UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

450 Fifth Street NW
Washington, D.C. 29549

Form 8-K

CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported):      August 23, 2007     

THE CATO CORPORATION

(Exact Name of Registrant as Specified in its Charter)

Delaware		1-31340		56-0484485
(State or Other Jurisdiction		(Commission		(I.R.S. Employer
of Incorporation)		File Number)		Identification Number)

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 or Former Address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

THE CATO CORPORATION

Item 2.02. Results of Operations and Financial Condition.

On August 23, 2007, The Cato Corporation issued a press release regarding its financial results for the second quarter ending August 4, 2007. A copy of this press release is furnished as Exhibit 99.1 hereto.

Item 9.01. Financial Statements and Exhibits.

     (d) Exhibits

     Exhibit 99.1 — Press Release issued August 23, 2007.

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 hereunto duly authorized.

		THE CATO CORPORATION
August 24, 2007		/s/ John P. D. Cato
Date		John P. D. Cato Chairman, President and Chief Executive Officer
August 24, 2007		/s/ Thomas W. Stoltz
Date		Thomas W. Stoltz Executive Vice President Chief Financial Officer

Exhibit Index

Exhibit		Exhibit No.
Press Release issued August 23, 2007		99.1

Exhibit 99.1

The CATO Corporation

NEWS RELEASE

FOR IMMEDIATE RELEASE

CEO Approval ________

For Further Information Contact:
     Thomas W. Stoltz
     Executive Vice President
     Chief Financial Officer
     704-551-7201

CATO REPORTS 2Q EPS UP 3%
Reaffirms Second Half Guidance

Charlotte, NC (August 23, 2007) — The Cato Corporation (NYSE: CTR) today reported net income of $12.5 million or $.39 per diluted share for the second quarter ended August 4, 2007, compared to net income of $12.1 million or $.38 per diluted share for the second quarter ended July 29, 2006. Both net income and earnings per diluted share increased 3% over last year. Sales for the second quarter were $219.0 million, a 2% increase over sales of $214.6 million last year. Second quarter comparable store sales decreased 1%.

For the six months ended August 4, 2007, the Company earned net income of $31.2 million or $.97 per diluted share, compared with net income of $32.9 million or $1.04 per diluted share for the six months ended July 29, 2006, a decrease in net income of 5% and a decrease in earnings per diluted share of 7%. Sales for the first half were $443.1 million, flat compared to the prior year’s first half sales of $444.4 million. Comparable store sales for the first half decreased 3% from first half 2006.

“Our results through the first half reflect the challenging apparel retail environment,” said John Cato, Chairman, President, and Chief Executive Officer. “Sell-throughs of regular priced goods have been below last year and, when coupled with higher markdowns, are the primary reason for the decrease in gross margin. Our inventory is in line with sales as we begin the third quarter.”

8100 Denmark Road
P. O. Box 34216
Charlotte, NC 28234
(704) 554-8510

The Company’s income from operations was in line with previous guidance. Second quarter results were $.02 above the Company’s estimate due primarily to an effective tax rate lower than anticipated due to volatility between quarters and higher tax credits. When compared to the prior year, second quarter and first half SG&A costs decreased from 24.1% to 23.9% and 23.9% to 23.4%, respectively, due primarily to a reduction in accrued incentive compensation.

The Company’s expectations for earnings per diluted share in the second half are unchanged from previous guidance. Comparable store sales for both the third and fourth quarters are estimated to be in the range of down 3% to flat. For the third quarter, earnings per diluted share are estimated to be in the range of $.10 to $.15 versus $.18 in 2006. For the fourth quarter, the Company expects earnings per diluted share to be in the range of $.15 to $.25 versus $.40 in 2006. Fourth quarter 2006 included 14 weeks and several positive one-time adjustments. For the year, after adjusting for second quarter actual results, earnings per diluted share are expected to be in the range of $1.23 to $1.38 versus $1.62 last year, a decrease of 24% to 15%.

During the first half, the Company opened 31 new stores, relocated 10 stores, and closed one store. The Company now expects to open approximately 70 stores during 2007 as compared to its previous guidance of 80 stores. As of August 4, 2007, The Cato Corporation operated 1,306 stores in 31 states, compared to 1,259 stores in 31 states as of July 29, 2006.

The Cato Corporation is a leading specialty retailer of value-priced women’s fashion apparel operating two divisions, “Cato” and “It’s Fashion!”. The Company offers exclusive merchandise with fashion and quality comparable to mall specialty stores at low prices, everyday. Additional information on The Cato Corporation is available at www.catocorp.com.

Statements in this press release not historical in nature including, without limitation, statements regarding the Company’s expected or estimated financial results for the third quarter, fourth quarter and full year and any related assumptions, as well as the Company’s expected plans for full year store openings are considered “forward-looking” within the meaning of The Private Securities Litigation Reform Act of 1995. Such forward-looking statements are based on current expectations that are 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: general economic conditions; competitive factors and pricing pressures; the Company’s ability to predict fashion trends; consumer apparel buying patterns; adverse weather conditions and inventory risks due to shifts in market demand and other factors discussed under “Risk Factors” in Part I, Item 1A of the Company’s most recently filed annual report on Form 10-K, as amended or supplemented, and in

8100 Denmark Road
P. O. Box 34216
Charlotte, NC 28234
(704) 554-8510

other reports the Company files with or furnishes to the SEC from time to time. The Company does not undertake to publicly update or revise the forward-looking statements even if experience or future changes make it clear that the projected results expressed or implied therein will not be realized. The Company is not responsible for any changes made to this press release by wire or Internet services.

# # #

THE CATO CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
FOR THE PERIODS ENDED AUGUST 4, 2007 AND JULY 29, 2006
(Dollars in thousands, except per share data)

		Quarter Ended																Six Months Ended
		August 4,				%				July 29,				%				August 4,				%				July 29,				%
		2007				Sales				2006				Sales				2007				Sales				2006				Sales
REVENUES
Retail sales		$	218,973				100.0	%		$	214,633				100.0	%		$	443,107				100.0	%		$	444,374				100.0	%
Other income (principally finance, late fees and layaway charges)			2,961				1.3	%			3,212				1.5	%			6,056				1.4	%			6,531				1.5	%
Total revenues			221,934				101.3	%			217,845				101.5	%			449,163				101.4	%			450,905				101.5	%
GROSS MARGIN (Memo)			71,459				32.6	%			70,887				33.0	%			152,171				34.3	%			158,516				35.7	%
COSTS AND EXPENSES, NET
Cost of goods sold			147,514				67.4	%			143,746				67.0	%			290,936				65.7	%			285,858				64.3	%
Selling, general and administrative			52,463				23.9	%			51,772				24.1	%			103,599				23.4	%			106,349				23.9	%
Depreciation			5,623				2.6	%			5,223				2.4	%			11,014				2.5	%			10,391				2.4	%
Interest and other income			(2,316	)			-1.1	%			(1,940	)			-0.9	%			(4,209	)			-1.0	%			(3,492	)			-0.8	%
Cost and expenses, net			203,284				92.8	%			198,801				92.6	%			401,340				90.6	%			399,106				89.8	%
Income Before Income Taxes			18,650				8.5	%			19,044				8.9	%			47,823				10.8	%			51,799				11.7	%
Income Tax Expense			6,140				2.8	%			6,951				3.3	%			16,642				3.8	%			18,907				4.3	%
Net Income		$	12,510				5.7	%		$	12,093				5.6	%		$	31,181				7.0	%		$	32,892				7.4	%
Basic Earnings Per Share		$	0.39							$	0.39							$	0.99							$	1.05
Basic Weighted Average Shares			31,897,365								31,267,637								31,624,979								31,250,921
Diluted Earnings Per Share		$	0.39							$	0.38							$	0.97							$	1.04
Diluted Weighted Average Shares			32,189,903								31,803,875								32,040,169								31,765,992

THE CATO CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)

		August 4,				July 29,				February 3,
		2007				2006				2007
		(Unaudited)				(Unaudited)
ASSETS
Current Assets
Cash and cash equivalents		$	19,929			$	21,809			$	24,833
Short-term investments			150,387				94,171				98,709
Accounts receivable — net			45,533				46,436				45,958
Merchandise inventories			99,236				91,989				115,918
Other current assets			14,719				10,970				14,095
Total Current Assets			329,804				265,375				299,513
Property and Equipment — net			126,573				130,422				128,461
Other Assets			4,279				11,201				4,348
TOTAL		$	460,656			$	406,998			$	432,322
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities		$	120,180			$	108,764			$	123,049
Noncurrent Liabilities			32,103				32,491				32,480
Stockholders’ Equity			308,373				265,743				276,793
TOTAL		$	460,656			$	406,998			$	432,322