UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.20549
FORM
10-Q
☑
QUARTERLY REPORT PURSUANTTO SECTION13 OR 15(d)OF THE SECURITIESEXCHANGEACT OF
1934
For the quarterly period ended
August 1, 2026
OR
☐
TRANSITIONREPORT PURSUANTTO SECTION13 OR 15(d)OF THE SECURITIESEXCHANGEACT OF
1934
For the transition period from ________________to__________________
Commission file number
1-31340
THE CATO CORPORATION
(Exact name of registrant as specified in itscharter)
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, ifchanged 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
Indicateby checkmarkwhethertheregistrant(1)hasfiledallreportsrequiredtobefiledby Section13or15(d)oftheSecurities
Exchange Act of 1934during the preceding 12months (or for such shorterperiod that the registrantwas required to file suchreports),
and (2) has been subject to such filing requirements for the past 90 days.
Yes
X
No
IndicatebycheckmarkwhethertheregistranthassubmittedelectronicallyeveryInteractiveDataFilerequiredtobesubmitted
pursuant to Rule405 of RegulationS-T (§232.405of this chapter)during the preceding12 months (orfor such shorterperiod that the
registrant was required to submit such files).
Yes
X
No
Indicate bycheck markwhether theregistrant isa largeaccelerated filer,an acceleratedfiler, anon-accelerated filer,a smallerreporting
company,oranemerginggrowthcompany.Seethedefinitionsof“largeacceleratedfiler,”“acceleratedfiler,”“smallerreporting
company,” and “emerging growthcompany” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
☐
Accelerated filer
☐
Non-accelerated filer
☑
Smaller reporting company
☑
Emerging growth company
☐
Ifanemerginggrowthcompany,indicatebycheckmarkiftheregistranthaselectednottousetheextendedtransitionperiodfor
complying with any new or revised financial accounting standards providedpursuant 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 1, 2026, there were
18,148,297
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 1, 2026
Tableof Contents
Page No.
PARTI – 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 August1, 2026 and August 2, 2025
Condensed Consolidated Balance Sheets
3
At August 1, 2026 and January 31, 2026
Condensed Consolidated Statements of Cash Flows
4
For the Six Months Ended August 1, 2026 and August2, 2025
Condensed Consolidated Statements of Stockholders’ Equity
5 – 6
For the Three Months and Six Months Ended August1, 2026 and August 2, 2025
Notes to Condensed Consolidated Financial Statements
7 – 23
Item 2.
Management’s Discussion and Analysisof Financial Condition and
Results of Operations
24 – 30
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
31
Item 4.
Controls and Procedures
31
PARTII – OTHER INFORMATION
Item 1.
Legal Proceedings
32
Item 1A.
Risk Factors
32
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
32
Item 3.
Defaults Upon Senior Securities
32
Item 4.
Mine Safety Disclosures
33
Item 5.
Other Information
33
Item 6.
Exhibits
33
Signatures
34
2
PARTI FINANCIAL INFORMATION
ITEM 1.FINANCIAL STATEMENTS
THE CATO CORPORATION
CONDENSED CONSOLIDATED STATEMENTSOF INCOME AND
COMPREHENSIVE INCOME
(UNAUDITED)
Three Months Ended
SixMonths Ended
August 1, 2026
August 2, 2025
August 1, 2026
August 2, 2025
(Dollars in thousands, except per share data)
REVENUES
Retail sales
$
163,902
$
174,653
$
333,312
$
343,072
Other revenue (principally finance charges, late fees and
layaway charges)
1,599
1,856
3,293
3,679
Total revenues
165,501
176,509
336,605
346,751
COSTS AND EXPENSES, NET
Cost of goods sold (exclusive of depreciation shownbelow)
110,180
111,467
216,520
220,784
Selling, general and administrative (exclusive ofdepreciation
shown below)
54,047
57,371
107,977
112,696
Depreciation
2,246
2,525
4,482
5,089
Interest and other income, net
(2,268)
(1,393)
(3,501)
(2,594)
Costs and expenses, net
164,205
169,970
325,478
335,975
Income before income taxes
1,296
6,539
11,127
10,776
Income tax expense (benefit)
147
(293)
669
635
Net income
$
1,149
$
6,832
$
10,458
$
10,141
Basic earnings per share
$
0.06
$
0.35
$
0.53
$
0.51
Diluted earnings per share
$
0.06
$
0.35
$
0.53
$
0.51
Comprehensive income:
Net income
$
1,149
$
6,832
$
10,458
$
10,141
Net unrealized gain (loss) on available-for-sale securities, net of
deferred income taxes of $
0
for each of the three and six months
ended August 1, 2026 and August 2, 2025, respectively
(231)
68
(491)
106
Comprehensive income
$
918
$
6,900
$
9,967
$
10,247
See notes to condensed consolidated financial statements (unaudited).
3
THE CATO CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
August 1, 2026
January 31, 2026
(Dollars in thousands, except per share data)
ASSETS
Current Assets:
Cash and cash equivalents
$
35,115
$
16,788
Short-term investments
58,650
56,859
Restricted cash
2,675
2,675
Accounts receivable, net of allowance for customer credit losses of
$
690
and $
682
at August 1, 2026 and January 31, 2026, respectively
20,459
25,462
Merchandise inventories
82,487
83,696
Prepaid expenses and other current assets
9,077
7,787
Total Current Assets
208,463
193,267
Property and equipment – net
51,730
53,748
Other assets
20,942
20,471
Right-of-Use assets – net
142,303
153,933
Total Assets
$
423,438
$
421,419
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable
$
73,758
$
64,958
Accrued expenses
31,830
37,101
Accrued bonus and benefits
-
326
Accrued income taxes
52
-
Current lease liability
47,835
53,507
Total Current Liabilities
153,475
155,892
Other noncurrent liabilities
11,264
11,272
Lease liability
90,794
96,941
Commitments and contingencies (Note 10)
-
-
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;
18,148,297
shares and
17,976,854
shares
issued at August 1, 2026 and January 31, 2026, respectively
613
608
Convertible Class B common stock, $
0.033
par value per share,
15,000,000
shares authorized;
1,763,652
shares
issued at August 1, 2026 and January 31, 2026
59
59
Additional paid-in capital
132,384
131,347
Retained earnings
35,066
25,026
Accumulated other comprehensive income (loss)
(217)
274
Total Stockholders' Equity
167,905
157,314
Total Liabilities and Stockholders' Equity
$
423,438
$
421,419
See notes to condensed consolidated financial statements (unaudited).
4
THE CATO CORPORATION
CONDENSED CONSOLIDATED STATEMENTSOF CASH FLOWS
(UNAUDITED)
Six Months Ended
August 1, 2026
August 2, 2025
(Dollars in thousands)
Operating Activities:
Net income
$
10,458
$
10,141
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation
4,482
5,089
Provision for customer credit losses
414
442
Premium amortization and discount accretion on investments
(94)
(464)
Gain on sale of assets held for investment
-
(34)
Share-based compensation
972
587
Gain on disposal of property and equipment
(13)
(37)
Changes in operating assets and liabilities which provided
(used) cash:
Accounts receivable
3,853
(2,054)
Merchandise inventories
1,209
13,466
Prepaid and other assets
(1,761)
(1,756)
Operating lease right-of-use assets and liabilities
(189)
(357)
Accounts payable, accrued expenses and other liabilities
3,206
(9,383)
Net cash provided by operating activities
22,537
15,640
Investing Activities:
Expenditures for property and equipment
(2,410)
(2,362)
Purchase of short-term investments
(15,963)
(12,906)
Sales of short-term investments
13,774
14,349
Sales of other assets
-
34
Proceeds from life insurance policy
738
-
Net cash used in investing activities
(3,861)
(885)
Financing Activities:
Repurchase of common stock
(422)
(995)
Proceeds from employee stock purchase plan
73
62
Net cash used in financing activities
(349)
(933)
Net increase in cash, cash equivalents, and restricted cash
18,327
13,822
Cash, cash equivalents, and restricted cash at beginning of period
19,463
23,078
Cash, cash equivalents, and restricted cash at end of period
$
37,790
$
36,900
Non-cash activity:
Accrued other assets and property and equipment expenditures
$
379
$
334
See notes to condensed consolidated financial statements (unaudited).
5
THE CATO CORPORATION
CONDENSED CONSOLIDATED STATEMENTSOF STOCKHOLDERS’ EQUITY
(UNAUDITED)
Accumulated
Additional
Other
Total
Common
Paid-in
Retained
Comprehensive
Stockholders'
Stock
Capital
Earnings
Income (Loss)
Equity
(Dollars in thousands, except per share data)
Balance — January 31, 2026
$
667
$
131,347
$
25,026
$
274
$
157,314
Comprehensive income:
Net income
-
-
9,309
-
9,309
Unrealized net loss on available-for-sale securities, net of
deferred income tax benefit of $
0
-
-
-
(260)
(260)
Class A common stock sold through employee stock purchaseplan
1
88
-
-
89
Share-based compensation issuances and exercises
10
(10)
-
-
-
Share-based compensation expense
-
564
-
-
564
Repurchase and retirement of treasury shares
(4)
-
(307)
-
(311)
Balance — May 2, 2026
$
674
$
131,989
$
34,028
$
14
$
166,705
Comprehensive income:
Net income
-
-
1,149
-
1,149
Unrealized net loss on available-for-sale securities, net of
deferred income tax benefit of $
0
-
-
-
(231)
(231)
Share-based compensation issuances and exercises
(1)
-
-
-
(1)
Share-based compensation expense
-
395
-
-
395
Repurchase and retirement of treasury shares
(1)
-
(111)
-
(112)
Balance — August 1, 2026
$
672
$
132,384
$
35,066
$
(217)
$
167,905
See notes to condensed consolidated financial statements (unaudited).
6
THE CATO CORPORATION
CONDENSED CONSOLIDATED STATEMENTSOF 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 purchaseplan
-
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).
THE CATO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(UNAUDITED)
7
NOTE 1 - GENERAL
:
The condensedconsolidated financialstatements asof August1, 2026and forthe threeand sixmonths
ended August1, 2026and August2, 2025have beenprepared fromthe accountingrecords ofThe Cato
Corporation andits wholly-ownedsubsidiaries (the“Company”), andall amountsshown areunaudited.
In theopinion ofmanagement, alladjustments considerednecessary fora fairstatement ofthe financial
statements havebeen included.All suchadjustments areof anormal, recurringnature unlessotherwise
noted.The results of the interim periods may not be indicative of the results expectedfor the entire year.
The interim financialstatements should be readin conjunction withthe consolidated financial statements
andnotesthereto,includedintheCompany’sAnnualReportonForm10-Kforthefiscalyearended
January 31,2026.Amounts asof January 31,2026 have beenderived from theaudited annualfinancial
statements, butdo notinclude alldisclosures required byaccounting principlesgenerally accepted inthe
United States of America.
InFebruary2026,theU.S.SupremeCourtissuedarulingthattariffsimposedundertheInternational
EmergencyEconomicPowersAct(“IEEPA”)ongoodsimportedintotheUnitedStateswere
unauthorized,effectivelyinvalidatingIEEPAtariffs.InApril2026,followingtheSupremeCourt’s
invalidationoftheIEEPAtariffsandtheestablishmentofproceduresforprocessingtariffrefunds,the
Company submitted a refund claim and recorded a $
5.7
million reduction in cost of goods sold in the first
quarter of fiscal 2026. During the second quarter of fiscal 2026, the Company received full payment of its
tariff refund claim.
THE CATO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(UNAUDITED)
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 ofall income statements forall entities with complexcapital
structures.The Company has presented one basic EPS and one diluted EPS amount for all common shares in
the accompanyingCondensed ConsolidatedStatements ofIncome andComprehensive Income.While the
Company’s certificateof incorporationprovides theright forthe Board ofDirectors todeclare dividendson
ClassAshareswithoutdeclarationofcommensuratedividendsonClassBshares,theCompanyhas
historically paid the same dividends to both Class A and Class B shareholders and theBoard of Directors has
resolved to continue this practice.Accordingly, the Company’s allocation of income for purposes of the EPS
computation is the samefor Class A andClass B shares andthe EPS amounts reportedherein are applicable
to both Class A and Class Bshares.
BasicEPSiscomputedasnetincomelessearningsallocatedtonon-vestedequityawardsdividedbythe
weighted averagenumber ofcommon sharesoutstanding forthe period.Diluted EPSreflects thepotential
dilutionthatcouldoccurfromcommonsharesissuablethroughstockoptionsandtheEmployeeStock
Purchase Plan.
Three Months Ended
Six Months Ended
August 1, 2026
August 2, 2025
August 1, 2026
August 2, 2025
(Dollars in thousands, except per share data)
Numerator
Net earnings
$
1,149
$
6,832
$
10,458
$
10,141
Earnings allocated to non-vested equity awards
(53)
(319)
(483)
(531)
Net earnings available to common stockholders
$
1,096
$
6,513
$
9,975
$
9,610
Denominator
Basic weighted average common shares outstanding
19,000,182
18,809,364
18,909,337
18,747,100
Diluted weighted average common shares outstanding
19,000,182
18,809,364
18,909,337
18,747,100
Net income per common share
Basic earnings per share
$
0.06
$
0.35
$
0.53
$
0.51
Diluted earnings per share
$
0.06
$
0.35
$
0.53
$
0.51
Unvested restricted stockexcluded fromthe calculation ofdiluted EPSwas
926,511
and
915,221
shares for
the three and six month periodsended August 1, 2026, respectively, and
922,075
and
1,036,914
shares for the
three and sixmonth periods endedAugust 2, 2025,respectively, becausethe effect ofincluding them inthe
calculation of diluted EPS would have beenantidilutive.
THE CATO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(UNAUDITED)
9
NOTE 3 – ACCUMULATED OTHER COMPREHENSIVE INCOME(LOSS):
ThefollowingtablesetsforthinformationregardingthechangesinAccumulatedothercomprehensive
income (loss) (in thousands) for thethree months ended August 1, 2026:
Changes in Accumulated Other
Comprehensive Income (Loss) (a)
Unrealized Gains
and (Losses) on
Available-for-Sale
Securities
Beginning Balance at May 2, 2026
$
14
Other comprehensive loss before
reclassification
(231)
Amounts reclassified from accumulated
other comprehensive income
-
Net current-period other comprehensive loss
(231)
Ending Balance at August 1, 2026
$
(217)
(a) All amounts are net-of-tax. Amounts in parentheses indicate a debit/reduction to accumulated other comprehensive income.
ThefollowingtablesetsforthinformationregardingthechangesinAccumulatedothercomprehensive
income (loss) (in thousands) for thesix months ended August 1, 2026:
Changes in Accumulated Other
Comprehensive Income (Loss) (a)
Unrealized Gains
and (Losses) on
Available-for-Sale
Securities
Beginning Balance at January 31, 2026
$
274
Other comprehensive loss before
reclassification
(491)
Amounts reclassified from accumulated
other comprehensive income
-
Net current-period other comprehensive loss
(491)
Ending Balance at August 1, 2026
$
(217)
(a) All amounts are net-of-tax. Amounts in parentheses indicate a debit/reduction to accumulated other comprehensive income.
THE CATO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(UNAUDITED)
10
NOTE 3 – ACCUMULATED OTHER COMPREHENSIVE INCOME(LOSS) (CONTINUED):
ThefollowingtablesetsforthinformationregardingthechangesinAccumulatedothercomprehensive
income (in thousands) for thethree 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
-
Net current-period other comprehensive income
68
Ending Balance at August 2, 2025
$
259
(a) All amounts are net-of-tax.
ThefollowingtablesetsforthinformationregardingthechangesinAccumulatedothercomprehensive
income (in thousands) for thesix 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 (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 gains on
available-for-sale securities. The tax impact of this reclassification was $
0
.
THE CATO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(UNAUDITED)
11
NOTE 4 – FINANCING ARRANGEMENTS:
On March13,2025, theCompany, asborrower, andcertainother domesticsubsidiaries, asborrowersand
guarantors, enteredinto aCredit Agreement(the “ABLCredit Agreement”)and relatedloan documents,by
andamongtheCompany,certainotheroftheCompany’sdomesticsubsidiaries,andWellsFargoBank,
National Association,as thelender (the“Lender”), toestablish anasset-based revolvingcredit facility(the
“ABLFacility”)inanamountupto$
35.0
million.TheproceedsfromtheABLFacilitymaybeusedto
provide funding for ongoing working capitaland general corporate purposes.
TheABLCreditAgreementiscommittedthrough
March 2028
andissecuredprimarilybyinventoryand
third-partycreditcardreceivables.Therewere
no
borrowingsoutstandingandtheavailabilityunderthe
facilitywas$
30.0
millionbeforegivingeffecttoa$
3.0
millionoutstandingletterofcreditthatreduced
borrowing availabilityto $
27.0
million asof August1, 2026and January31, 2026.The weightedaverage
interest rate under thecredit facility was
zero
at August 1, 2026and January 31, 2026due to
no
outstanding
borrowings.
THE CATO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(UNAUDITED)
12
NOTE 5 – REPORTABLE SEGMENT INFORMATION:
TheCompanyhasdeterminedthatithas
four
operatingsegments,asdefinedunderASC280–
Segment
Reporting
(“ASC 280”), including Cato, It’sFashion, Versona and Credit.The Company has
two
reportable
segments: Retailand Credit.The Companyhas aggregatedits
three
retail operatingsegments, inclusiveof
the e-commerce activities of each retail operating segment, based on the aggregation criteria outlined inASC
280-10,which states that two or moreoperating segments may be aggregated into asingle reportable segment
ifaggregationisconsistentwiththeobjectiveandbasicprinciplesofASC280-10,whichrequirethe
segmentstohavesimilareconomiccharacteristics,products,productionprocesses,clientsandmethodsof
distribution.
TheCompany’sretailoperatingsegmentshavesimilareconomiccharacteristicsandsimilaroperating,
financial andcompetitive risks.The productssold in eachretail operatingsegment aresimilar innature, as
theyallofferwomen’sapparel,shoesandaccessories.MerchandiseinventoryoftheCompany’sretail
operatingsegmentsissourcedfromthesamecountriesandsomeofthesamevendors,usingsimilar
production processes.Merchandise for the Company’s retail operating segments is distributed to retail stores
inasimilarmannerthroughtheCompany’ssingledistributioncenterandissubsequentlydistributedto
customers in asimilar manner. TheCompany operatesitswomen’sfashionspecialtyretailstoresin
31
states as of August 1, 2026, principally in the southeastern United States.
The Company offers its own credit card to itscustomers and all credit authorizations, payment processing
and collectionefforts areperformed bya wholly-ownedsubsidiary ofthe Company.The Companydoes
not allocate certain corporate expenses to the Credit segment.
The Company’sPresident andChief Executive Officeris theCompany’s chiefoperating decisionmaker
(“CODM”).Thestructure describedabove reflectsthemanner inwhichtheCODM regularlyassesses
informationfordecision-makingpurposes,includingtheallocationofresources.TheCompanyalso
provides corporateservices, includingfinance, informationtechnology,and corporateadministration, to
its segments which are fully allocated to the retail segment. Interest and other income from assets held for
investment and sale arenot included in assessingthe segments’ performance and,therefore, not allocated
to either segment.
TheCODMmanagesandevaluatesthesegments’operatingperformancebasedonsegmentsales,
expenses,andsegmentincomebeforeincometaxesaspresentedintheCompany’sannualbudgetand
forecasting process,as wellasmonthly analysesof budget-to-actualand prioryear variances.Segment
expensesandotheritemsprimarilyincludecostofgoodssold,selling,generalandadministrative
expenses,depreciationandinterestandotherincome.Assessmentandapprovalofallcapital
expenditures are determined to be in support of and based on the needs of the retail segment; however, the
CODMdoesnotevaluateperformanceorallocateresourcesbasedonsegmentassetbalancesand,
therefore,totalsegmentassetsarenotpresentedinthetablesbelow.Themeasureofsegmentassetsis
reported on the balance sheet as total consolidated assets.
The accountingpolicies ofthe segmentsare thesame asthose describedin theSummary ofSignificant
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 January 31, 2026.
THE CATO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(UNAUDITED)
13
NOTE 5 – REPORTABLE SEGMENT INFORMATION(CONTINUED):
The following schedule summarizes certain segment information (inthousands):
Three Months Ended
August 1, 2026
Retail
Credit
Total
Revenues
$
164,850
$
651
$
165,501
Cost of goods sold (a)
110,180
-
110,180
Selling, general, and administrative (b)
39,099
423
39,522
Corporate overhead
14,525
-
14,525
Depreciation
2,246
-
2,246
Interest and other income, net
(88)
(266)
(354)
Segment income (loss) before income taxes
$
(1,112)
$
494
$
(618)
Corporate interest and other income
(1,914)
Income before income taxes
$
1,296
Capital expenditures
$
1,343
$
-
$
1,343
Six Months Ended
August 1, 2026
Retail
Credit
Total
Revenues
$
335,289
$
1,316
$
336,605
Cost of goods sold (a)
216,520
-
216,520
Selling, general, and administrative (b)
77,816
820
78,636
Corporate overhead
29,341
-
29,341
Depreciation
4,482
-
4,482
Interest and other income, net
(173)
(538)
(711)
Segment income before income taxes
$
7,303
$
1,034
$
8,337
Corporate interest and other income
(2,790)
Income before income taxes
$
11,127
Capital expenditures
$
2,410
$
-
$
2,410
(a) 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.
(b) 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)
14
NOTE 5 – REPORTABLE SEGMENT INFORMATION(CONTINUED):
Three Months Ended
August 2, 2025
Retail
Credit
Total
Revenues
$
175,856
$
653
$
176,509
Cost of goods sold (a)
111,467
-
111,467
Selling, general, and administrative (b)
40,130
414
40,544
Corporate overhead
16,827
-
16,827
Depreciation
2,525
-
2,525
Interest and other income, net
(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 (a)
220,784
-
220,784
Selling, general, and administrative (b)
79,289
801
80,090
Corporate overhead
32,606
-
32,606
Depreciation
5,089
-
5,089
Interest and other income, net
(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) 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.
(b) 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)
15
NOTE 6 – STOCK-BASED COMPENSATION:
As of August1, 2026, theCompany’s 2018 IncentiveCompensation Planallows for thegranting of various
forms of equity-based awards,including restricted stockand stock options forgrant to officers, directorsand
key employees.
Thefollowingtablepresentsthenumberofoptionsandsharesofrestrictedstockinitiallyauthorizedand
available for grant under this plan asof August 1, 2026:
2018
Plan
Options and/or restricted stock initially authorized
4,725,000
Options and/or restricted stock available for grant
2,574,134
InaccordancewithASC718–
Compensation–StockCompensation
,thefairvalueofcurrentrestricted
stock awardsis estimatedon thedate ofgrant basedon themarket priceof theCompany’sstock andis
amortized to compensation expense on a straight-line basisover the related vesting periods. As ofAugust
1, 2026and January31, 2026,there was$
3,644,000
and $
4,064,000
, respectively,of totalunrecognized
compensationexpenserelatedtounvestedrestrictedstockawards,whichhadaremainingweighted-
average vestingperiodof
1.8
yearsand
1.4
years,respectively.Thetotalcompensation expenseduring
the three andsix months endedAugust 1, 2026was $
395,000
and $
959,000
, respectively,compared to a
totalcompensationexpenseof$
394,000
and$
578,000
forthethreeandsixmonthsendedAugust2,
2025,respectively.ThiscompensationactivityisclassifiedasacomponentofSelling,generaland
administrative expenses in the Condensed Consolidated Statements of Income.
The following summaryshows the changesin the numberof shares ofunvested restricted stockoutstanding
duringthe six months endedAugust1, 2026:
Weighted Average
Number of
Grant Date Fair
Shares
ValuePer Share
Restricted stock awards at January 31, 2026
905,052
$
8.06
Granted
298,494
2.88
Vested
(269,829)
11.45
Forfeited or expired
(11,584)
6.03
Restricted stock awards at August 1, 2026
922,133
$
5.42
THE CATO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(UNAUDITED)
16
NOTE 6 – STOCK BASED-COMPENSATION (CONTINUED):
TheCompany’sEmployeeStockPurchasePlanallowseligiblefull-timeemployeestopurchasealimited
number ofsharesof theCompany’sClassACommon Stockduring eachsemi-annual offeringperiodata
15
% discount through payrolldeductions. During thesix months ended August1, 2026 and August2, 2025,
theCompanysold
31,503
and
21,736
sharestoemployeesatanaveragediscountof$
0.43
and$
0.50
per
share, respectively, underthe Employee StockPurchase Plan. Thecompensation expense recognizedfor the
15
% discountgiven underthe EmployeeStock PurchasePlan wasapproximately $
13,000
and $
11,000
for
the sixmonths endedAugust 1,2026 andAugust 2,2025, respectively.These expensesare classifiedas a
componentofSelling,generalandadministrativeexpensesintheCondensedConsolidatedStatementsof
Income.
NOTE 7– FAIR VALUE MEASUREMENTS:
The followingtablesset forthinformation regardingtheCompany’s financialassets andliabilities thatare
measured at fair value (in thousands)as of August 1, 2026 andJanuary 31, 2026:
Quoted
Prices in
Active
Significant
Markets for
Other
Significant
Identical
Observable
Unobservable
August 1, 2026
Assets
Inputs
Inputs
Description
Level 1
Level 2
Level 3
Assets:
Corporate Bonds
$
58,650
$
-
$
58,650
$
-
Cash Surrender Value of Life Insurance
9,982
-
-
9,982
Total Assets
$
68,632
$
-
$
58,650
$
9,982
Liabilities:
Deferred Compensation
$
(8,289)
$
-
$
-
$
(8,289)
Total Liabilities
$
(8,289)
$
-
$
-
$
(8,289)
THE CATO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(UNAUDITED)
17
NOTE 7– FAIR VALUE MEASUREMENTS(CONTINUED):
Quoted
Prices in
Active
Significant
Markets for
Other
Significant
Identical
Observable
Unobservable
January 31, 2026
Assets
Inputs
Inputs
Description
Level 1
Level 2
Level 3
Assets:
Corporate Bonds
54,822
-
54,822
-
U.S. Treasury/Agencies Notes and Bonds
2,037
-
2,037
-
Cash Surrender Value of Life Insurance
9,693
-
-
9,693
Total Assets
$
66,552
$
-
$
56,859
$
9,693
Liabilities:
Deferred Compensation
$
(8,383)
$
-
$
-
$
(8,383)
Total Liabilities
$
(8,383)
$
-
$
-
$
(8,383)
TheCompany’s investmentportfoliowasprimarily investedincorporate bondsheld inmanaged accounts
with underlyingratings ofA orbetter atAugust 1,2026.The corporatebonds havecontractual maturities
which range from
two days
to
2.7
years.
Additionally,atAugust 1,2026, theCompany haddeferredcompensation planassets of$
10.0
million.At
January31,2026,theCompanyhaddeferredcompensationplanassetsof$
9.7
million.Theseassetsare
recorded within Other assets in the CondensedConsolidated Balance Sheets.
Level 2 investment securities atAugust 1, 2026 includecorporate bonds for whichquoted prices may notbe
available on active exchanges for identicalinstruments.Their fair value is principally based on marketvalues
determined by management with the assistanceof a third-party pricing service.Since quoted prices in active
marketsforidenticalassetsarenotavailable,thesepricesaredeterminedbythepricingserviceusing
observable market information such as quotes from less active markets and/or quoted prices of securities with
similar characteristics, among other factors.
Deferred compensation planassets consist oflife insurance policies.These life insurancepolicies are valued
based on the cash surrender value of the insurance contract, which is determined based onsuch factors as the
fair value of the underlying assets and discounted cash flow and are therefore classified within Level 3of the
valuationhierarchy.TheLevel3liabilityassociatedwiththelifeinsurancepoliciesrepresentsadeferred
compensation obligation,the valueof whichis trackedvia underlyinginsurance funds’net assetvalues, as
recordedinOthernoncurrentliabilitiesintheCondensedConsolidatedBalanceSheets.Thesefundsare
designed to mirror mutual funds and moneymarket funds that are observable andactively traded.
ThefollowingtablessummarizethechangeinfairvalueoftheCompany’sfinancialassetsandliabilities
measured using Level 3 inputs for the six months ended August 1, 2026 and the year ended January31, 2026
(in thousands):
THE CATO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(UNAUDITED)
18
NOTE 7– FAIR VALUE MEASUREMENTS(CONTINUED):
Fair Value
Measurements Using
Significant Unobservable
Asset Inputs (Level 3)
Cash Surrender Value
Beginning Balance at January 31, 2026
$
9,693
Redemptions
-
Additions
-
Total gains or (losses):
Included in interest and other income, net (or
changes in net assets)
289
Ending Balance at August 1, 2026
$
9,982
Fair Value
Measurements Using
Significant Unobservable
Liability Inputs (Level 3)
Deferred Compensation
Beginning Balance at January 31, 2026
$
(8,383)
Redemptions
548
Additions
(111)
Total (gains) or losses:
Included in interest and other income, net (or
changes in net assets)
(343)
Ending Balance at August 1, 2026
$
(8,289)
THE CATO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(UNAUDITED)
19
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
Redemptions
(365)
Additions
-
Total gains or (losses):
Included in interest and other income, net (or
changes in net assets)
757
Ending Balance at January 31, 2026
$
9,693
Fair Value
Measurements Using
Significant Unobservable
Liability Inputs (Level 3)
Deferred Compensation
Beginning Balance at February 1, 2025
$
(8,548)
Redemptions
1,246
Additions
(206)
Total (gains) or losses:
Included in interest and other income, net (or
changes in net assets)
(875)
Ending Balance at January 31, 2026
$
(8,383)
THE CATO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(UNAUDITED)
20
NOTE 8 – RECENT ACCOUNTING PRONOUNCEMENTS:
InSeptember2025,theFASBissuedASU2025-06,
Intangibles–GoodwillandOther–Internal-Use
Software (Subtopic350-40) – TargetedImprovements tothe Accounting forInternal-Use Software
(ASU
2025-06). TheFASBissued ASU2025-06 tomodernize theaccounting forcosts relatedto internal-use
software to better align with how softwareis developed and to clarify the thresholdto be applied to begin
capitalizingcosts.ASU2025-06iseffectiveforourannualandquarterlyreportingperiodsbeginning
January30,2028.Earlyadoptionispermitted.TheCompany iscurrentlyassessingtheimpactthatthe
adoption of ASU 2025-06 will have on our consolidated financial statements.
InNovember2024,theFASBissuedASU2024-03,
IncomeStatement–ReportingComprehensive
Income–Expense DisaggregationDisclosures(Subtopic 220-40):DisaggregationofIncome Statement
Expenses
,whichrequirespublicentitiestodisclose,onanannualandinterimbasis,disaggregated
informationinthefootnotesaboutspecifiedinformationrelatedtocertaincostsandexpenses.This
guidanceiseffectiveforannualperiodsbeginningafterDecember15,2026,andinterimperiods
beginningafterDecember15,2027,withearlyadoptionpermitted.TheCompanyiscurrentlyinthe
process ofevaluating thepotential impactof adoptionof thisnew guidanceon itsconsolidated financial
statements and related disclosures.
NOTE 9 – INCOME TAXES:
TheCompany hadaneffectivetaxrateforthefirstsixmonths offiscal2026 of
6.0
%compared toan
effectivetaxrateof
5.9
%forthefirstsixmonthsoffiscal2025.Incometaxexpenseforthefirstsix
monthsincreasedto$
0.7
millioninfiscal2026from$
0.6
millioninfiscal2025.Theincreaseintax
expenseisduetothenon-recurringprioryearfavorableadjustmenttothefederalnetoperatingloss
carrybackclaimasaresultoftheCoronavirusAid,ReliefandEconomicSecurityAct(CARESAct),
partially offset by lower foreign and state income taxes.
Duringthesecondquarteroffiscal2026,theCompanyreceiveda$
5.6
millionpaymentforthe
outstanding balance of its income tax refund receivable due fromthe IRS.
NOTE 10 – COMMITMENTS AND CONTINGENCIES:
The Company is, from time to time, involved in routine litigation incidental to the conduct of its business,
includinglitigationregardingthemerchandisethatitsells,litigationregardingintellectualproperty,
litigation institutedby personsinjured uponpremises underits control,litigation withrespect tovarious
employmentmatters,includingallegeddiscrimination andwageandhourlitigation,andlitigationwith
present or former employees.
Although suchlitigation isroutine andincidental tothe conductof theCompany’s business,as withany
businessofitssizewithasignificantnumberofemployeesandsignificantmerchandisesales,such
litigation couldresult inlargemonetary awards.Based oninformation currentlyavailable, management
doesnotbelievethatanyreasonablypossiblelossesarisingfrom currentpending litigationwillhavea
material adverseeffecton itscondensed consolidatedfinancial statements.However,given theinherent
uncertaintiesinvolvedinsuchmatters,anadverseoutcomeinoneormoreofsuchmatterscould
materially and adversely affect the Company’sfinancial condition, results of operations and cash flows in
anyparticularreportingperiod.TheCompanyaccruesforthesematterswhentheliabilityisdeemed
probable and reasonably estimable.
THE CATO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(UNAUDITED)
21
NOTE 11 – REVENUE RECOGNITION:
TheCompanyrecognizessalesatthepointofpurchasewhenthecustomertakespossessionofthe
merchandiseandpaysforthepurchase,generallywithcashorcredit.Salesfrompurchasesmadewith
Catocredit,giftcardsandlayawaysalesfromstoresarealsorecordedwhenthecustomertakes
possession ofthe merchandise. E-commercesales arerecorded when therisk ofloss istransferred to the
customer.Gift cardsare recordedas deferredrevenue until theyare redeemedor forfeited.Gift cardsdo
not have expiration dates. Layaway transactions are recorded asdeferred revenue until the customer takes
possession orforfeits themerchandise. Aprovision ismade forestimated merchandisereturns basedon
salesvolumesandtheCompany’sexperience;actualreturnshavenotvariedmateriallyfromhistorical
amounts.Aprovisionismadeforestimatedwrite-offsassociatedwithsalesmadewiththeCompany’s
proprietarycreditcard.
Inaddition,aprovisionismadeforestimatedrewardscardsissuedto
customers based on their purchases with the Company’s propriety creditcard.The rewards cards
issued by the Company have a 90-day expiration.
Amounts related to shipping and handling billed to
customers ina salestransaction areclassified asOther revenueand thecosts relatedto shippingproduct
to customers (billed and accrued) are classified as Cost of goods sold.
The Companyoffers itsown proprietarycredit cardto customers.All creditactivity isperformed bythe
Company’swholly-ownedsubsidiaries.
None
ofthecreditcardreceivablesaresecured.TheCompany
estimated customer credit lossesof $
206,000
and $
414,000
for the threeand six monthsended August 1,
2026,respectively,comparedto$
227,000
and$
442,000
forthethreeandsixmonthsendedAugust2,
2025,respectively.SalespurchasedontheCompany’sproprietarycreditcardforthethreeandsix
monthsendedAugust1,2026were$
5.1
millionand$
10.3
million,respectively,comparedto$
5.7
million and $
11.1
million for the three and six months ended August 2, 2025, respectively.
Thefollowingtableprovidesinformationaboutreceivablesandcontractliabilitiesfromcontractswith
customers (in thousands):
Balance as of
August 1, 2026
January 31, 2026
Proprietary Credit Card Receivables, net
$
10,310
$
10,711
Gift Card Liability
$
5,623
$
7,475
THE CATO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(UNAUDITED)
22
NOTE 12 – LEASES:
TheCompany determineswhetheranarrangement isaleaseatinception.TheCompanyhasoperating
leasesforstores,offices,warehousespaceandequipment.Itsleaseshaveremainingleasetermsof
one year
to
10 years
,someofwhichincludeoptionstoextendtheleasetermfor
up to five years
,and
someofwhichincludeoptionstoterminatethelease
within one year
.TheCompanyconsidersthese
optionsindeterminingtheleasetermusedtoestablishitsright-of-useassetsandleaseliabilities.The
Company’s leaseagreements do notcontain any material residualvalue guarantees or materialrestrictive
covenants.
AsmostoftheCompany’sleasesdonotprovideanimplicitrate,theCompanyusesitsestimated
incrementalborrowingratebasedontheinformationavailableatcommencementdateoftheleasein
determining the present value of lease payments.
The components of lease cost are shown below (in thousands):
Three Months Ended
August 1, 2026
August 2, 2025
Operating lease cost
$
16,477
$
16,496
Variablelease cost (a)
$
292
$
420
(a) Primarily related to monthly percentage rent for stores not presented on the balance sheet.
Six Months Ended
August 1, 2026
August 2, 2025
Operating lease cost
$
32,796
$
33,084
Variablelease cost (a)
$
811
$
858
(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)
23
NOTE 12 – LEASES (CONTINUED:
Supplemental cash flowinformation and non-cashactivity related tothe Company’soperating leases are
as follows (in thousands):
Operating cash flow information:
Three Months Ended
August 1, 2026
August 2, 2025
Cash paid for amounts included in the measurement of lease liabilities
$
14,443
$
14,829
Non-cash activity:
Right-of-use assets obtained in exchange for lease obligations, net of rent violations
$
7,837
$
12,224
Six Months Ended
August 1, 2026
August 2, 2025
Cash paid for amounts included in the measurement of lease liabilities
$
28,382
$
29,363
Non-cash activity:
Right-of-use assets obtained in exchange for lease obligations, net of rent violations
$
16,673
$
13,430
Weighted-averageremainingleasetermanddiscountratefortheCompany’soperatingleasesareas
follows:
As of
August 1, 2026
August 2, 2025
Weighted-average remaining lease term
2.1
years
2.1
years
Weighted-average discount rate
6.21%
5.92%
As of August 1,2026, the maturitiesof lease liabilities byfiscal year forthe Company’soperating leases
are as follows (in thousands):
Fiscal Year
2026 (a)
$
31,232
2027
50,042
2028
35,059
2029
22,799
2030
13,042
Thereafter
4,835
Total lease payments
157,009
Less: Imputed interest
18,380
Present value of lease liabilities
$
138,629
(a) Excluding the six months ended August 1, 2026
24
THE CATO CORPORATION
ITEM 2.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
FORWARD-LOOKING INFORMATION:
ThefollowinginformationshouldbereadalongwiththeunauditedCondensedConsolidatedFinancial
Statements,includingtheaccompanyingNotesappearinginthisreport.Anyofthefollowingare
“forward-looking”statementswithinthemeaningofSection27AoftheSecuritiesActof1933,as
amended,andSection21EoftheSecuritiesExchange Actof1934,asamended:(1)statementsinthis
Form 10-Qthatreflect projectionsor expectationsof ourfuture financialoreconomic performance;(2)
statementsthatarenothistoricalinformation;(3)statementsofourbeliefs,intentions,plansand
objectives for future operations,including those contained in“Management’s Discussion andAnalysis of
Financial Condition andResults of Operations”;(4) statements relatingto ouroperations or activitiesfor
ourfiscalyearendingJanuary30,2027(“fiscal2026”)andbeyond,including,butnotlimitedto,
statements regarding expectedamounts ofcapital expenditures andstore openings, relocations,remodels
and closures, statementsregarding the potentialimpact of publichealth threats andrelated responses and
mitigation efforts, as well as the potential impact of supply chain disruptions, extreme weather conditions,
tariffsandothertradepolicies,inflationarypressuresandothereconomicconditionsonourbusiness,
resultsofoperationsandfinancialconditionandstatementsregardingnewstoredevelopmentstrategy;
and(5)statementsrelatingtoourfuturerisksorcontingencies.Whenpossible,wehaveattemptedto
identifyforward-lookingstatementsbyusingwordssuchas“will,”“expects,”“anticipates,”
“approximates,” “believes,” “estimates,” “hopes,” “intends,”“may,” “plans,”“could,” “would,” “should”
andanyvariationsornegativeformationsofsuchwordsandsimilarexpressions.Wecangiveno
assurancethat actualresults oreventswill notdiffermaterially fromthoseexpressed orimplied inany
suchforward-lookingstatements.Forward-lookingstatementsincludedinthisreportarebasedon
information availableto usas ofthe filingdate ofthis report,but subjectto knownand unknownrisks,
uncertainties and other factors that could causeactual 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 perceiveddeterioration inthe conditionsthat driveconsumer confidenceand spending,including, but
notlimitedto,prevailingsocial,economic,politicalandpublichealththreatsanduncertainties,waror
similarhostilitiesandtheircollateraleffects,levelsofunemployment,fuel,energyandfoodcosts,
inflation,wagerates,taxrates,tariffrates,interestrates,homevalues,consumernetworthandthe
availabilityofcredit;changesinlaws,regulationsorgovernmentpoliciesaffectingourbusiness,
including but notlimited totariffs, taxesand customs enforcement;uncertainties regarding theimpact of
anygovernmentalactionregarding,orresponsesto,theforegoingconditions;competitivefactorsand
pricingpressures;ourabilitytopredictandrespondtorapidlychangingfashiontrendsandconsumer
demands;ourabilitytosuccessfullyopennewstoresinattractivelocationsandtheabilityofanysuch
newstorestogrowandperformasexpected;underperformanceorotherfactorsthatmayleadtoa
continuation or accelerationof storeclosures and negativelyaffect theCompany’s profitability,financial
conditionorprospects;adverseweather,publichealththreats,actsofwaroraggressionorsimilar
conditions andrelated consequences thatmay affectour salesor operations; inventoryrisks dueto shifts
inmarketdemand,includingtheabilitytoliquidateexcessinventoryatanticipatedmargins;adverse
developments or volatility affecting the financial services industry or broader financial markets; andother
factors discussed under “Risk Factors” in Part I, Item 1A of the Company’sAnnual Report on Form 10-K
forthefiscalyearendedJanuary31,2026(“fiscal2025”),asamendedorsupplemented,andinother
reportswe filewith orfurnish totheSecurities andExchange Commission(“SEC”) fromtimetotime.
Wedonotundertake,andexpresslydecline,anyobligationtoupdateanysuchforward-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)
25
CRITICAL ACCOUNTING POLICIES AND ESTIMATES:
TheCompany’scriticalaccountingpoliciesandestimatesaremorefullydescribedin“Management’s
DiscussionandAnalysisofFinancialConditionandResultsofOperations”inPartII,Item7inthe
Company’s Annual Report onForm 10-K for thefiscal year ended January31, 2026. The preparationof the
Company’sfinancialstatements inconformitywithgenerallyaccepted accountingprinciples intheUnited
States (“GAAP”) requires management to make estimates and assumptions about future events that affect the
amounts reported in thefinancial statements and accompanyingnotes. Future eventsand their effects cannot
bedeterminedwithabsolutecertainty.Therefore,thedeterminationofestimatesrequirestheexerciseof
judgment. Actual resultsinevitably will differfrom those estimates,and such differencesmay be materialto
thefinancialstatements.Themostsignificantaccountingestimatesinherentinthepreparationofthe
Company’s financialstatements includethe calculationof potentialasset impairment,income taxvaluation
allowances,reservesrelatingtoself-insuredhealthinsurance,workers’compensation,generalandauto
insuranceliabilities,uncertaintaxpositions,theallowanceforcustomercreditlosses,andinventory
shrinkage.
The Company’s critical accounting policies andestimates are discussed with the Audit Committee.
THE CATO CORPORATION
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS(CONTINUED)
26
RESULTS OF OPERATIONS:
The following table sets forth, for the periods indicated, certain items inthe Company's unaudited Condensed
Consolidated Statements of Income as apercentage of total retail sales:
Three Months Ended
Six Months Ended
August 1, 2026
August 2, 2025
August 1, 2026
August 2, 2025
Total retail sales
100.0
%
100.0
%
100.0
%
100.0
%
Other revenue
1.0
1.1
1.0
1.1
Total revenues
101.0
101.1
101.0
101.1
Cost of goods sold (exclusive of
depreciation)
67.2
63.8
65.0
64.4
Selling, general and administrative
(exclusive of depreciation)
33.0
32.8
32.4
32.8
Depreciation
1.4
1.4
1.3
1.5
Interest and other income
(1.4)
(0.8)
(1.1)
(0.8)
Income before income taxes
0.8
3.7
3.3
3.1
Net income
0.7
3.9
3.1
3.0
THE CATO CORPORATION
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS(CONTINUED)
27
RESULTS OF OPERATIONS(CONTINUED):
Management’sDiscussionandAnalysisofFinancialConditionandResultsofOperations(“MD&A”)is
intendedtoprovideinformationtoassistreadersinbetterunderstandingandevaluatingourfinancial
condition and results ofoperations. We recommend readingthis MD&A in conjunctionwith our Condensed
Consolidated FinancialStatements andthe Notesto thosestatements included inthe “FinancialStatements”
section of this Quarterly Report onForm 10-Q, as well as our Annual Reporton Form 10-K for fiscal 2025.
Recent Developments
Pricing Pressures
Oursecondquarterresultswerenegativelyimpactedbythecontinuedpressureonourcustomers’
discretionary income.Higher fuel prices,persistent inflationand ongoingelevated interest ratescontinue to
exert downwardpressure onour customers’discretionary income,which webelieve willcontinue tomake
our customersmore cautiouswith theirdiscretionary spendinginto theforeseeable future.In addition,our
ability topass throughcost increasescaused byrising fuelprices, potentialincreased tariffsor otherfactors
will be limited due in partto the pressure on ourcustomers’ discretionary spending.
TariffPressures
OnJuly24,2026,theOfficeoftheU.S.TradeRepresentative (“USTR”)imposedtariffsrangingfrom
10%to12.5%underSection301oftheTradeActof1974onvariouscountries,includingcountries
where asignificant portionof ourproducts aremanufactured, following investigationof thesecountries’
effortstoprohibittheimportofproductsmadewithforcedlabor.TheUSTRisconducting additional
investigationsregardingexcesscapacity,whichcouldalsoresultinincreasedtariffs.Althoughit
currentlyappearsthattheproductionofgarments,shoesandhandbagsarenotbeingtargetedbythese
additional investigations, that may change in the future.
Increased Customs Enforcement
On June 3, 2026, President Trump issued an executive order “Strengthening Customs Enforcement.”The
executive order instructsthe Department ofHomeland Security andU.S. Customs andBorder Protection
tooverhaul importregulations, targetforeignimportersofrecordandraisebondingminimums, among
otheritems.Asaresultofthisexecutiveorder,containersthatweimportdirectlyandcontainers
imported byour suppliersare beingsubjected toadditional U.S.Customs reviewand inspections,which
in somecases areresulting indelays inour receiptof thesecontainers. These delays,depending ontheir
timing and duration,could cause usto take additionalmarkdowns due tothe seasonality ofour products.
These additional inspections and potential new regulations mayalso cause additional compliance costs.
Comparison of the Three and SixMonths ended August 1, 2026with August 2, 2025
Total retail salesfor the secondquarter were$163.9 millioncompared to lastyear’s secondquarter salesof
$174.7 million, a 6% decrease. The Company’s sales decreased in the second quarter of fiscal 2026 primarily
due to a3.7% decrease insame-store sales, aswell as storesthat were closedin the past12 months. Forthe
six monthsended August1, 2026,total retailsales were$333.3 millioncompared tolast year’scomparable
six month sales of $343.1 million,a 2.9%decrease. The decrease insales in the first six monthsof fiscal 2026
was dueprimarily toflat same-storesales andthe impactof storeclosures.Same-store salesinclude stores
that have been openmore than 15 months.Stores that have beenrelocated or expanded arealso included in
THE CATO CORPORATION
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS(CONTINUED)
28
the same-store salescalculation after theyhave been openmore than 15months.The method ofcalculating
same-storesalesvaries acrosstheretail industry.Asaresult,oursame-storesalescalculationmaynotbe
comparable to similarly titled measures reported by other companies. E-commerce sales were less than 5% of
totalsalesforthesixmonthsendedAugust1,2026andareincludedinthesame-storesalescalculation.
Totalrevenues,comprisedofretailsalesandotherrevenue(principallyfinancechargesandlatefeeson
customer accounts receivable and layaway fees), were $165.5 million and $336.6 million for the threeand six
months endedAugust 1,2026, comparedto $176.5million and$346.8 millionfor the threeand sixmonths
endedAugust2,2025,respectively.TheCompanyoperated1,057storesatAugust1,2026comparedto
1,101storesattheendoflastfiscalyear’ssecondquarter.Forthefirstsixmonthsoffiscal2026,the
Company opened two new stores and closed 14 stores. The Company currently expects to open up to 10 new
stores and close approximately 50 storesin fiscal 2026.
Other revenue, a component of total revenues, was $1.6 million and $3.3 million for thethree and six months
endedAugust1,2026,respectively,comparedto$1.9millionand$3.7millionfortheprioryear’s
comparable threeand sixmonth periods.The decreasein Otherrevenue wasdue tolower layawayincome
and e-commerce shipping revenuefor the three andsix months ended August1, 2026 compared tothe three
and sixmonths endedAugust 2,2025.Included inOther revenueis creditrevenue of$0.7 million,which
represented0.4%oftotalrevenuesinthesecondquarteroffiscal2026,relativelyflatbothindollarsand
percentage compared to fiscal 2025.
Credit revenue is comprised of interest earned on the Company’s private
label credit cardportfolio and relatedfee income.Related expenses principallyinclude payroll, postageand
other administrative expensesand totaled $0.4million in thesecond quarter offiscal 2026, comparedto last
year’s second quarter expense of $0.4 million.
Cost ofgoods soldwas $110.2million, or67.2% ofretail salesand $216.5million, or65.0% of retailsales
for thethree andsix monthsended August1, 2026,respectively, comparedto $111.5million, or63.8% of
retailsales and$220.8million,or 64.4%of retailsalesfor thecomparable threeand sixmonthperiods of
fiscal 2025.The overall increasein cost ofgoods sold asa percent ofretail sales forthe second quarterand
firstsixmonthsoffiscal2026versusthecomparablethreeandsixmonthperiodsoffiscal2025resulted
primarily from increasedsales of markeddown goods anddeleveraging of ouroccupancy costs. Inaddition,
for thesix monthsended August1, 2026,cost ofgoods soldbenefited froman IEEPAtariff refund,which
reduced cost ofgoods sold by $5.7million, or 1.7%of retail sales. Costof goods soldincludes merchandise
costs(netofdiscountsandallowances),buyingcosts,distributioncosts,occupancycosts,freightand
inventory shrinkage.Net merchandise costs andin-bound freight are capitalizedas inventory costs.Buying
anddistributioncostsincludepayroll,payroll-relatedcostsandoperatingexpensesforthebuying
departments and distribution center.Occupancy costs include rent, real estate taxes, insurance, common area
maintenance, utilities andmaintenance for stores anddistribution facilities. Total grossmargin dollars (retail
sales lesscost ofgoods soldexclusive ofdepreciation) decreasedby 15.0%to $53.7million forthe second
quarteroffiscal2026andby4.5%to$116.8millionforthefirstsixmonthsoffiscal2026,comparedto
$63.2millionand$122.3millionfortheprioryear’scomparablethreeandsixmonthsoffiscal2025,
respectively.Gross margin as presented may not becomparable to those of other entities.
Selling, general and administrative (“SG&A”) expenses primarily include corporate and store payroll, related
payroll taxes andbenefits, insurance, supplies,advertising, and bankand credit cardprocessing fees. SG&A
expenseswere$54.0million,or33.0%ofretailsalesand$108.0million,or32.4%ofretailsalesforthe
second quarter and first six months of fiscal 2026, respectively, compared to $57.4 million, or32.8% of retail
sales, and $112.7 million, or 32.8% ofretail sales for the prior year’scomparable three and six month periods,
respectively.The decrease in SG&A expenses for thesecond quarter and first six months of fiscal2026 was
primarily due to lower payroll costs andequipment costs partially offset bylitigation and professional fees.
THE CATO CORPORATION
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS(CONTINUED)
29
Depreciation expense was $2.2 million, or 1.4% of retail sales and $4.5 million, or 1.3% ofretail sales for the
second quarterand firstsix monthsof fiscal2026, respectively,compared to$2.5 million,or 1.4%of retail
sales and $5.1 million,or 1.5% of retailsales for the comparable threeand six month periodsof fiscal 2025,
respectively.
Interest and other income was $2.3 million, or 1.4% of retail sales and $3.5 million, or 1.1% of retail sales for
the three and six months ended August1, 2026, respectively, compared to $1.4 million,or 0.8% of retail sales
and$2.6million,or0.8%ofretailsalesforthecomparablethreeandsixmonthperiodsoffiscal2025,
respectively. The increase forthe three andsix months endedAugust 1, 2026compared to thethree and six
months ended August 2, 2025 was primarilydue to interest income received aspart of the Company’s IEEPA
tariff refund and interest onan IRS refund.
Incometaxexpensewas$0.1millionandanexpenseof$0.7millionforthesecondquarterandfirstsix
monthsoffiscal2026,respectively,comparedtoanincometaxbenefitof$0.3millionandincometax
expense of $0.6 millionfor the comparable threemonths and sixmonths of fiscal2025.The increase in tax
expense is due to the non-recurring prior year favorable adjustment to the federal net operating losscarryback
claim as a result of the Coronavirus Aid, Relief and Economic Security Act (CARES Act), partiallyoffset by
lower foreign and state income taxes.
During thesecond quarter offiscal 2026,the Companyreceived a $5.6million payment forthe outstanding
balance of its income taxrefund receivable due from the IRS.
LIQUIDITY, CAPITALRESOURCESAND MARKETRISK:
The Companybelieves thatits cash,cash equivalentsand short-terminvestments, togetherwith cashflows
from operationsand availabilityunder itsasset-backed revolvingline ofcredit, willbe adequate tofund the
Company’s regular operating requirements and expected capitalexpenditures for the next 12 monthsfrom the
issuance of this quarterly reporton Form 10-Q.
Cashprovidedbyoperatingactivitiesduringthefirstsixmonthsoffiscal2026was$22.5millionas
compared to $15.6million provided inthe first sixmonths offiscal 2025. Theincrease incash providedby
operating activities of $6.9million for the firstsix months of fiscal2026 as compared tothe first six months
of fiscal 2025 was primarily attributableto a decrease in accounts receivablein 2026 and the relativechange
of accounts payable from year-end to the second quarter for both years, partially offset by the relative change
in inventories from year-end to the second quarter for both years.The decrease in accounts receivable is due
in large part to receiving theremaining IRS refund pertaining to the 2020tax year.
On August 1, 2026, the Company had working capital of $55.0 million comparedto $37.4 million at January
31,2026.Theincreaseinworkingcapitalwasprimarilyattributabletoanincreaseincashandcash
equivalentsanddecreasesinaccruedexpensesandcurrentleaseliability,partiallyoffsetbyadecreasein
inventories and an increase in accountspayables.
The ABL Credit Agreement (“ABL Facility”) of up to$35.0 million is committed through March2028 and is
secured primarilyby inventoryand third-partycredit cardreceivables. Theproceeds fromthe ABLFacility
may be usedto provide fundingfor ongoing workingcapital and generalcorporate purposes. Therewere no
borrowings outstanding and the availability under the facility was $30.0 million before giving effect to a$3.0
million outstanding letterof credit that reducedborrowing availability to $27.0million as ofAugust 1, 2026
and January 31, 2026.The weighted average interest rate under the credit facility was zero at August 1, 2026
and January 31, 2026 dueto no outstanding borrowings.
THE CATO CORPORATION
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS(CONTINUED)
30
Expenditures for property and equipment totaled $2.4 million in the first six months of fiscal 2026, compared
to$2.4millioninlastfiscalyear’sfirstsixmonths.TheCompanyexpectstoinvestapproximately$7.4
million for capital expenditures forthe full fiscal 2026 year.
Net cash used in investing activities was $3.9 million for the first sixmonths of fiscal 2026 compared to $0.9
million net cash used in thecomparable period of 2025.The increase in net cash usedby investing activities
in 2026 was primarilydue to an increasein the purchase ofshort-term investments, partiallyoffset by lower
sales of short-term investments and proceedsfrom life insurance policies.
Net cashused infinancing activitiestotaled $0.3million inthe firstsix monthsof fiscal2026 comparedto
$0.9millionusedinthecomparableperiodoffiscal2025.Thedecreaseinnetcashusedinfinancing
activities in fiscal 2026 was primarilydue to lower stock repurchases.
TheCompanypurchased39,147sharesinthesecondquarteroffiscal2026.AsofAugust1,2026,the
Company had 533,770 shares remainingin open authorizations under its sharerepurchase program.
The Company does not usederivative financial instruments.
TheCompany’s investmentportfoliowasprimarily investedin corporatebondsheld inmanaged accounts
with underlyingratings ofA orbetter atAugust 1,2026.The corporatebonds havecontractual maturities
which range from two days to 2.7 years.
Additionally, atAugust 1,2026, theCompany haddeferred compensationplan assetsof $10.0million.At
January31,2026,theCompanyhaddeferredcompensationplanassetsof$9.7million.Theseassetsare
recordedwithinOtherassetsintheCondensedConsolidatedBalanceSheets.SeeNote7,FairValue
Measurements, in the “Financial Statements” section ofthis Quarterly Report on Form 10-Q.
RECENT ACCOUNTING PRONOUNCEMENTS:
See Note 8, Recent Accounting Pronouncements, in the “Financial Statements”section of this Quarterly
Report on Form 10-Q.
THE CATO CORPORATION
QUANTITATIVEAND QUALITATIVEDISCLOSURES ABOUT MARKET RISK
31
ITEM 3. QUANTITATIVE AND QUALITATIVEDISCLOSURES ABOUT MARKET RISK:
TheCompanyissubjecttomarketrateriskfromexposuretochangesininterestratesrelatedtoits
financing, investing andcash management activities,but the Companydoes notbelieve suchexposure is
material.
ITEM 4. CONTROLS AND PROCEDURES:
We carried out an evaluation, with theparticipation of our Principal Executive Officer andPrincipal Financial
Officer, ofthe effectivenessof ourdisclosure controlsand proceduresas ofAugust 1,2026.Based onthis
evaluation, ourPrincipal ExecutiveOfficer andPrincipal FinancialOfficer concludedthat, asofAugust 1,
2026, ourdisclosure controlsandprocedures,as definedinRule13a-15(e), undertheSecuritiesExchange
Act of 1934 (the “ExchangeAct”), were effective to ensure thatinformation we are required to disclosein the
reportsthatwefileorsubmitundertheExchangeActisrecorded,processed,summarizedandreported
within the time periodsspecified in the SEC’srules and forms andthat such information isaccumulated and
communicated to our management, including our Principal Executive Officer and Principal Financial Officer,
as appropriate to allow timely decisionsregarding required disclosure.
CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING:
No change in the Company’s internal controlover financial reporting (as defined inExchange Act Rule 13a-
15(f)) has occurred during the Company’s fiscal quarter ended August 1, 2026 that has materially affected, or
is reasonably likely to materially affect, the Company’sinternal control over financial reporting.
THE CATO CORPORATION
PART II OTHERINFORMATION
32
ITEM 1.LEGAL PROCEEDINGS:
Not Applicable.
ITEM 1A.RISK FACTORS:
In addition to the other informationin this report, you should carefullyconsider the factors discussed inPart I,
“Item1A.RiskFactors”inourAnnualReportonForm10-KforourfiscalyearendedJanuary31,2026.
These riskscould materiallyaffect ourbusiness, financialcondition orfuture results;however, theyare not
the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem
tobeimmaterialmayalsomateriallyadverselyaffectourbusiness,financialconditionorresultsof
operations.
ITEM 2.UNREGISTERED SALES OF EQUITY SECURITIESAND USE OF PROCEEDS:
The following table summarizes the Company’s purchases of its common stock for the three months
ended August 1, 2026:
ISSUER PURCHASES OF EQUITY SECURITIES
Total Number of
Maximum Number
Shares Purchased as
(or Approximate Dollar
Total Number
Average
Part of Publicly
Value)of Shares that may
Fiscal
of Shares
Price Paid
Announced Plans or
Yet be PurchasedUnder
Period
Purchased
per Share (1)
Programs (2)
The Plans or Programs (2)
May 2026
39,147
$
2.88
39,147
June 2026
-
-
-
July 2026
-
-
-
Total
39,147
$
2.86
39,147
533,770
(1)
Prices include trading costs.
(2)
AsofMay 2,2026, theCompany’sshare repurchaseprogram had572,917shares remainingin
open authorizations. During thesecond quarter endedAugust 1, 2026,the Company repurchased
andretired 39,147shares underthisprogram forapproximately $112,692oran averagemarket
priceof$2.86pershare. AsofAugust 1,2026, theCompany had533,770shares remainingin
open authorizations. There is no specified expiration date for the Company’s repurchase program.
ITEM 3.DEFAULTSUPON SENIOR SECURITIES:
Not Applicable.
THE CATO CORPORATION
PART II OTHERINFORMATION
33
ITEM 4.MINE SAFETY DISCLOSURES:
No matters requiring disclosure.
ITEM 5.OTHER INFORMATION:
During the three months ended August 1, 2026, none of the Company’s directors or officers (as defined in
Rule 16a-1(f) of the Securities Exchange Act of 1934, as amended)
adopted
or
terminated
a “Rule 10b5-1
trading arrangement” or a “
non-Rule
10b5-1
trading arrangement” (as such terms aredefined in Item 408
of Regulation S-K).
ITEM 6.EXHIBITS:
Exhibit No.
Item
3.1
3.2
31.1*
31.2*
32.1*
32.2*
101.INS
Inline XBRL Instance Document
101.SCH
Inline XBRL Taxonomy Extension Schema Document
101.CAL
Inline XBRL Taxonomy Extension Calculation LinkbaseDocument
101.DEF
Inline XBRL Taxonomy Extension Definitions LinkbaseDocument
101.LAB
Inline XBRL Taxonomy Extension LabelLinkbase Document
101.PRE
Inline XBRL Taxonomy Extension Presentation LinkbaseDocument
104.1
CoverPageInteractiveDataFile (FormattedinInlineXBRLandcontained in
the Interactive Data Files submitted as Exhibits101.*)
* Submitted electronically herewith.
THE CATO CORPORATION
PART II OTHERINFORMATION
34
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, theRegistrant has duly caused this
report to be signed on its behalf by the undersigned thereunto dulyauthorized.
THE CATOCORPORATION
August 27, 2026
/s/ John P.D. Cato
Date
John P.D. Cato
Chairman, President and
Chief Executive Officer
August 27, 2026
/s/ Charles D. Knight
Date
Charles D. Knight
Executive Vice President
Chief Financial Officer