FALSE 2025 0000018255 --01-31 Q2 1763652 0.033 0.033 15000000 50000000 100 100000 none 2027-05-31 0000018255 2025-08-02 0000018255 2025-02-01 0000018255 2024-08-03 0000018255 2025-02-02 2025-08-02 0000018255 2024-02-04 2024-08-03 0000018255 2024-02-03 0000018255 2024-05-05 2024-08-03 0000018255 us-gaap:FairValueInputsLevel1Member us-gaap:CashSurrenderValueMember 2025-08-02 0000018255 us-gaap:CashSurrenderValueMember us-gaap:FairValueInputsLevel2Member 2025-08-02 0000018255 us-gaap:CashSurrenderValueMember us-gaap:FairValueInputsLevel3Member 2025-08-02 0000018255 us-gaap:FairValueInputsLevel1Member us-gaap:LiabilityMember 2025-08-02 0000018255 us-gaap:FairValueInputsLevel2Member us-gaap:LiabilityMember 2025-08-02 0000018255 us-gaap:FairValueInputsLevel3Member us-gaap:LiabilityMember 2025-08-02 0000018255 us-gaap:CashSurrenderValueMember us-gaap:FairValueInputsLevel2Member 2025-02-01 0000018255 us-gaap:FairValueInputsLevel1Member us-gaap:CashSurrenderValueMember 2025-02-01 0000018255 us-gaap:CashSurrenderValueMember us-gaap:FairValueInputsLevel3Member 2025-02-01 0000018255 us-gaap:FairValueInputsLevel1Member us-gaap:LiabilityMember 2025-02-01 0000018255 us-gaap:FairValueInputsLevel2Member us-gaap:LiabilityMember 2025-02-01 0000018255 us-gaap:FairValueInputsLevel3Member us-gaap:LiabilityMember 2025-02-01 0000018255 us-gaap:CashSurrenderValueMember 2025-02-01 0000018255 us-gaap:CashSurrenderValueMember 2024-02-04 2025-02-01 0000018255 us-gaap:CashSurrenderValueMember 2025-08-02 0000018255 us-gaap:CashSurrenderValueMember 2025-02-02 2025-08-02 0000018255 us-gaap:LiabilityMember 2025-02-01 0000018255 us-gaap:LiabilityMember 2025-08-02 0000018255 us-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMember 2025-02-02 2025-08-02 0000018255 us-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMember 2024-05-05 2024-08-03 0000018255 us-gaap:CashSurrenderValueMember 2024-02-03 0000018255 us-gaap:LiabilityMember 2024-02-03 0000018255 us-gaap:CommonClassBMember 2025-08-02 0000018255 us-gaap:CommonClassAMember 2025-08-02 0000018255 us-gaap:CommonClassAMember 2025-02-01 0000018255 us-gaap:CommonClassBMember 2025-02-01 0000018255 us-gaap:CommonClassAMember cato:StockPlan2004MemberMember us-gaap:RestrictedStockMember 2025-02-01 0000018255 us-gaap:CommonClassAMember cato:StockPlan2004MemberMember us-gaap:RestrictedStockMember 2025-08-02 0000018255 us-gaap:CommonClassAMember cato:StockPlan2004MemberMember us-gaap:RestrictedStockMember 2025-02-02 2025-08-02 0000018255 us-gaap:CommonClassAMember us-gaap:EmployeeStockMember 2025-08-02 0000018255 us-gaap:CommonClassAMember us-gaap:RestrictedStockMember 2025-02-01 0000018255 us-gaap:CommonClassAMember us-gaap:RestrictedStockMember 2025-08-02 0000018255 us-gaap:CommonClassAMember us-gaap:RestrictedStockMember 2025-02-02 2025-08-02 0000018255 us-gaap:CommonClassAMember us-gaap:EmployeeStockMember 2025-02-02 2025-08-02 0000018255 us-gaap:CommonClassAMember us-gaap:RestrictedStockMember 2024-05-05 2024-08-03 0000018255 us-gaap:CommonClassAMember us-gaap:EmployeeStockMember 2024-02-04 2024-08-03 0000018255 us-gaap:LiabilityMember 2024-02-04 2025-02-01 0000018255 us-gaap:LiabilityMember 2025-02-02 2025-08-02 0000018255 2025-05-04 2025-08-02 0000018255 cato:OptionsAndOrRestrictedStockMember cato:Stockplan2018membermemberMember 2025-08-02 0000018255 us-gaap:USStatesAndPoliticalSubdivisionsMember 2025-08-02 0000018255 us-gaap:USStatesAndPoliticalSubdivisionsMember us-gaap:FairValueInputsLevel1Member 2025-08-02 0000018255 us-gaap:USStatesAndPoliticalSubdivisionsMember us-gaap:FairValueInputsLevel2Member 2025-08-02 0000018255 us-gaap:USStatesAndPoliticalSubdivisionsMember us-gaap:FairValueInputsLevel3Member 2025-08-02 0000018255 us-gaap:DomesticCorporateDebtSecuritiesMember 2025-08-02 0000018255 us-gaap:FairValueInputsLevel1Member us-gaap:DomesticCorporateDebtSecuritiesMember 2025-08-02 0000018255 us-gaap:FairValueInputsLevel2Member us-gaap:DomesticCorporateDebtSecuritiesMember 2025-08-02 0000018255 us-gaap:FairValueInputsLevel3Member us-gaap:DomesticCorporateDebtSecuritiesMember 2025-08-02 0000018255 us-gaap:USTreasurySecuritiesMember 2025-08-02 0000018255 us-gaap:FairValueInputsLevel1Member 2025-08-02 0000018255 us-gaap:FairValueInputsLevel2Member 2025-08-02 0000018255 us-gaap:FairValueInputsLevel3Member 2025-08-02 0000018255 us-gaap:FairValueInputsLevel1Member 2025-02-01 0000018255 us-gaap:FairValueInputsLevel2Member 2025-02-01 0000018255 us-gaap:FairValueInputsLevel3Member 2025-02-01 0000018255 us-gaap:USStatesAndPoliticalSubdivisionsMember 2025-02-01 0000018255 us-gaap:USStatesAndPoliticalSubdivisionsMember us-gaap:FairValueInputsLevel1Member 2025-02-01 0000018255 us-gaap:USStatesAndPoliticalSubdivisionsMember us-gaap:FairValueInputsLevel2Member 2025-02-01 0000018255 us-gaap:USStatesAndPoliticalSubdivisionsMember us-gaap:FairValueInputsLevel3Member 2025-02-01 0000018255 us-gaap:DomesticCorporateDebtSecuritiesMember 2025-02-01 0000018255 us-gaap:FairValueInputsLevel1Member us-gaap:DomesticCorporateDebtSecuritiesMember 2025-02-01 0000018255 us-gaap:FairValueInputsLevel2Member us-gaap:DomesticCorporateDebtSecuritiesMember 2025-02-01 0000018255 us-gaap:FairValueInputsLevel3Member us-gaap:DomesticCorporateDebtSecuritiesMember 2025-02-01 0000018255 us-gaap:USTreasurySecuritiesMember 2025-02-01 0000018255 us-gaap:AssetBackedSecuritiesMember 2025-02-01 0000018255 us-gaap:FairValueInputsLevel1Member us-gaap:AssetBackedSecuritiesMember 2025-02-01 0000018255 us-gaap:FairValueInputsLevel2Member us-gaap:AssetBackedSecuritiesMember 2025-02-01 0000018255 us-gaap:FairValueInputsLevel3Member us-gaap:AssetBackedSecuritiesMember 2025-02-01 0000018255 us-gaap:AccumulatedNetUnrealizedInvestmentGainLossMember 2025-02-02 2025-08-02 0000018255 us-gaap:AccumulatedNetUnrealizedInvestmentGainLossMember 2024-05-05 2024-08-03 0000018255 us-gaap:AccumulatedNetUnrealizedInvestmentGainLossMember 2025-05-04 2025-08-02 0000018255 us-gaap:CommonClassAMember us-gaap:RestrictedStockMember 2025-05-04 2025-08-02 0000018255 us-gaap:CreditCardMember us-gaap:CollateralPledgedMember 2025-08-02 0000018255 us-gaap:CreditCardMember 2025-05-04 2025-08-02 0000018255 us-gaap:CreditCardMember 2025-02-02 2025-08-02 0000018255 us-gaap:CreditCardMember 2024-05-05 2024-08-03 0000018255 us-gaap:USTreasurySecuritiesMember us-gaap:FairValueInputsLevel1Member 2025-08-02 0000018255 us-gaap:USTreasurySecuritiesMember us-gaap:FairValueInputsLevel2Member 2025-08-02 0000018255 us-gaap:USTreasurySecuritiesMember us-gaap:FairValueInputsLevel3Member 2025-08-02 0000018255 us-gaap:USTreasurySecuritiesMember us-gaap:FairValueInputsLevel1Member 2025-02-01 0000018255 us-gaap:USTreasurySecuritiesMember us-gaap:FairValueInputsLevel2Member 2025-02-01 0000018255 us-gaap:USTreasurySecuritiesMember us-gaap:FairValueInputsLevel3Member 2025-02-01 0000018255 us-gaap:AccumulatedNetUnrealizedInvestmentGainLossMember 2024-02-04 2024-08-03 0000018255 us-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMember 2024-02-04 2024-08-03 0000018255 cato:RetailSegmentMember 2025-02-02 2025-08-02 0000018255 us-gaap:CommonClassAMember us-gaap:RestrictedStockMember 2024-02-04 2024-08-03 0000018255 us-gaap:CommonClassAMember us-gaap:EmployeeStockOptionMember 2025-02-02 2025-08-02 0000018255 us-gaap:CreditCardMember 2024-02-04 2024-08-03 0000018255 us-gaap:CommonClassAMember us-gaap:EmployeeStockOptionMember 2024-02-04 2024-08-03 0000018255 us-gaap:USStatesAndPoliticalSubdivisionsMember srt:MinimumMember 2025-08-02 0000018255 srt:MaximumMember us-gaap:USStatesAndPoliticalSubdivisionsMember 2025-08-02 0000018255 us-gaap:CommonStockMember 2025-02-01 0000018255 us-gaap:AdditionalPaidInCapitalMember 2025-02-01 0000018255 us-gaap:RetainedEarningsMember 2025-02-01 0000018255 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2025-02-01 0000018255 us-gaap:CommonStockMember 2025-02-02 2025-05-03 0000018255 us-gaap:AdditionalPaidInCapitalMember 2025-02-02 2025-05-03 0000018255 us-gaap:RetainedEarningsMember 2025-02-02 2025-05-03 0000018255 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2025-02-02 2025-05-03 0000018255 2025-02-02 2025-05-03 0000018255 us-gaap:CommonStockMember 2025-05-03 0000018255 us-gaap:AdditionalPaidInCapitalMember 2025-05-03 0000018255 us-gaap:RetainedEarningsMember 2025-05-03 0000018255 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2025-05-03 0000018255 2025-05-03 0000018255 us-gaap:CommonStockMember 2025-05-04 2025-08-02 0000018255 us-gaap:AdditionalPaidInCapitalMember 2025-05-04 2025-08-02 0000018255 us-gaap:RetainedEarningsMember 2025-05-04 2025-08-02 0000018255 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2025-05-04 2025-08-02 0000018255 us-gaap:CommonStockMember 2025-08-02 0000018255 us-gaap:AdditionalPaidInCapitalMember 2025-08-02 0000018255 us-gaap:RetainedEarningsMember 2025-08-02 0000018255 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2025-08-02 0000018255 us-gaap:CommonStockMember 2024-02-03 0000018255 us-gaap:AdditionalPaidInCapitalMember 2024-02-03 0000018255 us-gaap:RetainedEarningsMember 2024-02-03 0000018255 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2024-02-03 0000018255 us-gaap:CommonStockMember 2024-02-04 2024-05-04 0000018255 us-gaap:AdditionalPaidInCapitalMember 2024-02-04 2024-05-04 0000018255 us-gaap:RetainedEarningsMember 2024-02-04 2024-05-04 0000018255 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2024-02-04 2024-05-04 0000018255 2024-02-04 2024-05-04 0000018255 us-gaap:CommonStockMember 2024-05-04 0000018255 us-gaap:AdditionalPaidInCapitalMember 2024-05-04 0000018255 us-gaap:RetainedEarningsMember 2024-05-04 0000018255 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2024-05-04 0000018255 2024-05-04 0000018255 us-gaap:CommonStockMember 2024-05-05 2024-08-03 0000018255 us-gaap:AdditionalPaidInCapitalMember 2024-05-05 2024-08-03 0000018255 us-gaap:RetainedEarningsMember 2024-05-05 2024-08-03 0000018255 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2024-05-05 2024-08-03 0000018255 us-gaap:CommonStockMember 2024-08-03 0000018255 us-gaap:AdditionalPaidInCapitalMember 2024-08-03 0000018255 us-gaap:RetainedEarningsMember 2024-08-03 0000018255 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2024-08-03 0000018255 cato:ABLCreditAgreementMember 2025-08-02 0000018255 cato:ABLCreditAgreementMember 2025-02-02 2025-08-02 0000018255 cato:RetailSegmentMember 2025-05-04 2025-08-02 0000018255 cato:CreditSegmentMember 2025-05-04 2025-08-02 0000018255 cato:LandHeldForInvestmentMember 2024-02-04 2024-05-04 0000018255 cato:CreditSegmentMember 2025-02-02 2025-08-02 0000018255 cato:RetailSegmentMember 2024-05-05 2024-08-03 0000018255 cato:CreditSegmentMember 2024-05-05 2024-08-03 0000018255 cato:RetailSegmentMember 2024-02-04 2024-08-03 0000018255 cato:CreditSegmentMember 2024-02-04 2024-08-03 0000018255 us-gaap:CommonClassAMember us-gaap:RestrictedStockMember 2024-02-04 2025-02-01 0000018255 us-gaap:CommercialPaperMember 2025-08-02 0000018255 us-gaap:FairValueInputsLevel1Member us-gaap:CommercialPaperMember 2025-08-02 0000018255 us-gaap:FairValueInputsLevel2Member us-gaap:CommercialPaperMember 2025-08-02 0000018255 us-gaap:FairValueInputsLevel3Member us-gaap:CommercialPaperMember 2025-08-02 0000018255 srt:MinimumMember 2025-08-02 0000018255 srt:MaximumMember 2025-08-02 0000018255 us-gaap:USTreasurySecuritiesMember srt:MinimumMember 2025-08-02 0000018255 us-gaap:CommonClassAMember us-gaap:EmployeeStockMember 2024-08-03 0000018255 us-gaap:AccumulatedNetUnrealizedInvestmentGainLossMember 2024-02-03 0000018255 us-gaap:AccumulatedNetUnrealizedInvestmentGainLossMember 2025-05-03 0000018255 us-gaap:AccumulatedNetUnrealizedInvestmentGainLossMember 2025-08-02 0000018255 us-gaap:AccumulatedNetUnrealizedInvestmentGainLossMember 2025-02-01 0000018255 us-gaap:AccumulatedNetUnrealizedInvestmentGainLossMember 2024-08-03 0000018255 us-gaap:AccumulatedNetUnrealizedInvestmentGainLossMember 2024-05-04 iso4217:USD xbrli:pure xbrli:shares iso4217:USD xbrli:shares dummy:Segments dummy:States
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