CATO CORP

(4) statements relating

to our

operations or activities

for

our

fiscal

year

ending

January

30,

(“fiscal

2026”)

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 public

health threats and

related responses and

mitigation efforts, as well as the potential impact of supply chain disruptions, extreme weather conditions,

tariffs

and

other

trade

policies,

inflationary

pressures

and

other

conditions

on

our

results

of

operations

and

and

new

store

development

strategy;

and

(5)

relating

to

our

future

risks

or

contingencies.

When

possible,

we

have

attempted

to

identify

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

statements.

Forward-looking

in

this

report

are

based

on

information available

to us

as of

the filing

date of

this report,

but subject

to known

and unknown

risks,

uncertainties and other factors that could cause

actual results to differ materially from those contemplated

by the forward-looking statements.

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

any actual

or perceived

deterioration in

the conditions

that drive

consumer confidence

and spending,

including, but

not

limited

to,

prevailing

social,

economic,

political

and

public

health

threats

and

uncertainties,

war

or

similar

hostilities

and

their

collateral

effects,

levels

of

unemployment,

fuel,

energy

and

food

costs,

inflation,

wage

rates,

tax

rates,

tariff

rates,

rates,

home

values,

consumer

net

worth

and

the

availability

of

credit;

changes

in

laws,

regulations

or

government

affecting

our

including but not

limited to

tariffs, taxes

and customs enforcement;

uncertainties regarding the

impact of

any

governmental

action

regarding,

or

responses

to,

the

foregoing

conditions;

competitive

factors

and

pricing

pressures;

our

ability

to

predict

and

respond

to

rapidly

changing

fashion

trends

and

consumer

demands;

our

ability

to

successfully

open

new

stores

in

attractive

locations

and

the

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 the

Company’s profitability,

or

prospects;

adverse

weather,

public

health

threats,

acts

of

war

or

aggression

or

similar

conditions and

related consequences that

may affect

our sales

or operations; inventory

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 the Company’s

Annual Report on Form 10-K

for

the

fiscal

year

ended

January

31,

(“fiscal

2025”),

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

information contained in this report, whether as a result of new information,

future events, or otherwise.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES:

The

critical

accounting

and

are

more

fully

described

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 January

31, 2026. 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

accounting

inherent

in

the

preparation

of

the

Company’s financial

statements include

the calculation

of potential

asset impairment,

income tax

valuation

allowances,

reserves

relating

to

self-insured

health

insurance,

workers’

compensation,

general

and

auto

insurance

liabilities,

uncertain

tax

positions,

the

allowance

for

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

%

100.0

%

100.0

%

1.0

1.1

1.0

1.1

Total revenues

101.0

101.1

101.0

101.1

Cost of goods sold (exclusive of

depreciation)

67.2

63.8

65.0

64.4

Selling, general and administrative

(exclusive of depreciation)

33.0

32.8

32.4

32.8

1.4

1.4

1.3

1.5

Interest and other income

(1.4)

(0.8)

(1.1)

(0.8)

0.8

3.7

3.3

3.1

0.7

3.9

3.1

3.0

RESULTS OF OPERATIONS

Management’s

Discussion

and

Analysis

of

Condition

and

Results

of

Operations

(“MD&A”)

is

intended

to

provide

to

assist

readers

in

better

understanding

and

evaluating

our

condition and results of

operations. We recommend reading

this MD&A in conjunction

with our Condensed

Consolidated Financial

Statements and

the Notes

to those

statements included in

the “Financial

Statements”

section of this Quarterly Report on

Form 10-Q, as well as our Annual Report

on Form 10-K for fiscal 2025.

Recent Developments

Pricing Pressures

Our

second

quarter

results

were

negatively

impacted

by

the

continued

pressure

on

our

customers’

discretionary income.

Higher fuel prices,

persistent inflation

and ongoing

elevated interest rates

continue to

exert downward

pressure on

our customers’

discretionary income,

which we

believe will

continue to

make

our customers

more cautious

with their

discretionary spending

into the

foreseeable future.

In addition,

our

ability to

pass through

cost increases

caused by

rising fuel

prices, potential

increased tariffs

or other

factors

will be limited due in part

to the pressure on our

customers’ discretionary spending.

Tariff

Pressures

On

July

24,

2026,

the

Office

of

the

U.S.

Trade

Representative (“USTR”)

imposed

tariffs

ranging

from

10%

to

12.5%

under

Section

of

the

Trade

Act

of

on

various

countries,

countries

where a

significant portion

of our

products are

manufactured, following investigation

of these

countries’

efforts

to

prohibit

the

import

of

products

made

with

forced

labor.

The

USTR

is

conducting additional

investigations

excess

capacity,

which

could

also

result

in

increased

tariffs.

Although

it

appears

that

the

production

of

garments,

shoes

and

handbags

are

not

being

targeted

by

these

additional investigations, that may change in the future.

Increased Customs Enforcement

On June 3, 2026, President Trump issued an executive order “Strengthening Customs Enforcement.”

The

executive order instructs

the Department of

Homeland Security and

U.S. Customs and

Border Protection

to

overhaul import

regulations, target

foreign

importers

of

record

and

raise

bonding

minimums, among

other

items.

As

a

result

of

this

executive

order,

containers

that

we

import

directly

and

containers

imported by

our suppliers

are being

subjected to

additional U.S.

Customs review

and inspections,

which

in some

cases are

resulting in

delays in

our receipt

of these

containers. These delays,

depending on

their

timing and duration,

could cause us

to take additional

markdowns due to

the seasonality of

our products.

These additional inspections and potential new regulations may

also cause additional compliance costs.

Comparison of the Three and Six

Months ended August 1, 2026

with August 2, 2025

Total retail sales

for the second

quarter were

$163.9 million

compared to last

year’s second

quarter sales

of

$174.7 million, a 6% decrease. The Company’s sales decreased in the second quarter of fiscal 2026 primarily

due to a

3.7% decrease in

same-store sales, as

well as stores

that were closed

in the past

12 months. For

the

total retail

sales were

$333.3 million

last year’s

six month sales of $343.1 million,

a 2.9%

decrease. The decrease in

sales in the first six months

of fiscal 2026

was due

primarily to

flat same-store

sales and

the impact

of store

closures.

Same-store sales

include stores

that have been open

more than 15 months.

Stores that have been

relocated or expanded are

also included in

the same-store sales

calculation after they

have been open

more than 15

months.

The method of

calculating

sales

varies across

the

retail industry.

As

a

result,

our

sales

calculation

may

not

be

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

total

sales

for

the

six

months

ended

August

1,

and

are

in

the

sales

calculation.

Total

revenues,

comprised

of

retail

sales

and

other

revenue

(principally

finance

charges

and

late

fees

on

customer accounts receivable and layaway fees), were $165.5 million and $336.6 million for the three

and six

2026, compared

to $176.5

million and

$346.8 million

for the three

and six

months

ended

August

2,

2025,

The

Company

operated

1,057

stores

at

August

1,

to

1,101

stores

at

the

end

of

last

fiscal

second

quarter.

For

the

first

six

months

of

fiscal

2026,

the

Company opened two new stores and closed 14 stores. The Company currently expects to open up to 10 new

stores and close approximately 50 stores

in fiscal 2026.

Other revenue, a component of total revenues, was $1.6 million and $3.3 million for the

three and six months

ended

August

1,

2026,

to

$1.9

million

and

$3.7

million

for

the

prior

comparable three

and six

month periods.

The decrease

in Other

revenue was

due to

lower layaway

income

and e-commerce shipping revenue

for the three and

six months ended August

1, 2026 compared to

the three

and six

August 2,

Included in

is credit

revenue of

$0.7 million,

which

represented

0.4%

of

total

revenues

in

the

second

quarter

of

fiscal

2026,

relatively

flat

both

in

dollars

and

percentage compared to fiscal 2025.

Credit revenue is comprised of interest earned on the Company’s private

label credit card

portfolio and related

fee income.

Related expenses principally

include payroll, postage

and

other administrative expenses

and totaled $0.4

million in the

second quarter of

fiscal 2026, compared

to last

year’s second quarter expense of $0.4 million.

Cost of

was $110.2

67.2% of

retail sales

and $216.5

65.0% of retail

sales

for the

three and

respectively, compared

to $111.5

63.8% of

retail

sales and

$220.8

or 64.4%

of retail

sales

for the

comparable three

and six

month

periods of

fiscal 2025.

The overall increase

in cost of

goods sold as

a percent of

retail sales for

the second quarter

and

first

six

months

of

fiscal

versus

the

three

and

six

month

periods

of

fiscal

resulted

primarily from increased

sales of marked

down goods and

deleveraging of our

occupancy costs. In

addition,

for the

cost of

benefited from

an IEEPA

tariff refund,

which

reduced cost of

goods sold by $5.7

million, or 1.7%

of retail sales. Cost

of goods sold

includes merchandise

costs

(net

of

discounts

and

allowances),

buying

costs,

costs,

occupancy

costs,

freight

and

inventory shrinkage.

Net merchandise costs and

in-bound freight are capitalized

as inventory costs.

Buying

and

costs

include

payroll,

payroll-related

costs

and

for

the

buying

departments and distribution center.

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

maintenance, utilities and

maintenance for stores and

distribution facilities. Total gross

margin dollars (retail

sales less

cost of

exclusive of

depreciation) decreased

by 15.0%

to $53.7

million for

the second

quarter

of

fiscal

and

by

4.5%

to

$116.8

million

for

the

first

six

months

of

fiscal

2026,

to

$63.2

million

and

$122.3

million

for

the

prior

three

and

six

months

of

fiscal

2025,

Gross margin as presented may not be

comparable to those of other entities.

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

payroll taxes and

benefits, insurance, supplies,

advertising, and bank

and credit card

processing fees. SG&A

were

$54.0

or

33.0%

of

retail

sales

and

$108.0

or

32.4%

of

retail

sales

for

the

second quarter and first six months of fiscal 2026, respectively, compared to $57.4 million, or

32.8% of retail

sales, and $112.7 million, or 32.8% of

retail sales for the prior year’s

comparable three and six month periods,

The decrease in SG&A expenses for the

second quarter and first six months of fiscal

2026 was

primarily due to lower payroll costs and

equipment costs partially offset by

litigation and professional fees.

Depreciation expense was $2.2 million, or 1.4% of retail sales and $4.5 million, or 1.3% of

retail sales for the

second quarter

and first

of fiscal

2026, respectively,

$2.5 million,

or 1.4%

of retail

sales and $5.1 million,

or 1.5% of retail

sales for the comparable three

and six month periods

of fiscal 2025,

Interest and other income was $2.3 million, or 1.4% of retail sales and $3.5 million, or 1.1% of retail sales for

the three and six months ended August

1, 2026, respectively, compared to $1.4 million,

or 0.8% of retail sales

and

$2.6

or

0.8%

of

retail

sales

for

the

three

and

six

month

periods

of

fiscal

2025,

respectively. The increase for

the three and

six months ended

compared to the

three and six

months ended August 2, 2025 was primarily

due to interest income received as

part of the Company’s IEEPA

tariff refund and interest on

an IRS refund.

Income

tax

expense

was

$0.1

million

and

an

expense

of

$0.7

million

for

the

second

quarter

and

first

six

months

of

fiscal

2026,

to

an

income

tax

benefit

of

$0.3

million

and

income

tax

expense of $0.6 million

for the comparable three

months and six

months of fiscal

The increase in tax

expense is due to the non-recurring prior year favorable adjustment to the federal net operating loss

carryback

claim as a result of the Coronavirus Aid, Relief and Economic Security Act (CARES Act), partially

offset by

lower foreign and state income taxes.

During the

second quarter of

fiscal 2026,

the Company

received a $5.6

million payment for

the outstanding

balance of its income tax

refund receivable due from the IRS.

LIQUIDITY, CAPITAL

RESOURCES

AND MARKET

RISK:

believes that

its cash,

cash equivalents

and short-term

investments, together

with cash

flows

from operations

and availability

under its

asset-backed revolving

line of

credit, will

be adequate to

fund the

Company’s regular operating requirements and expected capital

expenditures for the next 12 months

from the

issuance of this quarterly report

on Form 10-Q.

Cash

provided

by

activities

during

the

first

six

months

of

fiscal

was

$22.5

million

as

compared to $15.6

million provided in

the first six

months of

fiscal 2025. The

increase in

cash provided

by

operating activities of $6.9

million for the first

six months of fiscal

2026 as compared to

the first six months

of fiscal 2025 was primarily attributable

to a decrease in accounts receivable

in 2026 and the relative

change

of accounts payable from year-end to the second quarter for both years, partially offset by the relative change

in inventories from year-end to the second quarter for both years.

The decrease in accounts receivable is due

in large part to receiving the

remaining IRS refund pertaining to the 2020

tax year.

On August 1, 2026, the Company had working capital of $55.0 million compared

to $37.4 million at January

31,

The

in

working

capital

was

attributable

to

an

in

cash

and

cash

equivalents

and

decreases

in

accrued

and

current

lease

liability,

partially

offset

by

a

decrease

in

inventories and an increase in accounts

payables.

The ABL Credit Agreement (“ABL Facility”) of up to

$35.0 million is committed through March

2028 and is

secured primarily

by inventory

and third-party

credit card

receivables. The

proceeds from

the ABL

Facility

may be used

to provide funding

for ongoing working

capital and general

corporate purposes. 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

and January 31, 2026.

The weighted average interest rate under the credit facility was zero at August 1, 2026

and January 31, 2026 due

to no outstanding borrowings.

Expenditures for property and equipment totaled $2.4 million in the first six months of fiscal 2026, compared

to

$2.4

million

in

last

fiscal

first

six

months.

The

Company

expects

to

invest

approximately

$7.4

million for capital expenditures for

the full fiscal 2026 year.

Net cash used in investing activities was $3.9 million for the first six

months of fiscal 2026 compared to $0.9

million net cash used in the

comparable period of 2025.

The increase in net cash used

by investing activities

in 2026 was primarily

due to an increase

in the purchase of

short-term investments, partially

offset by lower

sales of short-term investments and proceeds

from life insurance policies.

Net cash

used in

financing activities

totaled $0.3

million in

the first

of fiscal

2026 compared

to

$0.9

million

used

in

the

period

of

fiscal

The

decrease

in

net

cash

used

in

financing

activities in fiscal 2026 was primarily

due to lower stock repurchases.

The

Company

purchased

39,147

shares

in

the

second

quarter

of

fiscal

As

of

August

1,

2026,

the

Company had 533,770 shares remaining

in open authorizations under its share

repurchase program.

The Company does not use

derivative financial instruments.

The

Company’s investment

portfolio

was

primarily invested

in corporate

bonds

held in

managed accounts

with underlying

ratings of

A or

better at

The corporate

bonds have

contractual maturities

which range from two days to 2.7 years.

Additionally, at

deferred compensation

plan assets

of $10.0

At

January

31,

2026,

the

Company

had

plan

assets

of

$9.7

These

assets

are

within

Other

assets

in

the

Balance

Sheets.

See

Note

7,

Fair

Value

Measurements, in the “Financial Statements” section of

this Quarterly Report on Form 10-Q.

RECENT ACCOUNTING PRONOUNCEMENTS:

See Note 8, Recent Accounting Pronouncements, in the “Financial Statements”

section of this Quarterly

Report on Form 10-Q.

QUANTITATIVE

AND QUALITATIVE

DISCLOSURES ABOUT MARKET RISK

VE 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

Based on

this

evaluation, our

Principal Executive

Officer and

Principal Financial

Officer concluded

that, as

of

2026, our

disclosure controls

and

procedures,

as defined

in

Rule

13a-15(e), under

the

Exchange

Act of 1934 (the “Exchange

Act”), were effective to ensure that

information we are required to disclose

in the

reports

that

we

file

or

submit

under

the

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 August 1, 2026 that has materially affected, or

is reasonably likely to materially affect, the Company’s

internal control over financial reporting.

LEGAL PROCEEDINGS:

Not Applicable.

RISK FACTORS:

In addition to the other information

in this report, you should carefully

consider the factors discussed in

Part I,

“Item

1A.

Risk

Factors”

in

our

Annual

Report

on

Form

10-K

for

our

fiscal

year

ended

January

31,

These risks

could materially

affect our

business, financial

condition or

future results;

however, they

are not

the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem

to

be

immaterial

may

also

materially

adversely

affect

our

or

results

of

operations.

UNREGISTERED SALES OF EQUITY SECURITIES

AND USE OF PROCEEDS:

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

ended August 1, 2026:

ISSUER PURCHASES OF EQUITY SECURITIES

Total Number of

Maximum Number

Shares Purchased as

(or Approximate Dollar

Total Number

Average

Part of Publicly

Value)

of Shares that may

Fiscal

of Shares

Price Paid

Announced Plans or

Yet be Purchased

Under

Period

Purchased

per Share (1)

Programs (2)

The Plans or Programs (2)

May 2026

39,147

$

2.88

39,147

June 2026

July 2026

Total

39,147

$

2.86

39,147

533,770

(1)

Prices include trading costs.

(2)

As

of

May 2,

share repurchase

program had

572,917

shares remaining

in

open authorizations. During the

second quarter ended

August 1, 2026,

the Company repurchased

and

retired 39,147

shares under

this

program for

approximately $112,692

or

an average

market

price

of

$2.86

per

share. As

of

533,770

shares remaining

in

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

DEFAULTS

UPON SENIOR SECURITIES:

Not Applicable.

MINE SAFETY DISCLOSURES:

No matters requiring disclosure.

OTHER INFORMATION:

During the three months ended August 1, 2026, none of the Company’s directors or officers (as defined in

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

adopted

or

terminated

a “Rule 10b5-1

trading arrangement” or a “

non-Rule

10b5-1

trading arrangement” (as such terms are

defined in Item 408

of Regulation S-K).

EXHIBITS:

Exhibit No.

Item

3.1

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

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

2, 2020.

3.2

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

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

31.1*

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

31.2*

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

32.1*

Section 1350 Certification of Principal Executive Officer.

32.2*

Section 1350 Certification of Principal Financial Officer.

101.INS

Inline XBRL Instance Document

101.SCH

Inline XBRL Taxonomy Extension Schema Document

101.CAL

Inline XBRL Taxonomy Extension Calculation Linkbase

101.DEF

Inline XBRL Taxonomy Extension Definitions Linkbase

101.LAB

Inline XBRL Taxonomy Extension Label

Linkbase Document

101.PRE

Inline XBRL Taxonomy Extension Presentation Linkbase

104.1

Cover

Page

Interactive

Data

File (Formatted

in

Inline

XBRL

and

contained in

the Interactive Data Files submitted as Exhibits

101.*)

• Submitted electronically herewith.

SIGNATURES

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

Registrant has duly caused this

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

authorized.

THE CATO

CORPORATION

August 27, 2026

/s/ John P.

D. Cato

Date

John P.

D. Cato

Chairman, President and

Chief Executive Officer

August 27, 2026

/s/ Charles D. Knight

Date

Charles D. Knight

Executive Vice President

Chief Financial Officer