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UNITED STATES
 
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
 
20549
FORM
10-Q
QUARTERLY REPORT PURSUANT
 
TO SECTION
 
13 OR 15(d)
 
OF THE SECURITIES
 
EXCHANGE
 
ACT OF
1934
For the quarterly period ended
November 2, 2024
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
 
November
 
2,
 
2024,
 
there
 
were
18,774,124
 
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 November 2, 2024
Table
 
of Contents
Page No.
PART
 
I – FINANCIAL INFORMATION
 
(UNAUDITED)
Item 1.
Financial Statements (Unaudited):
Condensed Consolidated Statements of Income (Loss) and Comprehensive Income (Loss)
2
For the Three Months and Nine Months Ended November
 
2, 2024 and October 28,
2023
Condensed Consolidated Balance Sheets
3
At November 2, 2024 and February 3, 2024
Condensed Consolidated Statements of Cash Flows
4
For the Nine Months Ended November 2, 2024 and
 
October 28, 2023
Condensed Consolidated Statements of Stockholders’ Equity
5 – 6
For the Three Months and Nine Months Ended November
 
2, 2024 and October 28,
2023
Notes to Condensed Consolidated Financial Statements
7 – 21
For the Three Months and Nine Months Ended November
 
2, 2024 and October 28,
2023
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 (LOSS) AND
COMPREHENSIVE INCOME (LOSS)
(UNAUDITED)
Three Months Ended
Nine Months Ended
November 2,
2024
October 28,
2023
November 2,
2024
October 28,
2023
(Dollars in thousands, except per share data)
REVENUES
 
Retail sales
$
144,642
$
156,682
$
486,848
$
528,174
 
Other revenue (principally finance charges, late fees and
 
layaway charges)
1,528
1,574
5,049
5,003
 
Total revenues
146,170
158,256
491,897
533,177
COSTS AND EXPENSES, NET
 
Cost of goods sold (exclusive of depreciation shown
 
below)
102,955
105,832
324,582
345,536
 
Selling, general and administrative (exclusive of
 
depreciation
 
shown below)
57,876
61,792
172,809
185,344
 
Depreciation
2,737
2,504
7,106
7,371
 
Interest and other income
(2,646)
(1,523)
(10,209)
(3,754)
 
Costs and expenses, net
160,922
168,605
494,288
534,497
Loss before income taxes
(14,752)
(10,349)
(2,391)
(1,320)
Income tax (benefit) expense
322
(4,272)
1,614
(797)
Net loss
$
(15,074)
$
(6,077)
$
(4,005)
$
(523)
Basic loss per share
$
(0.79)
$
(0.30)
$
(0.24)
$
(0.02)
Diluted loss per share
$
(0.79)
$
(0.30)
$
(0.24)
$
(0.02)
Comprehensive income:
Net loss
$
(15,074)
$
(6,077)
$
(4,005)
$
(523)
Unrealized gain (loss) on available-for-sale securities, net of
 
 
deferred income taxes of $
60
 
and $
217
 
for
 
 
the three and nine months ended October 28, 2023,
 
respectively
(151)
201
(223)
723
Comprehensive income (loss)
$
(15,225)
$
(5,876)
$
(4,228)
$
200
See notes to condensed consolidated financial statements (unaudited).
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
3
THE CATO CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
November 2, 2024
February 3, 2024
ASSETS
(Dollars in thousands)
Current Assets:
Cash and cash equivalents
 
$
20,216
$
23,940
Short-term investments
 
65,994
79,012
Restricted cash
3,355
3,973
Accounts receivable, net of allowance for customer credit losses of
 
$
670
 
and $
705
 
at November 2, 2024 and February 3, 2024, respectively
24,776
29,751
Merchandise inventories
 
107,159
98,603
Prepaid expenses and other current assets
8,705
7,783
 
Total Current Assets
 
230,205
243,062
Property and equipment – net
 
62,648
64,022
Other assets
 
19,783
25,047
Right-of-Use assets – net
 
111,769
154,686
 
Total Assets
 
$
424,405
$
486,817
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable
 
$
84,169
$
87,821
Accrued expenses
 
38,158
37,404
Accrued employee benefits and bonus
1,370
1,675
Current lease liability
45,836
61,108
 
Total Current Liabilities
 
169,533
188,008
Other noncurrent liabilities
14,555
14,475
Lease liability
63,218
92,013
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;
18,774,124
 
shares and
18,802,742
 
shares
 
issued at November 2, 2024 and February 3, 2024, respectively
634
635
Convertible Class B common stock, $
0.033
 
par value per share,
 
15,000,000
 
shares authorized;
 
1,763,652
 
shares
 
 
issued at November 2, 2024 and February 3, 2024
59
59
Additional paid-in capital
 
128,827
126,953
Retained earnings
 
47,407
64,279
Accumulated other comprehensive income
172
395
 
Total Stockholders' Equity
 
177,099
192,321
 
Total Liabilities and Stockholders' Equity
 
$
424,405
$
486,817
See notes to condensed consolidated financial statements (unaudited).
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
4
THE CATO CORPORATION
CONDENSED CONSOLIDATED STATEMENTS
 
OF CASH FLOWS
(UNAUDITED)
Nine Months Ended
November 2, 2024
October 28, 2023
(Dollars in thousands)
Operating Activities:
Net loss
$
(4,005)
$
(523)
Adjustments to reconcile net loss to net cash (used in) provided
 
by operating activities:
 
Depreciation
7,106
7,371
 
Provision for customer credit losses
492
397
 
Purchase premium and discount accretion of investments
(848)
(226)
 
Gain on sale of assets held for investment
(5,350)
-
 
Share-based compensation
1,581
3,189
 
Deferred income taxes
-
(1,981)
 
Loss on disposal of property and equipment
116
13
 
Changes in operating assets and liabilities which provided
 
(used) cash:
 
Accounts receivable
1,283
(1,815)
 
Merchandise inventories
(8,556)
13,184
 
Prepaid and other assets
(1,315)
(1,716)
 
Operating lease right-of-use assets and liabilities
(1,151)
(1,499)
 
Accrued income taxes
-
1,375
 
Accounts payable, accrued expenses and other liabilities
(2,619)
(6,099)
Net cash (used in) provided by operating activities
(13,266)
11,670
Investing Activities:
Expenditures for property and equipment
 
(6,509)
(10,271)
Purchase of short-term investments
(38,659)
(44,595)
Sales of short-term investments
52,994
60,999
Sales of other assets
13,674
-
Net cash provided by investing activities
21,500
6,133
Financing Activities:
Dividends paid
(10,516)
(10,457)
Repurchase of common stock
(2,398)
(2,563)
Proceeds from employee stock purchase plan
338
357
Net cash used in financing activities
(12,576)
(12,663)
Net (decrease) increase in cash, cash equivalents, and restricted cash
(4,342)
5,140
Cash, cash equivalents, and restricted cash at beginning of period
27,913
23,792
Cash, cash equivalents, and restricted cash at end of period
 
$
23,571
$
28,932
Non-cash activity:
Accrued other assets and property and equipment expenditures
$
440
$
1,100
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 3, 2024
$
694
$
126,953
$
64,279
$
395
$
192,321
Comprehensive income:
 
Net income
-
-
10,974
-
10,974
 
Unrealized net losses on available-for-sale securities, net of
 
deferred income tax expense 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 gains on available-for-sale securities, net of
 
deferred income tax expense 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
Comprehensive income:
 
Net loss
 
-
-
(15,074)
-
(15,074)
 
Unrealized net losses on available-for-sale securities, net of
 
deferred income tax expense of $0
-
-
-
(151)
(151)
Dividends paid ($
0.17
 
per share)
-
-
(3,466)
-
(3,466)
Class A common stock sold through employee stock purchase
 
plan
1
172
-
-
173
Share-based compensation expense
(1)
704
11
-
714
Repurchase and retirement of treasury shares
(1)
-
(158)
-
(159)
Balance — November 2, 2024
$
693
$
128,827
$
47,407
$
172
$
177,099
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 — January 28, 2023
$
691
$
122,431
$
104,709
$
(1,238)
$
226,593
Comprehensive income:
 
Net income
-
-
4,428
-
4,428
 
Unrealized net gains on available-for-sale securities, net of
 
deferred income tax expense of $
107
-
-
-
355
355
Dividends paid ($
0.17
 
per share)
-
-
(3,455)
-
(3,455)
Class A common stock sold through employee stock purchase
 
plan
-
195
-
-
195
Share-based compensation issuances and exercises
 
-
-
3
-
3
Share-based compensation expense
-
929
-
-
929
Repurchase and retirement of treasury shares
(8)
-
(2,259)
-
(2,267)
Balance — April 29, 2023
$
683
$
123,555
$
103,426
$
(883)
$
226,781
Comprehensive income:
 
Net income
-
-
1,127
-
1,127
 
Unrealized net gains on available-for-sale securities, net of
 
deferred income tax expense of $
50
-
-
-
167
167
Dividends paid ($
0.17
 
per share)
-
-
(3,507)
-
(3,507)
Class A common stock sold through employee stock purchase
 
plan
1
31
-
-
32
Share-based compensation expense
12
1,212
3
-
1,227
Repurchase and retirement of treasury shares
(1)
-
(293)
-
(294)
Balance — July 29, 2023
$
695
$
124,798
$
100,756
$
(716)
$
225,533
Comprehensive income:
 
Net loss
-
-
(6,077)
-
(6,077)
 
Unrealized net gains on available-for-sale securities, net of
 
 
deferred income tax expense of $
60
-
-
-
201
201
Dividends paid ($
0.17
 
per share)
-
-
(3,495)
-
(3,495)
Class A common stock sold through employee stock purchase
 
plan
1
188
-
-
189
Share-based compensation expense
(1)
963
5
-
967
Balance — October 28, 2023
$
695
$
125,949
$
91,189
$
(515)
$
217,318
See notes to condensed consolidated financial statements (unaudited).
 
THE CATO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 
(UNAUDITED)
FOR THE THREE MONTHS AND NINE MONTHS ENDED
 
NOVEMBER 2, 2024 AND
OCTOBER 28, 2023
7
 
NOTE 1 - GENERAL
:
The
 
condensed
 
consolidated
 
financial
 
statements
 
as
 
of
 
November
 
2,
 
2024
 
and
 
for
 
the
 
three
 
and
 
nine
months ended
 
November 2, 2024
 
and October 28,
 
2023 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 period
 
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 3, 2024.
 
Amounts as of February 3, 2024 have been derived from the audited balance sheet, 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
 
was included
 
in Interest
 
and other
 
income in
 
the accompanying
 
Condensed
Consolidated Statements of Income
 
(Loss) and Comprehensive
 
Income (Loss) for
 
the nine months
 
ended
November 2, 2024.
During the current quarter of the fiscal year,
 
the Company received $
8.6
 
million from the insurance claim
settlement and sale of its corporate jet.
 
 
 
 
 
THE CATO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 
(UNAUDITED)
FOR THE THREE MONTHS AND NINE MONTHS ENDED
 
NOVEMBER 2, 2024 AND
OCTOBER 28, 2023
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 (Loss) and Comprehensive Income (Loss).
 
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 (loss)
 
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.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended
Nine Months Ended
November 2,
2024
October 28,
2023
November 2,
2024
October 28,
2023
(Dollars in thousands, except per share data)
Numerator
Net loss
$
(15,074)
$
(6,077)
$
(4,005)
$
(523)
Earnings (loss) allocated to non-vested equity awards
(200)
346
(548)
49
Net loss available to common stockholders
$
(15,274)
$
(5,731)
$
(4,553)
$
(474)
Denominator
Basic weighted average common shares outstanding
19,302,107
19,421,701
19,318,794
19,373,411
Diluted weighted average common shares outstanding
19,302,107
19,421,701
19,318,794
19,373,411
Net loss per common share
Basic loss per share
$
(0.79)
$
(0.30)
$
(0.24)
$
(0.02)
Diluted loss per share
$
(0.79)
$
(0.30)
$
(0.24)
$
(0.02)
 
THE CATO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 
(UNAUDITED)
FOR THE THREE MONTHS AND NINE MONTHS ENDED
 
NOVEMBER 2, 2024 AND
OCTOBER 28, 2023
9
 
NOTE 3 – ACCUMULATED OTHER COMPREHENSIVE INCOME:
The
 
following
 
table
 
sets
 
forth
 
information
 
regarding
 
the
 
reclassification
 
out
 
of
 
Accumulated
 
other
comprehensive income (in thousands) for the
 
three months ended November 2, 2024:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Changes in Accumulated Other
 
Comprehensive Income (a)
Unrealized Gains
and (Losses) on
Available-for-Sale
Securities
Beginning Balance at August 3, 2024
$
323
 
Other comprehensive income (loss) before
 
 
reclassification
(151)
 
Amounts reclassified from accumulated
 
other comprehensive income to net income
-
Net current-period other comprehensive income (loss)
(151)
Ending Balance at November 2, 2024
$
172
(a) All amounts are net-of-tax. Amounts in parentheses indicate a debit/reduction to accumulated other comprehensive income.
The
 
following
 
table
 
sets
 
forth
 
information
 
regarding
 
the
 
reclassification
 
out
 
of
 
Accumulated
 
other
comprehensive income (in thousands) for the
 
nine months ended November 2, 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 (loss) before
 
 
reclassification
563
 
Amounts reclassified from accumulated
 
other comprehensive income to net income (b)
(786)
Net current-period other comprehensive income (loss)
(223)
Ending Balance at November 2, 2024
$
172
(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 NINE MONTHS ENDED
 
NOVEMBER 2, 2024 AND
OCTOBER 28, 2023
10
 
NOTE 3 – ACCUMULATED OTHER COMPREHENSIVE INCOME
 
(CONTINUED):
The
 
following
 
table
 
sets
 
forth
 
information
 
regarding
 
the
 
reclassification
 
out
 
of
 
Accumulated
 
other
comprehensive income (in thousands) for the
 
three months ended October 28, 2023:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Changes in Accumulated Other
 
Comprehensive Income (a)
Unrealized Gains
and (Losses) on
Available-for-Sale
Securities
Beginning Balance at July 29, 2023
$
(716)
 
Other comprehensive income (loss) before
 
 
reclassification
185
 
Amounts reclassified from accumulated
 
other comprehensive income to net income (b)
16
Net current-period other comprehensive income (loss)
201
Ending Balance at October 28, 2023
$
(515)
(a) All amounts are net-of-tax. Amounts in parentheses indicate a debit/reduction to accumulated other comprehensive income.
(b) Includes $
20
 
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 $
4
.
The
 
following
 
table
 
sets
 
forth
 
information
 
regarding
 
the
 
reclassification
 
out
 
of
 
Accumulated
 
other
comprehensive income (in thousands) for the
 
nine months ended October 28, 2023:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Changes in Accumulated Other
 
Comprehensive Income (a)
Unrealized Gains
and (Losses) on
Available-for-Sale
Securities
Beginning Balance at January 28, 2023
$
(1,238)
 
Other comprehensive income (loss) before
 
 
reclassification
704
 
Amounts reclassified from accumulated
 
other comprehensive income to net income (b)
19
Net current-period other comprehensive income (loss)
723
Ending Balance at October 28, 2023
$
(515)
(a) All amounts are net-of-tax. Amounts in parentheses indicate a debit/reduction to accumulated other comprehensive income.
(b) Includes $
24
 
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 $
5
.
 
THE CATO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 
(UNAUDITED)
FOR THE THREE MONTHS AND NINE MONTHS ENDED
 
NOVEMBER 2, 2024 AND
OCTOBER 28, 2023
11
 
NOTE 4 – FINANCING ARRANGEMENTS:
At November 2,
 
2024, the Company had
 
a revolving credit agreement,
 
which provides for borrowings of
 
up
to $
35.0
 
million, less
 
the balance
 
of any
 
revocable letters
 
of credit
 
related to
 
purchase commitments,
 
and is
committed
 
through
 
May
 
2027.
 
The
 
credit
 
agreement
 
contains
 
various
 
financial
 
covenants
 
and
 
limitations,
including
 
the
 
maintenance
 
of
 
specific
 
financial
 
ratios.
 
On
 
April
 
25,
 
2024,
 
the
 
Company
 
amended
 
the
revolving credit
 
agreement to
 
modify a
 
definition used
 
in calculating
 
the Company’s
 
minimum EBITDAR
coverage
 
ratio
 
to
 
add
 
back
 
certain
 
income
 
tax
 
receivables
 
included
 
in
 
the
 
calculation
 
of
 
the
 
ratio.
 
On
November 1, 2024, the Company
 
amended the revolving credit agreement
 
to lower the minimum EBITDAR
coverage
 
ratio
 
and
 
the
 
corresponding
 
minimum
 
cash
 
and
 
investments
 
used
 
to
 
determine
 
the
 
EBITDAR
coverage ratio in exchange
 
for a secured position
 
in any future borrowings.
 
For the quarter ended
 
November
2, 2024,
 
after giving
 
effect to
 
the amendments,
 
the Company
 
was in
 
compliance with
 
the credit
 
agreement.
There
 
were
no
 
borrowings
 
outstanding,
no
r
 
any
 
outstanding
 
letters
 
of
 
credit
 
that
 
reduced
 
borrowing
availability, as of November 2, 2024.
 
The weighted average interest rate under
 
the credit facility was
zero
 
at
November 2, 2024 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 sold to customers in
a similar
 
manner.
 
The Company
 
operates
 
its women’s
 
fashion specialty
 
retail stores
 
in
31
 
states as
 
of
 
November 2,
 
2024,
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
 
separate
 
wholly-
owned subsidiaries of the Company.
 
 
 
 
 
THE CATO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 
(UNAUDITED)
FOR THE THREE MONTHS AND NINE MONTHS ENDED
 
NOVEMBER 2, 2024 AND
OCTOBER 28, 2023
12
 
NOTE 5 – REPORTABLE SEGMENT INFORMATION
 
(CONTINUED):
The following schedule summarizes certain segment
 
information (in thousands):
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended
Nine Months Ended
November 2, 2024
Retail
Credit
Total
November 2, 2024
Retail
Credit
Total
Revenues
$145,508
$662
$146,170
Revenues
$489,893
$2,004
$491,897
Depreciation
2,737
-
2,737
Depreciation
7,105
1
7,106
Interest and other income
(2,646)
-
(2,646)
Interest and other income
(10,209)
-
(10,209)
Income (loss) before
 
income taxes
(14,992)
240
(14,752)
Income (loss) before
 
income taxes
(3,132)
741
(2,391)
Capital expenditures
1,710
-
1,710
Capital expenditures
6,509
-
6,509
Three Months Ended
Nine Months Ended
October 28, 2023
Retail
Credit
Total
October 28, 2023
Retail
Credit
Total
Revenues
$157,595
$661
$158,256
Revenues
$531,243
$1,934
$533,177
Depreciation
2,504
-
2,504
Depreciation
7,370
1
7,371
Interest and other income
(1,523)
-
(1,523)
Interest and other income
(3,754)
-
(3,754)
Income (loss) before
 
income taxes
(10,604)
255
(10,349)
Income (loss) before
 
income taxes
(2,014)
694
(1,320)
Capital expenditures
1,801
-
1,801
Capital expenditures
10,271
-
10,271
Retail
Credit
Total
Total assets as of November 2, 2024
$386,664
$37,741
$424,405
Total assets as of February 3, 2024
448,488
38,329
486,817
The Company evaluates segment performance based on
 
income before income taxes.
 
The Company does not
allocate certain corporate expenses or
 
income taxes to the credit segment.
The following schedule summarizes the direct expenses
 
of the credit segment, which are
 
reflected in Selling,
general and administrative expenses (in
 
thousands):
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended
Nine Months Ended
November 2,
2024
October 28,
2023
November 2,
2024
October 28,
2023
Payroll
$
152
$
135
$
466
$
411
Postage
113
111
330
321
Other expenses
157
160
466
507
Total expenses
$
422
$
406
$
1,262
$
1,239
 
THE CATO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 
(UNAUDITED)
FOR THE THREE MONTHS AND NINE MONTHS ENDED
 
NOVEMBER 2, 2024 AND
OCTOBER 28, 2023
13
 
NOTE 6 – STOCK-BASED COMPENSATION:
As
 
of
 
November
 
2,
 
2024,
 
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 November 2, 2024:
 
 
2018
Plan
Options and/or restricted stock initially authorized
4,725,000
Options and/or restricted stock available for grant
2,782,782
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
November
 
2,
 
2024
 
and
 
February
 
3,
 
2024,
 
there
 
was
 
$
8,212,000
 
and
 
$
9,334,000
,
 
respectively,
 
of
 
total
unrecognized compensation expense
 
related to nonvested
 
restricted stock awards,
 
which had a
 
remaining
weighted-average vesting period of
2.2
 
years and
2.1
 
years, respectively. The
 
total compensation expense
during the
 
three and
 
nine months
 
ended November
 
2, 2024
 
was $
714,000
 
and $
1,520,000
, respectively,
compared
 
to
 
a
 
total
 
compensation
 
expense
 
of
 
$
967,000
 
and
 
$
3,126,000
 
for
 
the
 
three
 
and
 
nine
 
months
ended
 
October
 
28,
 
2023,
 
respectively.
 
These
 
compensation
 
expenses
 
are
 
classified
 
as
 
a
 
component
 
of
Selling,
 
general
 
and
 
administrative
 
expenses
 
in
 
the
 
Condensed
 
Consolidated
 
Statements
 
of
 
Income
(Loss).
The following summary
 
shows the changes
 
in the number
 
of shares of
 
unvested restricted stock
 
outstanding
during the nine months ended November 2, 2024:
 
 
 
 
 
 
 
Weighted Average
Number of
Grant Date Fair
Shares
Value
 
Per Share
Restricted stock awards at February 3, 2024
1,123,873
$
11.32
Granted
386,900
4.80
Vested
(232,696)
13.22
Forfeited or expired
(48,077)
9.51
Restricted stock awards at November 2, 2024
1,230,000
$
8.97
 
 
 
 
 
THE CATO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 
(UNAUDITED)
FOR THE THREE MONTHS AND NINE MONTHS ENDED
 
NOVEMBER 2, 2024 AND
OCTOBER 28, 2023
14
 
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 nine
 
months ended November 2, 2024
 
and October 28,
2023, the
 
Company sold
73,593
 
and
50,540
 
shares to
 
employees at
 
an average
 
discount of
 
$
0.81
 
and $
1.23
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
 
$
60,000
 
and
 
$
62,000
 
for
 
the
 
nine
months
 
ended
 
November
 
2,
 
2024
 
and
 
October
 
28,
 
2023,
 
respectively.
 
These
 
expenses
 
are
 
classified
 
as
 
a
component of Selling, general and administrative expenses.
 
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 November 2, 2024 and February
 
3, 2024:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Quoted
Prices in
Active
Significant
Markets for
Other
Significant
Identical
Observable
Unobservable
November 2, 2024
Assets
Inputs
Inputs
Description
Level 1
Level 2
Level 3
Assets:
 
State/Municipal Bonds
$
2,253
$
-
$
2,253
$
-
 
Corporate Bonds
52,649
-
52,649
-
 
U.S. Treasury/Agencies Notes and Bonds
10,578
-
10,578
-
 
Cash Surrender Value of Life Insurance
9,109
-
-
9,109
 
Asset-backed Securities (ABS)
514
-
514
-
Total Assets
$
75,103
$
-
$
65,994
$
9,109
Liabilities:
 
Deferred Compensation
$
(8,886)
$
-
$
-
$
(8,886)
Total Liabilities
$
(8,886)
$
-
$
-
$
(8,886)
 
 
 
 
 
THE CATO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 
(UNAUDITED)
FOR THE THREE MONTHS AND NINE MONTHS ENDED
 
NOVEMBER 2, 2024 AND
OCTOBER 28, 2023
15
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Quoted
Prices in
Active
Significant
Markets for
Other
Significant
Identical
Observable
Unobservable
February 3, 2024
Assets
Inputs
Inputs
Description
Level 1
Level 2
Level 3
Assets:
 
State/Municipal Bonds
$
12,540
$
-
$
12,540
$
-
 
Corporate Bonds
45,400
-
45,400
-
 
U.S. Treasury/Agencies Notes and Bonds
18,114
-
18,114
-
 
Cash Surrender Value of Life Insurance
8,586
-
-
8,586
 
Asset-backed Securities (ABS)
2,958
-
2,958
-
 
Corporate Equities
1,084
1,084
-
-
Total Assets
$
88,682
$
1,084
$
79,012
$
8,586
Liabilities:
 
Deferred Compensation
$
(8,654)
$
-
$
-
$
(8,654)
Total Liabilities
$
(8,654)
$
-
$
-
$
(8,654)
The Company’s investment portfolio
 
was primarily invested in
 
corporate bonds and
 
U.S. Treasury/Agencies
notes and
 
bonds held
 
in managed
 
accounts with
 
underlying ratings
 
of A
 
or better
 
at November
 
2, 2024
 
and
February 3, 2024.
 
The state, municipal and corporate bonds have contractual maturities which range from
13
days
 
to
2.9
 
years. The U.S. Treasury/Agencies notes and bonds have contractual maturities which range from
3 days
 
to
2.7
 
years.
 
These
 
securities
 
are
 
classified
 
as
 
available-for-sale
 
and
 
are
 
recorded
 
as
 
Short-term
investments
 
and
 
Other
 
assets
 
on
 
the
 
respective
 
Condensed
 
Consolidated
 
Balance
 
Sheets.
 
These
 
assets
 
are
carried
 
at
 
fair
 
value
 
with
 
unrealized
 
gains
 
and
 
losses
 
reported
 
net
 
of
 
taxes
 
in
 
Accumulated
 
other
comprehensive income.
At February
 
3,
 
2024, the
 
Company
 
had $
1.1
 
million
 
of corporate
 
equities and
 
deferred compensation
 
plan
assets of
 
$
8.6
 
million.
 
At November 2,
 
2024, the Company
 
had deferred compensation
 
plan assets of
 
$
9.1
million.
 
During the nine
 
months ended November
 
2, 2024, the
 
Company sold its
 
corporate equities.
 
All of
these assets are recorded within Other
 
assets in the Condensed Consolidated Balance
 
Sheets.
Level 1 category securities are measured
 
at fair value using quoted active
 
market prices.
 
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 CATO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 
(UNAUDITED)
FOR THE THREE MONTHS AND NINE MONTHS ENDED
 
NOVEMBER 2, 2024 AND
OCTOBER 28, 2023
16
The
 
following
 
tables
 
summarize
 
the
 
change
 
in
 
fair
 
value
 
of
 
the
 
Company’s
 
financial
 
assets
 
and
 
liabilities
measured using Level 3 inputs
 
for the nine months ended November
 
2, 2024 and the year ended
 
February 3,
2024
 
(in thousands):
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fair Value
Measurements Using
Significant Unobservable
Asset Inputs (Level 3)
Cash Surrender Value
Beginning Balance at February 3, 2024
$
8,586
Redemptions
-
Additions
-
Total gains or (losses):
 
Included in interest and other income (or
changes in net assets)
523
Ending Balance at November 2, 2024
$
9,109
Fair Value
Measurements Using
Significant Unobservable
Liability Inputs (Level 3)
Deferred Compensation
Beginning Balance at February 3, 2024
$
(8,654)
 
Redemptions
573
 
Additions
(175)
 
Total (gains) or losses:
 
Included in interest and other income (or
changes in net assets)
(630)
Ending Balance at November 2, 2024
$
(8,886)
 
 
THE CATO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 
(UNAUDITED)
FOR THE THREE MONTHS AND NINE MONTHS ENDED
 
NOVEMBER 2, 2024 AND
OCTOBER 28, 2023
17
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fair Value
Measurements Using
Significant Unobservable
Asset Inputs (Level 3)
Cash Surrender Value
Beginning Balance at January 28, 2023
$
9,274
Redemptions
(1,168)
Additions
-
Total gains or (losses):
 
Included in interest and other income (or
changes in net assets)
480
Ending Balance at February 3, 2024
$
8,586
Fair Value
Measurements Using
Significant Unobservable
Liability Inputs (Level 3)
Deferred Compensation
Beginning Balance at January 28, 2023
$
(8,903)
 
Redemptions
1,119
 
Additions
(292)
 
Total (gains) or losses:
 
Included in interest and other income (or
changes in net assets)
(578)
Ending Balance at February 3, 2024
$
(8,654)
 
THE CATO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 
(UNAUDITED)
FOR THE THREE MONTHS AND NINE MONTHS ENDED
 
NOVEMBER 2, 2024 AND
OCTOBER 28, 2023
18
 
NOTE 8 – RECENT ACCOUNTING PRONOUNCEMENTS:
In
 
November
 
2023,
 
the
 
Financial
 
Accounting
 
Standards
 
Board
 
(“FASB”)
 
issued
 
Accounting
 
Standards
Update
 
(“ASU”)
 
2023-07,
 
“Segment
 
Reporting
 
(Topic
 
280):
 
Improvements
 
to
 
Reportable
 
Segment
Disclosures,”
 
which
 
modifies
 
disclosure
 
requirements
 
for
 
all
 
public
 
entities
 
that
 
are
 
required
 
to
 
report
segment
 
information.
 
The update
 
will change
 
the
 
reporting of
 
segments by
 
adding
 
significant
 
segment
expenses,
 
other
 
segment
 
items,
 
title
 
and
 
position
 
of
 
the
 
chief
 
operating
 
decision
 
maker
 
(“CODM”) and
how
 
the
 
CODM
 
uses
 
the
 
reported
 
measures
 
to
 
make
 
decisions.
 
The
 
update
 
also
 
requires
 
all
 
annual
disclosures
 
about
 
a
 
reportable
 
segment’s
 
profit
 
or
 
loss
 
and
 
assets
 
in
 
interim
 
periods.
 
This
 
guidance
 
is
effective
 
for
 
fiscal
 
years
 
beginning
 
after
 
December
 
15,
 
2023
 
and
 
interim
 
periods
 
within
 
fiscal
 
years
beginning
 
after
 
December
 
15,
 
2024.
 
Early
 
adoption
 
is
 
permitted,
 
and
 
the
 
guidance
 
is
 
applicable
retrospectively to all prior periods presented
 
in the financial statements.
 
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.
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.
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 interim periods 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
 
nine
 
months
 
of
 
2024
 
of
 
(
67.5
%)
 
compared
 
to
 
an
effective tax
 
rate of
60.4
% for the
 
first nine months
 
of fiscal 2023.
 
Income tax expense
 
for the first
 
nine
months increased to $
1.6
 
million in fiscal 2024 from an
 
income tax benefit of $
0.8
 
million in fiscal 2023.
 
The increase
 
in tax
 
expense in
 
2024 is
 
primarily due
 
to the
 
valuation allowance
 
against net
 
deferred tax
assets attributable
 
to U.S.
 
federal net operating
 
loss carryforwards recorded
 
in the fourth
 
quarter of 2023
and a smaller release of reserves for uncertain tax positions.
 
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 the Company’s control, litigation with respect
THE CATO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 
(UNAUDITED)
FOR THE THREE MONTHS AND NINE MONTHS ENDED
 
NOVEMBER 2, 2024 AND
OCTOBER 28, 2023
19
 
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
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. During the
 
three
and
 
nine
 
months ended
 
November 2,
 
2024, the
 
Company estimated
 
customer
 
credit
 
losses
 
of
 
$
154,000
and
 
$
492,000
,
 
respectively,
 
compared
 
to
 
$
149,000
 
and
 
$
421,000
 
for
 
the
 
three
 
and
 
nine
 
months
 
ended
October 28,
 
2023, respectively.
 
Sales purchased
 
on the
 
Company’s
 
proprietary credit
 
card for
 
the three
and nine months ended November 2, 2024 were $
5.1
 
million and $
16.4
 
million, respectively, compared to
$
5.7
 
million and $
17.4
 
million for the three and nine months ended October 28, 2023,
 
respectively.
The
 
following
 
table
 
provides
 
information
 
about
 
receivables
 
and
 
contract
 
liabilities
 
from
 
contracts
 
with
customers (in thousands):
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance as of
November 2, 2024
February 3, 2024
Proprietary Credit Card Receivables, net
$
10,716
$
10,909
Gift Card Liability
$
6,266
$
8,143
 
THE CATO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 
(UNAUDITED)
FOR THE THREE MONTHS AND NINE MONTHS ENDED
 
NOVEMBER 2, 2024 AND
OCTOBER 28, 2023
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 up
 
to
10
 
years based on
 
the estimated likelihood
 
of renewal. Some
 
include options to
 
extend the lease
 
term for
up to
five years
, and some 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
November 2, 2024
October 28, 2023
Operating lease cost (a)
$
16,755
$
17,498
Variable
 
lease cost (b)
$
490
$
544
(a) Includes right-of-use asset amortization of ($
0.2
) million and ($
0.3
) million for the three months ended November 2, 2024 and
October 28, 2023, respectively.
(b) Primarily related to monthly percentage rent for stores not presented on the condensed consolidated balance sheets.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Nine Months Ended
November 2, 2024
October 28, 2023
Operating lease cost (a)
$
50,565
$
53,174
Variable
 
lease cost (b)
$
1,450
$
1,642
(a) Includes right-of-use asset amortization of ($
0.6
) million and ($
0.9
) million for the nine months ended November 2, 2024 and
October 28, 2023, respectively.
(b) Primarily related to monthly percentage rent for stores not presented on the condensed consolidated balance sheets.
 
THE CATO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 
(UNAUDITED)
FOR THE THREE MONTHS AND NINE MONTHS ENDED
 
NOVEMBER 2, 2024 AND
OCTOBER 28, 2023
21
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
November 2, 2024
October 28, 2023
Cash paid for amounts included in the measurement of lease liabilities
$
15,584
$
16,671
Non-cash activity:
Right-of-use assets obtained in exchange for lease obligations
$
1,207
$
(1,468)
 
 
 
 
 
 
 
 
 
 
 
Nine Months Ended
November 2, 2024
October 28, 2023
Cash paid for amounts included in the measurement of lease liabilities
$
46,672
$
50,696
Non-cash activity:
Right-of-use assets obtained in exchange for lease obligations
$
2,564
$
1,435
Weighted-average
 
remaining
 
lease
 
term
 
and
 
discount
 
rate
 
for
 
the
 
Company’s
 
operating
 
leases
 
are
 
as
follows:
 
 
 
 
 
 
 
As of
November 2, 2024
October 28, 2023
Weighted-average remaining lease term
1.7
 
years
1.8
 
years
Weighted-average discount rate
4.84%
3.30%
Maturities
 
of
 
lease
 
liabilities
 
by
 
fiscal
 
year
 
for
 
the
 
Company’s
 
operating
 
leases
 
are
 
as
 
follows
 
(in
thousands):
 
 
 
 
 
Fiscal Year
2024 (a)
$
15,226
2025
45,680
2026
29,745
2027
17,027
2028
8,843
Thereafter
1,171
Total lease payments
117,692
Less: Imputed interest
8,638
Present value of lease liabilities
$
109,054
(a) Excluding the nine months ended November 2, 2024
 
 
22
THE CATO CORPORATION
ITEM 2.
 
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
FORWARD-LOOKING INFORMATION:
The
 
information
 
contained
 
in
 
“Management’s
 
Discussion
 
and
 
Analysis
 
of
 
Financial
 
Condition
 
and
Results
 
of
 
Operations”
 
should
 
be
 
read
 
along
 
with
 
the
 
unaudited
 
Condensed
 
Consolidated
 
Financial
Statements,
 
including
 
the
 
accompanying
 
Notes
 
appearing
 
in
 
this
 
report.
 
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,
 
including those contained in
 
“Management’s Discussion and
 
Analysis of
Financial Condition and
 
Results of Operations”;
 
(4) statements relating to
 
our operations or
 
activities for
our
 
fiscal
 
year
 
ending
 
February
 
1,
 
2025
 
(“fiscal
 
2024”)
 
and
 
beyond,
 
including,
 
but
 
not
 
limited
 
to,
statements regarding expected
 
amounts of
 
capital expenditures and
 
store openings, relocations,
 
remodels
and closures, and
 
statements regarding the
 
potential impact of
 
supply chain disruptions,
 
extreme weather
conditions,
 
inflationary
 
pressures
 
and
 
other
 
economic
 
or
 
market
 
conditions
 
on
 
our
 
business,
 
results
 
of
operations and financial condition and
 
statements of plans or
 
intentions regarding new store development
or
 
store
 
closures;
 
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,
 
or
 
continuation
 
of
 
negative
 
trends
 
in,
 
the
 
conditions
 
that
 
drive
 
consumer
confidence and
 
spending, including,
 
but
 
not limited
 
to, prevailing
 
social, economic,
 
political
 
and public
health conditions and
 
uncertainties, levels of
 
unemployment, fuel, energy
 
and food
 
costs, wage rates,
 
tax
rates, interest
 
rates, home
 
values, consumer
 
net worth,
 
the availability
 
of credit
 
and inflation;
 
changes in
laws, regulations
 
or government
 
policies affecting
 
our business,
 
including but
 
not limited
 
to current
 
and
potentially
 
new
 
tariffs;
 
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
 
increase new
 
store
openings and
 
the ability
 
of any
 
such new
 
stores to
 
grow and
 
perform as
 
expected; underperformance
 
or
other factors that may lead to, or affect the
 
volume of, store closures and negatively affect the Company’s
profitability,
 
financial
 
condition,
 
prospects,
 
and
 
ability
 
to
 
comply
 
with
 
its
 
debt
 
covenants;
 
adverse
weather,
 
public
 
health
 
threats,
 
acts
 
of
 
war
 
or
 
aggression
 
or
 
similar
 
conditions
 
that
 
may
 
affect
 
our
merchandise supply chain,
 
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
3, 2024
 
(“fiscal 2023”),
 
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 the
 
Company’s Annual Report
on
 
Form
 
10-K
 
for
 
the
 
fiscal
 
year
 
ended
 
February
 
3,
 
2024.
 
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 (Loss) as a
 
percentage of total retail sales:
Three Months Ended
Nine Months Ended
November 2, 2024
October 28, 2023
November 2, 2024
October 28, 2023
Total retail sales
100.0
%
100.0
%
100.0
%
100.0
%
Other revenue
1.1
1.0
1.0
0.9
Total revenues
101.1
101.0
101.0
100.9
Cost of goods sold (exclusive of depreciation)
71.2
67.5
66.7
65.4
Selling, general and administrative (exclusive
of depreciation)
40.0
39.4
35.5
35.1
Depreciation
1.9
1.6
1.5
1.4
Interest and other income
(1.8)
(1.0)
(2.1)
(0.7)
Loss before income taxes
(10.2)
(6.6)
(0.5)
(0.3)
Net loss
(10.4)
(3.9)
(0.8)
(0.1)
 
 
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 2023
 
Annual Report on Form 10-K.
Recent Developments
Inflationary Cost Pressure and High Interest Rates
The pressure on our customers’ disposable income continued in the
 
first three quarters of fiscal 2024, due
to
 
prolonged and
 
persistently higher
 
prices caused
 
by high
 
inflation rates,
 
especially related
 
to
 
housing,
groceries
 
and
 
fuel,
 
as
 
well
 
as
 
high
 
interest
 
rates.
 
These
 
high
 
interest
 
rates
 
have
 
adversely
 
affected
 
the
availability and cost of credit for our customers, including
 
revolving credit and auto loans, and continue to
negatively
 
impact
 
our
 
customers’
 
disposable
 
income.
 
Our
 
customers’
 
willingness
 
to
 
purchase
 
our
products may continue to be negatively impacted by these inflationary
 
pressures and high interest rates.
Although
 
interest
 
rates
 
and
 
inflation
 
have
 
decreased,
 
we
 
believe
 
the
 
pressure
 
on
 
our
 
customers’
disposable
 
income adversely
 
impacted
 
the
 
first
 
three quarters
 
of
 
fiscal
 
2024
 
and will
 
likely
 
continue to
have a
 
negative impact
 
on consumer
 
behavior and,
 
by extension,
 
our results
 
of
 
operations and
 
financial
condition during the remainder of fiscal 2024.
Merchandise Supply Chain
A
 
significant
 
amount
 
of
 
our
 
merchandise
 
is
 
manufactured
 
overseas,
 
principally
 
in
 
Southeast
 
Asia,
 
and
traverses
 
through
 
the
 
Panama
 
Canal
 
or
 
the
 
Suez
 
Canal.
 
In
 
the
 
first
 
quarter
 
of
 
2024,
 
the
 
drought
conditions
 
experienced
 
in
 
the
 
region
 
surrounding
 
the
 
Panama
 
Canal
 
reduced
 
the
 
number
 
of
 
transits
 
by
approximately 37% and
 
also reduced the
 
permissible draft of
 
vessels transiting the
 
Panama Canal, which
reduced the volume
 
and number of
 
containers carried by container
 
ships and increased
 
our costs.
 
These
conditions improved as
 
the Panama
 
Canal authority
 
increased the
 
daily transits
 
and the
 
permissible draft
of vessels, raising the number of
 
transits to 95% of pre-drought operations in the
 
second quarter and back
to pre-drought
 
levels in
 
the third
 
quarter.
 
The hostilities
 
affecting the
 
region surrounding the
 
Suez Canal
are causing container ships to
 
travel longer distances around the
 
Cape of Good Hope,
 
which is increasing
lead times for merchandise and
 
our costs to ship these
 
goods, as well as decreasing the
 
pool of containers
available.
 
The combination of
 
these situations
 
has negatively impacted
 
the first
 
nine months
 
of 2024.
 
In
addition,
 
the
 
third
 
quarter
 
was
 
impacted
 
by
 
later
 
shipments
 
in
 
part
 
due
 
to
 
congestion
 
at
 
certain
 
Asian
ports,
 
the
 
U.S.
 
port
 
strike
 
on
 
the
 
east
 
coast,
 
and
 
civil
 
unrest
 
in
 
some
 
Asian
 
countries
 
that
 
caused
merchandise to miss
 
its shipping windows.
 
Though conditions have
 
incrementally improved, we believe
the totality of
 
these conditions will
 
likely continue to
 
have a negative
 
impact on our
 
results of operations
and financial condition for the foreseeable future.
Comparison of the Three and Nine
 
Months ended November 2, 2024 with October
 
28, 2023
Total retail sales for the
 
third quarter were $144.6 million compared to
 
last year’s third quarter sales
 
of $156.7
million, an 8% decrease.
 
The Company’s sales
 
decrease in the third quarter
 
of fiscal 2024 was
 
primarily due
to
 
a
 
3%
 
decrease
 
in
 
same-store
 
sales
 
and
 
stores
 
closed
 
in
 
the
 
fourth
 
quarter
 
of
 
2023.
 
For
 
the
 
nine
 
months
ended
 
November
 
2,
 
2024,
 
total
 
retail
 
sales
 
were
 
$486.8
 
million
 
compared
 
to
 
last
 
year’s
 
comparable
 
nine
 
THE CATO CORPORATION
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
 
(CONTINUED)
26
month sales of
 
$528.2 million, an
 
8% decrease. The
 
decrease in sales
 
in the first
 
nine months of
 
fiscal 2024
was due
 
primarily to
 
a 4%
 
decrease in
 
same-store sales
 
and 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 nine months ended
 
November 2, 2024 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 $146.2
 
million and
 
$491.9 million
 
for the
 
three and
nine months ended November 2, 2024, compared to $158.3 million and $533.2
 
million for the three and nine
months
 
ended
 
October
 
28,
 
2023,
 
respectively.
 
The
 
Company
 
operated
 
1,167
 
stores
 
at
 
November
 
2,
 
2024
compared
 
to
 
1,245 stores
 
at
 
October
 
28,
 
2023.
 
During
 
the first
 
nine
 
months of
 
fiscal
 
2024, the
 
Company
opened one store
 
and closed
 
13 stores.
 
The Company currently
 
expects to
 
close approximately
 
65 stores
 
in
total in fiscal 2024.
Credit
 
revenue
 
of
 
$0.7
 
million
 
represented
 
0.5%
 
of
 
total
 
revenues
 
in
 
the
 
third
 
quarter
 
of
 
fiscal
 
2024,
compared to credit revenue of $0.7 million or 0.4% of total revenues in the third quarter of fiscal 2023. 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 third quarter
 
of fiscal 2024, compared to
 
last year’s third quarter expense of
 
$0.4 million.
Other
 
revenue,
 
a
 
component
 
of
 
total
 
revenues,
 
was
 
$1.5
 
million
 
and
 
$5.0
 
million
 
for
 
the
 
three
 
and
 
nine
months ended November 2, 2024, respectively, compared to $1.6 million and $5.0 million for the prior year’s
comparable three
 
and nine
 
month periods.
 
The slight
 
decrease in
 
Other revenue
 
for the
 
three months
 
ended
November
 
2,
 
2024
 
was
 
due
 
to
 
decreases
 
in
 
e-commerce
 
shipping
 
revenue
 
and
 
finance
 
charges
 
associated
with the Company’s proprietary credit
 
card, partially offset by an increase
 
in gift card breakage income.
Cost of
 
goods sold
 
was $103.0
 
million, or
 
71.2% of
 
retail sales
 
and $324.6
 
million, or
 
66.7% of retail
 
sales
for the three and
 
nine months ended November
 
2, 2024, respectively, compared
 
to $105.8 million, or
 
67.5%
of retail sales and $345.5 million, or 65.4% of retail sales for the comparable three and nine month periods of
fiscal 2023.
 
The overall increase in cost of goods sold as a percent of retail sales for the third
 
quarter and first
nine
 
months
 
of
 
fiscal
 
2024
 
versus
 
the
 
comparable
 
three
 
and
 
nine
 
month
 
periods
 
of
 
fiscal
 
2023
 
resulted
primarily from deleveraging of occupancy and buying costs and higher distribution and freight costs, partially
offset
 
by
 
higher
 
selling
 
margins.
 
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) decreased by
 
18.1% to $41.7 million for the third quarter
 
of fiscal 2024 and by
11.1%
 
to
 
$162.3
 
million
 
for
 
the
 
first
 
nine
 
months
 
of
 
fiscal
 
2024,
 
compared
 
to
 
$50.9
 
million
 
and
 
$182.6
million for the
 
prior year’s comparable
 
three and nine
 
months of fiscal
 
2023, 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,
 
bank
 
and
 
credit
 
card
 
processing
 
fees.
 
SG&A
expenses were $57.9 million, or 40.0% of retail sales and $172.8 million, or 35.5% of retail sales for the
 
third
quarter and first nine months of
 
fiscal 2024, respectively, compared to $61.8
 
million, or 39.4% of retail sales
and
 
$185.3
 
million,
 
or 35.1%
 
of retail
 
sales
 
for the
 
prior
 
year’s
 
comparable three
 
and
 
nine
 
month periods,
 
 
THE CATO CORPORATION
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
 
(CONTINUED)
27
respectively.
 
The decrease in SG&A
 
expenses for the third
 
quarter and first nine
 
months of fiscal 2024
 
was
primarily due to lower payroll,
 
advertising and insurance expenses, partially
 
offset by expenses related to the
startup of our distribution center automation project.
Depreciation expense was $2.7 million, or 1.9% of retail sales and $7.1 million, or 1.5% of
 
retail sales for the
third quarter
 
and first
 
nine months
 
of fiscal
 
2024, respectively,
 
compared to
 
$2.5 million,
 
or 1.6%
 
of retail
sales and $7.4 million or 1.4%
 
of retail sales for the comparable three
 
and nine month periods of fiscal
 
2023,
respectively.
 
Interest and other
 
income was $2.6
 
million, or 1.8%
 
of retail sales
 
and $10.2 million,
 
or 2.1% of
 
retail sales
for the
 
three and
 
nine months
 
ended November
 
2, 2024,
 
respectively, compared to
 
$1.5 million,
 
or 1.0%
 
of
retail sales and $3.8 million,
 
or 0.7% of retail sales for the
 
comparable three and nine month periods
 
of fiscal
2023, respectively.
 
The increase
 
for the
 
third quarter
 
of fiscal
 
2024 compared
 
to fiscal
 
2023 was
 
primarily
due
 
to
 
a
 
gain
 
on
 
the
 
disposal
 
of
 
the
 
Company’s
 
corporate
 
aircraft
 
and
 
higher
 
interest
 
earned
 
on
 
the
Company’s investments.
 
The increase
 
for the
 
first nine
 
months of
 
fiscal 2024
 
compared to
 
fiscal 2023
 
was
primarily
 
due
 
to
 
a
 
$3.2
 
million
 
net
 
gain
 
on
 
sale
 
of
 
land
 
held
 
for
 
investment,
 
gain
 
on
 
the
 
disposal
 
of
 
the
Company’s corporate aircraft and higher interest
 
earned on the Company’s investments.
Income tax expense was
 
$0.3 million and $1.6 million
 
for the third quarter
 
and first nine months of fiscal
2024, respectively,
 
compared to
 
a tax
 
benefit of
 
$4.3 million
 
and $0.8
 
million for
 
the comparable
 
three
and
 
nine
 
month
 
periods
 
of
 
fiscal
 
2023,
 
respectively.
 
The
 
effective
 
income
 
tax
 
rate
 
for
 
the
 
first
 
nine
months
 
of
 
fiscal
 
2024
 
was
 
(67.5%)
 
compared
 
to
 
60.4%
 
for
 
the
 
first
 
nine
 
months
 
of
 
fiscal
 
2023.
 
The
increase in tax expense in
 
2024 is primarily due to
 
the valuation allowance against net
 
deferred tax assets
attributable to
 
U.S. federal
 
net operating
 
loss carryforwards
 
recorded in
 
the fourth
 
quarter of
 
2023 and
 
a
smaller release of reserves for uncertain tax positions.
 
LIQUIDITY, CAPITAL
 
RESOURCES
 
AND MARKET
 
RISK:
 
The Company
 
believes that
 
its cash,
 
cash equivalents
 
and short-term
 
investments, together
 
with cash
 
flows
from operations, will be adequate to fund the Company’s regular operating requirements and expected capital
expenditures for the next 12
 
months.
Cash used in operating activities during the first nine months of fiscal 2024 was $13.3 million as compared
 
to
$11.7
 
million
 
provided
 
in
 
the
 
first
 
nine
 
months
 
of
 
fiscal
 
2023.
 
The
 
increase
 
in
 
cash
 
used
 
by
 
operating
activities
 
of
 
$25.0
 
million
 
for the
 
first
 
nine
 
months of
 
fiscal
 
2024
 
as
 
compared to
 
the
 
first nine
 
months of
fiscal 2023 was primarily attributable to the
 
relative change in inventory from year-end to
 
the third quarter for
both
 
years
 
and
 
a
 
subtraction
 
of
 
net
 
income
 
for
 
non-operating
 
gains
 
on
 
sale
 
of
 
assets
 
held
 
for
 
investment,
partially offset by the relative change
 
of accounts payable from year-end to
 
the third quarter for both years.
At
 
November
 
2,
 
2024,
 
the
 
Company
 
had
 
working
 
capital
 
of
 
$60.7
 
million
 
compared
 
to
 
$55.1
 
million
 
at
February 3,
 
2024.
The increase
 
in working
 
capital was
 
primarily attributable
 
to a
 
decrease in
 
current lease
liability
 
and
 
an
 
increase
 
in
 
inventory,
 
partially
 
offset
 
by
 
a
 
decrease
 
in
 
short-term
 
investments,
 
cash
 
and
accounts receivable.
At November 2,
 
2024, the Company had
 
a revolving credit agreement,
 
which provides for borrowings of
 
up
to $35.0
 
million, less
 
the balance
 
of any
 
revocable letters
 
of credit
 
related to
 
purchase commitments,
 
and is
committed
 
through
 
May
 
2027.
 
The
 
credit
 
agreement
 
contains
 
various
 
financial
 
covenants
 
and
 
limitations,
including
 
the
 
maintenance
 
of
 
specific
 
financial
 
ratios.
 
On
 
April
 
25,
 
2024,
 
the
 
Company
 
amended
 
the
 
THE CATO CORPORATION
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
 
(CONTINUED)
28
revolving credit
 
agreement to
 
modify a
 
definition used
 
in calculating
 
the Company’s
 
minimum EBITDAR
coverage
 
ratio
 
to
 
add
 
back
 
certain
 
income
 
tax
 
receivables
 
included
 
in
 
the
 
calculation
 
of
 
the
 
ratio.
 
On
November 1, 2024, the Company
 
amended the revolving credit agreement
 
to lower the minimum EBITDAR
coverage
 
ratio
 
and
 
the
 
corresponding
 
minimum
 
cash
 
and
 
investments
 
used
 
to
 
determine
 
the
 
EBITDAR
coverage ratio in exchange
 
for a secured position
 
in any future borrowings.
 
For the quarter ended
 
November
2, 2024,
 
after giving
 
effect to
 
the amendments,
 
the Company
 
was in
 
compliance with
 
the credit
 
agreement.
There
 
were
 
no
 
borrowings
 
outstanding,
 
nor
 
any
 
outstanding
 
letters
 
of
 
credit
 
that
 
reduced
 
borrowing
availability, as of November 2, 2024.
 
The weighted average interest rate under
 
the credit facility was zero at
November 2, 2024 due to
 
no outstanding borrowings.
Expenditures
 
for
 
property
 
and
 
equipment
 
totaled
 
$6.5
 
million
 
in
 
the
 
first
 
nine
 
months
 
of
 
fiscal
 
2024,
compared to
 
$10.3 million
 
in last
 
fiscal year’s
 
first nine
 
months. The
 
decrease in
 
expenditures for
 
property
and equipment
 
was
 
primarily
 
due to
 
finishing
 
projects related
 
to investments
 
in the
 
distribution center
 
and
information
 
technology.
 
For
 
the
 
full
 
fiscal
 
2024
 
year,
 
the
 
Company
 
expects
 
to
 
invest
 
approximately
 
$7.0
million for capital expenditures.
Net
 
cash
 
provided
 
by
 
investing
 
activities
 
totaled
 
$21.5
 
million
 
in
 
the
 
first
 
nine
 
months
 
of
 
fiscal
 
2024
compared
 
to
 
$6.1
 
million
 
net
 
cash
 
provided
 
in
 
the
 
comparable
 
period
 
of
 
2023.
 
The
 
increase
 
in
 
net
 
cash
provided
 
by
 
investing
 
activities
 
in
 
2024
 
was
 
primarily
 
due
 
to
 
the
 
sale
 
of
 
other
 
assets,
 
lower
 
purchases
 
of
short-term investments,
 
and lower capital
 
expenditure spending,
 
partially offset
 
by lower sales
 
of short-term
investments.
Net cash used in financing activities totaled $12.6 million in the first nine months of fiscal
 
2024 compared to
$12.7 million used in the comparable period of fiscal 2023.
 
The slight decrease in net cash used in financing
activities in fiscal 2024 was primarily
 
due to lower stock repurchases, partially offset
 
by dividends paid.
As of November
 
2, 2024, the Company
 
had 442,831 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
 
U.S. Treasury/Agencies
notes and
 
bonds held
 
in managed
 
accounts with
 
underlying ratings
 
of A
 
or better
 
at November
 
2, 2024
 
and
February 3, 2024.
 
The state, municipal and corporate bonds have contractual maturities which range from 13
days to 2.9 years. The U.S. Treasury/Agencies notes and bonds have contractual maturities which range from
3
 
days
 
to
 
2.7
 
years.
 
These
 
securities
 
are
 
classified
 
as
 
available-for-sale
 
and
 
are
 
recorded
 
as
 
Short-term
investments
 
and
 
Other
 
assets
 
on
 
the
 
respective
 
Condensed
 
Consolidated
 
Balance
 
Sheets.
 
These
 
assets
 
are
carried
 
at
 
fair
 
value
 
with
 
unrealized
 
gains
 
and
 
losses
 
reported
 
net
 
of
 
taxes
 
in
 
Accumulated
 
other
comprehensive income.
 
At February
 
3,
 
2024, the
 
Company
 
had $1.1
 
million
 
of corporate
 
equities and
 
deferred
 
compensation
 
plan
assets of
 
$8.6 million.
 
At November
 
2, 2024,
 
the Company
 
had deferred
 
compensation plan
 
assets of
 
$9.1
million.
 
During the nine
 
months ended November
 
2, 2024, the
 
Company sold its
 
corporate equities.
 
All of
these assets
 
are recorded
 
within
 
Other assets
 
in the
 
Condensed
 
Consolidated
 
Balance
 
Sheets.
 
See
 
Note
 
7,
Fair Value Measurements.
 
 
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.
 
 
 
 
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 November
 
2, 2024.
 
Based on this
evaluation, our Principal Executive Officer and Principal Financial Officer concluded that, as of November 2,
2024, 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
 
November
 
2,
 
2024
 
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
 
3,
 
2024.
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 November 2, 2024:
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)
August 2024
-
$
-
-
September 2024
35,407
4.49
35,407
October 2024
-
-
-
Total
35,407
$
4.49
35,407
442,831
(1)
Prices include trading costs.
(2)
As of August 3, 2024, the Company’s
 
share repurchase program had 478,238 shares remaining in
open authorizations. During the third quarter ended November 2, 2024, the Company repurchased
and
 
retired 35,407
 
shares under
 
this
 
program for
 
approximately $158,827
 
or
 
an average
 
market
price of $4.49 per share.
 
As of November 2, 2024, the Company had 442,831 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
 
November
 
2,
 
2024,
 
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
 
3.2
10.1*
 
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 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
November
 
26, 2024
/s/ John P.
 
D. Cato
Date
John P.
 
D. Cato
Chairman, President and
Chief Executive Officer
November 26, 2024
/s/ Charles D. Knight
Date
Charles D. Knight
Executive Vice President
Chief Financial Officer
exhibit101
 
 
 
 
 
 
 
 
 
 
 
 
1
FIFTH AMENDMENT TO
 
CREDIT AGREEMENT
THIS FIFTH AMENDMENT TO CREDIT AGREEMENT
(this “Amendment”), dated as
of November 1, 2024, is by and among
 
THE CATO
 
CORPORATION, a Delaware corporation (the
“Borrower”), the other Loan Parties party hereto, the Banks
 
(as defined below) party hereto and
WELLS FARGO BANK, NATIONAL
 
ASSOCIATION, as agent on behalf of the Banks under the
Existing Credit Agreement (as hereinafter defined) (in such capacity, the “Agent”).
 
Capitalized terms
used herein and not otherwise defined herein shall have the meanings
 
ascribed thereto in the Amended
Credit Agreement.
W I T N E S S E T H
WHEREAS
, the Borrower, certain Domestic Subsidiaries of the Borrower as may be from
time to time party thereto, certain banks and financial institutions
 
from time to time party thereto (the
“Banks”) and the Agent are parties to that certain Credit Agreement
 
dated as of May 19, 2022 (as
amended by that certain First Amendment to Credit Agreement, dated
 
as of June 6, 2022, that certain
Second Amendment to Credit Agreement, dated as of August 9, 2023,
 
that certain Third Amendment
to Credit Agreement, dated as of October 24, 2023, that certain Fourth Amendment
 
to Credit
Agreement, dated as of April 25, 2024, and as further amended, modified, extended,
 
restated, replaced,
or supplemented from time to time, the “Existing Credit Agreement”
 
and, after giving effect to this
Amendment, the “Amended Credit Agreement”);
WHEREAS
, the Borrower has requested that the Required Banks and Agent amend
 
certain
provisions of the Existing Credit Agreement; and
WHEREAS
, the Required Banks and the Agent are willing to make such amendments
 
to the
Existing Credit Agreement, in accordance with and subject to the terms
 
and conditions set forth herein.
NOW,
 
THEREFORE
, in consideration of the agreements hereinafter set forth, and for other
good and valuable consideration, the receipt and adequacy of which are hereby
 
acknowledged, the
parties hereto agree as follows:
ARTICLE I
 
AMENDMENTS
 
TO CREDIT AGREEMENT
1.1
Amendment to Section 1.01
.
 
The following defined terms are hereby added to
Section 1.01 of the Existing Credit Agreement in the appropriate alphabetical
 
order:
 
“Fifth Amendment”
 
means that certain Fifth Amendment to Credit Agreement dated as
of the Fifth Amendment Effective Date, by and among the Loan Parties,
 
the Banks party
thereto and the Agent.
 
“Fifth Amendment Draw Request”
 
means the first Revolving Credit Advance or Letter
of Credit requested by the Borrower on or after the Fifth Amendment Effective Date.
 
“Fifth Amendment Effective Date” means November [_], 2024.
 
“Security Agreement”
 
means a security agreement executed by the Loan Parties in favor
of the Agent, for the ratable benefit of the Secured Parties (as defined therein), which shall be
substantially in the form and substance acceptable to the Agent in
 
its reasonable discretion.
 
1.2
Amendment to definition of Loan Documents
.
 
The definition of Loan Documents
 
 
 
 
 
 
 
2
set forth in Section 1.01 of the Existing Credit Agreement is hereby amended
 
and restated in its
entirety to read as follows:
 
“Loan Documents”
 
means this Agreement, the Notes, the Letter of Credit Agreements,
the Letters of Credit, the Security Agreement (from and after a Fifth Amendment Draw
Request), any other document evidencing, relating to or securing the Revolving Credit
Advances, or the Letters of Credit, and any other document or instrument delivered from time
to time in connection with this Agreement, the Notes, the Letter of Credit Agreements, the
Letters of Credit, or Revolving Credit Advances, as such documents and instruments may be
amended or supplemented from time to time.
1.3
Amendment to Section 3.02
.
 
Section 3.02 of the Existing Credit Agreement is
hereby amended by adding the following sentence to the end of such
 
section:
 
In addition to the forgoing, the obligation of each Bank to make the Fifth Amendment
Draw Request shall be subject to receipt by the Agent of (a) a Security Agreement duly
executed by, and enforceable against, each of the Loan Parties and (b) customary lien
searches in the jurisdiction of incorporation of each Loan Party satisfactory to the
 
Agent.
1.4
Amendment to Section 3.03
.
 
Section 3.03 of the Existing Credit Agreement is
hereby amended by adding the following sentence to the end of such
 
section:
 
In addition to the forgoing, the obligation of the Issuing Bank to make the Fifth
Amendment Draw Request shall be subject to receipt by the Agent of (a) a Security Agreement
duly executed by, and enforceable against, each of the Loan Parties and (b) customary lien
searches in the jurisdiction of incorporation of each Loan Party satisfactory to the
 
Agent.
1.5
Amendment to Section 5.03
. Section 5.03 of the Existing Credit Agreement is hereby
amended and restated in its entirety to read as follows:
5.03 Minimum EBITDAR Coverage Ratio. On the last day of each Fiscal Quarter, the
Minimum EBITDAR Coverage Ratio shall not be less than (a)
 
with respect to the third Fiscal
Quarter of 2024, 0.90 to 1.0 and (b) with respect to each subsequent Fiscal Quarter, (i) to the
extent Liquidity at any time during such Fiscal Quarter was less than
 
$100,000,000, 1.15 to
1.0 or (ii) otherwise, 1.05 to 1.0.
 
Other than with respect to the period beginning on the Fifth
Amendment Effective Date through and including the date financial statements for the 2024
Fiscal Year are
 
required to be delivered pursuant to Section 5.01, to the extent (i) a Liquidity
Event occurs and (ii) the Minimum EBITDAR Coverage Ratio as of
 
the most recently ended
Fiscal Quarter for which Financial Statements have been delivered was less than 1.05 to 1.0,
the Borrower shall be in violation of this Section 5.03 and an immediate Event of Default shall
occur pursuant to Section 6.01(b).
 
1.6
Amendment to Section 5.11(o)
. Clause (o) appearing in Section 5.11 of the Credit
Agreement is hereby amended and restated in its entirety to read
 
as follows:
 
(o)
 
Liens (i) created pursuant to the Loan Documents (including the Security
Agreement) and (ii) not described in subclauses (a) through (n) above, the foregoing clause
(o)(i), or subclause (m) below that relate to liabilities not in excess of $2,000,000 in the
aggregate; and
1.7
Amendment to Section 6.01(p)
. Clause (p) appearing in Section 6.01 of the Existing
Credit Agreement is hereby amended and restated in its entirety to read
 
as follows:
 
 
 
 
 
 
 
 
 
 
3
 
(p) the Security Agreement shall for any reason cease to create a valid and perfected
first priority Lien (subject to Liens permitted pursuant to Section 5.11) on, or security interest
in, any of the Collateral (as defined in the Security Agreement) purported to be covered
thereby, in each case other than in accordance with the express terms hereof
 
or thereof,
ARTICLE II
 
CONDITIONS TO
 
EFFECTIVENESS
This Amendment shall become effective as of the day and year set forth above
 
(the “Fifth
Amendment Effective Date”) when the Agent shall have received a copy of this
 
Amendment duly
executed by each of the Borrower, the other Loan Parties, the Required Banks and the Agent.
ARTICLE III
 
MISCELLANEOUS
3.1
Amended Terms.
On and after the Fifth Amendment Effective Date, all references to
the Existing Credit Agreement in each of the Loan Documents shall hereafter
 
mean the Amended
Credit Agreement as amended by
 
this
 
Amendment.
Except
 
as
 
specifically amended
 
hereby
 
or
otherwise
 
agreed,
 
the
Existing
Credit Agreement
 
is
 
hereby
 
ratified
 
and
 
confirmed
 
and
 
shall
remain
 
in
 
full
 
force
 
and
 
effect
 
according
 
to
 
its terms.
3.2
Reaffirmation of Obligations.
The Borrower hereby ratifies the Existing Credit
Agreement
 
as amended by this Amendment and acknowledges and reaffirms (a) that it is bound by
 
all
terms of the Existing Credit Agreement as so amended applicable to
 
it and (b) that it is responsible for
the observance and full performance of its Obligations.
3.3
Loan Document.
This Amendment shall constitute a Loan Document under the terms
of the Amended Credit Agreement.
 
3.4
Further Assurances.
The Borrower agrees to promptly take such action, upon the
request of the Agent, as is necessary to carry out the intent of this Amendment.
3.5
Entirety.
This Amendment and the other Loan Documents embody the entire
agreement among the parties hereto relating to the subject matter hereof
 
and thereof and supersede all
previous documents, agreements and understandings, oral or written, relating
 
to the subject matter
hereof and thereof.
3.6
Counterparts; Telecopy.
This Amendment may be executed in counterparts (and by
different parties hereto in different counterparts), each of which when so executed and delivered
 
will
constitute an original, but all of which when taken together will constitute
 
a single contract.
 
Delivery
of an executed counterpart to this Amendment by telecopy or other electronic
 
means shall be effective
as an original and shall constitute a representation that an original will
 
be delivered.
3.7
No Actions, Claims, Etc.
As of the date hereof, the Borrower hereby acknowledges
and confirms that it has no knowledge of any actions, causes of action,
 
claims, demands, damages and
liabilities of whatever kind or nature, in law or in equity, against the Agent, the Banks, or the Agent’s
or the Banks’ respective officers, employees,
 
representatives, agents, counsel or directors arising from
any action by such Persons, or failure of such Persons to act under the Existing
 
Credit Agreement on or
prior to the date hereof.
3.8
NORTH CAROLINA LAW
 
.
 
THIS AMENDMENT SHALL BE CONSTRUED
 
 
 
4
IN ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE STATE
 
OF NORTH
CAROLINA.
3.9
Successors and Assigns.
This Amendment shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns.
3.10
Expenses.
 
Notwithstanding the provisions of Section 9.03 of the Existing
 
Credit
Agreement, each party hereto agrees that it shall be responsible for its own
 
expenses in connection with
this Amendment;
provided
 
however the Borrower shall pay fees and disbursements of outside counsel
for the Agent in connection with the preparation of this Amendment.
3.11
Consent to Jurisdiction; Service of Process; Waiver of Jury Trial.
The
jurisdiction, service of process and waiver of jury trial provisions set
 
forth in Section 9.16 of the
Existing Credit Agreement are hereby incorporated by reference,
mutatis mutandis.
[REMAINDER OF PAGE INTENTIONALLY
 
LEFT BLANK]
 
 
1
IN WITNESS WHEREOF the parties hereto
 
have caused this Amendment to be duly
 
executed on
the date first above written.
BORROWER:
THE CATO CORPORATION
By:
 
_________________________
Charles D. Knight
Executive Vice President and Chief Financial Officer
 
 
 
 
 
 
 
 
 
2
Acknowledged and Agreed to:
GUARANTORS:
 
CADEL LLC
By:
 
Name:
Title:
CHW, LLC
By:
 
Name:
Title:
CATO
 
OF TEXAS L.P.
By:
 
Name:
Title:
CATOSOU
 
TH LLC
By:
 
Name:
Title:
catocorp.com, LLC
By:
 
Name:
Title:
CATOWEST,
 
LLC
By:
 
Name:
Title:
CATO
 
SOUTHWEST, INC.
By:
 
Name:
Title:
 
 
 
 
 
 
 
 
3
CATO
 
WO LLC
By:
 
Name:
Title:
CATO
 
OF FLORIDA L.L.C.
By:
 
Name:
Title:
CATO
 
OF TENNESSEE, LLC
By:
 
Name:
Title:
CATO
 
OF VIRGINIA, LLC
By:
 
Name:
Title:
CATO
 
OF NORTH CAROLINA, LLC
By:
 
Name:
Title:
CATO
 
OF ILLINOIS, LLC
By:
 
Name:
Title:
CATO
 
OF SOUTH CAROLINA, LLC
By:
 
Name:
Title:
OHIO CATO
 
STORES, LLC
By:
 
Name:
Title:
 
4
CATO
 
OF GEORGIA, LLC
By:
 
Name:
Title:
 
 
1
AGENT AND BANKS:
WELLS FARGO BANK, NATIONAL
ASSOCIATION
, as Agent, Issuing Bank and as a Bank
By:
 
_________________________
Name: Brad D. Bostick
Title: Senior Vice President
exhibit311
 
1
EXHIBIT 31.1
PRINCIPAL EXECUTIVE
 
OFFICER CERTIFICATION
 
PURSUANT TO
SECURITIES EXCHANGE ACT OF 1934 RULE 13a-14(a)/15d-14(a),
 
AS ADOPTED
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY
 
ACT OF 2002
 
I, John P.
 
D. Cato, certify that:
 
 
1.
 
I have reviewed this report on Form 10-Q of The Cato Corporation (the “registrant”);
 
 
2.
 
Based
 
on
 
my
 
knowledge,
 
this
 
report
 
does
 
not
 
contain
 
any
 
untrue
 
statement
 
of
 
a
 
material
 
fact
 
or
 
omit
 
to
 
state
 
a
 
material
 
fact
 
necessary
 
to
 
make
 
the
 
statements
 
made,
 
in
 
light
 
of
 
the
 
circumstances
 
under
 
which
 
such statements were made, not misleading with respect to the period
 
covered by this report;
 
 
3.
 
Based
 
on
 
my
 
knowledge,
 
the
 
financial
 
statements,
 
and
 
other
 
financial
 
information
 
included
 
in
 
this
 
report,
 
fairly present
 
in all
 
material respects
 
the financial
 
condition,
 
results of
 
operations
 
and
 
cash
 
flows of
 
the registrant
 
as of,
and for, the periods presented in this report;
 
 
4.
 
The
 
registrant’s
 
other
 
certifying
 
officer
 
and
 
I
 
are
 
responsible
 
for
 
establishing
 
and
 
maintaining
 
disclosure
 
controls
 
and
procedures
 
(as defined
 
in Exchange
 
Act Rules 13a-15(e)
 
and 15d-15(e))
 
and internal
 
control over
 
financial reporting
 
(as
defined
 
in
 
Exchange
 
Act
 
Rules
 
13a-15(f)
 
and
 
15d-15(f))
 
for
 
the
 
registrant
 
and have:
 
 
 
 
a)
 
Designed
 
such
 
disclosure
 
controls
 
and
 
procedures,
 
or
 
caused
 
such
 
disclosure
 
controls
 
and
 
procedures
 
to
 
be
 
designed
 
under
 
our
 
supervision,
 
to
 
ensure
 
that
 
material
 
information
 
relating
 
to
 
the
 
registrant,
 
including
 
its
consolidated
 
subsidiaries,
 
is
 
made
 
known
 
to
 
us
 
by
 
others
 
within
 
those
 
entities,
particularly during the period in which this report is being prepared;
 
 
 
b)
 
Designed such
 
internal control
 
over financial
 
reporting, or
 
caused such
 
internal control
 
over financial
 
reporting to
 
be
designed under our supervision,
 
to provide reasonable assurance
 
regarding the reliability
 
of financial reporting and
 
the
preparation of financial statements for external purposes in accordance
 
with generally accepted accounting principles;
 
c)
 
Evaluated
 
the
 
effectiveness
 
of
 
the
 
registrant’s
 
disclosure
 
controls
 
and
 
procedures
 
and
 
presented
 
in
 
this
 
report
 
our
conclusions
 
about
 
the
 
effectiveness
 
of
 
the
 
disclosure
 
controls
 
and
 
procedures,
 
as
 
of
 
the
 
end
 
of the period covered by this report based on such evaluation; and
 
 
 
d)
 
Disclosed
 
in
 
this
 
report
 
any
 
change
 
in
 
the
 
registrant’s
 
internal
 
control
 
over
 
financial
 
reporting
 
that
 
occurred
 
during
 
the
 
registrant’s
 
most
 
recent
 
fiscal
 
quarter
 
(the
 
registrant’s
 
fourth
 
fiscal
 
quarter
 
in
 
the
 
case
 
of
 
an
 
annual
 
report)
 
that
 
has
 
materially
 
affected,
 
or
 
is
 
reasonably
 
likely
 
to
 
materially
 
affect,
 
the
 
registrant’s
internal control over financial reporting; and
5.
 
The registrant’s
 
other certifying
 
officer and
 
I have disclosed,
 
based on
 
our most recent
 
evaluation of
 
internal control
 
over
financial
 
reporting,
 
to
 
the registrant’s
 
auditors
 
and
 
the audit
 
committee
 
of the
 
registrant’s
 
board
 
of directors
 
(or
 
persons
performing the equivalent functions):
 
 
 
 
a)
 
All
 
significant
 
deficiencies
 
and
 
material
 
weaknesses
 
in
 
the
 
design
 
or
 
operation
 
of
 
internal
 
control
 
over
 
financial
reporting
 
which
 
are
 
reasonably
 
likely
 
to
 
adversely
 
affect
 
the
 
registrant’s
 
ability
 
to
 
record,
 
process, summarize and report financial information; and
 
 
 
b)
 
Any
 
fraud,
 
whether
 
or
 
not
 
material,
 
that
 
involves
 
management
 
or
 
other
 
employees
 
who
 
have
 
a
 
significant role in the registrant’s internal
 
control over financial reporting.
Date: November 26, 2024
/s/ John P.
 
D. Cato
John P.
 
D. Cato
Chairman, President and
Chief Executive Officer
exhibit312
 
1
EXHIBIT 31.2
PRINCIPAL FINANCIAL
 
OFFICER CERTIFICATION
 
PURSUANT TO
SECURITIES EXCHANGE ACT OF 1934 RULE 13a-14(a)/15d-14(a),
 
AS ADOPTED
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY
 
ACT OF 2002
I, Charles D. Knight, certify that:
 
 
1.
 
I have reviewed this report on Form 10-Q of The Cato Corporation (the “registrant”);
 
 
2.
 
Based
 
on
 
my
 
knowledge,
 
this
 
report
 
does
 
not
 
contain
 
any
 
untrue
 
statement
 
of
 
a
 
material
 
fact
 
or
 
omit
 
to
 
state
 
a
 
material
 
fact
 
necessary
 
to
 
make
 
the
 
statements
 
made,
 
in
 
light
 
of
 
the
 
circumstances
 
under
 
which
 
such statements were made, not misleading with respect to the period
 
covered by this report;
 
 
3.
 
Based
 
on
 
my
 
knowledge,
 
the
 
financial
 
statements,
 
and
 
other
 
financial
 
information
 
included
 
in
 
this
 
report,
 
fairly present
 
in all
 
material respects
 
the financial
 
condition,
 
results of
 
operations
 
and
 
cash
 
flows of
 
the registrant
 
as of,
and for, the periods presented in this report;
 
 
4.
 
The
 
registrant’s
 
other
 
certifying
 
officer
 
and
 
I
 
are
 
responsible
 
for
 
establishing
 
and
 
maintaining
 
disclosure
 
controls
 
and
procedures
 
(as defined
 
in Exchange
 
Act Rules 13a-15(e)
 
and 15d-15(e))
 
and internal
 
control over
 
financial reporting
 
(as
defined
 
in
 
Exchange
 
Act
 
Rules
 
13a-15(f)
 
and
 
15d-15(f))
 
for
 
the
 
registrant
 
and have:
 
 
 
 
a)
 
Designed
 
such
 
disclosure
 
controls
 
and
 
procedures,
 
or
 
caused
 
such
 
disclosure
 
controls
 
and
 
procedures
 
to
 
be
 
designed
 
under
 
our
 
supervision,
 
to
 
ensure
 
that
 
material
 
information
 
relating
 
to
 
the
 
registrant,
 
including
 
its
consolidated
 
subsidiaries,
 
is
 
made
 
known
 
to
 
us
 
by
 
others
 
within
 
those
 
entities,
 
particularly during the period in which this report is being prepared;
 
 
 
b)
 
Designed such
 
internal control
 
over financial
 
reporting, or
 
caused such
 
internal control
 
over financial
 
reporting to
 
be
designed under our supervision,
 
to provide reasonable assurance
 
regarding the reliability
 
of financial reporting and
 
the
preparation of financial statements for external purposes in accordance
 
with generally accepted accounting principles;
 
c)
 
Evaluated
 
the
 
effectiveness
 
of
 
the
 
registrant’s
 
disclosure
 
controls
 
and
 
procedures
 
and
 
presented
 
in
 
this
 
report
 
our
conclusions
 
about
 
the
 
effectiveness
 
of
 
the
 
disclosure
 
controls
 
and
 
procedures,
 
as
 
of
 
the
 
end
 
of the period covered by this report based on such evaluation; and
 
 
 
d)
 
Disclosed
 
in
 
this
 
report
 
any
 
change
 
in
 
the
 
registrant’s
 
internal
 
control
 
over
 
financial
 
reporting
 
that
 
occurred
 
during
 
the
 
registrant’s
 
most
 
recent
 
fiscal
 
quarter
 
(the
 
registrant’s
 
fourth
 
fiscal
 
quarter
 
in
 
the
 
case
 
of
 
an
 
annual
 
report)
 
that
 
has
 
materially
 
affected,
 
or
 
is
 
reasonably
 
likely
 
to
 
materially
 
affect,
 
the
 
registrant’s
internal control over financial reporting; and
5.
 
The registrant’s
 
other certifying
 
officer and
 
I have disclosed,
 
based on
 
our most recent
 
evaluation of
 
internal control
 
over
financial
 
reporting,
 
to
 
the registrant’s
 
auditors
 
and
 
the audit
 
committee
 
of the
 
registrant’s
 
board
 
of directors
 
(or
 
persons
performing the equivalent functions):
 
 
 
 
a)
 
All
 
significant
 
deficiencies
 
and
 
material
 
weaknesses
 
in
 
the
 
design
 
or
 
operation
 
of
 
internal
 
control
 
over
 
financial
reporting
 
which
 
are
 
reasonably
 
likely
 
to
 
adversely
 
affect
 
the
 
registrant’s
 
ability
 
to
 
record,
 
process, summarize and report financial information; and
 
 
 
b)
 
Any
 
fraud,
 
whether
 
or
 
not
 
material,
 
that
 
involves
 
management
 
or
 
other
 
employees
 
who
 
have
 
a
 
significant role in the registrant’s internal
 
control over financial reporting.
Date: November 26, 2024
/s/ Charles D. Knight
Charles D. Knight
Executive Vice President
Chief Financial Officer
exhibit321
 
1
EXHIBIT 32.1
CERTIFICATION OF PERIODIC REPORT
I,
 
John
 
P.
 
D.
 
Cato,
 
Chairman,
 
President
 
and
 
Chief
 
Executive
 
Officer
 
of
 
The
 
Cato
 
Corporation
 
(the
“Company”), certify,
 
pursuant to
 
Section 906 of
 
the Sarbanes-Oxley
 
Act of
 
2002, 18
 
U.S.C. Section 1350,
that on the date of this
 
Certification:
1.
the Form 10-Q of the Company for
 
the quarter ended November 2, 2024 (the
 
“Report”) fully complies
with the requirements of Section 13(a)
 
or 15(d) of the Securities
 
Exchange Act of 1934; and
2.
the information contained in the Report
 
fairly presents, in all material respects, the
 
financial condition and
results of operations of the Company.
Dated: November 26, 2024
 
 
 
/s/ John P.
 
D. Cato
 
John P.
 
D. Cato
 
Chairman, President and
 
Chief Executive Officer
exhibit322
 
1
EXHIBIT 32.2
CERTIFICATION OF PERIODIC REPORT
I,
 
Charles
 
D.
 
Knight,
 
Executive
 
Vice
 
President,
 
Chief
 
Financial
 
Officer
 
of
 
The
 
Cato
 
Corporation
 
(the
“Company”), certify,
 
pursuant to
 
Section 906 of
 
the Sarbanes-Oxley
 
Act of
 
2002, 18
 
U.S.C. Section 1350,
that on the date of this
 
Certification:
1.
the
 
Form 10-Q of
 
the
 
Company for
 
the
 
quarter
 
ended November
 
2,
 
2024
 
(the “Report”)
 
fully
 
complies
with the requirements of Section 13(a)
 
or 15(d) of the Securities
 
Exchange Act of 1934; and
2.
 
the information contained in the Report fairly presents, in all material respects, the financial condition and
results of operations of the Company.
Dated: November 26, 2024
 
 
 
/s/ Charles D. Knight
 
Charles D. Knight
 
Executive Vice President
 
Chief Financial Officer