Cato Presents Key Strategies for Continued Success and Growth During Annual Shareholders' Meeting

CHARLOTTE, N.C., May 30 /PRNewswire/ -- The Cato Corporation (Nasdaq: CACOA) held its Annual Shareholders' Meeting on Thursday, May 25, 2000 at its corporate offices in Charlotte, NC.

In his address to shareholders, John Cato, Vice Chairman, President and Chief Executive Officer, outlined Cato's key strategies for continued growth and success. Priorities for fiscal 2000 include an accelerated store expansion program, the strengthening of the corporate infrastructure, and the building of the Cato brand.

Mr. Cato noted that 1999 was a record year for the company with sales of $585 million, an increase of over $60 million. Net income rose to $34 million, up $10 million over last year and earnings per share increased 48% to $1.26. Mr. Cato remarked, "In spite of a weak Easter and cooler weather compared to last year, we reported a record first quarter 2000. This marks our 13th consecutive quarter of earnings improvement and shows the strength of our strategies and management team in driving long-term growth."

"Cato is a leader in the value-priced women's fashion apparel retail segment with its clearly defined 'customer focused' operating strategy," stated Mr. Cato. "We are unique in our market because:

• We offer high quality, private label products that appeal to a broad customer base;

• we are the everyday low price leader in our segment which ensures that we deliver exceptional value to our customer;

• and we provide personalized customer service with the convenience of a strip shopping center in an easy-to-shop specialty store format."

Over the past three years, Cato has concentrated its efforts on delivering real value in terms of fashion, quality, fit, assortment and everyday low prices in a shopping environment that keeps customers coming back again and again. Mr. Cato noted that this strategy has become the framework for Cato's success and the value proposition for its customers, associates, shareholders and business partners.

During first quarter 2000, Cato introduced a new ad campaign, "Look Smart. Buy Smart." reflecting Cato's customer and her shopping attitude. Mr. Cato explained that the campaign was the result of a marketing study through which the Company gained additional knowledge of customers' lifestyles and purchasing patterns, enabling Cato to refine its merchandise offerings to better satisfy its customer's wants and needs. Additionally, Cato has enhanced its marketing programs to more effectively communicate this value message through in-store signage and collateral materials, print, radio and its website.

Mr. Cato spoke at length about Cato's branding initiative. "With these strategies in place, we are now focused on strengthening and positioning the Cato brand, a key initiative to our continued success and growth. For our customer, we want the Cato brand to be synonymous with quality fashion at great prices. Having established real value in our brand, we now need to focus on establishing perceived value, like major national chains have done successfully. Delivering superior customer service is an important element of our branding efforts. Our customers are increasingly loyal to the Cato brand which enhances sales and customer satisfaction. Our branding initiative is part of a larger strategic equation -- to generate increased customer and shareholder value," said Mr. Cato.

Accelerated store growth is another key element of Cato's brand-building strategy. The reconfiguration of the Distribution Center will support the accelerated store growth plans. An enhanced physical plant and systems upgrade during fiscal 2000 will provide Cato the capacity to support up to 1,500 stores, almost double its current store count.

Cato accelerated store growth in 1999 by opening 83 new stores. "Our plan is to add 100 new stores this year and 125 stores next year. Our strong financial position will enable us to support and fund this aggressive growth strategy. Our research has shown that we can double our store count within our existing geography. However, we won't be satisfied until Cato is a national chain. Our remodeling program also continues to add value with 97 remodels last year and 100 planned this year. The constant refinement of our store prototype assures us that our stores reflect and project the Cato brand. Our newest store prototype will be rolled out beginning in June, 2000," Mr. Cato commented.

Over the past two years, Cato has continued to focus on technology upgrades. These upgrades, along with the implementation of an enterprise-wide system, will allow Cato to dramatically expand the level of detail by which its business is planned and analyzed. The new system is scheduled to be in operation by the fall of 2001 and will integrate the merchandising, distribution and financial systems.

In March of this year, Cato launched its new website at www.catocorp.com . "As we update our technical infrastructure to a web-enabled client/server environment, we will continue to develop the website's functionality," Mr. Cato remarked. "A priority for this year will be to utilize the Internet to enhance our business-to-business and business-to-customer relationships."

The Company continues to execute its share buyback program. The Company repurchased 985,400 shares in fiscal 1999 and 1,468,800 shares in first quarter 2000. Under the program 4,832,200 shares have been repurchased and the Company has authorization to repurchase an additional 1,167,800 shares.

Mr. Cato closed the meeting by stating, "This is an exciting time for Cato, having established the framework for continued success and growth, while strengthening the Cato brand. We remain committed to executing our plans to grow profitability and increase shareholder value."

During the formal session of the meeting, shareholders approved all proposals of the Board of Directors, including the ratification of Deloitte & Touche as independent auditors for fiscal year 2000, the approval of the 1999 Incentive Compensation Plan, the amendment of the 1987 Non-Qualified Stock Option Plan and the re-election of four Board members, including Clarice Cato Goodyear, Paul W. Fulton, James H. Shaw and John P. Derham Cato.

On May, 25, 2000 a quarterly cash dividend of $.10 per share on issued and outstanding Class A Common Stock and Class B Common Stock of the Corporation was declared. The dividend will be payable on June 26, 2000 to stockholders of record of the Corporation at the close of business on June 12, 2000.

The Cato Corporation is a leading value-priced women's fashion specialty retailer operating two divisions, "Cato" and "It's Fashion!" The Company offers private label merchandise with fashion and quality comparable to mall specialty stores at low prices, everyday. As of April 29, 2000, The Cato Corporation operated 817 stores in 21 states, compared to 753 stores at May 1, 1999. Additional information on The Cato Corporation is available on the Internet at www.catocorp.com .

Statements in this press release not historical in nature 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. 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. SOURCE The Cato Corporation

CONTACT: Michael O. Moore, Executive Vice President, Chief Financial Officer of The Cato Corporation, 704-551-7201/