fiscal 2025,

compared to

$56.8

or

32.4%

of

retail

sales

in

the

first

quarter

of

fiscal

SG&A

expense

was

lower

in

the

first

quarter of fiscal

2025 compared to

the first quarter

of fiscal 2024

primarily due to

lower corporate and

field

payroll

expense,

as

well

as

lower

costs

and

store

expenses,

partially

offset

by

increases

in

equipment maintenance.

Depreciation expense was $2.6 million, or 1.5% of retail sales for the first quarter of fiscal 2025, compared to

$2.0 million,

or 1.2% of

for the first

fiscal 2024.

The increase in

depreciation expense

was due to the distribution center

automation implementation at the end

of the second quarter of 2024.

Interest

and

other

income

was

$1.2

or

0.7%

of

retail

sales

for

the

first

quarter

of

fiscal

2025,

to

$5.8

or

3.3%

of

retail

sales

for

the

first

quarter

of

fiscal

The

was

due

to

a

$3.2

million

net

gain

on

the

sale

of

land

held

for

and

the

sale

of

equity

securities recorded in the first quarter

of 2024.

Income tax expense

was $0.9 million or

0.6% of retail sales

for the first quarter

of fiscal 2025, compared

to

income

tax

expense

of

$0.6

or

0.4%

of

retail

sales

for

the

first

quarter

of

fiscal

The

income

tax

rate

for

the

first

quarter

of

fiscal

was

21.9%

to

5.6%

for

the

first

2024. The

increase in

tax expense

was primarily

due to

increases in

foreign and

state income

taxes.

LIQUIDITY, CAPITAL

RESOURCES

AND MARKET

RISK:

The Company

believes that

its cash,

cash equivalents

and short-term

investments, together

with cash

flows

from operations

and its

new asset-backed

revolving line

of credit,

will be

adequate to

fund the

regular operating requirements and expected

capital expenditures for the next 12

months.

Cash

by

activities

for

the

first

three

months

of

fiscal

was

primarily generated

by

earnings

adjusted

for

depreciation

and

changes

in

working

capital.

The

in

cash

of

$1.8

million

for

the

first

three

months

of

fiscal

as

to

the

first

three

months

of

fiscal

was

primarily attributable to

lower net income,

partially offset by

the relative change

in inventory from

year-end

to the first

quarter for both

years and non-operating

gain on the

sale of assets

held for investment

in the first

quarter of fiscal 2024.

At May 3, 2025, the Company had working capital of $43.9 million compared to $34.9 million at February 1,

The increase was primarily attributable to an increase in cash and lower current lease

liability, partially

offset by lower short-term investments and higher

accounts payable.

On March 13, 2025, the Company,

as borrower, and certain other

domestic subsidiaries, as borrowers and

guarantors, entered

into a

(the “ABL

Credit Agreement”)

and related

loan documents,

by

and

among

the

Company,

certain

other

of

the

domestic

subsidiaries,

and

Wells

Fargo

Bank,

National

Association,

as

the

lender

(the

“Lender”),

to

establish

an

asset-based

revolving

credit

facility (the “ABL

Facility”) in an

amount up to

$35.0 million. The proceeds

from the ABL

Facility may

be used to provide funding for ongoing working capital and general corporate

purposes.

The ABL

is committed

through May

2027 and

is secured

primarily by

inventory and

third-party credit

card receivables.

There

were no

borrowings outstanding

and the

availability under

the

facility was

$30.0 million

before giving

effect

to a

$3.0 million

outstanding letter

of credit

that reduced

borrowing availability to

$27.0 million

as of

May 3,

The weighted

average interest rate

credit facility was zero at May 3, 2025 due to no outstanding borrowings.

Expenditures

for

property

and

equipment

totaled

$1.0

million

in

the

first

three

months

of

fiscal

2025,

to

$3.3

million

in

last

year’s

first

three

months.

The

in

expenditures

for

property

and

equipment

was

due

to

lower

capital

investments

in

technology

and

the

center, as well

as no new

store openings in

the first quarter

of fiscal 2025.

For the full

fiscal 2025 year,

the

Company expects

to invest

approximately $7.3

capital expenditures,

including distribution

center

automation projects.

Net

cash

by

investing

activities

totaled

$7.9

million

in

the

first

three

months

of

fiscal

compared to $14.6 million provided in the comparable period of fiscal 2024. The decrease

was primarily due

to

a

in

the

sales

of

short-term

investments

and

other

assets,

partially

offset

by

lower

capital

expenditures.

Net cash used in

financing activities totaled $0.9

million in the first

three months of fiscal

2025 compared to

$5.6

m

illion used in the comparable

period of fiscal

2024. The decrease was

primarily due to

no dividends

paid and reduced stock repurchases.

As

of

May

3,

2025,

the

Company

had

703,419

shares

in

open

authorizations

under

its

share

repurchase program.

The Company does not use

derivative financial instruments.

The

portfolio

was

invested

in

bonds

and

taxable

debt securities held in managed accounts

with underlying ratings of A

or better at May 3, 2025

and February

1,

The

state,

bonds and

asset-backed securities

have

maturities

which

range

from

days

to

2.9

years.

The

U.S.

Treasury/Agencies

notes

and

bonds

have

maturities which range from 3 months to

1.0 year.

Additionally,

at

May

3,

2025,

the

Company

had

plan

assets

of

$9.2

At

1,

2025,

the

Company

had

plan

assets

of

$9.3

These

assets

are

within

Other

assets

in

the

Balance

Sheets.

See

Note

7,

Fair

Value

Measurements.

RECENT ACCOUNTING PRONOUNCEMENTS:

See Note 8, Recent Accounting Pronouncements.

QUANTITATIVE

AND QUALITATIVE

DISCLOSURES ABOUT MARKET RISK

AND QUALITATIVE

DISCLOSURES ABOUT MARKET RISK:

The

Company

is

subject

to

market

rate

risk

from

exposure

to

changes

in

rates

related

to

its

financing, investing and

cash management activities,

but the Company

does not

believe such exposure

is

material.

We carried out an evaluation, with the

participation of our Principal Executive Officer and

Principal Financial

Officer,

of

the

effectiveness

of

our

disclosure

controls

and

procedures

as

of

May

3,

Based

on

this

evaluation, our Principal Executive Officer and Principal

Financial Officer concluded that, as of May

3, 2025,

our disclosure

controls and

procedures, as

defined in

Rule 13a-15(e),

Securities Exchange

Act of

(the

“Exchange

Act”),

were

to

ensure

that

we

are

to

disclose

in

the

reports

that

we

file

or

submit

under

the

Exchange

Act

is

recorded,

processed,

summarized

and

reported

within the time periods

specified in the SEC’s

rules and forms and

that such information is

accumulated and

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

as appropriate to allow timely decisions

regarding required disclosure.

CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING:

No change in the Company’s internal control

over financial reporting (as defined in

Exchange Act Rule 13a-

15(f)) has occurred during the Company’s fiscal quarter ended May 3, 2025 that has

materially affected, or is

reasonably

likely

to

affect,

the

internal

control

over

reporting.

PART

LEGAL PROCEEDINGS:

RISK FACTORS:

In addition to the other information

in this report, you should carefully

consider the factors discussed in

Part I,

“Item

1A.

Risk

Factors”

in

our

Annual

Report

on

Form

10-K

for

our

fiscal

year

ended

1,

These risks

could materially

affect our

business, financial

condition or

future results;

however, they

are not

the only risks we face.

Additional risks and uncertainties not currently known to

us or that we currently deem

to

be

immaterial

may

also

adversely

affect

our

business,

or

results

of

operations.

UNREGISTERED SALES OF EQUITY SECURITIES

AND USE OF PROCEEDS:

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

ended May 3, 2025:

ISSUER PURCHASES OF EQUITY SECURITIES

Total Number of

Maximum Number

Shares Purchased as

(or Approximate Dollar

Total Number

Average

Part of Publicly

Value)

of Shares that may

of Shares

Price Paid

Announced Plans or

Yet be Purchased

Under

Period

Purchased

per Share (1)

Programs (2)

The Plans or Programs (2)

February 2025

135,279

$

3.35

135,279

March 2025

129,603

2.91

129,603

April 2025

29,154

2.37

29,154

Total

294,036

$

3.06

294,036

703,419

(1)

Prices include trading costs.

(2)

As of February

1, 2025, the

Company’s share

repurchase program had

997,455 shares remaining

in

open authorizations.

During

the

first

quarter

ended

May

3,

2025,

the

Company repurchased

and retired

294,036 shares under

this program

for approximately

$899,087 or

an average

market

price of $3.06 per share.

As of May 3, 2025, the Company had 703,419 shares remaining in open

authorizations.

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

DEFAULTS

UPON SENIOR SECURITIES:

PART

MINE SAFETY DISCLOSURES:

No matters requiring disclosure.

OTHER INFORMATION:

During the

three months

ended May

3, 2025,

none of

directors or

officers (as

defined in

Rule 16a-1(f) of the

Securities Exchange Act of 1934,

as amended)

adopted

or

terminated

a “Rule10b5-1

trading arrangement” or

a “

non-Rule

10b5-1

trading arrangement” (as

such terms are

defined in Item

of Regulation S-K).

EXHIBITS:

Exhibit No.

Item

3.1

Registrant’s Amended and Restated Certificate of Incorporation,

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

for the quarter ended May 2, 2020.

3.2

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

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

ended May 2, 2020.

10.1

Credit Agreement, dated as of March 13, 2025, by and among Wells

Fargo Bank, National Association, as Lender, and The Cato

Corporation and certain of its subsidiaries as Borrowers and certain

of its other subsidiaries as Guarantors, incorporated by reference to

Exhibit 10.1 to Form 8-K of the Registrant filed March 19, 2025.

31.1*

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

31.2*

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

32.1*

Section 1350 Certification of Principal Executive Officer.

32.2*

Section 1350 Certification of Principal Financial Officer.

101.INS

Inline XBRL Instance Document

101.SCH

Inline XBRL Taxonomy Extension Schema Document

101.CAL

Inline XBRL Taxonomy Extension Calculation Linkbase

101.DEF

Inline XBRL Taxonomy Extension Definitions Linkbase

101.LAB

Inline XBRL Taxonomy Extension Label

Linkbase Document

101.PRE

Inline XBRL Taxonomy Extension Presentation Linkbase

104.1

Cover

Page

Interactive

Data

File

(Formatted

in

Inline

XBRL

and

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

• Submitted electronically herewith.

PART

SIGNATURES

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

Registrant has duly caused this

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

authorized.

THE CATO

CORPORATION

May 29, 2025

/s/ John P.

D. Cato

Date

John P.

D. Cato

Chairman, President and

Chief Executive Officer

May 29, 2025

/s/ Charles D. Knight

Date

Charles D. Knight

Executive Vice President

Chief Financial Officer