[10-Q] CATO CORP Quarterly Earnings Report

Rhea-AI Filing Summary

The Cato Corporation reported improved profitability in the quarter ended August 2, 2025, with total revenues of $176.5 million and net income of $6.8 million compared with $0.1 million in the prior-year quarter. Retail sales benefit from a lower cost of goods sold as a percent of retail sales (63.8% versus 65.4% year-ago) and SG&A that declined as a percent of retail sales (32.8% versus 34.9% year-ago). Cash provided by operations was $15.6 million for the six months, working capital was $50.5 million, and total assets were $436.9 million. The Company operates 1,101 stores as of August 2, 2025 and closed 16 stores in the first six months, with an expected ~50 store closures for fiscal 2025. The Company established a $35.0 million asset-based revolving credit facility with $27.0 million availability after a $3.0 million letter of credit.

Positive

• Net income increased to $6.8 million for the quarter versus $0.1 million a year earlier.
• Basic and diluted EPS were $0.35 for the quarter.
• Cost of goods sold as a percent of retail sales improved to 63.8% from 65.4% year-over-year.
• Operating cash flow of $15.6 million for the six months improved versus $8.8 million prior year.
• Committed ABL facility of $35.0 million provides additional liquidity (availability $27.0 million after a $3.0 million letter of credit).

Negative

• Store count declined to 1,101 stores from 1,166 at prior-year end; Company expects ~50 store closures in fiscal 2025.
• Total assets decreased from $452.4 million at February 1, 2025 to $436.9 million at August 2, 2025.
• Lease liabilities remain substantial (current lease liability $53.9 million; noncurrent lease liability $76.0 million), reflecting material ongoing obligations.
• Interest and other income fell materially year-over-year for the six months (down to $2.6 million from $7.6 million) driven by a prior-year gain on sale of land.

Insights

Financial Analyst

TL;DR: Profitability recovered materially year-over-year with stronger gross margin, positive operating cash flow and modest leverage flexibility.

The quarter shows a meaningful rebound in net income to $6.8 million from $0.1 million a year earlier, producing basic and diluted EPS of $0.35. Gross margin dollars increased and cost of goods sold as a percent of retail sales improved to 63.8% in the quarter. Operating cash flow of $15.6 million for the six months supports liquidity alongside $225.8 million in current assets and a $35.0 million committed ABL facility with $27.0 million availability after a $3.0 million letter of credit. These items indicate improved near-term earnings conversion to cash and available working capital to support operations.

Risk Analyst

TL;DR: Improvements are offset by store reductions and concentration of secured credit availability; monitor execution risk.

While margins and cash flow improved, the Company reduced its store base from 1,166 to 1,101 year-over-year and anticipates approximately 50 store closures in fiscal 2025 which may affect future revenues. The ABL facility is secured primarily by inventory and credit card receivables and had $3.0 million in letters of credit reducing availability to $27.0 million. Lease liabilities remain significant with right-of-use assets of $133.2 million and lease liabilities total over $129.8 million (current plus noncurrent). These factors represent execution and liquidity composition risks to monitor.

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UNITED STATES 

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM

10-Q

☑

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF

1934

For the quarterly period ended

August 2, 2025

OR

☐

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF

1934

For the transition period from ________________to__________________

Commission file number 

1-31340

THE CATO CORPORATION

(Exact name of registrant as specified in its charter)

Delaware

56-0484485

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

8100 Denmark Road

,

Charlotte

,

North Carolina

28273-5975

(Address of principal executive offices)

(Zip Code)

(704)

554-8510

(Registrant's telephone number, including area code)

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Class A - Common Stock, par value $.033 per share

CATO

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities

Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports),

and (2) has been subject to such filing requirements for the past 90 days.

Yes

X

No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted

pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the

registrant was required to submit such files).

Yes

X

No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting

company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting

company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☐

Accelerated filer

☑

 Non-accelerated filer 

☐

 Smaller reporting company 

☐

 Emerging growth company 

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for

complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b -2 of the Exchange Act). Yes

☐

No

☒

As of August 2, 2025, there were

17,962,676

 shares of Class A common stock and

1,763,652

 shares of Class B common stock outstanding.

1

THE CATO CORPORATION

FORM 10-Q

Quarter Ended August 2, 2025

Table of Contents

Page No.

PART I – FINANCIAL INFORMATION (UNAUDITED)

Item 1.

Financial Statements (Unaudited):

Condensed Consolidated Statements of Income and Comprehensive Income 

2

For the Three Months and Six Months Ended August 2, 2025 and August 3, 2024

Condensed Consolidated Balance Sheets

3

At August 2, 2025 and February 1, 2025

Condensed Consolidated Statements of Cash Flows

4

For the Six Months Ended August 2, 2025 and August 3, 2024

Condensed Consolidated Statements of Stockholders’ Equity

5 – 6

For the Three Months and Six Months Ended August 2, 2025 and August 3, 2024

Notes to Condensed Consolidated Financial Statements

7 – 21

For the Three Months and Six Months Ended August 2, 2025 and August 3, 2024

Item 2.

Management’s Discussion and Analysis of Financial Condition and

Results of Operations

22 – 29

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

30

Item 4.

Controls and Procedures

30

PART II – OTHER INFORMATION

Item 1.

Legal Proceedings

31

Item 1A.

Risk Factors

31

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

31

Item 3.

Defaults Upon Senior Securities

31

Item 4.

Mine Safety Disclosures

32

Item 5.

Other Information

32

Item 6.

Exhibits

32

Signatures

33

2

PART I FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

THE CATO CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND

COMPREHENSIVE INCOME

(UNAUDITED)

Three Months Ended

Six Months Ended

August 2, 2025

August 3, 2024

August 2, 2025

August 3, 2024

(Dollars in thousands, except per share data)

REVENUES

 Retail sales

$

174,653

$

166,934

$

343,072

$

342,206

 Other revenue (principally finance charges, late fees and

 layaway charges)

1,856

1,694

3,679

3,521

 Total revenues

176,509

168,628

346,751

345,727

COSTS AND EXPENSES, NET

 Cost of goods sold (exclusive of depreciation shown below)

111,467

109,122

220,784

221,627

 Selling, general and administrative (exclusive of depreciation

 shown below)

57,371

58,181

112,696

114,933

 Depreciation

2,525

2,329

5,089

4,369

 Interest and other income

(1,393)

(1,742)

(2,594)

(7,563)

 Costs and expenses, net

169,970

167,890

335,975

333,366

Income before income taxes

6,539

738

10,776

12,361

Income tax (benefit) expense

(293)

643

635

1,292

Net income

$

6,832

$

95

$

10,141

$

11,069

Basic earnings per share

$

0.35

$

0.01

$

0.51

$

0.54

Diluted earnings per share

$

0.35

$

0.01

$

0.51

$

0.54

Comprehensive income:

Net income

$

6,832

$

95

$

10,141

$

11,069

Net unrealized gain (loss) on available-for-sale securities

 for each of the three and six months ended

 August 2, 2025 and August 3, 2024, respectively

68

676

106

(72)

Comprehensive income

$

6,900

$

771

$

10,247

$

10,997

See notes to condensed consolidated financial statements (unaudited).

3

THE CATO CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

August 2, 2025

February 1, 2025

ASSETS

(Dollars in thousands)

Current Assets:

Cash and cash equivalents 

$

34,225

$

20,279

Short-term investments 

56,550

57,423

Restricted cash

2,675

2,799

Accounts receivable, net of allowance for customer credit losses of

 $

641

 and $

581

 at August 2, 2025 and February 1, 2025, respectively

26,152

24,540

Merchandise inventories 

97,273

110,739

Prepaid expenses and other current assets

8,941

7,406

 Total Current Assets 

225,816

223,186

Property and equipment – net 

57,641

60,326

Other assets 

20,201

19,979

Right-of-Use assets – net 

133,228

148,870

 Total Assets 

$

436,886

$

452,361

LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:

Accounts payable 

$

85,448

$

88,641

Accrued expenses 

35,353

41,717

Accrued employee benefits and bonus

326

326

Accrued income taxes 

343

-

Current lease liability

53,877

57,555

 Total Current Liabilities 

175,347

188,239

Other noncurrent liabilities

13,340

13,485

Lease liability

76,018

88,341

Stockholders' Equity:

Preferred stock, $

100

 par value per share,

100,000

 shares

 authorized,

none

 issued

-

-

Class A common stock, $

0.033

 par value per share,

50,000,000

 shares authorized;

17,962,676

 shares and

18,313,929

 shares

 issued at August 2, 2025 and February 1, 2025, respectively

607

619

Convertible Class B common stock, $

0.033

 par value per share,

15,000,000

 shares authorized; 

1,763,652

 shares 

 issued at August 2, 2025 and February 1, 2025

59

59

Additional paid-in capital 

130,180

129,530

Retained earnings 

41,076

31,935

Accumulated other comprehensive income

259

153

 Total Stockholders' Equity 

172,181

162,296

 Total Liabilities and Stockholders' Equity 

$

436,886

$

452,361

See notes to condensed consolidated financial statements (unaudited).

4

THE CATO CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

Six Months Ended

August 2, 2025

August 3, 2024

(Dollars in thousands)

Operating Activities:

Net income

$

10,141

$

11,069

Adjustments to reconcile net income to net cash provided

 by operating activities:

 Depreciation

5,089

4,369

 Provision for customer credit losses

442

338

 Purchase premium and premium amortization of investments

(464)

(577)

 (Gain) on sale of assets held for investment

(34)

(4,223)

 Share-based compensation

587

840

 (Gain) loss on disposal of property and equipment

(37)

96

 Changes in operating assets and liabilities which provided

 (used) cash:

 Accounts receivable

(2,054)

1,041

 Merchandise inventories

13,466

2,631

 Prepaid and other assets

(1,756)

(1,891)

 Operating lease right-of-use assets and liabilities

(357)

(775)

 Accrued income taxes

-

646

 Accounts payable, accrued expenses and other liabilities

(9,383)

(4,728)

Net cash provided by operating activities

15,640

8,836

Investing Activities:

Expenditures for property and equipment 

(2,362)

(4,799)

Purchase of short-term investments

(12,906)

(31,396)

Sales of short-term investments

14,349

37,703

Sales of other assets

34

5,165

Net cash (used in) provided by investing activities

(885)

6,673

Financing Activities:

Dividends paid

-

(7,050)

Repurchase of common stock

(995)

(2,237)

Proceeds from employee stock purchase plan

62

191

Net cash used in financing activities

(933)

(9,096)

Net increase in cash, cash equivalents, and restricted cash

13,822

6,413

Cash, cash equivalents, and restricted cash at beginning of period

23,078

27,913

Cash, cash equivalents, and restricted cash at end of period 

$

36,900

$

34,326

Non-cash activity:

Accrued other assets and property and equipment expenditures

$

334

$

721

See notes to condensed consolidated financial statements (unaudited).

5

THE CATO CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(UNAUDITED)

Accumulated

Additional

Other

Total

Common

Paid-in

Retained

Comprehensive

Stockholders'

Stock

Capital

Earnings

Income

Equity

(Dollars in thousands, except per share data)

Balance — February 1, 2025

$

678

$

129,530

$

31,935

$

153

$

162,296

Comprehensive income:

 Net income

-

-

3,309

-

3,309

 Unrealized net gain on available-for-sale securities, net of

 deferred income tax benefit of $

0

-

-

-

38

38

Class A common stock sold through employee stock purchase plan

-

72

-

-

72

Other

-

-

(73)

-

(73)

Share-based compensation issuances and exercises

(2)

-

-

-

(2)

Share-based compensation expense

-

184

-

-

184

Repurchase and retirement of treasury shares

(10)

-

(897)

-

(907)

Balance — May 3, 2025

$

666

$

129,786

$

34,274

$

191

$

164,917

Comprehensive income:

 Net income 

-

-

6,832

-

6,832

 Unrealized net gain on available-for-sale securities, net of

 deferred income tax benefit of $

0

-

-

-

68

68

Other

-

-

30

-

30

Share-based compensation expense

-

394

-

-

394

Repurchase and retirement of treasury shares

-

-

(60)

-

(60)

Balance — August 2, 2025

$

666

$

130,180

$

41,076

$

259

$

172,181

See notes to condensed consolidated financial statements (unaudited).

6

THE CATO CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(UNAUDITED)

Accumulated

Additional

Other

Total

Common

Paid-in

Retained

Comprehensive

Stockholders'

Stock

Capital

Earnings

Income

Equity

(Dollars in thousands, except per share data)

Balance — February 3, 2024

$

694

$

126,953

$

64,279

$

395

$

192,321

Comprehensive income:

 Net income

-

-

10,974

-

10,974

 Unrealized net loss on available-for-sale securities, net of

 deferred income tax benefit of $

0

-

-

-

(748)

(748)

Dividends paid ($

0.17

 per share)

-

-

(3,523)

-

(3,523)

Class A common stock sold through employee stock purchase plan

1

189

-

-

190

Share-based compensation issuances and exercises 

13

-

5

-

18

Share-based compensation expense

-

(84)

-

-

(84)

Repurchase and retirement of treasury shares

(14)

-

(2,223)

-

(2,237)

Balance — May 4, 2024

$

694

$

127,058

$

69,512

$

(353)

$

196,911

Comprehensive income:

 Net income

-

-

95

-

95

 Unrealized net gain on available-for-sale securities, net of 

 deferred income tax benefit of $

0

-

-

-

676

676

Dividends paid ($

0.17

 per share)

-

-

(3,527)

-

(3,527)

Class A common stock sold through employee stock purchase plan

-

35

-

-

35

Share-based compensation expense

-

858

14

-

872

Balance — August 3, 2024

$

694

$

127,951

$

66,094

$

323

$

195,062

See notes to condensed consolidated financial statements (unaudited).

THE CATO CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

FOR THE THREE MONTHS AND SIX MONTHS ENDED AUGUST 2, 2025 AND AUGUST 3,

2024

7

NOTE 1 - GENERAL

:

The condensed consolidated financial statements as of August 2, 2025 and for the three and six months

ended August 2, 2025 and August 3, 2024 have been prepared from the accounting records of The Cato

Corporation and its wholly-owned subsidiaries (the “Company”), and all amounts shown are unaudited.

In the opinion of management, all adjustments considered necessary for a fair statement of the financial

statements have been included. All such adjustments are of a normal, recurring nature unless otherwise

noted. The results of the interim periods may not be indicative of the results expected for the entire year.

The interim financial statements should be read in conjunction with the consolidated financial statements

and notes thereto, included in the Company’s Annual Report on Form 10-K for the fiscal year ended

February 1, 2025. Amounts as of February 1, 2025 have been derived from the audited annual financial

statements, but do not include all disclosures required by accounting principles generally accepted in the

United States of America.

On February 16, 2024, the Company closed on the sale of land held for investment. The sale resulted in a

net gain of $

3.2

 million and is included in Interest and other income in the accompanying Condensed

Consolidated Statements of Income and Comprehensive Income in the first quarter of fiscal 2024.

THE CATO CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

FOR THE THREE MONTHS AND SIX MONTHS ENDED AUGUST 2, 2025 AND AUGUST 3,

2024

8

NOTE 2 - EARNINGS PER SHARE:

Accounting Standard Codification (“ASC”) 260 –

Earnings Per Share

 requires dual presentation of basic and

diluted Earnings Per Share (“EPS”) on the face of all income statements for all entities with complex capital

structures. The Company has presented one basic EPS and one diluted EPS amount for all common shares in

the accompanying Condensed Consolidated Statements of Income and Comprehensive Income. While the

Company’s certificate of incorporation provides the right for the Board of Directors to declare dividends on

Class A shares without declaration of commensurate dividends on Class B shares, the Company has

historically paid the same dividends to both Class A and Class B shareholders and the Board of Directors has

resolved to continue this practice. Accordingly, the Company’s allocation of income for purposes of the EPS

computation is the same for Class A and Class B shares and the EPS amounts reported herein are applicable

to both Class A and Class B shares.

Basic EPS is computed as net income less earnings allocated to non-vested equity awards divided by the

weighted average number of common shares outstanding for the period. Diluted EPS reflects the potential

dilution that could occur from common shares issuable through stock options and the Employee Stock

Purchase Plan, of which there were none for the periods presented below.

Three Months Ended

Six Months Ended

August 2, 2025

August 3, 2024

August 2, 2025

August 3, 2024

(Dollars in thousands, except per share data)

Numerator

Net earnings

$

6,832

$

95

$

10,141

$

11,069

Less: Earnings allocated to non-vested equity awards

(319)

9

(531)

(583)

Net earnings available to common stockholders

$

6,513

$

104

$

9,610

$

10,486

Denominator

Basic weighted average common shares outstanding

18,809,364

19,297,484

18,747,100

19,327,137

Diluted weighted average common shares outstanding

18,809,364

19,297,484

18,747,100

19,327,137

Net income per common share

Basic earnings per share

$

0.35

$

0.01

$

0.51

$

0.54

Diluted earnings per share

$

0.35

$

0.01

$

0.51

$

0.54

THE CATO CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

FOR THE THREE MONTHS AND SIX MONTHS ENDED AUGUST 2, 2025 AND AUGUST 3,

2024

9

NOTE 3 – ACCUMULATED OTHER COMPREHENSIVE INCOME:

The following table sets forth information regarding the changes in Accumulated other comprehensive

income (in thousands) for the three months ended August 2, 2025:

Changes in Accumulated Other 

Comprehensive Income (a)

Unrealized Gains

and (Losses) on

Available-for-Sale

Securities

Beginning Balance at May 3, 2025

$

191

 Other comprehensive income before 

 reclassification

68

 Amounts reclassified from accumulated

 other comprehensive income to net income

-

Net current-period other comprehensive income

68

Ending Balance at August 2, 2025

$

259

(a) All amounts are net-of-tax.

The following table sets forth information regarding the changes in Accumulated other comprehensive

income (in thousands) for the six months ended August 2, 2025:

Changes in Accumulated Other 

Comprehensive Income (a)

Unrealized Gains

and (Losses) on

Available-for-Sale

Securities

Beginning Balance at February 1, 2025

$

153

 Other comprehensive income before 

 reclassification

140

 Amounts reclassified from accumulated

 other comprehensive income to net income (b)

(34)

Net current-period other comprehensive income

106

Ending Balance at August 2, 2025

$

259

(a) All amounts are net-of-tax. Amounts in parentheses indicate a debit/reduction to accumulated other comprehensive income.

(b) Includes $

34

 impact of Accumulated other comprehensive income reclassifications into Interest and other 

income for net realized gains on available-for-sale securities. The tax impact of this reclassification was

$0

.

THE CATO CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

FOR THE THREE MONTHS AND SIX MONTHS ENDED AUGUST 2, 2025 AND AUGUST 3,

2024

10

NOTE 3 – ACCUMULATED OTHER COMPREHENSIVE INCOME (CONTINUED):

The following table sets forth information regarding the changes in Accumulated other comprehensive

income (in thousands) for the three months ended August 3, 2024:

Changes in Accumulated Other 

Comprehensive Income (a)

Unrealized Gains

and (Losses) on

Available-for-Sale

Securities

Beginning Balance at May 4, 2024

$

(353)

 Other comprehensive income before 

 reclassification

776

 Amounts reclassified from accumulated

 other comprehensive income (b)

100

Net current-period other comprehensive income 

676

Ending Balance at August 3, 2024

$

323

(a) All amounts are net-of-tax. Amounts in parentheses indicate a debit/reduction to accumulated other comprehensive income.

(b) Includes $

130

 impact of Accumulated other comprehensive income reclassifications into Interest and other 

income for net realized gains on available-for-sale securities. The tax impact of this reclassification was $

30

.

The following table sets forth information regarding the changes in Accumulated other comprehensive

income (in thousands) for the six months ended August 3, 2024:

Changes in Accumulated Other 

Comprehensive Income (a)

Unrealized Gains

and (Losses) on

Available-for-Sale

Securities

Beginning Balance at February 3, 2024

$

395

 Other comprehensive income before 

 reclassification

714

 Amounts reclassified from accumulated

 other comprehensive income (b)

786

Net current-period other comprehensive loss

(72)

Ending Balance at August 3, 2024

$

323

(a) All amounts are net-of-tax. Amounts in parentheses indicate a debit/reduction to accumulated other comprehensive income.

(b) Includes

$1,022

 impact of Accumulated other comprehensive income reclassifications into Interest and other 

income for net realized gains on available-for-sale securities. The tax impact of this reclassification was $

236

.

THE CATO CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

FOR THE THREE MONTHS AND SIX MONTHS ENDED AUGUST 2, 2025 AND AUGUST 3,

2024

11

NOTE 4 – FINANCING ARRANGEMENTS:

On March 13, 2025, the Company, as borrower, and certain other domestic subsidiaries, as borrowers and

guarantors, entered into a Credit Agreement (the “ABL Credit Agreement”) and related loan documents, by

and among the Company, certain other of the Company’s 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 Credit Agreement 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 August 2, 2025. The weighted average interest rate under the credit facility

was

zero

 at August 2, 2025 due to

no

 outstanding borrowings.

NOTE 5 – REPORTABLE SEGMENT INFORMATION:

The Company has determined that it has

four

 operating segments, as defined under ASC 280 –

Segment

Reporting

, including Cato, It’s Fashion, Versona and Credit. As outlined in ASC 280-10, the Company has

two

 reportable segments: Retail and Credit. The Company has aggregated its

three

 retail operating segments,

including e-commerce, based on the aggregation criteria outlined in ASC 280-10, which states that two or

more operating segments may be aggregated into a single reportable segment if aggregation is consistent with

the objective and basic principles of ASC 280-10, which require the segments to have similar economic

characteristics, products, production processes, clients and methods of distribution. 

The Company’s retail operating segments have similar economic characteristics and similar operating,

financial and competitive risks. The products sold in each retail operating segment are similar in nature, as

they all offer women’s apparel, shoes and accessories. Merchandise inventory of the Company’s retail

operating segments is sourced from the same countries and some of the same vendors, using similar

production processes. Merchandise for the Company’s retail operating segments is distributed to retail stores

in a similar manner through the Company’s single distribution center and is subsequently distributed to

customers in a similar manner. The Company operates its women’s fashion specialty retail stores in

31

states as of August 2, 2025, principally in the southeastern United States.

The Company offers its own credit card to its customers and all credit authorizations, payment processing

and collection efforts are performed by a wholly-owned subsidiary of the Company. The Company does

not allocate certain corporate expenses to the Credit segment.

The Company’s President and Chief Executive Officer is the Company’s chief operating decision maker

(“CODM”). The structure described above reflects the manner in which the CODM regularly assesses

information for decision-making purposes, including the allocation of resources. The Company also

provides corporate services, including finance, information technology, and corporate administration, to

its segments which are fully allocated to the retail segment. Interest and other income from assets held for

investment and sale are not included in assessing the segments’ performance and therefore not allocated

to either segment.

The CODM manages and evaluates the segments’ operating performance based on segment sales,

THE CATO CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

FOR THE THREE MONTHS AND SIX MONTHS ENDED AUGUST 2, 2025 AND AUGUST 3,

2024

12

expenses, and profit or loss from operations before income taxes as presented in the Company’s annual

budget and forecasting process, as well as monthly analyses of budget-to-actual and prior year variances. 

Segment expenses and other items primarily include cost of goods sold, selling, general and

administrative expenses, depreciation and interest and other income. Assessment and approval of all

capital expenditures are determined to be in support of and based on the needs of the retail segment;

however, the CODM does not evaluate performance or allocate resources based on segment asset

balances and, therefore, total segment assets are not presented in the tables below.

The accounting policies of the segments are the same as those described in the Summary of Significant

Accounting Policies in Note 1 of the consolidated financial statements included in the Company’s Annual

Report on Form 10-K for the fiscal year ended February 1, 2025. The Company evaluates segment

performance based on segment income before income taxes.

The following schedule summarizes certain segment information (in thousands):

Three Months Ended

August 2, 2025

Retail

Credit

Total

Revenues

$

175,856

$

653

$

176,509

Cost of goods sold

111,467

-

111,467

Selling, general, and administrative (a)

40,130

414

40,544

Corporate overhead

16,827

-

16,827

Depreciation

2,525

-

2,525

Interest and other income

(89)

(288)

(377)

Segment income before income taxes

$

4,996

$

527

$

5,523

Corporate interest and other income

(1,016)

Income before income taxes

$

6,539

Capital expenditures

$

1,343

$

-

$

1,343

Six Months Ended

August 2, 2025

Retail

Credit

Total

Revenues

$

345,433

$

1,318

$

346,751

Cost of goods sold

220,784

-

220,784

Selling, general, and administrative (a)

79,289

801

80,090

Corporate overhead

32,606

-

32,606

Depreciation

5,089

-

5,089

Interest and other income

(192)

(592)

(784)

Segment income before income taxes

$

7,857

$

1,109

$

8,966

Corporate interest and other income

(1,810)

Income before income taxes

$

10,776

Capital expenditures

$

2,362

$

-

$

2,362

(a) Selling, general, and administrative expense include corporate and store payroll, related payroll taxes and 

 benefits, insurance, supplies, advertising, bank and credit card processing fees.

THE CATO CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

FOR THE THREE MONTHS AND SIX MONTHS ENDED AUGUST 2, 2025 AND AUGUST 3,

2024

13

NOTE 5 – REPORTABLE SEGMENT INFORMATION (CONTINUED):

Three Months Ended

August 3, 2024

Retail

Credit

Total

Revenues

$

167,954

$

674

$

168,628

Cost of goods sold

109,122

-

109,122

Selling, general, and administrative (a)

40,946

416

41,362

Corporate overhead

16,819

-

16,819

Depreciation

2,328

1

2,329

Interest and other income

(97)

(284)

(381)

Segment income (loss) before income taxes

$

(1,164)

$

541

$

(623)

Corporate interest and other income

(1,361)

Income before income taxes

$

738

Capital expenditures

$

1,538

$

-

$

1,538

Six Months Ended

August 3, 2024

Retail

Credit

Total

Revenues

$

344,384

$

1,343

$

345,727

Cost of goods sold

221,627

-

221,627

Selling, general, and administrative (a)

81,915

823

82,738

Corporate overhead

32,195

-

32,195

Depreciation

4,368

1

4,369

Interest and other income

(188)

(518)

(706)

Segment income before income taxes

$

4,467

$

1,037

$

5,504

Corporate interest and other income

(6,857)

Income before income taxes

$

12,361

Capital expenditures

$

4,799

$

-

$

4,799

(a) Selling, general, and administrative expense include corporate and store payroll, related payroll taxes and 

 benefits, insurance, supplies, advertising, bank and credit card processing fees.

THE CATO CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

FOR THE THREE MONTHS AND SIX MONTHS ENDED AUGUST 2, 2025 AND AUGUST 3,

2024

14

NOTE 6 – STOCK-BASED COMPENSATION:

As of August 2, 2025, the Company’s 2018 Incentive Compensation Plan allows for the granting of various

forms of equity-based awards, including restricted stock and stock options for grant to officers, directors and

key employees.

The following table presents the number of options and shares of restricted stock initially authorized and

available for grant under this plan as of August 2, 2025:

2018

Plan

Options and/or restricted stock initially authorized

4,725,000

Options and/or restricted stock available for grant

2,853,875

In accordance with ASC 718 –

Compensation–Stock Compensation

, the fair value of current restricted

stock awards is estimated on the date of grant based on the market price of the Company’s stock and is

amortized to compensation expense on a straight-line basis over the related vesting periods. As of August

2, 2025 and February 1, 2025, there was $

5,548,000

 and $

7,276,000

, respectively, of total unrecognized

compensation expense related to nonvested restricted stock awards, which had a remaining weighted-

average vesting period of

1.9

 years for both periods. The total compensation expense during the three and

six months ended August 2, 2025 was $

394,000

 and $

578,000

, respectively, compared to a total

compensation expense of $

872,000

 and $

806,000

 for the three and six months ended August 3, 2024,

respectively. This compensation activity is classified as a component of Selling, general and

administrative expenses in the Condensed Consolidated Statements of Income.

The following summary shows the changes in the number of shares of unvested restricted stock outstanding

during the six months ended August 2, 2025:

Weighted Average

Number of

Grant Date Fair

Shares

Value Per Share

Restricted stock awards at February 1, 2025

1,215,181

$

8.98

Granted

-

-

Vested

(225,924)

12.89

Forfeited or expired

(68,274)

8.33

Restricted stock awards at August 2, 2025

920,983

$

8.07

THE CATO CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

FOR THE THREE MONTHS AND SIX MONTHS ENDED AUGUST 2, 2025 AND AUGUST 3,

2024

15

NOTE 6 – STOCK BASED-COMPENSATION (CONTINUED):

The Company’s Employee Stock Purchase Plan allows eligible full-time employees to purchase a limited

number of shares of the Company’s Class A Common Stock during each semi-annual offering period at a

15

% discount through payroll deductions. During the six months ended August 2, 2025 and August 3, 2024,

the Company sold

21,736

 and

38,910

 shares to employees at an average discount of $

0.50

 and $

0.87

 per

share, respectively, under the Employee Stock Purchase Plan. The compensation expense recognized for the

15

% discount given under the Employee Stock Purchase Plan was $

11,000

 and $

34,000

 for the six months

ended August 2, 2025 and August 3, 2024, respectively. These expenses are classified as a component of

Selling, general and administrative expenses in the Condensed Consolidated Statements of Income.

NOTE 7 – FAIR VALUE MEASUREMENTS:

The following tables set forth information regarding the Company’s financial assets and liabilities that are

measured at fair value (in thousands) as of August 2, 2025 and February 1, 2025:

Quoted

Prices in

Active

Significant

Markets for

Other

Significant

Identical

Observable

Unobservable

August 2, 2025

Assets

Inputs

Inputs

Description

Level 1

Level 2

Level 3

Assets:

 State/Municipal Bonds

$

337

$

-

$

337

$

-

 Corporate Bonds

52,946

-

52,946

-

 U.S. Treasury/Agencies Notes and Bonds

2,035

-

2,035

-

 Cash Surrender Value of Life Insurance

9,485

-

-

9,485

 Commercial Paper

1,232

-

1,232

-

Total Assets

$

66,035

$

-

$

56,550

$

9,485

Liabilities:

 Deferred Compensation

$

(8,358)

$

-

$

-

$

(8,358)

Total Liabilities

$

(8,358)

$

-

$

-

$

(8,358)

THE CATO CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

FOR THE THREE MONTHS AND SIX MONTHS ENDED AUGUST 2, 2025 AND AUGUST 3,

2024

16

NOTE 7 – FAIR VALUE MEASUREMENTS (CONTINUED):

Quoted

Prices in

Active

Significant

Markets for

Other

Significant

Identical

Observable

Unobservable

February 1, 2025

Assets

Inputs

Inputs

Description

Level 1

Level 2

Level 3

Assets:

 State/Municipal Bonds

$

1,244

$

-

$

1,244

$

-

 Corporate Bonds

51,326

-

51,326

-

 U.S. Treasury/Agencies Notes and Bonds

4,624

-

4,624

-

 Cash Surrender Value of Life Insurance

9,301

-

-

9,301

 Asset-backed Securities (ABS)

229

-

229

-

Total Assets

$

66,724

$

-

$

57,423

$

9,301

Liabilities:

 Deferred Compensation

$

(8,548)

$

-

$

-

$

(8,548)

Total Liabilities

$

(8,548)

$

-

$

-

$

(8,548)

The Company’s investment portfolio was primarily invested in corporate bonds and taxable governmental

debt securities held in managed accounts with underlying ratings of A or better at August 2, 2025 and

February 1, 2025. The state, municipal and corporate bonds and asset-backed securities have contractual

maturities which range from

13 days

 to

2.9

 years. The U.S. Treasury/Agencies notes and bonds have a

contractual maturity of up to

7 months

. 

Additionally, at August 2, 2025, the Company had deferred compensation plan assets of $

9.5

 million. At

February 1, 2025, the Company had deferred compensation plan assets of $

9.3

 million. These assets are

recorded within Other assets in the Condensed Consolidated Balance Sheets.

Level 2 investment securities include corporate, state and municipal bonds for which quoted prices may not

be available on active exchanges for identical instruments. Their fair value is principally based on market

values determined by management with the assistance of a third-party pricing service. Since quoted prices in

active markets for identical assets are not available, these prices are determined by the pricing service using

observable market information such as quotes from less active markets and/or quoted prices of securities with

similar characteristics, among other factors.

Deferred compensation plan assets consist of life insurance policies. These life insurance policies are valued

based on the cash surrender value of the insurance contract, which is determined based on such factors as the

fair value of the underlying assets and discounted cash flow and are therefore classified within Level 3 of the

valuation hierarchy. The Level 3 liability associated with the life insurance policies represents a deferred

compensation obligation, the value of which is tracked via underlying insurance funds’ net asset values, as

recorded in Other noncurrent liabilities in the Condensed Consolidated Balance Sheet. These funds are

designed to mirror mutual funds and money market funds that are observable and actively traded.

The following tables summarize the change in fair value of the Company’s financial assets and liabilities

measured using Level 3 inputs for the six months ended August 2, 2025 and the year ended February 1, 2025

(in thousands):

THE CATO CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

FOR THE THREE MONTHS AND SIX MONTHS ENDED AUGUST 2, 2025 AND AUGUST 3,

2024

17

NOTE 7 – FAIR VALUE MEASUREMENTS (CONTINUED):

Fair Value

Measurements Using

Significant Unobservable

Asset Inputs (Level 3)

Cash Surrender Value

Beginning Balance at February 1, 2025

$

9,301

Total gains or (losses):

 Included in interest and other income (or

changes in net assets)

184

Ending Balance at August 2, 2025

$

9,485

Fair Value

Measurements Using

Significant Unobservable

Liability Inputs (Level 3)

Deferred Compensation

Beginning Balance at February 1, 2025

$

(8,548)

 Redemptions

566

 Additions

(129)

 Total (gains) or losses:

 Included in interest and other income (or

changes in net assets)

(247)

Ending Balance at August 2, 2025

$

(8,358)

Fair Value

Measurements Using

Significant Unobservable

Asset Inputs (Level 3)

Cash Surrender Value

Beginning Balance at February 3, 2024

$

8,586

Total gains or (losses):

 Included in interest and other income (or

changes in net assets)

715

Ending Balance at February 1, 2025

$

9,301

Fair Value

Measurements Using

Significant Unobservable

Liability Inputs (Level 3)

Deferred Compensation

Beginning Balance at February 3, 2024

$

(8,654)

 Redemptions

1,175

 Additions

(220)

 Total (gains) or losses:

 Included in interest and other income (or

changes in net assets)

(849)

Ending Balance at February 1, 2025

$

(8,548)

THE CATO CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

FOR THE THREE MONTHS AND SIX MONTHS ENDED AUGUST 2, 2025 AND AUGUST 3,

2024

18

NOTE 8 – RECENT ACCOUNTING PRONOUNCEMENTS:

In December 2023, the FASB issued ASU 2023-09,

Income Taxes (Topic 740): Improvements to Income

Tax Disclosures

, which modifies the requirements on income tax disclosures to require disaggregated

information about a reporting entity’s effective tax rate reconciliation as well as information on income

taxes paid. This guidance is effective for fiscal years beginning after December 15, 2024 for all public

business entities, with early adoption and retrospective application permitted. The Company is currently

in the process of evaluating the potential impact of adoption of this new guidance on its consolidated

financial statements and related disclosures. The required disclosures will be included in our 2025 Annual

Report on Form 10-K.

In November 2024, the FASB issued ASU 2024-03,

Income Statement—Reporting Comprehensive

Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement

Expenses

, which requires public entities to disclose, on an annual and interim basis, disaggregated

information in the footnotes about specified information related to certain costs and expenses. This

guidance is effective for annual periods beginning after December 15, 2026 and for interim periods within

fiscal years beginning after December 15, 2027, with early adoption permitted. The Company is currently

in the process of evaluating the potential impact of adoption of this new guidance on its consolidated

financial statements and related disclosures.

NOTE 9 – INCOME TAXES:

The Company had an effective tax rate for the first six months of 2025 of

5.9

% compared to an effective

tax rate of

10.5

% for the first six months of fiscal 2024. Income tax expense for the first six months

decreased to $

0.6

 million in fiscal 2025 from an income tax expense of $

1.3

 million in fiscal 2024. The

decrease in tax expense in 2025 is primarily due to reductions in foreign income taxes and a 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 an increase in state income taxes. 

On July 4, 2025, the One Big Beautiful Bill Act (the “OBBBA”) was signed into law. The Company has

considered the impact of the OBBBA in the second quarter of fiscal 2025 and concluded the changes do

not have a material impact on the Company’s effective tax rate.

NOTE 10 – COMMITMENTS AND CONTINGENCIES:

The Company is, from time to time, involved in routine litigation incidental to the conduct of its business,

including litigation regarding the merchandise that it sells, litigation regarding intellectual property,

litigation instituted by persons injured upon premises under its control, litigation with respect to various

employment matters, including alleged discrimination and wage and hour litigation, and litigation with

present or former employees.

Although such litigation is routine and incidental to the conduct of the Company’s business, as with any

business of its size with a significant number of employees and significant merchandise sales, such

litigation could result in large monetary awards. Based on information currently available, management

does not believe that any reasonably possible losses arising from current pending litigation will have a

material adverse effect on the Company’s condensed consolidated financial statements. However, given

the inherent uncertainties involved in such matters, an adverse outcome in one or more of such matters

THE CATO CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

FOR THE THREE MONTHS AND SIX MONTHS ENDED AUGUST 2, 2025 AND AUGUST 3,

2024

19

could materially and adversely affect the Company’s financial condition, results of operations and cash

flows in any particular reporting period. The Company accrues for these matters when the liability is

deemed probable and reasonably estimable.

NOTE 11 – REVENUE RECOGNITION:

The Company recognizes sales at the point of purchase when the customer takes possession of the

merchandise and pays for the purchase, generally with cash or credit. Sales from purchases made with

Cato credit, gift cards and layaway sales from stores are also recorded when the customer takes

possession of the merchandise. E-commerce sales are recorded when the risk of loss is transferred to the

customer. Gift cards are recorded as deferred revenue until they are redeemed or forfeited. Gift cards do

not have expiration dates. Layaway transactions are recorded as deferred revenue until the customer takes

possession or forfeits the merchandise. A provision is made for estimated merchandise returns based on

sales volumes and the Company’s experience; actual returns have not varied materially from historical

amounts. A provision is made for estimated write-offs associated with sales made with the Company’s

proprietary credit card. Amounts related to shipping and handling billed to customers in a sales

transaction are classified as Other revenue and the costs related to shipping product to customers (billed

and accrued) are classified as Cost of goods sold.

The Company offers its own proprietary credit card to customers. All credit activity is performed by the

Company’s wholly-owned subsidiaries.

None

 of the credit card receivables are secured. The Company

estimated customer credit losses of $

227,000

 and $

442,000

 for the three and six months ended August 2,

2025, respectively, compared to $

166,000

 and $

338,000

 for the three and six months ended August 3,

2024, respectively. Sales purchased on the Company’s proprietary credit card for the three and six

months ended August 2, 2025 were $

5.7

 million and $

11.1

 million, respectively, compared to $

5.6

million and $

11.3

 million for the three and six months ended August 3, 2024, respectively.

The following table provides information about receivables and contract liabilities from contracts with

customers (in thousands):

Balance as of

August 2, 2025

February 1, 2025

Proprietary Credit Card Receivables, net

$

10,816

$

10,848

Gift Card Liability

$

5,671

$

7,541

THE CATO CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

FOR THE THREE MONTHS AND SIX MONTHS ENDED AUGUST 2, 2025 AND AUGUST 3,

2024

20

NOTE 12 – LEASES:

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 include options to terminate the lease

within one year

. The Company considers these options in

determining the lease term used to establish its right-of-use assets and lease liabilities. The Company’s

lease agreements do not contain any material residual value guarantees or material restrictive covenants.

As most of the Company’s leases do not provide an implicit rate, the Company uses its estimated

incremental borrowing rate based on the information available at commencement date of the lease in

determining the present value of lease payments.

The components of lease cost are shown below (in thousands):

Three Months Ended

August 2, 2025

August 3, 2024

Operating lease cost

$

16,496

$

16,808

Variable lease cost (a)

$

420

$

463

(a) Primarily related to monthly percentage rent for stores not presented on the balance sheet.

Six Months Ended

August 2, 2025

August 3, 2024

Operating lease cost

$

33,084

$

33,810

Variable lease cost (a)

$

858

$

960

(a) Primarily related to monthly percentage rent for stores not presented on the balance sheet.

THE CATO CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

FOR THE THREE MONTHS AND SIX MONTHS ENDED AUGUST 2, 2025 AND AUGUST 3,

2024

21

NOTE 12 – LEASES (CONTINUED:

Supplemental cash flow information and non-cash activity related to the Company’s operating leases are

as follows (in thousands):

Operating cash flow information:

Three Months Ended

August 2, 2025

August 3, 2024

Cash paid for amounts included in the measurement of lease liabilities

$

14,829

$

15,481

Non-cash activity:

Right-of-use assets obtained in exchange for lease obligations, net of rent violations

$

12,224

$

913

Six Months Ended

August 2, 2025

August 3, 2024

Cash paid for amounts included in the measurement of lease liabilities

$

29,363

$

31,088

Non-cash activity:

Right-of-use assets obtained in exchange for lease obligations, net of rent violations

$

13,430

$

1,357

Weighted-average remaining lease term and discount rate for the Company’s operating leases are as

follows:

As of

August 2, 2025

August 3, 2024

Weighted-average remaining lease term

2.1

 years

1.8

 years

Weighted-average discount rate

5.92%

4.74%

As of August 2, 2025, the maturities of lease liabilities by fiscal year for the Company’s operating leases

are as follows (in thousands):

Fiscal Year

2025 (a)

$

31,303

2026

48,424

2027

32,528

2028

20,105

2029

10,482

Thereafter

3,017

Total lease payments

145,859

Less: Imputed interest

15,964

Present value of lease liabilities

$

129,895

(a) Excluding the six months ended August 2, 2025

22

THE CATO CORPORATION

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

FORWARD-LOOKING INFORMATION:

The following information should be read along with the unaudited Condensed Consolidated Financial

Statements, including the accompanying Notes appearing in this Form 10-Q. 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-Q that reflect projections or expectations of our future financial or economic performance; (2)

statements that are not historical information; (3) statements of our beliefs, intentions, plans and

objectives for future operations; (4) statements relating to our operations or activities for our fiscal year

ending January 31, 2026 (“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 public health threats 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 business, results of operations and

financial condition and statements regarding new store development strategy; and (5) statements relating

to our future contingencies. When possible, we have attempted to identify forward-looking statements by

using words such as “will,” “expects,” “anticipates,” “approximates,” “believes,” “estimates,” “hopes,”

“intends,” “may,” “plans,” “could,” “would,” “should” and any variations or negative formations of such

words and similar expressions. We can give no assurance that actual results or events will not differ

materially from those expressed or implied in any such forward-looking statements. Forward-looking

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 threats and uncertainties, levels of unemployment, fuel, energy and food costs,

inflation, wage rates, tax rates, tariffs, interest 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 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

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 the Company’s 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;

inventory risks due to shifts in market demand, including the ability to liquidate excess inventory at

anticipated margins; adverse developments or volatility affecting the financial services industry or

broader financial markets; and other factors discussed under “Risk Factors” in Part I, Item 1A of our

annual report on Form 10-K for the fiscal year ended February 1, 2025 (“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.

THE CATO CORPORATION

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

23

CRITICAL ACCOUNTING POLICIES AND ESTIMATES:

The Company’s critical accounting policies and estimates are more fully described in “Management’s

Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 in the

Company’s Annual Report on Form 10-K for the fiscal year ended February 1, 2025. The preparation of the

Company’s financial 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 determined with absolute certainty. Therefore, the determination of estimates requires the exercise of

judgment. Actual results inevitably will differ from those estimates, and such differences may be material to

the financial statements. The most significant accounting estimates inherent in the preparation of the

Company’s financial statements include the calculation of potential asset impairment, income tax valuation

allowances, reserves relating to self-insured health insurance, workers’ compensation, general and auto

insurance liabilities, uncertain tax positions, the allowance for customer credit losses, and inventory

shrinkage.

The Company’s critical accounting policies and estimates are discussed with the Audit Committee.

THE CATO CORPORATION

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

24

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:

Three Months Ended

Six Months Ended

August 2, 2025

August 3, 2024

August 2, 2025

August 3, 2024

Total retail sales

100.0

%

100.0

%

100.0

%

100.0

%

Other revenue

1.1

1.0

1.1

1.0

Total revenues

101.1

101.0

101.1

101.0

Cost of goods sold (exclusive of

depreciation)

63.8

65.4

64.4

64.8

Selling, general and administrative

(exclusive of depreciation)

32.8

34.9

32.8

33.6

Depreciation

1.4

1.4

1.5

1.3

Interest and other income

(0.8)

(1.0)

(0.8)

(2.2)

Income before income taxes

3.7

0.4

3.1

3.6

Net income

3.9

0.1

3.0

3.2

THE CATO CORPORATION

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

25

RESULTS OF OPERATIONS (CONTINUED):

Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is

intended to provide information to assist readers in better understanding and evaluating our financial

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 2024 Annual Report on Form 10-K.

Recent Developments

Tariff Pressures

A significant quantity of our products are made in China and Southeast Asia. The products from these

countries are subject to the newly implemented reciprocal tariffs, as well as an additional Section 301 ad

valorem tariff on Chinese products. In the second quarter, products from China were subject to the

Section 301 ad valorem tariffs and products sourced from all other countries were subject to reciprocal

tariffs. During the second quarter, these tariffs increased our costs associated with receipted products

made in China and Southeast Asia. Excluding China, reciprocal tariffs will be increasing up to 100%,

resulting in rates of 19% to 20%, depending on the country. We anticipate that our product acquisition

costs in the back half of the third quarter and the remainder of the fiscal year will be impacted by these

additional costs.

These cost increases will negatively impact our results of operations and financial condition 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, which are

predominately made in China, will be difficult to source in countries with lower tariffs.

Pricing Pressures

As the cost of tariffs begins to impact retail pricing, our customers 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 the Three and Six Months ended August 2, 2025 with August 3, 2024

Total retail sales for the second quarter were $174.7 million compared to last year’s second quarter sales of

$166.9 million, a 5% increase. The Company’s sales increased in the second quarter of fiscal 2025 primarily

due to a 9% increase in same-store sales, partially offset by stores that were closed in the past 12 months. For

the six months ended August 2, 2025, total retail sales were $343.1 million compared to last year’s

comparable six month sales of $342.2 million, a 0.3% increase. The increase in sales in the first six months of

fiscal 2025 was due primarily to a 4% increase in same-store sales, mainly offset by 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 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% of total sales for the six months ended August 2, 2025 and are included

in the same-store sales calculation. Total revenues, comprised of retail sales and other revenue (principally

finance charges and late fees on customer accounts receivable and layaway fees), were $176.5 million and

$346.8 million for the three and six months ended August 2, 2025, compared to $168.6 million and $345.7

THE CATO CORPORATION

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

26

million for the three and six months ended August 3, 2024, respectively. The Company operated 1,101 stores

at August 2, 2025 compared to 1,166 stores at the end of last fiscal year’s second quarter. For the first six

months of fiscal 2025, the Company permanently closed 16 stores. The Company currently expects to close

approximately 50 stores in fiscal 2025.

Other revenue, a component of total revenues, was $1.9 million and $3.7 million for the three and six months

ended August 2, 2025, respectively, compared to $1.7 million and $3.5 million for the prior year’s

comparable three and six month periods. Included in Other revenue is credit revenue of $0.7 million, which

represented 0.4% of total revenues in the second quarter of fiscal 2025, flat both in dollars and percentage

compared to fiscal 2024.

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 2025, compared to last year’s

second quarter expense of $0.4 million.

Cost of goods sold was $111.5 million, or 63.8% of retail sales and $220.8 million, or 64.4% of retail sales

for the three and six months ended August 2, 2025, respectively, compared to $109.1 million, or 65.4% of

retail sales and $221.6 million, or 64.8% of retail sales for the comparable three and six month periods of

fiscal 2024. The overall decrease in cost of goods sold as a percent of retail sales for the second quarter and

first six months of fiscal 2025 versus the comparable three and six month periods of fiscal 2024 resulted

primarily from lower buying and distribution costs, partially offset by increased sales of marked down goods. 

Cost of goods sold includes merchandise costs (net of discounts and allowances), buying costs, distribution

costs, occupancy costs, freight and inventory shrinkage. Net merchandise costs and in-bound freight are

capitalized as inventory costs. Buying and distribution costs include payroll, payroll-related costs and

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 distribution

facilities. Total gross margin dollars (retail sales less cost of goods sold exclusive of depreciation) increased

by 9.3% to $63.2 million for the second quarter of fiscal 2025 and by 1.4% to $122.3 million for the first six

months of fiscal 2025, compared to $57.8 million and $120.6 million for the prior year’s comparable three

and six months of fiscal 2024, respectively. 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 $57.4 million, or 32.8% of retail sales and $112.7 million, or 32.8% of retail sales for the

second quarter and first six months of fiscal 2025, respectively, compared to $58.2 million, or 34.9% of retail

sales and $114.9 million, or 33.6% of retail sales for the prior year’s comparable three and six month periods,

respectively. The decrease in SG&A expenses for the second quarter and first six months of fiscal 2025 was

primarily due to lower corporate and field payroll expense, as well as lower insurance, partially offset by

increases in advertising and general corporate costs.

Depreciation expense was $2.5 million, or 1.4% of retail sales and $5.1 million, or 1.5% of retail sales for the

second quarter and first six months of fiscal 2025, respectively, compared to $2.3 million, or 1.4% of retail

sales and $4.4 million or 1.3% of retail sales for the comparable three and six month periods of fiscal 2024,

respectively. 

Interest and other income was $1.4 million, or 0.8% of retail sales and $2.6 million, or 0.8% of retail sales for

the three and six months ended August 2, 2025, respectively, compared to $1.7 million, or 1.0% of retail sales

and $7.6 million, or 2.2% of retail sales for the comparable three and six month periods of fiscal 2024,

respectively. The decrease for the first six months of fiscal 2025 compared to fiscal 2024 was primarily due

THE CATO CORPORATION

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

27

to a $3.2 million net gain on the sale of land held for investment and the sale of equity securities recorded in

the first quarter of 2024.

Income tax benefit was $0.3 million and an expense of $0.6 million for the second quarter and first six

months of fiscal 2025, respectively, compared to a tax expense of $0.6 million and $1.3 million for the

comparable three and six month periods of fiscal 2024, respectively. The effective income tax rate for the

first six months of fiscal 2025 was 5.9% compared to 10.5% for the first six months of fiscal 2024. The

decrease in tax expense in 2025 is primarily due to reductions in foreign income taxes and a 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 an increase in state income taxes. On July 4,

2025, the One Big Beautiful Bill Act (the “OBBBA”) was signed into law. The Company has considered

the impact of the OBBBA in the second quarter of fiscal 2025 and concluded the changes do not have a

material impact on the Company’s effective tax rate.

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 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.

Cash provided by operating activities during the first six months of fiscal 2025 was $15.6 million as

compared to $8.8 million provided in the first six months of fiscal 2024. The increase in cash provided by

operating activities of $6.8 million for the first six months of fiscal 2025 as compared to the first six months

of fiscal 2024 was primarily attributable to the relative change in inventory from year-end to the second

quarter for both years and a non-operating gain on sale of assets held for investment in the first quarter of

fiscal 2024, partially offset by the relative change of accounts payable from year-end to the second quarter for

both years.

At August 2, 2025, the Company had working capital of $50.5 million compared to $34.9 million at February

1, 2025.

The increase in working capital was primarily attributable to an increase in cash and cash

equivalents and decreases in accrued expenses, current lease liability and accounts payable, partially offset by

a decrease in inventories.

On March 13, 2025, the Company, as borrower, and certain other domestic subsidiaries, as borrowers and

guarantors, entered into a Credit Agreement (the “ABL Credit Agreement”) and related loan documents, by

and among the Company, certain other of the Company’s 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 Credit Agreement 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 August 2, 2025. The weighted average interest rate under the credit facility

was zero at August 2, 2025 due to no outstanding borrowings.

Expenditures for property and equipment totaled $2.4 million in the first six months of fiscal 2025, compared

to $4.8 million in last fiscal year’s first six months. The decrease in expenditures for property and equipment

THE CATO CORPORATION

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

28

was primarily due to finishing projects related to investments in the distribution center and information

technology, as well as no new store openings in the first six months of the current fiscal year. For the full

fiscal 2025 year, the Company expects to invest approximately $5.9 million for capital expenditures.

Net cash used in investing activities totaled $0.9 million in the first six months of fiscal 2025 compared to

$6.7 million net cash provided in the comparable period of 2024. The increase in net cash used in investing

activities in 2025 was primarily due to a decrease 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 six months of fiscal 2025 compared to

$9.1 million used in the comparable period of fiscal 2024. The decrease in net cash used in financing

activities in fiscal 2025 was primarily due to the elimination of dividend payments in fiscal 2025 and lower

stock repurchases.

As of August 2, 2025, the Company had 680,740 shares remaining in open authorizations under its share

repurchase program. 

The Company does not use derivative financial instruments.

The Company’s investment portfolio was primarily invested in corporate bonds and taxable governmental

debt securities held in managed accounts with underlying ratings of A or better at August 2, 2025 and

February 1, 2025. The state, municipal and corporate bonds and asset-backed securities have contractual

maturities which range from 13 days to 2.9 years. The U.S. Treasury/Agencies notes and bonds have a

contractual maturity of up to 7 months. 

Additionally, at August 2, 2025, the Company had deferred compensation plan assets of $9.5 million. At

February 1, 2025, the Company had deferred compensation plan assets of $9.3 million. These assets are

recorded within Other assets in the Condensed Consolidated Balance Sheets. See Note 7, Fair Value

Measurements, included in Part 1, Item 1 Financial Statements (Unaudited) in this Quarterly Report on Form

10-Q.

THE CATO CORPORATION

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

29

RECENT ACCOUNTING PRONOUNCEMENTS: 

See Note 8, Recent Accounting Pronouncements, included in Part 1, Item 1 Financial Statements

(Unaudited) in this Quarterly Report on Form 10-Q.

THE CATO CORPORATION

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

30

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK:

The Company is subject to market rate risk from exposure to changes in interest rates based on its

financing, investing and cash management activities, but the Company does not believe such exposure is

material.

ITEM 4. CONTROLS AND PROCEDURES:

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 August 2, 2025. Based on this

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

2025, our disclosure controls and procedures, as defined in Rule 13a-15(e), under the Securities 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 2, 2025 that has materially affected, or

is reasonably likely to materially affect, the Company’s internal control over financial reporting.

THE CATO CORPORATION

PART II OTHER INFORMATION

31

ITEM 1. LEGAL PROCEEDINGS:

Not Applicable.

ITEM 1A. 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 February 1, 2025.

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 business, financial condition or results of

operations.

ITEM 2. 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 2, 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

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 2025

-

$

-

-

June 2025

22,679

2.64

22,679

July 2025

-

-

-

Total

22,679

$

2.64

22,679

680,740

(1)

Prices include trading costs.

(2)

As of May 3, 2025, the Company’s share repurchase program had 703,419 shares remaining in

open authorizations. During the second quarter ended August 2, 2025, the Company repurchased

and retired 22,679 shares under this program for approximately $59,911 or an average market

price of $2.64 per share. As of August 2, 2025, the Company had 680,740 shares remaining in

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

ITEM 3. DEFAULTS UPON SENIOR SECURITIES:

Not Applicable.

THE CATO CORPORATION

PART II OTHER INFORMATION

32

ITEM 4. MINE SAFETY DISCLOSURES:

No matters requiring disclosure.

ITEM 5. OTHER INFORMATION:

During the three months ended August 2, 2025, 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).

ITEM 6. 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 Document

101.DEF

Inline XBRL Taxonomy Extension Definitions Linkbase Document

101.LAB

Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE

Inline XBRL Taxonomy Extension Presentation Linkbase Document

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.

THE CATO CORPORATION

PART II OTHER INFORMATION

33

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 28, 2025

/s/ John P. D. Cato

Date

John P. D. Cato

Chairman, President and

Chief Executive Officer

August 28, 2025

/s/ Charles D. Knight

Date

Charles D. Knight

Executive Vice President

Chief Financial Officer

FAQ

What were CATO's total revenues and net income for the quarter (CATO)?

Total revenues were $176.5 million and net income was $6.8 million for the quarter ended August 2, 2025.

How did CATO's earnings per share (EPS) perform in the quarter?

Basic and diluted earnings per share were both $0.35 for the quarter ended August 2, 2025.

What liquidity resources does CATO have available?

Cato has cash and short-term investments and access to a $35.0 million asset-based revolving credit facility with $27.0 million availability after a $3.0 million letter of credit as of August 2, 2025.

How many stores does CATO operate and are they closing stores?

The Company operated 1,101 stores as of August 2, 2025, closed 16 stores in the first six months and expects to close approximately 50 stores in fiscal 2025.

Did CATO generate positive operating cash flow?

Yes. Cash provided by operating activities was $15.6 million for the six months ended August 2, 2025.