UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the quarterly period ended
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the transition period from ________________to__________________
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(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
,
,
(Address of principal executive offices)
(Zip Code)
(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
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.
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 during the preceding 12 months (or for such shorter period that the registrant was required to
submit and post such files).
X
No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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
☐
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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.
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b -2 of the Exchange Act).
As of April 29, 2023, there were
1
THE CATO CORPORATION
FORM 10-Q
Quarter Ended April 29, 2023
Table of Contents
Page No.
PART I – FINANCIAL INFORMATION (UNAUDITED)
Item 1.
Financial Statements (Unaudited):
Condensed Consolidated Statements of Income and Comprehensive Income
2
For the Three Months Ended April 29, 2023 and April 30, 2022
Condensed Consolidated Balance Sheets
3
At April 29, 2023 and January 28, 2023
Condensed Consolidated Statements of Cash Flows
4
For the Three Months Ended April 29, 2023 and April 30, 2022
Condensed Consolidated Statements of Stockholders’ Equity
5
For the Three Months Ended April 29, 2023 and April 30, 2022
Notes to Condensed Consolidated Financial Statements
6 - 18
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results
of Operations
19 - 25
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
26
Item 4.
Controls and Procedures
26
PART II – OTHER INFORMATION
Item 1.
Legal Proceedings
27
Item 1A.
Risk Factors
27
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
27
Item 3.
Defaults Upon Senior Securities
27
Item 4.
Mine Safety Disclosures
28
Item 5.
Other Information
28
Item 6.
Exhibits
28
Signatures
29
2
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
THE CATO CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND
COMPREHENSIVE INCOME
(UNAUDITED)
Three Months Ended
April 29, 2023
April 30, 2022
(Dollars in thousands, except per share data)
REVENUES
$
$
COSTS AND EXPENSES, NET
(897 )
(403 )
Income before income taxes
Income tax expense
Net income
$
$
Basic earnings per share
$
$
Diluted earnings per share
$
$
Comprehensive income:
Net income
$
$
Unrealized gain (loss) on available-for-sale securities, net
(1,206 )
Comprehensive income
$
$
See notes to condensed consolidated financial statements (unaudited).
3
THE CATO CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
April 29, 2023
January 28, 2023
(Dollars in thousands)
ASSETS
Current Assets:
Cash and cash equivalents
$
$
Short-term investments
Restricted cash
Accounts receivable, net of allowance for customer credit losses of
Merchandise inventories
Prepaid expenses and other current assets
Property and equipment – net
Deferred income taxes
Other assets
Right-of-Use assets – net
$
$
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable
$
$
Accrued expenses
Accrued bonus and benefits
Accrued income taxes
Current lease liability
Other noncurrent liabilities
Lease liability
Stockholders' Equity:
Preferred stock, $
Class A common stock, $
Convertible Class B common stock, $
Additional paid-in capital
Retained earnings
Accumulated other comprehensive income
(883 )
(1,238 )
$
$
See notes to condensed consolidated financial statements (unaudited).
4
THE CATO CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Three Months Ended
April 29, 2023
April 30, 2022
(Dollars in thousands)
Operating Activities:
Net income
$
$
Adjustments to reconcile net income to net cash provided (used) by operating activities:
Depreciation
Provision for customer credit losses
Purchase premium and premium amortization of investments
(18 )
Share-based compensation
Deferred income taxes
(832 )
(Gain) Loss on disposal of property and equipment
(33 )
Changes in operating assets and liabilities which provided (used) cash:
(1,793 )
(4,382 )
(2,669 )
(618 )
(532 )
(590 )
(1,429 )
(8,331 )
Net cash provided (used) by operating activities
(765 )
Investing Activities:
Expenditures for property and equipment
(6,170 )
(4,440 )
Purchase of short-term investments
(5,914 )
(1,529 )
Sales of short-term investments
Net cash provided (used) by investing activities
Financing Activities:
Dividends paid
(3,455 )
(3,638 )
Repurchase of common stock
(2,267 )
(9,162 )
Proceeds from employee stock purchase plan
Net cash provided (used) by financing activities
(5,556 )
(12,709 )
Net increase (decrease) in cash, cash equivalents, and restricted cash
Cash, cash equivalents, and restricted cash at beginning of period
Cash, cash equivalents, and restricted cash at end of period
$
$
Non-cash activity:
Accrued other assets and property and equipment
$
$
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)
Balance — January 28, 2023
$
$
$
$
(1,238 )
$
Comprehensive income:
Dividends paid ($
(3,455 )
(3,455 )
Class A common stock sold through employee stock purchase plan
Share-based compensation issuances and exercises
Share-based compensation expense
Repurchase and retirement of treasury shares
(8 )
(2,259 )
(2,267 )
Balance — April 29, 2023
$
$
$
$
(883 )
$
Accumulated
Additional
Other
Total
Common
Paid-in
Retained
Comprehensive
Stockholders'
Stock
Capital
Earnings
Income
Equity
(Dollars in thousands)
Balance — January 29, 2022
$
$
$
$
(280 )
$
Comprehensive income:
(1,206 )
(1,206 )
Dividends paid ($
(3,638 )
(3,638 )
Class A common stock sold through employee stock purchase plan
Share-based compensation issuances and exercises
Share-based compensation expense
Repurchase and retirement of treasury shares
(20 )
(9,142 )
(9,162 )
Balance — April 30, 2022
$
$
$
$
(1,486 )
$
See notes to condensed consolidated financial statements (unaudited).
THE CATO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
6
NOTE 1 - GENERAL
:
The condensed consolidated financial statements as of April 29, 2023 and for the thirteen-week periods
ended April 29, 2023 and April 30, 2022 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 presentation 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
January 28, 2023. Amounts as of January 28, 2023 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 May 18, 2023, the Board of Directors maintained the quarterly dividend at $
THE CATO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
7
NOTE 2 - EARNINGS PER SHARE:
Accounting Standard Codification (“ASC”) 260 –
Earnings Per Share
diluted Earnings Per Share (“EPS”) on the face of all income statements for all entities with complex capital
structures. The Company has presented one basic EPS and one diluted EPS amount for all common shares in
the accompanying Condensed Consolidated Statements of Income and Comprehensive Income. While the
Company’s certificate of incorporation provides the right for the Board of Directors to declare dividends on
Class A shares without declaration of commensurate dividends on Class B shares, the Company has
historically paid the same dividends to both Class A and Class B shareholders and the Board of Directors has
resolved to continue this practice. Accordingly, the Company’s allocation of income for purposes of the EPS
computation is the same for Class A and Class B shares and the EPS amounts reported herein are applicable
to both Class A and Class B shares.
Basic EPS is computed as net income less earnings allocated to non-vested equity awards divided by the
weighted average number of common shares outstanding for the period. Diluted EPS reflects the potential
dilution that could occur from common shares issuable through stock options and the Employee Stock
Purchase Plan.
Three Months Ended
April 29, 2023
April 30, 2022
(Dollars in thousands)
Numerator
Net earnings
$
$
Earnings allocated to non-vested equity awards
(227 )
(541 )
Net earnings available to common stockholders
$
$
Denominator
Basic weighted average common shares outstanding
Diluted weighted average common shares outstanding
Net income per common share
Basic earnings per share
$
$
Diluted earnings per share
$
$
THE CATO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
8
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 April 29, 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 )
Net current-period other comprehensive income (loss)
Ending Balance at April 29, 2023
$
(883 )
(a) All amounts are net-of-tax. Amounts in parentheses indicate a debit/reduction to other comprehensive income ("OCI").
The following table sets forth information regarding the reclassification out of Accumulated other
comprehensive income (in thousands) for the three months ended April 30, 2022:
Changes in Accumulated Other
Comprehensive Income (a)
Unrealized Gains
and (Losses) on
Available-for-Sale
Securities
Beginning Balance at January 29, 2022
$
(280 )
(1,203 )
(3 )
Net current-period other comprehensive income (loss)
(1,206 )
Ending Balance at April 30, 2022
$
(1,486 )
(a) All amounts are net-of-tax. Amounts in parentheses indicate a debit/reduction to other comprehensive income ("OCI").
(b) Includes
$4
income for net gains on available-for-sale securities. The tax impact of this reclassification was
$1
.
THE CATO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
9
NOTE 4 – FINANCING ARRANGEMENTS:
At April 29, 2023, the Company had an unsecured revolving credit agreement, which provided for
borrowings of up to $
commitments, and was committed through May 2027. The credit agreement contains various financial
covenants and limitations, including the maintenance of specific financial ratios with which the Company
was in compliance as of April 29, 2023. There were
letters of credit that reduced borrowing availability, as of April 29, 2023. The weighted average interest
rate under the credit facility was
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
including e-commerce, based on the aggregation criteria outlined in ASC 280-10, which states that two or
more operating segments may be aggregated into a single reportable segment if aggregation is consistent with
the objective and basic principles of ASC 280-10, which require the segments to have similar economic
characteristics, products, production processes, clients and methods of distribution.
The Company’s retail operating segments have similar economic characteristics and similar operating,
financial and competitive risks. The products sold in each retail operating segment are similar in nature, as
they all offer women’s apparel, shoes and accessories. Merchandise inventory of the Company’s retail
operating segments is sourced from the same countries and some of the same vendors, using similar
production processes. Merchandise for the Company’s retail operating segments is distributed to retail stores
in a similar manner through the Company’s single distribution center and is subsequently distributed to
clients in a similar manner.
The Company operates its women’s fashion specialty retail stores in
principally in the southeastern United States. The Company offers its own credit card to its customers and
all credit authorizations, payment processing and collection efforts are performed by a separate subsidiary of
the Company.
THE CATO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
10
NOTE 5 – REPORTABLE SEGMENT INFORMATION (CONTINUED):
The following schedule summarizes certain segment information (in thousands):
Three Months Ended
April 29, 2023
Retail
Credit
Total
Revenues
$191,434
$616
$192,050
Depreciation
Interest and other income
(897 )
(897 )
Income before taxes
Capital expenditures
Three Months Ended
April 30, 2022
Retail
Credit
Total
Revenues
$206,208
$513
$206,721
Depreciation
Interest and other income
(403 )
(403 )
Income before taxes
Capital expenditures
Retail
Credit
Total
Total assets as of April 29, 2023
$495,730
$38,906
$534,636
Total assets as of January 28, 2023
The Company evaluates segment performance based on income before 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
April 29, 2023
April 30, 2022
Payroll
$
$
Postage
Other expenses
Total expenses
$
$
THE CATO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
11
NOTE 6 – SHARE BASED COMPENSATION:
As of April 29, 2023, the Company had two long-term compensation plans pursuant to which stock-based
compensation was outstanding or could be granted. The 2018 Incentive Compensation Plan and 2013
Incentive Compensation Plan are for the granting of various forms of equity-based awards, including
restricted stock and stock options for grant to officers, directors and key employees. Effective May 24, 2018,
shares for grant were no longer available under the 2013 Incentive Compensation Plan.
The following table presents the number of options and shares of restricted stock initially authorized and
available for grant under each of the plans as of April 29, 2023:
2013
2018
Plan
Plan
Total
Options and/or restricted stock initially authorized
Options and/or restricted stock available for grant:
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 April
29, 2023 and January 28, 2023, there was $
, respectively, of total
unrecognized compensation expense related to unvested restricted stock awards, which had a remaining
weighted-average vesting period of
during the three months ended April 29, 2023 was $
ended April 30, 2022. These expenses are classified as a component of Selling, general and
administrative expenses in the Condensed Consolidated Statements of Income.
The following summary shows the changes in the shares of unvested restricted stock outstanding during the
three months ended April 29, 2023:
Weighted
Average
Number of
Grant Date Fair
Shares
Value Per Share
Restricted stock awards at January 28, 2023
$
Granted
Vested
Forfeited or expired
(12,414 )
Restricted stock awards at April 29, 2023
$
THE CATO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
12
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
% discount through payroll deductions. During the three months ended April 29, 2023 and April 30, 2022,
the Company sold
respectively, under the Employee Stock Purchase Plan. The compensation expense recognized for the
%
discount given under the Employee Stock Purchase Plan was approximately $
three months ended April 29, 2023 and April 30, 2022, respectively. These expenses are classified as a
component of Selling, general and administrative expenses in the Condensed Consolidated Statements of
Income.
NOTE 7 – FAIR VALUE MEASUREMENTS:
The following tables set forth information regarding the Company’s financial assets and liabilities that are
measured at fair value (in thousands) as of April 29, 2023 and January 28, 2023:
Quoted
Prices in
Active
Significant
Markets for
Other
Significant
Identical
Observable
Unobservable
April 29, 2023
Assets
Inputs
Inputs
Description
Level 1
Level 2
Level 3
Assets:
$
$
$
$
Total Assets
$
$
$
$
Liabilities:
$
(8,731 )
$
$
$
(8,731 )
Total Liabilities
$
(8,731 )
$
$
$
(8,731 )
THE CATO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
13
Quoted
Prices in
Active
Significant
Markets for
Other
Significant
Identical
Observable
Unobservable
January 28,
2023
Assets
Inputs
Inputs
Description
Level 1
Level 2
Level 3
Assets:
$
$
$
$
-
-
Total Assets
$
$
$
$
Liabilities:
$
(8,903 )
$
$
$
(8,903 )
Total Liabilities
$
(8,903 )
$
$
$
(8,903 )
The Company’s investment portfolio was primarily invested in corporate bonds and tax-exempt and taxable
governmental debt securities held in managed accounts with underlying ratings of A or better at April 29,
2023 and January 28, 2023. The state, municipal and corporate bonds and asset-backed securities have
contractual maturities which range from
Deposit have contractual maturities which range from
available-for-sale and are recorded as Short-term investments, Restricted cash and Other assets on the
accompanying 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. The asset-backed
securities are bonds comprised of auto loans and bank credit cards that carry AAA ratings. The auto loan
asset-backed securities are backed by static pools of auto loans that were originated and serviced by captive
auto finance units, banks or finance companies. The bank credit card asset-backed securities are backed by
revolving pools of credit card receivables generated by account holders of cards from American Express,
Citibank, JPMorgan Chase, Capital One, and Discover.
Additionally, at April 29, 2023, the Company had $
compensation plan assets of $
equities and deferred compensation plan assets of $
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 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 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
THE CATO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
14
compensation obligation, the value of which is tracked via underlying insurance funds’ net asset values, as
recorded in Other noncurrent liabilities in the Condensed Consolidated Balance Sheet. These funds are
designed to mirror mutual funds and money market funds that are observable and actively traded.
The following tables summarize the change in fair value of the Company’s financial assets and liabilities
measured using Level 3 inputs as of April 29, 2023 and January 28, 2023 (dollars in thousands):
Fair Value
Measurements Using
Significant Unobservable
Asset Inputs (Level 3)
Cash Surrender Value
Beginning Balance at January 28, 2023
$
Redemptions
Additions
Total gains or (losses)
Ending Balance at April 29, 2023
$
Fair Value
Measurements Using
Significant Unobservable
Liability Inputs (Level 3)
Deferred Compensation
Beginning Balance at January 28, 2023
$
(8,903 )
(82 )
(38 )
Ending Balance at April 29, 2023
$
(8,731 )
Fair Value
Measurements Using
Significant Unobservable
Asset Inputs (Level 3)
Cash Surrender Value
Beginning Balance at January 29, 2022
$
Redemptions
(1,718 )
Additions
(480 )
Ending Balance at January 28, 2023
$
Fair Value
Measurements Using
Significant Unobservable
Liability Inputs (Level 3)
THE CATO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
15
Deferred Compensation
Beginning Balance at January 29, 2022
$
(10,020 )
(379 )
Ending Balance at January 28, 2023
$
(8,903 )
THE CATO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
16
NOTE 8 – RECENT ACCOUNTING PRONOUNCEMENTS:
The Company has reviewed recent accounting pronouncements and believe none will have a material
impact on the Company’s financial statements.
NOTE 9 – INCOME TAXES:
The Company had an effective tax rate for the first quarter of 2023 of
% compared to an effective tax
rate of
% for the first quarter of 2022. The increase in the 2023 first quarter tax rate was primarily due
to higher Global Intangible Low-taxed Income (GILTI), partially offset by the foreign rate differential
and offshore claim, as a percentage on lower pre-tax earnings.
NOTE 10 – COMMITMENTS AND CONTINGENCIES:
The Company is, from time to time, involved in routine litigation incidental to the conduct of its business,
including litigation regarding the merchandise that it sells, litigation regarding intellectual property,
litigation instituted by persons injured upon premises under its control, litigation with respect to various
employment matters, including alleged discrimination and wage and hour litigation, and litigation with
present or former employees.
Although such litigation is routine and incidental to the conduct of the Company’s business, as with any
business of its size with a significant number of employees and significant merchandise sales, such
litigation could result in large monetary awards. Based on information currently available, management
does not believe that any reasonably possible losses arising from current pending litigation will have a
material adverse effect on its 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. Layaway sales
are recorded as deferred revenue until the customer takes possession or forfeits the merchandise. Gift
cards do not have expiration dates. 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.
ne of the credit card receivables are secured. The Company
estimated customer credit losses of $
THE CATO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
17
30, 2022, respectively, on sales purchased by the Company’s proprietary credit card of $
$
The following table provides information about receivables and contract liabilities from contracts with
customers (in thousands):
Balance as of
April 29, 2023
January 28, 2023
Proprietary Credit Card Receivables, net
$
$
Gift Card Liability
$
$
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
, some of which include options to extend the lease term for
, and some of
which include options to terminate the lease
. 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
April 29, 2023
April 30, 2022
Operating lease cost (a)
$
$
Variable lease cost (b)
$
$
(a) Includes right-of-use asset amortization of ($
) million and ($
) million for the three months ended
April 29, 2023 and April 30, 2022, respectively.
(b) Primarily relates to monthly percentage rent for stores not presented on the balance sheet.
Supplemental cash flow information and non-cash activity related to the Company’s operating leases are
as follows (in thousands):
THE CATO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
18
Operating cash flow information:
Three Months Ended
April 29, 2023
April 30, 2022
Cash paid for amounts included in the measurement of lease liabilities
$
$
Non-cash activity:
Right-of-use assets obtained in exchange for lease obligations, net of rent violations
$
$
Weighted-average remaining lease term and discount rate for the Company’s operating leases are as
follows:
As of
April 29, 2023
April 30, 2022
Weighted-average remaining lease term
Weighted-average discount rate
As of April 29, 2023, the maturities of lease liabilities by fiscal year for the Company’s operating leases
are as follows (in thousands):
Fiscal Year
2023 (a)
$
2024
2025
2026
2027
Thereafter
Total lease payments
Less: Imputed interest
Present value of lease liabilities
$
(a) Excluding the 3 months ended April 29, 2023.
19
THE CATO CORPORATION
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
FORWARD-LOOKING INFORMATION:
The following information should be read along with the unaudited Condensed Consolidated Financial
Statements, including the accompanying Notes appearing in this 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 3, 2024 (“fiscal 2023”) 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 the COVID-19 pandemic and related
responses and mitigation efforts, as well as the potential impact of supply chain disruptions, inflationary
pressures and other economic or market conditions on our business, results of operations and financial
condition and statements regarding new store development strategy; and (5) statements relating to our
future contingencies. When possible, we have attempted to identify forward-looking statements by using
words such as “will,” “expects,” “anticipates,” “approximates,” “believes,” “estimates,” “hopes,”
“intends,” “may,” “plans,” “could,” “would,” “should” and any variations or negative formations of such
words and similar expressions. We can give no assurance that actual results or events will not differ
materially from those expressed or implied in any such forward-looking statements. Forward-looking
statements included in this report are based on information available to us as of the filing date of this
report, but subject to known and unknown risks, uncertainties and other factors that could cause actual
results to differ materially from those contemplated by the forward-looking statements. Such factors
include, but are not limited to, the following: any actual or perceived deterioration in the conditions that
drive consumer confidence and spending, including, but not limited to, prevailing social, economic,
political and public health 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 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 successfully implement our new
store development strategy to increase new store openings and our ability of any such new stores to grow
and perform as expected; adverse weather, public health threats (including the global COVID-19
pandemic) or similar conditions that may affect our sales or operations; inventory risks due to shifts in
market demand, including the ability to liquidate excess inventory at anticipated margins; adverse
developments or volatility affecting the financial services industry or broader financial markets; and other
factors discussed under “Risk Factors” in Part I, Item 1A of our annual report on Form 10-K for the fiscal
year ended January 28, 2023 (“fiscal 2022”), 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)
20
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 January 28, 2023. 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 allowance for customer credit losses, inventory shrinkage, the calculation of potential
asset impairment, workers’ compensation, general and auto insurance liabilities, reserves relating to self-
insured health insurance, and uncertain tax positions.
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)
21
RESULTS OF OPERATIONS:
The following table sets forth, for the periods indicated, certain items in the Company's unaudited Condensed
Consolidated Statements of Income as a percentage of total retail sales:
Three Months Ended
April 29, 2023
April 30, 2022
Total retail sales
100.0
%
100.0
%
Other revenue
0.9
0.9
Total revenues
100.9
100.9
Cost of goods sold (exclusive of depreciation)
64.2
64.5
Selling, general and administrative (exclusive of depreciation)
32.5
29.5
Depreciation
1.2
1.3
Interest and other income
(0.5)
(0.2)
Income before income taxes
3.5
5.7
Net income
2.3
4.8
THE CATO CORPORATION
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
22
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 2022
Form 10-K.
Recent Developments
Inflationary Cost Pressure and Rising Interest Rates
The current inflationary environment continues to negatively impact the Company’s operating costs,
including higher wages, operating supplies and services. In addition, increased costs for fuel, food, and
housing, including rent, as well as other consumable products across the economy, are negatively impacting
our customers’ disposable income, and our customers’ willingness to purchase discretionary items such as
apparel, jewelry and shoes.
In response to inflationary pressures, the Federal Reserve began raising interest rates and is committed to
continue raising interest rates until inflationary pressures subside. These rising interest rates have adversely
affected the availability and cost of credit for both businesses and our customers. In addition, the rising
interest rates are increasing the costs related to revolving credit, auto loans and mortgages, which continue to
negatively impact our customers’ discretionary income. Additionally, rising interest rates may continue to
negatively impact our customers’ willingness to purchase our products.
We believe price increases and rising interest rates impacted the first quarter of fiscal 2023 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 2023.
Labor Challenges and Wage Inflation
The tight labor market has increased competition for labor among consumer-facing companies. This
competition for labor has driven significant increases in wages in order to compete for sufficient labor
availability and/or to prevent the loss of existing workforce in our stores, distribution center and corporate
office. We expect these pressures to continue in fiscal 2023.
Comparison of First Quarter of 2023 with 2022
Total retail sales for the first quarter were $190.3 million compared to last year’s first quarter sales of $204.9
million. Sales decreased primarily due to a decrease in same-store sales and sales from stores that were
closed in the past 12 months, partially offset by sales from stores opened in the past 12 months. The decrease
in same-store sales is primarily from fewer transactions due to the aforementioned pressures on our
customers’ disposable income, partially offset by higher average sales per transaction. 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 5.1% of sales for the first quarter of fiscal 2023 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
THE CATO CORPORATION
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
23
customer accounts receivable, shipping charged to customers for e-commerce purchases and layaway fees),
were $192.1 million for the first quarter ended April 29, 2023, compared to $206.7 million for the first
quarter ended April 30, 2022. The Company operated 1,264 stores at April 29, 2023 compared to 1,315 stores
at the end of last fiscal year’s first quarter. For the first three months of fiscal 2023, the Company opened
four stores and permanently closed 20 stores. The Company currently anticipates closing approximately 80
stores in fiscal 2023.
Credit revenue of $0.6 million represented 0.3% of total revenues in the first quarter of fiscal 2023, compared
to 2022 credit revenue of $0.5 million or 0.2% of total revenues. Credit revenue is comprised of interest
earned on the Company’s private label credit card portfolio and related fee income. Related expenses include
principally payroll, postage and other administrative expenses, and totaled $0.4 million in the first quarter of
2023, compared to last year’s first quarter expenses of $0.4 million.
Other revenue, a component of total revenues, was $1.7 million for the first quarter of fiscal 2023, compared
to $1.8 million for the prior year’s comparable first quarter. The slight decrease was due to lower e-
commerce shipping revenue, partially offset by higher finance charges and layaway fees.
Cost of goods sold was $122.1 million, or 64.2% of retail sales for the first quarter of fiscal 2023, compared
to $132.2 million, or 64.5% of retail sales in the first quarter of fiscal 2022. The overall decrease in cost of
goods sold as a percent of retail sales for the first quarter of 2023 resulted primarily from both lower ocean
freight costs and outbound freight costs to our stores, partially offset by deleveraging of occupancy and
buying costs. 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 6.1% to $68.2 million for the first quarter of fiscal 2023 compared to $72.7 million in the first quarter of
fiscal 2022. Gross margin as presented may not be comparable to those of other entities.
Selling, general and administrative expenses (“SG&A”) primarily include corporate and store payroll, related
payroll taxes and benefits, insurance, supplies, advertising, and bank and credit card processing fees. SG&A
expenses were 32.5% of retail sales for the first quarter of fiscal 2023, compared to 29.5% of retail sales in
the first quarter of fiscal 2022. The increase in SG&A as a percent of retail sales was due primarily to higher
operating costs, driven in part by higher wages as a result of the tight labor market and expenses related to the
closure of 20 stores in the quarter, partially offset by lower insurance expense.
Depreciation expense was $2.4 million, or 1.2% of retail sales for the first quarter of fiscal 2023, compared to
$2.7 million, or 1.3% of retail sales for the first quarter of fiscal 2022. The decrease in depreciation expense
was attributable to older stores being fully depreciated.
Interest and other income was $0.9 million, or 0.5% of retail sales for the first quarter of fiscal 2023,
compared to $0.4 million, or 0.2% of retail sales for the first quarter of fiscal 2022. The increase was
primarily attributable to an increase in interest rates earned on short-term investments, partially offset by a
decrease in short-term investments.
Income tax expense was $2.1 million or 1.1% of retail sales for the first quarter of fiscal 2023, compared
to income tax expense of $1.9 million, or 1.0% of retail sales for the first quarter of fiscal 2022. The
THE CATO CORPORATION
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
24
effective income tax rate for the first quarter of fiscal 2023 was 32.6% compared to 16.7% for the first
quarter of 2022. The increase in the 2023 first quarter tax rate was primarily due to higher Global
Intangible Low-taxed Income (GILTI), partially offset by the foreign rate differential and offshore claim.
LIQUIDITY, CAPITAL RESOURCES AND MARKET RISK:
The Company believes that its cash, cash equivalents and short-term investments, together with cash flows
from operations and borrowings available under its revolving credit agreement, will be adequate to fund the
Company’s regular operating requirements and expected capital expenditures for fiscal 2023 and the next 12
months.
Cash provided by operating activities for the first three months of fiscal 2023 was primarily generated by
earnings adjusted for depreciation and changes in working capital. The increase in cash provided of $10.7
million for the first three months of fiscal 2023 as compared to the first three months of fiscal 2022 was
primarily due to a decrease in inventory and a smaller decrease in accounts payable, accrued expenses and
other liabilities compared to year-end, partially offset by lower net income.
At April 29, 2023, the Company had working capital of $87.9 million compared to $74.7 million at January
28, 2023. The increase is primarily attributable to an increase in accounts receivable, lower current lease
liability and accounts payable partially offset by lower merchandise inventory.
At April 29, 2023, the Company had an unsecured 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 with which the Company
was in compliance as of April 29, 2023. There were no borrowings outstanding, nor any outstanding
letters of credit that reduced borrowing availability, as of April 29, 2023. The weighted average interest
rate under the credit facility was zero at April 29, 2023 due to no outstanding borrowings.
Expenditures for property and equipment totaled $6.2 million in the first three months of fiscal 2023,
compared to $4.4 million in last year’s first three months. The increase in expenditures for property and
equipment was primarily due to costs associated with opening four new stores and capital investments in
information technology and the distribution center. For the full fiscal 2023 year, the Company expects to
invest approximately $22.1 million in capital expenditures, including distribution center automation projects.
Net cash provided by investing activities totaled $15.3 million in the first three months of fiscal 2023
compared to $19.6 million provided in the comparable period of fiscal 2022. The decrease is primarily due to
higher purchases of short-term investments and an increase in capital expenditures, partially offset by higher
sales of short-term investments.
Net cash used in financing activities totaled $5.6 million in the first three months of fiscal 2023 compared to
$12.7 million used in the comparable period of fiscal 2022, primarily due to a decrease in share repurchases
and dividends paid.
On May 18, 2023, the Board of Directors maintained the quarterly dividend at 0.17 per share.
As of April 29, 2023, the Company had 944,379 shares remaining in open authorizations under its share
repurchase program.
THE CATO CORPORATION
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
25
The Company does not use derivative financial instruments.
The Company’s investment portfolio was primarily invested in corporate bonds and tax-exempt and taxable
governmental debt securities held in managed accounts with underlying ratings of A or better at April 29,
2023 and January 28, 2023. The state, municipal and corporate bonds and asset-backed securities have
contractual maturities which range from two days to 3.6 years. The U.S. Treasury Notes and Certificates of
Deposit have contractual maturities which range from one day to 2.8 years. These securities are classified as
available-for-sale and are recorded as Short-term investments, Restricted cash and Other assets on the
accompanying 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. The asset-backed
securities are bonds comprised of auto loans and bank credit cards that carry AAA ratings. The auto loan
asset-backed securities are backed by static pools of auto loans that were originated and serviced by captive
auto finance units, banks or finance companies. The bank credit card asset-backed securities are backed by
revolving pools of credit card receivables generated by account holders of cards from American Express,
Citibank, JPMorgan Chase, Capital One, and Discover.
Additionally, at April 29, 2023, the Company had $0.8 million of corporate equities and deferred
compensation plan assets of $9.3 million. At January 28, 2023, the Company had $0.9 million of corporate
equities and deferred compensation plan assets of $9.3 million. All of these assets are recorded within Other
assets in the Condensed Consolidated Balance Sheets. See Note 7, Fair Value Measurements.
RECENT ACCOUNTING PRONOUNCEMENTS:
See Note 8, Recent Accounting Pronouncements.
THE CATO CORPORATION
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
26
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK:
The Company is subject to market rate risk from exposure to changes in interest rates related to 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 April 29, 2023. Based on this
evaluation, our Principal Executive Officer and Principal Financial Officer concluded that, as of April 29,
2023, 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 April 29, 2023 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
27
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 January 28, 2023.
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 April 29, 2023:
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
of Shares
Price Paid
Announced Plans or
Yet be Purchased Under
Period
Purchased
per Share (1)
Programs (2)
The Plans or Programs (2)
February 2023
57,930
$
9.39
57,930
March 2023
195,460
8.81
195,460
April 2023
-
-
-
Total
253,390
$
8.95
253,390
944,379
(1)
Prices include trading costs.
(2)
As of January 28, 2023, the Company’s share repurchase program had 197,769 shares remaining
in open authorizations. The Board of Directors authorized an additional 1,000,000 shares for
repurchase under the program at its February 23, 2023 meeting. During the first quarter ended
April 29, 2023, the Company repurchased and retired 253,390 shares under this program for
approximately $2,266,727 or an average market price of $8.95 per share. As of April 29, 2023,
the Company had 944,379 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
28
ITEM 4. MINE SAFETY DISCLOSURES:
Not Applicable
ITEM 5. OTHER INFORMATION:
Not Applicable
ITEM 6. EXHIBITS:
Exhibit No.
Item
101.1*
The following materials from Registrant’s Quarterly Report on Form
10-Q for the fiscal quarter ended April 29, 2023, formatted in Inline
XBRL: (i) Condensed Consolidated Statements of Income and
Comprehensive Income for the Three Months ended April 29, 2023
and April 30, 2022; (ii) Condensed Consolidated Balance Sheets at
April 29, 2023 and January 28, 2023; (iii) Condensed Consolidated
Statements of Cash Flows for the Three Months Ended April 29, 2023
and April 30, 2022; (iv) Condensed Consolidated Statements of
Stockholders’ Equity for the Three Months Ended April 29, 2023 and
April 30, 2022; and (v) Notes to Condensed Consolidated Financial
Statements.
104.1
Cover Page Interactive Data File (Formatted in Inline XBRL and
contained in the Interactive Data Files submitted as Exhibit 101.1*)
THE CATO CORPORATION
PART II OTHER INFORMATION
29
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.
May 25, 2023
/s/ John P. D. Cato
Date
John P. D. Cato
Chairman, President and
Chief Executive Officer
May 25, 2023
/s/ Charles D. Knight
Date
Charles D. Knight
Executive Vice President
Chief Financial Officer
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
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: May 25, 2023
/s/ John P. D. Cato
John P. D. Cato
Chairman, President and
Chief Executive Officer
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: May 25, 2023
/s/ Charles D. Knight
Charles D. Knight
Executive Vice President
Chief Financial Officer
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 April 29, 2023 (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: May 25, 2023
/s/ John P. D. Cato
John P. D. Cato
Chairman, President and
Chief Executive Officer
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 April 29, 2023 (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
Dated: May 25, 2023
/s/ Charles D. Knight
Charles D. Knight
Executive Vice President
Chief Financial Officer