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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form

10-K

☑

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended

~~February~~January 131, ~~2025~~2026

☐

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number

1-31340

The Cato Corporation

Registrant

Delaware

56-0484485

State of Incorporation

I.R.S. Employer Identification Number

8100 Denmark Road

Charlotte

North Carolina

28273-5975

Address of Principal Executive Offices

704

554-8510

Registrant’s Telephone

Number

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

Securities registered pursuant to Section 12(g) of the Act:

None

Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes

☐

☑

Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act.

Yes

☐

☑

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

☑

☐

Indicate by

check mark

whether the

registrant has

submitted electronically

every Interactive

Data File

required to

be submitted

pursuant to

Rule

405

Regulation

S-T

(§

232.405 of

this

chapter) during

the preceding

months

(or

for

such

shorter period

that

the

registrant was

required

submit such files). Yes

☑

☐

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

~~Accelerated filer~~☐

☑

Emerging Growth Company

☐

Non-accelerated filer

☐☑

Smaller reporting company

☐☑

emerging

growth

company,

indicate

check

mark

the

registrant

has

elected

not

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

check

mark

whether

the

registrant

has

filed

report

and

attestation

its

management’s

assessment

the

effectiveness

its

internal

control over

financial reporting

under Section

404(b) of

the Sarbanes-Oxley

Act (15

U.S.C. 7262(b))

by the

registered public

accounting

firm that prepared or issued its audit report.

☑

If securities are registered

pursuant to Section

12(b) of the

Act, indicate by check

mark whether the

financial statements of

the registrant included

in the filing reflect the correction of an error to previously issued financial statements.

☐

Indicate by check

mark whether any

of those error

corrections are restatements

that required a

recovery analysis of incentive-based

compensation

received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b).

☐

Indicate by check mark whether the registrant is a shell company (as defined in Exchange Act Rule 12b-2). Yes

☐

☑

The

aggregate

market

value

the

Registrant’s

Class A

Common

Stock

held

non-affiliates

the

Registrant

August

2025,

the

last

business day of

the Company’s

most recent second

quarter, was

8846,~~395~~198,~~998~~006

based on the

last reported sale

price per share

on the New

York

Stock

Exchange on that date.

As of January 31, 2026, there were

1817,~~313~~976,~~929~~854

shares of Class A common stock and

1,763,652

shares of Class B common stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the proxy statement relating to the 2026 annual meeting of shareholders are incorporated by reference into Part III.

THE CATO CORPORATION

FORM 10-K

TABLE OF CONTENTS

Page

PART

Item 1.

Business

..........................................................................................................................

5 – 10

Item 1A.

Risk Factors

....................................................................................................................

10 – 23

Item 1B.

Unresolved Staff Comments

...........................................................................................

Item 1C.

Cybersecurity

..................................................................................................................

Item 2.

Properties

........................................................................................................................

2524

Item 3.

Legal Proceedings

...........................................................................................................

2524

Item 3A.

Executive Officers of the Registrant

...............................................................................

2625

Item 4.

Mine Safety Disclosures

.................................................................................................

2625

PART

Item 5.

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer

Purchases of Equity Securities

........................................................................................

26 – 28

Item 7.

Management’s Discussion and Analysis of Financial Condition and Results

of Operations ..................................................................................................................

3029 – 3634

Item 7A.

Quantitative and Qualitative Disclosures About Market Risk

........................................

3634

Item 8.

Financial Statements and Supplementary Data ..............................................................

3735 – 7167

Item 9.

Changes in and Disagreements with Accountants on Accounting

and Financial

Disclosure

.......................................................................................................................

7268

Item 9A.

Controls and Procedures

.................................................................................................

7268

Item 9B.

Other Information

...........................................................................................................

7369

Item 9C.

Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

............................

7369

PART

III

Item 10.

Directors, Executive Officers and Corporate Governance .............................................

Item 11.

Executive Compensation

................................................................................................

7470

Item 12.

Security Ownership of Certain Beneficial Owners and Management and Related

Stockholder Matters

........................................................................................................

7470

Item 13.

Certain Relationships and Related Transactions, and Director Independence

...............

7571

Item 14.

Principal Accountant Fees and Services

.........................................................................

7571

PART

Item 15.

Exhibits and Financial Statement Schedules

..................................................................

Item 16.

Form 10-K Summary ………………………………………………………………….

7874

Forward-looking Information

The

following

information

should

read

along

with

the

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-K and any documents

incorporated

reference

that

reflect

projections

expectations

our

future

financial

economic

performance;

(2) statements

that

are

not

historical information;

(3) statements

our

beliefs,

intentions,

plans

and

objectives for

future operations,

including those

contained in

“Management’s

Discussion and

Analysis of

Financial Condition

and Results

Operations”; (4) statements

relating to

our operations

activities

for

our

fiscal

year

ending

January

30,

2027

(“fiscal

2026”)

and

beyond,

including,

but

not

limited to, statements regarding expected amounts of capital expenditures and store openings, relocations,

remodels

and

closures,

statements

regarding

the

potential

impact

public

health

threats

and

responses

and

mitigation

efforts,

well

the

potential

impact

supply

chain

disruptions,

extreme

weather conditions,

trade policies,

inflationary pressures and

other economic

conditions on

our business,

results

operations

and

financial

condition

and

statements

regarding

new

store

development

strategy;

and

(5) statements

relating

our

future

risks

contingencies.

When

possible,

have

attempted

identify

forward-looking

statements

using

words

such

“will,”

“expects,”

“anticipates,”

“approximates,” “believes,” “estimates,” “hopes,”

“intends,” “may,”

“plans,” “could,” “would,”

“should”

and

any

variations

negative

formations

such

words

and

similar

expressions.

can

give

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

this

report

are

based

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,

inflation, wage rates, tax rates, interest rates, home values,

consumer

net

worth

and

the

availability

credit;

changes

laws,

regulations

government

policies

affecting our business, including

but not limited to

tariffs and taxes; uncertainties

regarding the impact of

any

governmental

action

regarding,

responses

to,

the

foregoing

conditions;

competitive

factors

and

pricing

pressures;

our

ability

predict

and

respond

rapidly

changing

fashion

trends

and

consumer

demands;

our

ability

successfully open

new

stores

attractive

locations

and

the

ability

any

such

new

stores

grow

and

perform

expected;

underperformance

other

factors

that

may

lead

continuation or

acceleration of

store closures

and negatively

affect the

Company’s

profitability; adverse

weather, public

health threats, acts of

war or aggression

or similar conditions

that may affect

our sales or

operations;

inventory

risks

due

shifts

market

demand,

including

the

ability

liquidate

excess

inventory

anticipated

margins;

adverse

developments

volatility

affecting

the

financial

services

industry or broader financial markets; and

other factors discussed under “Risk Factors”

in Part I, Item 1A

~~openings~~of ~~and~~this ~~our~~annual ~~ability~~report ofon ~~any~~Form ~~such~~10-K ~~new~~for ~~stores~~the tofiscal ~~grow~~year ~~and~~ended ~~perform~~January as31, ~~expected;~~2026 ~~adverse~~(“fiscal ~~weather~~2025”), ~~public~~as amended

or supplemented, and in

other reports we file

with or furnish to

the Securities and Exchange

Commission

(“SEC”)

from

time

time.

not

undertake, and

expressly

decline,

any

obligation

update

any

such forward-looking information contained

in this report,

whether as a

result of new

information, future

~~information, future~~ events, or otherwise.

As used herein,

the terms “we,”

“our,”

“us,” the “Company”

or “Cato”

include The Cato

Corporation

and

its

subsidiaries,

unless

the

context

indicates

another

meaning

and

except

that

when

used

with

reference

common

stock

other

securities

described

herein

and

describing

the

positions

held

management of

the Company,

such terms

include only

The Cato

Corporation.

Our website

is located

www.catofashions.com

where

make

available,

free

charge,

our

annual

reports

Form 10-K,

quarterly

reports

Form 10-Q,

current

reports

Form 8-K,

proxy

statements

and

other

reports

(including amendments

these

reports) filed

furnished

pursuant to

Section 13(a) or

15(d)

under

the

Securities Exchange

Act of

1934. These

reports are

available as

soon as

reasonably practicable

after we

electronically file

these

materials with

the

SEC. We

also post

on our

website the

charters of

our

Audit,

Compensation

and

Corporate

Governance

and

Nominating

Committees;

our

Corporate

Governance

Guidelines; Code of Business Conduct and Ethics and

Code of Ethics for the

Principal Executive Officer,

Principal Financial Officer

and Principal Accounting

Officer and

any amendments or

waivers thereto for

any of our directors or executive officers; and any other publicly available corporate governance materials

contemplated

SEC

New

York

Stock

Exchange

regulations.

The

information

contained

our

website, www.catofashions.com,

is not,

and should in

no way be

construed as, a

part of this

or any other

report that we filed with or furnished to the SEC.

PART

Item 1.

Business:

Background

The

Company,

founded

1946,

operated

1,069

fashion

specialty

stores

January

31,

2026,

states,

principally

the

southeastern

United

States,

under

the

names

“Cato,”

“Cato

Fashions,”

“Cato

Plus,”

“It’s

Fashion,”

“It’s

Fashion

Metro”

and

“Versona.”

The

Cato

concept

seeks

offer

quality

fashion

apparel

and

accessories

low

prices

every

day,

junior/missy

and

plus

sizes.

The

Cato

concept’s stores and e-commerce website feature a broad assortment of apparel and accessories, including

dressy,

career,

and

casual

sportswear,

dresses,

coats,

shoes,

lingerie,

costume

jewelry

and

handbags.

major portion of the Cato concept’s

merchandise is sold under its private label and is produced by various

vendors

accordance

with

the

concept’s

specifications.

The

It’s

Fashion

and

It’s

Fashion

Metro

concepts offer fashion with a focus on the latest trendy styles for the entire family at low prices every day.

The

Versona

concept’s

stores

and

e-commerce website

offer

quality fashion

apparel items,

jewelry

and

accessories at exceptional

values every day.

The “Cache” brand

is a shop

within Versona

stores, as well

e-commerce website,

that

offers

elevated

fashion apparel

items and

accessories.

The

Company’s

stores range

in size

from 2,400

to 19,000

square feet

and are

located primarily

in strip

shopping centers

anchored by national

discounters or market-dominant grocery

stores.

The Company emphasizes friendly

customer

service

and

coordinated

merchandise

presentations

appealing

store

environment.

The

Company

offers

its

own

credit

card

and

layaway

plan.

Credit

and

layaway

sales

under

the

Company’s

plan represented

6% of retail

sales in

fiscal 2025. See

Note 13 to

the Consolidated Financial

Statements,

“Reportable

Segment

Information,”

for

discussion

information

regarding

the

Company’s

two

reportable segments: Retail and Credit.

The

Company

has

operated

Cato-branded

retail

stores

for

years.

The

Company originated

family-owned business and

made its

first initial

public offering

of stock

in 1968.

In 1980,

the Company

went private and in 1987 again conducted an initial public offering.

Business Strategy

The Company’s

primary objective

is to

be the

leading fashion

specialty retailer

for fashion

and value

in its

markets. Management believes the

Company’s success

is dependent upon

its ability to

differentiate

its stores

from department

stores, mass

merchandise discount

stores and

competing specialty

stores. The

key elements of the Company’s business strategy are:

Merchandise

Assortment.

The

Company’s

stores

offer

wide

assortment

on-trend

apparel

and

accessory items in primarily junior/missy,

plus sizes, men and kids sizes, toddler to

boys size 20 and girls

size 16 with

an emphasis on color,

product coordination and selection.

Colors and styles are

coordinated

and presented so that outfit selection is easily made.

Value

Pricing.

The

Company offers

quality

merchandise that

generally priced

below comparable

merchandise

offered

department

stores

and

mall

specialty

apparel

chains,

but

generally

fashionable

than

merchandise

offered

discount

stores.

Management

believes

that

the

Company

has

positioned itself as the every day low price leader in its market

segment.

Strip

Shopping

Center

Locations.

The

Company

locates

its

stores

principally

convenient

strip

centers anchored by

national discounters or

market-dominant grocery stores

that attract large

numbers of

potential customers.

Customer Service.

Store managers

and sales

associates are

trained

provide prompt

and courteous

service and to assist customers in merchandise selection and wardrobe

coordination.

Credit and

Layaway Programs

The Company offers

its own credit

card and a

layaway plan to

make

the purchase of its merchandise more convenient for its customers.

Merchandising

The

Company

seeks

offer

broad

selection

high

quality

and

exceptional

value

apparel

and

accessories

suit

the

various

lifestyles

fashion

and

value-conscious

customers.

addition,

the

Company strives to offer on-trend fashion in exciting colors with consistent fit and

quality.

The Company’s merchandise lines

include dressy, career,

and casual sportswear, dresses,

coats, shoes,

lingerie, costume

jewelry,

handbags, men’s

wear and

lines for

kids and

infants. The

Company primarily

offers exclusive

merchandise with

fashion and

quality comparable

to mall

specialty stores

at low

prices,

every day.

The Company believes that the collaboration of its merchandising and design teams with an expanded

in-house

product

development

and

direct

sourcing

function

has

enhanced

merchandise

offerings

and

delivers quality,

exclusive on-trend

styles at

lower prices.

The product

development and

direct sourcing

operations provide

research on

emerging fashion

and color

trends, technical

services and

direct sourcing

options.

As a

part of

its merchandising

strategy,

members of

the Company’s

merchandising and

design staff

visit selected

stores to

monitor the

merchandise offerings

of other

retailers, regularly

communicate with

store operations

associates and frequently

confer with

key vendors.

The Company

also takes

aggressive

markdowns

slow-selling

merchandise

and

typically

does

not

carry

over

merchandise

the

season.

Purchasing, Allocation and Distribution

Although

the

Company

purchases

merchandise

from

approximately

560

suppliers,

most

its

merchandise is

purchased from

approximately 100

primary vendors.

fiscal

2025,

purchases from

the

Company’s

largest

vendor

accounted

for

approximately

14%

the

Company’s

total

purchases.

The

Company is

not dependent

on its

largest vendor

or any

other vendor

for merchandise

purchases, and

the

loss of any single vendor or group of

vendors would not have a material adverse effect on

the Company’s

operating results or financial condition. A substantial portion of the Company’s merchandise is sold under

its

private

labels

and

produced

various

vendors

accordance

with

the

Company’s

strict

specifications. The Company sources a majority of its

merchandise directly from manufacturers overseas,

primarily in Southeast Asia and Egypt.

These manufacturers are dependent on materials that are primarily

sourced

from

China.

The

Company

purchases

its

remaining

merchandise

from

domestic

importers

and

vendors, which typically minimizes

the time necessary

to purchase and

obtain shipments; however,

these

vendors

are

dependent

materials

primarily

sourced

from

China.

The

Company

opened

its

own

overseas

sourcing

operations

2014.

Although

significant

portion

the

Company’s

merchandise is

manufactured

overseas,

primarily

Southeast

Asia,

the

Company

does

not

expect

that

any

economic,

political,

public

health

social

unrest in

any

one

country

would

have

material

adverse effect

the

Company’s

ability

obtain

adequate

supplies

merchandise.

However,

the

Company

can

give

assurance

that

any

changes

disruptions

its

merchandise

supply

chain

would

not

materially

and

adversely affect the

Company.

See “Risk Factors –

Risks Relating to Our

Business – Because we

source

significant

portion

our

merchandise

directly

and

indirectly

from

overseas,

are

subject

risks

associated

with

increased

costs,

changes,

disruptions

other

problems

affecting

the

Company’s

merchandise

supply

chain,

risks

associated

with

trade

policies,

including

costs

and

uncertainties

the

result of

actual or

threatened tariffs,

the risks

of conducting

international operations

and risks

that affect

the prevailing

economic, social,

geopolitical, public

health and

other conditions

in the

areas from

which

source

merchandise.

These

risks

have

and

could

continue

materially

and

adversely

affect

the

Company’s business, results of operations and financial condition.”

important

component

the

Company’s

strategy

the

allocation

merchandise

individual

stores

based

analysis

sales

trends

merchandise

category,

customer

profiles

and

climatic

conditions.

merchandise

control

system

provides

current

information

the

sales

activity

each

merchandise

style

each

the

Company’s

stores.

Point-of-sale

terminals

the

stores

collect

and

transmit sales and inventory information to the Company’s central database, permitting timely response to

sales trends on a store-by-store basis.

All merchandise is shipped directly to the Company’s distribution

center in Charlotte, North Carolina,

where it

is inspected

and then

allocated by

the merchandise

distribution staff

for shipment

to individual

stores. The flow

of merchandise from

receipt at

the distribution center

to shipment to

stores is controlled

online

system.

Shipments

are

made

common

carrier,

and

each

store

receives

least

one

shipment per

week.

The centralization

of the

Company’s

distribution process

also subjects

it to

risks in

the

event

damage

destruction

its

distribution

facility

other

disruptions

affecting

the

distribution

center

the

flow

goods

into

out

Charlotte,

North

Carolina.

See

“Risk

Factors

–

Risks

Relating

Our

Information

Technology,

Systems

and

Cybersecurity

–

disruption

shutdown of

our centralized

distribution center

or transportation

network could

materially and

adversely

affect our business and results of operations.”

Advertising

The

Company

uses

television,

in-store

signage,

graphics,

Company

website,

two

e-commerce

websites

and

social

media

its

primary

advertising

media.

The

Company’s

total

advertising

expenditures

were

approximately

0.8%,

0.8%

and

1.0%

retail

sales

for

fiscal

years

2025,

2024

and

~~2022~~2023, respectively.

Store Operations

The

Company’s

store

operations

management

team

consists

four

territorial

managers,

eight

regional

managers and

68 district

managers. Regional

managers receive

a salary

plus

bonus based

achieving targeted

goals for

sales and

payroll.

District managers

receive a

salary plus

a bonus

based on

achieving targeted

objectives for district

sales increases. Stores

are typically staffed

with a

manager, two

assistant

managers

and

additional

part-time

sales

associates

depending

the

size

the

store

and

seasonal

personnel

needs.

general,

store

managers

are

paid

salary

hourly

basis

are

all

other

store

personnel.

Store

managers,

assistant

managers

and

sales

associates

are

eligible

for

monthly

and semi-annual bonuses based on achieving targeted goals for their respective

store’s sales increases.

Store Locations

Most

the

Company’s

stores

are

located

the

southeastern

United

States in

variety of

markets

ranging

from

small

towns

large

metropolitan

areas

with

trade

area

populations

20,000

more.

Stores average approximately 4,500 square feet in size.

All of the

Company’s stores

are leased. Approximately 94% are

located in strip shopping

centers and

6% in enclosed

shopping malls. The

Company typically locates stores

in strip shopping

centers anchored

national

discounter,

primarily

Walmart

Supercenters,

market-dominant

grocery

stores.

The

Company’s strip center locations provide ample parking and shopping convenience for its customers.

The

Company’s

store

development

activities

consist

opening

new

stores

new

and

existing

markets,

relocating

selected

existing

stores

desirable

locations

the

same

market

area

and

development activities since fiscal 2020:

closing underperforming stores. The following table sets forth information

with respect to the Company’s

development activities since fiscal 2021:

Store Development

Number of Stores

Beginning of

Number

Number of Stores

Fiscal Year

Year

Opened

Closed

End of Year

2020………………….……...………….

1,281

1,330

2021………………….……...………….

1,330

1,311

2022……………………….……...………….

1,311

1,280

2023…………~~....~~…………….……...…….

1,280

111

1,178

2024………….~~………~~...………….……...…….

1,178

1,117

2025………….………...….……...…….

1,117

1,069

The Company periodically reviews its store base to determine whether any particular store should be

closed based on its sales

trends and profitability.

The Company intends to continue this

review process to

identify underperforming stores.

Credit and Layaway

Credit Card Program

The Company offers its own credit card, which accounted for 3.3%, 3.4% and 3.4% of

retail sales in

fiscal 2025,

2024 and

2023, respectively.

The Company’s

bad debt

expense,

net of

recovery,

was 4.9%,

3.69% and 23.06% of credit sales in fiscal ~~2024~~2025, ~~2023~~2024 and ~~2022~~2023, respectively.

Customers applying for the Company’s credit card are approved for credit if

they have a satisfactory

credit

record

and

the

Company

has

positively

assessed

the

customer’s

ability

make

the

required

minimum payment.

Customers are required to make

minimum monthly payments based on

their account

balances.

the

balance

not

paid

full

each

month,

the

Company

assesses

the

customer

finance

charge.

payments

are

not

received

time,

the

customer

assessed

late

fee

subject

regulatory

limits.

The

Company

introduced

its

loyalty

program

October

2021.

The

loyalty

program

credits

the

customer points based on their purchases of

merchandise using the Company’s proprietary

credit card.

point is earned for every dollar spent on merchandise purchases.

$5.00 rewards card is earned for every

250

points

accumulated

the

customer.

The

rewards

card

expires

days

after

the

rewards

card

issued.

The

impact

the

loyalty

program

immaterial

the

fiscal

2025

financial

statements.

The

loyalty

program

accounted

for

accordance

with

ASU

2014-09,

Revenue

from

Contracts

with

Customers (Topic 606)

Layaway Plan

Under

the

Company’s

layaway

plan,

merchandise

set

aside

for

customers

who

agree

make

periodic

payments.

The

Company adds

nonrefundable

administrative

fee

each

layaway

sale.

payment is made within four weeks,

the customer is considered to have

defaulted, and the merchandise is

returned

the

selling floor

and again

offered

for

sale, often

a reduced

price. All

payments made

customers who subsequently default on their layaway purchase are returned to the customer upon request,

less the administrative fee and a restocking fee.

The Company defers recognition of layaway sales to the accounting period when the customer picks

and

completely pays

for

layaway

merchandise.

Administrative fees

are

recognized

the

period

which the

layaway is

initiated.

Recognition of

restocking fees occurs

in the

accounting period

when the

customer

defaults

the

layaway

purchase.

Layaway

sales

represented

approximately

2.6%,

2.8%

and

23.70% of retail sales in fiscal ~~2024~~2025, ~~2023~~2024 and ~~2022~~2023, respectively.

Information Technology Systems

The

Company’s

information

technology

systems

provide

daily

financial

and

merchandising

information

that

used

management to

enhance

the

timeliness

and

effectiveness

purchasing and

pricing

decisions.

Management

uses

daily

report

comparing

actual

sales

with

planned

sales

and

weekly

ranking

report

monitor

and

control

purchasing

decisions.

Weekly

reports

are

also

produced

which reflect

sales, weeks

supply of

inventory and

other critical

data by

product categories,

by store

and by various levels of

responsibility reporting. Purchases are made based

on projected sales, but can

modified to accommodate unexpected increases or decreases in demand

for a particular item.

Sales information is

projected by merchandise

category and, in

some cases, is

further projected and

actual

performance measured

stock

keeping

unit

(SKU).

Merchandise

allocation

models

are

used

distribute

merchandise

individual

stores

based

upon

historical

sales

trends,

climatic

conditions,

customer demographics and targeted inventory turnover rates.

Competition

The women’s

retail apparel industry is

highly competitive. The Company believes

that the principal

competitive factors

in its

industry include

merchandise assortment

and presentation,

fashion, price,

store

location

and

customer

service. The

Company competes

with

retail

chains that

operate similar

women’s

apparel specialty stores. In addition, the Company competes with

mass merchandise chains, discount store

chains, major

department stores, off

-price retailers

and internet-based

retailers.

Although we

believe we

compete favorably

with respect

to the

principal competitive

factors described

above, many

of our

direct

and

indirect

competitors

are

well-established

national,

regional

local

chains,

and

some

have

substantially greater

financial, marketing

and other

resources.

The Company

expects its

stores in

larger

cities and metropolitan areas to face more intense competition.

Seasonality

Due

the

seasonal

nature

the

retail

business,

the

Company

has

historically

experienced

and

expects to continue to

experience seasonal fluctuations in its

revenues, operating income and

net income.

Our stores

typically generate a

higher percentage of

our annual net

sales and

profitability in the

first and

second quarters of

our fiscal year compared

to other quarters.

Results of a

period shorter than a

full year

may

not

indicative

results

expected

for

the

entire

year.

Furthermore,

the

seasonal

nature

our

business may affect comparisons between periods.

Regulation

The

Company’s

business

and

operations

subject

wide

range

local,

state,

national

and

international laws

and regulations

in a

variety of

areas, including

but not

limited to,

trade, licensing

and

permit

requirements,

import

and

export

matters,

privacy

and

data

protection,

credit

regulation,

environmental

matters,

recordkeeping

and

information

management,

tariffs,

taxes,

intellectual

property

and anti-corruption.

Though compliance with these

laws and regulations has

not had a

material effect on

our capital

expenditures, results

of operations

or competitive

position in

fiscal 2025,

the Company

faces

ongoing

risks

its

efforts

comply

with

these

laws

and

regulations

and

risks

noncompliance,

discussed

generally

below

throughout

the

“Risk

Factors”

section

and

particular

under

“Risk Factors – Risks Relating to Accounting and Legal Matters –

Our business operations subject

legal

compliance and

litigation

risks, as

well as

regulations and

regulatory enforcement

priorities,

which

could

result

increased

costs

liabilities,

divert

our

management’s

attention

otherwise

adversely affect our business, results of operations and financial condition.”

Human Capital

January

31,

2026,

the

Company

employed

approximately

6,700

full-time

and

part-time

associates. The

Company also

employs additional

part-time associates

during the

peak retailing

seasons.

The

Company’s

full-time

associates

are

engaged

various

executive,

operating,

and

administrative

functions

the

home

office

and

distribution

center and

the

remainder

are

engaged in

store

operations.

The Company is

not a party

to any

collective bargaining agreements

and considers its

associate relations

good.

The

Company

offers

broad

range

Company-paid

benefits

its

associates

including

medical and

dental plans,

paid vacation,

a 401(k)

plan, Employee

Stock Purchase

Plan, Employee

Stock

Ownership

Plan,

disability

insurance,

associate

assistance

programs,

life

insurance

and

associate

discount.

The

level

benefits

and

eligibility

vary

depending

the

associate’s

full-time

part-time

status,

date

hire,

length

service

and

level

pay.

The

Company

endeavors

promote

environment where all associates can develop and flourish, to provide opportunities for advancement, and

treat

all

its

associates

with

dignity

and

respect.

The

Company

constantly

strives

improve

its

training

programs

develop

associates.

Over

80%

store

and

field

management

are

promoted

from

within,

allowing the

Company to

internally

staff

its

store

base.

The

Company has

training

programs

each

level

store

operations.

The

Company

also

performs

ongoing

reviews

its

safety

protocols,

including measures to promote the health and safety of its associates.

Item 1A.

Risk Factors:

An investment in our common stock involves numerous types of risks.

You

should carefully consider

the

following

risk

factors,

addition

the

other

information

contained

this

report,

including

the

disclosures

under

“Forward-looking

Information”

above

evaluating

our

Company

and

any

potential

investment

our

common

stock.

any

the

following

risks

uncertainties

occur

persist,

our

business, financial condition and

operating results could

be materially and

adversely affected, the

trading

price

our

common

stock

could

decline,

and

you

could

lose

all

part

your

investment

our

common

stock.

The

risks

and

uncertainties

described

this

section

are

not

the

only

ones

facing

us.

Additional risks

and uncertainties

not presently

known to

us or

that we

currently deem

immaterial

may

also materially

and adversely

affect our

business, operating results,

financial condition,

and value

of our

common

stock.

These

disclosures

reflect

the

Company’s

beliefs

and

opinions

factors

that

could

materially

and

adversely

affect

the

Company

and

its

securities

the

future.

References

particular

events or contingencies are provided as

examples only and should not be

interpreted as a complete listing

as any

representation about

whether or

not such

events or

contingencies have

occurred in

the past

~~common~~may ~~stock~~occur in the future.

Risks Relating to Our Business:

Because we source a significant portion of our merchandise directly

and indirectly from overseas,

we are subject to risks associated with increased costs, changes, disruptions

or other problems

affecting the Company’s merchandise supply chain, risks associated with trade policies, including

costs and uncertainties as the result of actual or threatened tariffs, the risks of conducting

international operations and risks that affect the prevailing economic, social,

geopolitical, public

health and other conditions in the areas from which we source

merchandise. These risks have and

could continue to materially and adversely affect the Company’s business, results of operations

and financial condition.

not

own

operate

any

manufacturing

facilities.

result,

the

continued

success

our

operations

tied

our

timely

receipt

quality

merchandise

from

third

party

manufacturers

reasonable

cost.

significant

amount

our

merchandise

manufactured

overseas,

principally

Southeast

Asia

and

Egypt.

Geopolitical

tensions,

conflicts,

sanctions,

prohibitions,

additional

actual

threatened tariffs, compliance and reporting requirements

have resulted in increased costs associated with

merchandise produced

in certain

regions. Any

new sanctions,

tariffs

and reporting

requirements enacted

in the future

may further increase our

costs associated with sourcing

products from those regions

or limit

our ability to

procure the products

we source, and

our ability to

source these products from

other regions

may be limited

or result in

increased sourcing costs.

are subject to

supply chain disruptions

affecting

transit times

and costs,

including disruptions from

issues related

to vessels

transiting the Suez

Canal and

Red Sea,

which are

being forced to

travel a

much longer distance

around the Cape

of Good

Hope due to

the hostilities in the Middle East. These

issues have and may continue to drive

up our ocean freight costs,

delay

merchandise

deliveries,

and

impact

our

ability

access

the

already

limited

supply

ocean

container shipping capacity that we require. Additionally,

we may be subject to additional

costs related to

our supply

chain such

as increased

facility fees,

fuel costs,

peak surcharges

and other

additional charges

transport

our

goods,

which

may

increase

our

costs.

also

are

subject

domestic

supply

chain

disruptions,

including

lack

domestic

intermodal

transportation

(trucks

and

drivers),

domestic

port

congestion, including increased dwell

times for incoming container

ships, lack of container

yard capacity

and lack of

available drayage from

the ports

and other conditions

that impact our

domestic supply chain.

These

supply

chain

risks

have

and

may

continue

result

both

higher

costs

transport

our

merchandise and delayed merchandise arrivals to

our stores, which adversely affect

our ability to sell this

merchandise and increase markdowns of it.

directly import

some of

this merchandise

and indirectly

import the

remaining merchandise

from

domestic vendors who acquire the merchandise from foreign

sources. Further, our third-party

vendors are

dependent

materials

primarily

sourced

from

China,

and

our

costs

for

these

materials

are

likely

increase as

a result

of newly implemented

tariffs on

Chinese products. We

are subject

to numerous

risks

that can

cause significant

delays or

interruptions in

the supply

of our

merchandise or

increase our

costs.

These risks include political unrest,

labor disputes, terrorism, war,

public health threats, including but

not

limited

communicable diseases

(such

COVID-19 or

other

pandemics), financial

other

forms

instability or

other events

resulting in

the

disruption of

trade

from countries

affecting our

supply chain,

increased

security

requirements

for

imported

merchandise,

the

imposition

of,

changes

in,

laws,

regulations or

changes in

duties, quotas, tariffs,

taxes or

governmental policies regarding

or responses

these matters

or other

factors affecting

the availability

or cost

of imports.

If we

are unable

to pass

these

increased

sourcing

costs

onto

our

vendors

our

customers,

may

adversely

impact

our

results

~~it may adversely impact our results of~~ operations.

Increased product costs, freight costs, wage increases and operating

costs due to inflation and

other factors, as well as limitations in our ability to offset these cost increases by increasing

the

retail prices of our products or otherwise, have and may continue to adversely affect our business,

margins, results of operations and financial condition.

Our

ability

raise

retail

prices

response

these

cost

increases

limited,

part

due

our

customers’

unwillingness

pay

higher

prices

for

discretionary

items

light

actual

perceived

effects of pricing pressure on consumer confidence,

limited customer disposable income to purchase our

products,

sentiment

financial

outlook.

Moreover,

the

persistence

worsening

these

conditions

could

also lead

our customers

to reduce

their amount

current discretionary

spending on

our

products

even

the

absence

price

increases,

which

could

erode

our

sales

volume

and

adversely

affect

our

results of operations and financial condition.

Any actual or perceived deterioration in the conditions that drive

consumer confidence and

spending have and may continue to materially and adversely affect consumer demand

for our

apparel and accessories and our results of operations.

Consumer

spending

habits,

including

spending

for

our

apparel

and

accessories,

are

affected

by,

among other

things, prevailing

social, economic,

political and

public health

conditions and

uncertainties

(such

matters

under

debate

the

U.S.

from

time

regarding

budgetary,

spending

and

tax

policies),

levels

employment, fuel

costs,

inflation,

interest

rates,

energy

and

food

costs,

salaries

and

wage rates

and other

sources of

income, tax

rates, home

values, consumer

net worth,

the availability

consumer

credit,

consumer

confidence

and

consumer

perceptions

adverse

changes

trends

affecting any of these conditions. Any perception that these conditions may be worsening or continuing to

trend negatively

may significantly

weaken many

these drivers

of consumer

spending habits.

Adverse

perceptions of

these conditions

uncertainties regarding

them also

generally cause

consumers to

defer

purchases

discretionary

items,

such

our

merchandise,

purchase

cheaper

alternatives

our

merchandise, all

of which

may also

adversely affect

our

net sales

and results

of operations.

In addition,

numerous events,

whether or

not

related to

actual

economic conditions,

such

as downturns

the

stock

markets,

acts

war

terrorism,

geopolitical

uncertainty

unrest

natural

disasters,

outbreaks

disease

similar

events,

may

also

dampen

consumer

confidence,

and

accordingly,

lead

reduced

consumer spending.

Any of

these events

could have

a material

adverse effect

on our

business, results

operations and financial condition.

Fluctuations in the price, availability and quality of inventory have and

may continue to result in

higher cost of goods, which the Company may not be able to pass on to

its customers.

The

price

and

availability

raw

materials

may

impacted

demand

and

supply

fluctuations,

regulation, tariffs, weather and

crop yields, currency value fluctuations, inflation, as

well as other factors.

Additionally,

manufacturers have and

may continue to

have increases in

other manufacturing costs,

such

transportation,

labor

and

benefit

costs.

These

increases

production

costs

may

result

higher

merchandise costs to the Company.

Due to the Company’s

limited flexibility in price point, the

Company

may

not

able

pass

those

cost

increases

the

consumer,

which

could

have

material

adverse

12effect on our margins, results of operations and financial condition.

Our inability to effectively manage inventory has impacted and may continue

to negatively impact

our gross margin and our overall results of operations.

Factors

affecting

sales

include

fashion

trends,

customer

preferences,

calendar

and

holiday

shifts,

competition,

weather,

supply

chain

issues,

actual

potential

public

health

threats

and

economic

conditions, including

but not

limited to

continued high

interest rates

and persistent

inflation. In

addition,

merchandise

must

ordered

well

advance

the

applicable

selling

season

and

before

trends

are

confirmed

sales.

When

are

not

able

accurately predict

customers’ preferences

for

our

fashion

items, we may have too

much inventory, which

may cause excessive markdowns. When we

are unable to

accurately

predict

demand

for

our

merchandise,

may

end

with

inventory

shortages,

resulting

missed

sales.

Our

inability

effectively

manage

inventory

may

continue

adversely

affect

our

gross

margin and results of operations.

The competitive hiring environment and our failure to attract, train,

and retain skilled personnel

has and could continue to adversely affect our business and our financial condition.

Like most

retailers, we experience

significant associate turnover

rates, particularly among

store sales

associates

and

managers.

Moreover,

attracting

and

retaining

skilled

personnel

has

been

and

could

continue

challenging.

offset

this

turnover

well

support

new

store

growth,

must

continually attract, hire and train new store associates to meet our staffing needs. A

significant increase in

the

turnover

rate

among

our

store

sales

associates

and

managers

would

increase

our

recruiting

and

training costs, as well

as possibly cause a

decrease in our store

operating efficiency and productivity.

compete

for

qualified

store

associates,

well

experienced

management

personnel,

with

other

companies in our industry or other industries, many of whom have greater financial

resources than we do.

addition,

depend

key

management

personnel

oversee

the

operational

divisions

the

Company

for

the

support

our

existing

business

and

future

expansion.

The

success

executing

our

business strategy

depends in

large part

on retaining

key management.

compete for

key management

personnel

with

other

retailers, and

our

inability

attract

and

retain

qualified personnel

could

limit

our

ability to grow.

are

unable

retain

our

key management

and

store

associates or

attract, train,

retain

other

skilled

personnel in

the

future,

may not

able

service

our

customers effectively

execute

our

business strategy, which could adversely affect our business, operating results and financial condition.

The currently

competitive environment

for hiring

new associates

and retaining

existing associates

causing

wages

increase,

which

has

affected

and

could

continue

adversely

affect

our

business,

margins, operating results and financial condition if we cannot offset these cost increases.

Our ability to attract consumers and grow our revenues is dependent

on the success of our store

location strategy and our ability to successfully open new stores as planned.

Our sales are

dependent in part

on the location

of our stores

in shopping centers

and malls where

believe

our

consumers

and

potential

consumers

shop.

addition,

our

ability

grow

our

revenues

has

been substantially dependent on our ability to secure space for and open new stores in attractive locations.

Shopping centers

and malls

where we

currently operate

existing stores

or seek

open new

stores have

been and

may continue

to be

adversely affected

by,

among other

things, general

economic downturns

those

particularly affecting

the

commercial real

estate industry,

the

closing of

anchor

stores, changes

tenant

mix

and

changes

customer

shopping

preferences,

including

but

not

limited

increase

preference for online

versus in-person shopping. To

take advantage of

consumer traffic and

the shopping

preferences

our

consumers,

need

maintain

and

acquire

stores

desirable

locations

where

competition for suitable

store locations is

intense. A decline

in customer popularity

of the

strip shopping

centers where we

generally locate our

stores or in

availability of space in

desirable centers and

locations,

or an increase in the cost of such desired space, has limited and could further limit our ability to open new

stores,

adversely

affecting

consumer

traffic

and

reducing

our

sales

and

net

earnings

increasing

our

operating costs.

Our ability

to open

and operate

new stores

depends on

many factors,

some of

which are

beyond our

control.

These

factors

include,

but

are

not

limited

to,

our

ability

identify

suitable

store

locations,

negotiate acceptable lease terms, secure

necessary governmental permits and approvals and

hire and train

appropriate store

personnel. In

addition, our

continued expansion

into new

regions of

the country

where

have

not

done

business

before

may

present

new

challenges

competition,

distribution

and

merchandising as we enter these new markets. Our failure to successfully and timely

execute our plans for

opening new stores

or the failure

of these stores

to perform up

to our expectations

could adversely affect

our business, results of operations and financial condition.

Continued high interest rates have and may continue to adversely

impact our customers’

discretionary income or willingness to purchase discretionary items, which

may adversely affect

our business, margins, results of operations and financial condition.

Continued high interest rates have adversely affected our customers’ discretionary income, in part due

to increased

interest costs

associated with

credit accounts

including revolving

credit accounts,

car loans,

mortgage loans and other credit accounts. In

addition, the increased payments due to higher

interest rates,

combined

with

continued

inflationary

pressures

non-discretionary

items,

including

food,

fuel

and

shelter, reduce

our customers’ discretionary income

and their

willingness to purchase

discretionary items

such as apparel, shoes or jewelry products. Any reduction in our customers’ discretionary

spending on our

products

could

erode

our

sales

volume

and

adversely

affect

our

results

operations

and

financial

condition.

~~margins, results of operations and financial condition.~~14

The operation of our sourcing offices in Asia presents increased operational and

legal risks.

results of operations and financial condition may be adversely affected.

sales volume and adversely affect our results of operations and financial condition.

In October 2014, we established our own sourcing offices in Asia. If our sourcing offices are unable to

successfully oversee

merchandise production

ensure that

product is

produced on

time

and

within the

Company’s

specifications,

our

business,

brand,

reputation,

costs,

results

operations

and

financial

condition could be materially and adversely affected.

In addition, the current business environment, including geopolitical issues, make operating in

certain

Asian

markets

challenging.

the

extent

explore

other

countries

source

our

product

explore

increasing

the

amount

product

sourced

from

current

countries,

may

subject

additional

increased

legal

and

operational risks

associated

with

doing

business

new

countries

increasing our

business in other countries.

Further, the activities conducted by

our sourcing offices outside the

United States subject us to foreign

operational

risks,

well

U.S.

and

international

regulations

and

compliance

risks,

discussed

elsewhere

this

“Risk

Factors”

section,

particular

below

under

“Risk

Factors

–

Risks

Relating

Accounting

and

Legal

Matters

–

Our

business

operations

subject

legal

compliance

and

litigation

risks, as well as regulations and regulatory enforcement priorities, which could result in increased costs or

liabilities,

divert

our

management’s

attention

otherwise

adversely

affect

our

business,

results

13operations and financial condition.”

operations and financial condition.

Extreme weather, natural disasters, impacts of climate change, public health threats or similar

events have and may continue to adversely affect our sales or operations from time

to time.

Extreme

changes

weather,

natural

disasters,

physical

impacts

climate

change,

public

health

threats or

similar events

can influence

customer trends

and shopping

habits. For

example, heavy

rainfall

or other extreme weather conditions, including but

not limited to winter weather over a

prolonged period,

might

make

difficult

for

our

customers

travel

our

stores

and

thereby

reduce

our

sales

and

profitability.

Our business is

also susceptible to

unseasonable weather conditions. For

example, extended

periods of unseasonably

warm temperatures during the

winter season or

cool weather during

the summer

season can

render a

portion of

our inventory

incompatible with

those unseasonable

conditions. Reduced

sales

from extreme

prolonged unseasonable

weather

conditions

would

adversely affect

our

business.

The occurrence or

threat of extreme

weather, natural

disasters, power outages, terrorist

acts, outbreaks of

flu

other

communicable

diseases

(such

COVID-19)

other

catastrophic

events

could

reduce

customer

traffic

our

stores

and

likewise

disrupt

our

ability

conduct

operations,

which

would

materially and adversely affect us and could adversely affect our reputation and results of operations.

The inability of third-party vendors to produce goods on time and to the

Company’s specifications

reputational risks. The potential cost of compliance with any future regulations may substantially increase

concerns, which could increase our costs. Furthermore, any failure of or perceived failure by us to comply

regarding the environment, could adversely affect our reputation and results of operations.

location strategy and our ability to successfully open new stores as planned.

been substantially dependent on our ability to secure space for and open new stores in attractive locations.

or an increase in the cost of such desired space, has limited and could further limit our ability to open new

operating costs.

our business, results of operations and financial condition.

may adversely affect the Company’s business, results of operations and financial condition.

Our

dependence

third-party

vendors

manufacture

and

supply

our

merchandise

subjects

numerous risks that our vendors will fail to perform as we expect. For example, the deterioration in any of

our key

vendors’ financial condition,

their failure to

ship merchandise in

a timely manner

that meets

our

specifications,

other

failures

our

vendor

guidelines

comply

with

applicable

laws

and

regulations,

including

compliant

labor,

environmental

practices

and

product

safety,

could

expose

operational, quality,

competitive, reputational

and legal

risks. If

we are

not able

to timely

adequately

replace the merchandise we currently

source with merchandise produced elsewhere,

or if our vendors fail

perform as

expect,

our

business, results

operations

and

financial

condition

could

adversely

affected.

Activities

conducted

our

behalf

outside

the

United

States

further

subject

numerous

U.S.

and

international

regulations

and

compliance

risks,

discussed

below

under

“Risk

Factors –

Risks Relating

to Accounting

and Legal

Matters –

Our business

operations subject

us to

legal

compliance and litigation

risks, as well

as regulations and

regulatory enforcement priorities, which

could

result in increased costs or liabilities,

divert our management’s attention

or otherwise adversely affect our

business, results of operations and financial condition.”

Existing and increased competition in the women’s retail apparel industry may negatively impact

our business, results of operations, financial condition and

market share.

The

women’s

retail

apparel

industry

highly

competitive.

compete

primarily

with

discount

stores,

mass

merchandisers,

department

stores,

off-price

retailers,

specialty

stores

and

internet-based

retailers, many of which have substantially greater financial, marketing and other resources

than we have.

Many

our

competitors

offer

frequent

promotions

and

reduce

their

selling

prices.

some

cases,

our

competitors are

expanding into markets

in which

we have a

significant market presence.

In addition, our

competitors

also

compete

for

the

same

retail

store

space.

result

this

competition,

may

experience

pricing

pressures,

increased

marketing

expenditures,

increased

costs

open

new

stores,

well

loss

market

share,

which

could

materially

and

adversely

affect

our

business,

results

operations and financial condition.

If we are unable to anticipate, identify and respond to rapidly changing

fashion trends and

customer demands in a timely manner, our business and results of operations could materially

suffer.

Customer

tastes

and

fashion

trends,

particularly

for

women’s

apparel,

are

volatile,

tend

change

rapidly

and

cannot

predicted

with

certainty.

Our

success

depends

part

upon

our

ability

consistently anticipate, design and respond to changing merchandise trends and consumer preferences in a

timely

manner.

Accordingly,

any

failure

anticipate,

identify,

design

and

respond

changing

fashion

trends

could

adversely

affect

consumer

acceptance

our

merchandise,

which

turn

could

adversely affect our

business, results of

operations and our

image with our

customers. If we

miscalculate

either the

market for

our merchandise

or our

customers’ tastes or

purchasing habits, we

may be required

to sell a significant amount of inventory at below-average markups over

cost, or below cost, which would

adversely affect our margins and results of operations.

Adverse developments affecting the financial services industry or events or concerns

involving

Existing and increased competition in the women’s retail apparel industry may negatively impact

operations and financial condition.

effect on our margins, results of operations and financial condition.

our gross margin and our overall results of operations.

margin and results of operations.

liquidity, defaults or non-performance by financial institutions or transactional counterparties

could adversely affect our business, financial condition or results of operations.

Actual

events

involving limited

liquidity,

defaults,

non-performance or

other

adverse

developments

that affect

financial institutions,

transactional counterparties

or other

companies in

the financial

services

industry

the

financial

services

industry

generally,

concerns

rumors

about

any

events

these

kinds

other

similar

risks,

have

the

past

and

may

the

future

lead

sporadic

market-wide

liquidity problems

that

could adversely

affect

us. If

any of

our transactional

counterparties, such

our

merchandise vendors

and their

factors, our

landlords, our

payment processors

including credit

card, gift

card and checks, our transportation vendors and other vendors that provide services and supplies to us, are

unable to

access funds

or lending

arrangements with

such

a financial

institution, such

parties’ ability

pay their obligations

could be adversely

affected. If this

occurred we could

be adversely impacted

by not

receiving

the

product

ordered

the

payments

generated

our

sales,

not

being

able

receive

products to our distribution center or

our stores in a timely

manner or at all, or

by not being able to

retain

services

from third

parties that

require. These

impacts

may adversely

affect

our

financial condition,

results

operations

and

our

ability

execute

our

business

strategy.

Furthermore,

these

adverse

developments affecting

the

financial services

industry or

related perceptions

may negatively

impact our

customers’

discretionary

income

our

customers’

willingness

purchase

apparel,

shoes

jewelry

products. Any

reduction in

our customers’

discretionary spending

on our

products could

erode our

sales

volume and adversely affect our results of operations and financial condition.

has and could continue to adversely affect our business and our financial condition.

ability to grow.

business strategy, which could adversely affect our business, operating results and financial condition.

margins, operating results and financial condition if we cannot offset these cost increases.

Company’s financial condition and results of operations will be adversely affected.

Risks Relating to Our Information Technology, Related Systems and Cybersecurity:

A failure or disruption relating to our information technology systems could

adversely affect our

business.

rely

our

existing

information

technology

systems

for

merchandise

operations,

including

merchandise planning,

replenishment, pricing, ordering,

markdowns and

product life

cycle management.

In addition to

merchandise operations, we utilize

our information technology systems for

our distribution

processes,

well

our

financial

systems,

including

accounts

payable,

general

ledger,

accounts

receivable,

sales, banking,

inventory

and

fixed

assets. Despite

the

precautions we

take,

our

information

systems are or may be vulnerable to disruption

or failure from numerous events, including but not limited

to, natural disasters,

severe weather conditions,

power outages, technical malfunctions,

cyberattacks, acts

war

terrorism,

similar

catastrophic

events

other

causes

beyond

our

control

that

fail

anticipate. Any disruption or failure in the operation of our information technology systems, our failure to

continue

upgrade

improve

such

systems,

the

cost

associated

with

maintaining,

repairing

improving

these

systems,

could

adversely

affect

our

business,

results

operations

and

financial

condition. Modifications and/or upgrades to

our current information technology systems may also

disrupt

our operations.

A disruption or shutdown of our centralized distribution center

or transportation network could

breach, mishandling, human or programming error or other event that results in the misappropriation, loss

and financial condition.

materially and adversely affect our business and results of operations.

The distribution

of our

products is centralized

in one

distribution center in

Charlotte, North Carolina

and

distributed

through

our

network

third-party

freight

carriers.

The

merchandise

purchase

shipped directly to

our distribution center,

where it is

prepared for shipment

to the appropriate

stores and

subsequently

delivered

the

stores

our

third-party

freight

carriers.

the

distribution

center

our

third-party freight carriers were

to be shut down

or lose significant capacity

for any reason, including but

not limited to, any of the causes described above under “A failure or disruption

relating to our information

technology

systems

could

adversely

affect

our

business,”

our

operations

would

likely

seriously

disrupted. Such problems could occur as

the result of any loss,

destruction or impairment of our ability to

use

our

distribution center,

well

any broader

problem generally

affecting

the ability

ship

goods

into our distribution center

or deliver goods to

our stores. As

a result, we

could incur significantly higher

costs and longer lead

times associated with distributing our

products to our stores

during the time it

takes

for us to reopen or

replace the distribution center and/or our transportation network. Any such

occurrence

could adversely affect our business, results of operations and financial condition.

A security breach that results in unauthorized access to or disclosure

of employee, Company or

customer information or a ransomware attack could adversely affect our costs,

reputation and

results of operations, and efforts to mitigate these risks may continue to increase

our costs.

The

protection

employee,

Company

and

customer

data

critical

the

Company.

Any

security

breach, mishandling, human or programming error or other event that results in the misappropriation, loss

other

unauthorized

disclosure

employee,

Company

customer

information,

including

but

not

limited

credit

card

data

other

personally

identifiable

information,

could

severely

damage

the

Company's reputation, expose it to

remediation and other costs

and the risks of legal

proceedings, disrupt

its

operations

and

otherwise

adversely

affect

the

Company's

business

and

financial

condition.

The

security of certain of

this information also depends on

the ability of third-party

service providers, such as

those

use

process

credit

and

debit

card

payments

described

below

under

“We

are

subject

payment-related

risks,”

properly

handle

and

protect

such

information.

Our

information

systems

and

those of our

third-party service providers are

subject to ongoing and

persistent cybersecurity threats from

those seeking unauthorized

access through means

which are

continually evolving and

may be difficult

anticipate or detect

for long periods

of time. Despite

measures the Company

takes to

protect confidential

information against

unauthorized access

or disclosure, which

measures are

ongoing and

may continue

increase

our

costs,

there

assurance

that

such

measures

will

prevent

the

compromise

such

information. If

our measures

are unsuccessful

due to

cyberattacks or

otherwise, it

could have

a material

adverse

effect

the

Company's

reputation,

business,

operating

results,

financial

condition

and

cash

flows. In addition, the Company may be subject to ransomware attacks, which if successful could

result in

disruptions

the

Company’s

operations

and

expose

remediation

and

other

costs,

risks

legal

proceedings,

damage the

Company’s

reputation

and

otherwise

adversely

affect

the

Company's business

and financial condition.

The Company’s failure to successfully operate its e-commerce websites or fulfill customer

expectations could adversely impact customer satisfaction, our reputation

and our business.

Although the

Company's e-commerce

platform provides

another channel

drive incremental

sales,

expose existing customers with

the online shopping experience

and introduce a new

customer base to the

Company,

also exposes

us to

numerous risks.

are

subject to

potential failures

in the

efficient

and

uninterrupted

operation

our

websites,

customer

contact

center

our

distribution

center,

including

system

failures

caused

telecommunication

software

system

providers,

order

volumes

that

exceed

our

present

system

capabilities,

electrical

outages,

mechanical

problems

and

human

error.

Our

commerce

platform

may

also

expose

greater

potential

for

security

data

breaches

involving

the

unauthorized

access

disclosure

customer

information,

discussed

above

under

“A

security

breach

that

results

unauthorized

access

disclosure

employee,

Company

customer

information or a ransomware

attack could adversely affect

our costs, reputation and

results of operations,

and efforts to

mitigate these risks

may continue to increase

our costs.” We

are also subject

to risk related

delays

failures

the

performance

third

parties,

such

shipping

companies,

including

delays

associated

with

labor

strikes

slowdowns

adverse

weather

conditions.

the

Company

does

not

successfully

meet

the

challenges

operating

e-commerce

websites

fulfilling customer

expectations,

18the Company's business and sales could be adversely affected.

could be adversely affected.

We are subject to payment-related risks.

payments

using

variety

methods,

including

third-party

credit

cards,

“buy

now,

pay

later”

services,

our

own

branded

credit

card,

debit

cards,

gift

cards

and

physical

and

electronic

bank

checks. For

existing and future

payment methods we

offer to

our customers, we

are subject

to fraud

risk

and to additional

regulations and compliance

requirements (including obligations to

implement enhanced

authentication processes that could result in increased costs

and reduce the ease of use of

certain payment

methods). For

certain payment

methods, including

credit and

debit cards,

we pay

interchange and

other

fees,

which

have

increased

from

time

and

may

continue

increase

over

time,

raising

our

operating

costs

and

lowering

profitability.

rely

third-party

service

providers

for

payment

processing services,

including the

processing of

credit and

debit cards.

In each

case, it

could disrupt

our

business if these third-party service providers

become unwilling or unable to provide

these services to us.

~~business~~We ~~and~~are also subject to payment card association operating ~~results~~rules, ~~could~~including bedata ~~adversely~~security ~~affected.~~rules, certification

requirements

and

rules

governing

electronic

funds

transfers,

which

could

change

reinterpreted

make it difficult

or impossible for

us to comply.

If we fail

to comply with

these rules or

requirements, or

if our data security

systems are breached or compromised,

we may be liable for

card-issuing banks’ costs

and subject

to fines

and higher transaction

fees. In addition,

we may lose

our ability to

accept credit

and

debit card payments from

our customers and

process electronic funds transfers or

facilitate other types of

payments, and our business and operating results

could be adversely affected.

We are exposed to risks related to the use of

AI by us and our competitors.

are

exploring

incorporating

artificial

intelligence

(AI)

capabilities

into

the

development

technologies,

our

business

operations

and

our

merchandise.

technology

complex

and

rapidly

evolving

and

may

subject

significant

competitive,

legal,

regulatory,

operational

and

other

risks.

There is no guarantee that our use of AI will enhance our technologies, benefit our business operations, or

produce

apparel

and

accessories

that

are

preferred

our

customers.

Our

competitors

may

successful in their AI

strategy and develop

superior products with

the aid of AI

technology. Additionally,

AI algorithms or

training methodologies may be

flawed, and datasets

may contain irrelevant,

insufficient

or biased information, which can

cause errors in outputs. This may give

rise to legal liability,

damage our

reputation, and materially harm our business. The use of AI in the development of our products could also

cause

loss

intellectual

property,

well

subject

risks

intellectual

property

infringement or

misappropriation, data

privacy and

cybersecurity. The

United States

and other

countries

may adopt laws

and regulations related

to AI. These laws

and regulations could

cause us

to incur

greater

compliance

costs

and

limit

the

use

of AI

the

development

our

products. Any

failure

perceived

failure by us to comply with these regulatory requirements could subject us to legal

liabilities, damage our

reputation, or otherwise have a material and adverse impact on our business.

Risks Relating to Accounting and Legal Matters:

Our business operations subject us to legal compliance and litigation risks,

as well as regulations

and regulatory enforcement priorities, which could result in increased

costs or liabilities, divert our

operations and financial condition could be adversely affected.

condition and results of operations.

ultimately successful, may result in costly litigation, and if the Company is not successful in its defense, it

profitability, cash flows, financial condition and reputation could be adversely affected.

management’s attention or otherwise adversely affect our business, results of operations and

financial condition.

Our operations

are subject

to federal,

state and

local laws,

rules and

regulations, as

well as

U.S. and

foreign

laws

and

regulations

relating

our

activities

foreign

countries

from

which

source

our

merchandise and operate our sourcing offices. Our business is also subject to regulatory and litigation risk

in all of these

jurisdictions, including foreign jurisdictions that may

lack well-established or reliable legal

systems for resolving legal disputes. Compliance risks and litigation claims have

arisen and may continue

arise

the

ordinary

course

our

business

and

include,

among

other

issues,

intellectual

property

issues,

employment

issues,

commercial

disputes,

product-oriented

matters,

tax,

customer

relations

and

personal injury

claims. International

activities subject

us to

numerous U.S.

and international

regulations,

including

but

not

limited

to,

restrictions

trade,

license

and

permit

requirements,

import

and

export

license

requirements,

privacy

and

data

protection

laws,

environmental

laws,

records

and

information

management regulations, tariffs

and taxes

and anti-corruption

laws, violations

of which

by employees or

persons acting

on the

Company’s

behalf may

result

in significant

investigation costs,

severe criminal

civil

sanctions

and

reputational

harm.

These

and

other

liabilities

which

may

subject

could

negatively

affect

our

business,

operating

results

and

financial

condition.

These

matters

frequently

raise

complex factual and

legal issues, which

are subject to

risks and uncertainties

and could divert

significant

management

time.

The

Company

may

also

subject

regulatory

reviews

and

audits,

the

results

which could materially and adversely

affect our business, results of

operations and financial condition. In

addition, governing laws,

rules and regulations,

and interpretations of

existing laws are

subject to change

from time to time.

Compliance and litigation matters could result

in unexpected expenses and liability,

well as have an adverse effect on our operations and our reputation.

New

legislation

regulation

and

interpretation

existing

laws

and

regulations,

including

those

related to

data privacy,

AI or

sustainability matters,

could increase

our

costs of

compliance, technology

and business

operations. The

interpretation of

existing or

new laws

existing and

evolving technology

and business practices can be uncertain and may lead to additional compliance

risk and cost.

Maintaining and improving our internal control over financial reporting

and other requirements

necessary to operate as a public company may strain our resources, and

any material failure in

these controls may negatively impact our business, the price of our common

stock and market

negatively impact our business, reputation and financial condition.

requirements, additional costs and compliance risks.

compliance, disclosure and reporting. Furthermore, evolving laws, regulations or stakeholder expectations

business or financial performance.

operations and financial condition.

confidence in our reported financial information.

As a public

company, we

are subject to

the reporting requirements of

the Securities Exchange

Act of

1934, the

Sarbanes-Oxley Act

of 2002,

the rules

of the

SEC and

New York

Stock Exchange

and certain

aspects of the Dodd-Frank Wall

Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) and

related rule-making that

has been and

may continue to

be implemented over

the next several

years under

the mandates of the Dodd-Frank Act. The

requirements of these rules and regulations have increased, and

may continue to increase, our compliance costs and

place significant strain on our personnel, systems and

resources.

satisfy

the

SEC’s

rules

implementing

the

requirements

Section

404

the

Sarbanes-

Oxley Act

2002, we

must continue

document, test,

monitor and

enhance our

internal control

over

financial reporting, which is

a costly and time-consuming effort

that must be re-evaluated

frequently. We

cannot give

assurance that

our disclosure

controls and

procedures and

our internal

control over

financial

reporting, as

defined by applicable

SEC rules,

will be adequate

in the future.

Any failure

to maintain the

effectiveness

internal

control

over

financial

reporting

comply

with

the

other

various

laws

and

regulations to

which we

are and

will continue

to be

subject, or

which we

may become

subject in

the

future,

public

company

could

have

adverse

material

impact

our

business,

our

financial

condition and

the price

of our

common stock.

In addition,

our efforts

to comply

with these

existing and

new requirements could significantly increase our compliance costs.

Adverse litigation matters may adversely affect our business and our financial

condition.

From

time

the

Company

involved

litigation

and

other

claims

against

our

business.

Primarily these arise in the

normal course of business but are

subject to risks and uncertainties, and

could

require

significant

management

time.

The

Company’s

periodic

assessment

litigation-related

matters

may change in light of the discovery of facts not presently known to us or determinations by

judges, juries

or other finders of fact. We

may also be subjected to legal matters not yet known to us. Adverse

decisions

or settlements of disputes may negatively impact our business, reputation

and financial condition.

If we fail to protect our trademarks and other intellectual property

rights or infringe the

intellectual property rights of others, our business, brand image,

growth strategy, results of

operations and financial condition could be adversely affected.

believe

that

our

“Cato”,

“It’s

Fashion”,

“It’s

Fashion

Metro”,

“Versona”,

“Cache”

and

“Body

Central”

trademarks

are

integral

our

store

designs,

brand

recognition

and

our

ability

successfully

build

consumer

loyalty.

Although

have

registered

these

trademarks

with

the

U.S.

Patent

and

Trademark Office

(“PTO”) and

have also

registered, or

applied for

registration of,

additional trademarks

with

the

PTO

that

believe

are

important

our

business,

cannot

give

assurance

that

these

registrations

will

prevent

imitation

our

trademarks,

merchandising

concepts,

store

designs

private

label merchandise or

the infringement of

our other intellectual

property rights by

others. Infringement of

our

names,

concepts,

store

designs

merchandise

generally,

particularly

manner

that

projects

lesser quality or carries a negative connotation of

our image could adversely affect our business, financial

condition and results of operations.

The

Company

from

time

subject

claims

that

its

products,

processes,

advertising,

trademarks

infringe

the

intellectual

property

rights

others.

The

defense

these

claims,

even

ultimately successful, may result in costly litigation,

and if the Company is not successful in its defense, it

could be subject to

injunctions and liability for

damages or royalty obligations,

and the Company’s

sales,

profitability, cash flows, financial condition and reputation could be adversely affected.

Changes to accounting rules and regulations may adversely affect our reported

results of

operations and financial condition.

Changes

U.S.

Generally

Accepted

Accounting

Principles

and

SEC

accounting,

disclosure

and

reporting rules

and regulations

are

common and

have become

more frequent

and significant

the

past

several

years.

Changes

accounting

rules,

disclosures

regulations

and

varying

interpretations

existing

accounting

rules,

disclosures

and

regulations

have

significantly

affected

our

reported

financial

statements and

those of

other participants

in the

retail industry

in the

past and

may continue

to do

so in

the

future.

Future

changes

accounting

rules,

disclosures

regulations

may

adversely

affect

our

reported

results

operations

and

financial

position

perceptions

our

performance

and

financial

condition.

Changes in tax and accounting laws and the mix and level of earnings

in any of the jurisdictions in

which we operate and the outcome of tax audits can cause fluctuations in our overall

tax rate,

which impact our reported earnings.

are subject to income

taxes in the

United States and numerous

domestic states, as well

as foreign

jurisdictions. In

addition, our

products are

subject to

import and

excise duties

and/or sales,

consumption

or value-added taxes in many jurisdictions. Significant judgment is required to determine and estimate tax

liabilities,

and

there

are

many

transactions

and

calculations

where

the

ultimate

tax

determination

uncertain. We

record tax

expense based

on our

estimates of

future payments,

which include

reserves for

estimates of probable settlements of domestic

and foreign tax audits. At any

one time, many tax years are

subject

audit

various

taxing

jurisdictions.

Adverse

determinations

these

audits

may

have

adverse effect

on our

reported financial results

in the

period such

determinations are

made, as

well as

future periods.

In addition, our

effective tax

rate may be

materially impacted by

changes in tax

rates and

duties,

the

mix

and

level

earnings

losses

taxing

jurisdictions,

changes

existing

accounting rules

regulations. As

a result,

expect

that throughout

the

year there

could

ongoing

variability in

our quarterly

tax rates

as events

occur and

exposures are

evaluated. Changes

to foreign

domestic tax

and accounting laws

and regulations, the

outcome of

tax audits and

changes in the

mix and

level

earnings

jurisdictions

could

have

material

impact

our

effective

tax

rate,

financial

condition, results of operations or cash flows.

Continued scrutiny and changing expectations surrounding sustainability

matters from investors,

customers, government regulators and other stakeholders may impose additional

reporting

requirements, additional costs and compliance risks.

Public companies

from across

all industries

have and

may continue

face scrutiny

from investors,

customers,

regulators

and

other

stakeholders

concerning

sustainability

matters.

the

U.S.,

there

have

been

numerous

initiatives

the

federal

and

state

level

impose

new

enhanced

disclosure

requirements

regarding

climate

emissions,

sustainability,

workforce

composition

and

metrics,

among other

topics. Complying

with these

complex reporting

obligations or

expectations could

increase

our

costs associated

with compliance,

disclosure and

reporting. Furthermore,

evolving laws,

regulations

stakeholder

expectations

may

result

uncertain,

potentially

burdensome,

and

changing

reporting

requirements

expectations,

and

our

failure

comply

with

such

requirements

expectations

may

adversely affect our reputation, business or financial performance.

Risks Relating to Our Investments and Liquidity:

We may experience market conditions or other events that could adversely impact the valuation

and liquidity of, and our ability to access, our short-term investments,

cash and cash equivalents

and our revolving line of credit.

Our

short-term investments

and cash

equivalents are

primarily comprised

of investments

federal,

state, municipal and corporate debt securities. The value of those securities may be adversely impacted by

factors

relating

these

securities,

similar

securities

the

broader

credit

markets

general.

Many

these factors

are beyond our

control, and include

but are

not limited to

changes to credit

ratings, rates of

default, collateral

value, discount

rates, and

strength and

quality of

market credit

and liquidity,

potential

disruptions in the capital

markets and changes in the

underlying economic, financial and

other conditions

that drive

these factors.

As federal,

state and

municipal entities

struggle with

declining tax

revenues and

budget deficits,

we cannot

be assured

of our

ability to

timely access

these investments

if the

market for

these issues

declines. Similarly,

the default

by issuers

of the

debt securities

we hold

or similar

securities

could

impair

the

value

liquidity of

our

investments.

The

development

persistence of

any

these

conditions could

adversely affect

our financial

condition, results

of operations

and ability

to execute

our

business

strategy.

addition,

have

significant

amounts

cash

and

cash

equivalents

financial

institutions that

are

in excess

the federally

insured limits.

An economic

downturn or

development of

adverse

conditions

affecting

the

financial

sector

and

stability

financial

institutions

could

cause

experience losses on our deposits.

Our ability

to access

credit markets

and our

revolving line

of credit,

either generally or

on favorable

market terms, may be

impacted by the

factors discussed in

the preceding paragraph, as

well as continued

compliance with covenants under

our revolving credit agreement. The

development or persistence of

any

of these

adverse factors or

failure to

comply with covenants

on which our

borrowing is conditioned

may

adversely affect

our financial

condition, results of

operations and

our ability

to access

our revolving

line

of credit and to execute our business strategy.

The terms of our asset-based revolving credit facility (“ABL

Facility”) restrict our operations and

financial flexibility, which could adversely affect our ability to respond to changes in our business

and to manage our operations.

are

subject

the

borrowing

terms

our

ABL

Facility,

which

limited

borrowing

base

consisting of certain eligible accounts

receivable and eligible inventory,

reduced by specified reserves, as

follows:

●

90% of eligible credit card receivables, plus

●

90% of the

net recovery percentage

of eligible inventory

multiplied by the

most recent appraised

value of such inventory, calculated at the lower of (a) cost computed on a first-in first-out basis or

(b) market value (net of intercompany profits and certain other adjustments),

minus

●

applicable reserves.

addition,

the

ABL Facility

prohibits

minimum excess

availability at

any time

less than

the

greater of

(i) 10%

of the

loan cap

(defined as

the lesser

of (A)

the borrowing

base at

such time

and (B)

$35 million (as of the date hereof)) and (ii) $5 million.

In addition, the covenants under

our ABL Facility include

restrictions that, among other things,

limit

our ability

to incur

additional indebtedness,

create liens

on assets,

make investments,

loans or

advances,

engage in mergers, consolidations, sell assets,

make acquisitions, pay dividends and make other restricted

22payments, and enter into transactions with affiliates. A failure by us to comply with these covenants could

result

event

default,

which

could

adversely

affect

our

ability

respond

changes

our

business and

manage our

operations. Upon the

occurrence of

an event

of default,

the lenders

could elect

to declare all

amounts outstanding to

be immediately due

and payable and

exercise other remedies

as set

forth under

our ABL

Facility,

including without

limitation foreclosing

on the

collateral pledged

such

lenders. If

the indebtedness

under our

ABL Facility

was to

be accelerated,

our future

financial condition

could be materially adversely affected.

Risks Relating to the Market Value of Our Common Stock:

The interests of our principal shareholder may limit the ability of other

shareholders to influence

the direction of the Company and otherwise affect our corporate governance and

the market price

of our common stock.

Our common stock

consists of two

classes: Class

A and

Class B.

Holders of

Class A common

stock

are entitled to one vote per share, and holders of Class B common stock are entitled to

10 votes per share,

on all matters to be voted on by our common shareholders. All of the shares of Class B common stock are

beneficially owned by

John P.

D. Cato. As

a result, Mr.

Cato owns a

significant economic interest in

the

Company and

the

majority

the

total

voting

power

our

outstanding

common

stock

53.3%

March

23,

2026.

addition,

Mr.

Cato

serves

Chairman

the

Board

Directors,

President

and

Chief Executive

Officer.

As a

result, Mr.

Cato has

the ability

to substantially

influence or

determine the

outcome of all

matters requiring approval by

the shareholders, including the

election of directors

and the

approval

mergers

and

other

business

combinations

other

significant

Company

transactions.

Mr.

Cato may

have interests

that differ

from those

of other

shareholders and

may vote

in a

way with

which

other

shareholders disagree

perceive as

adverse to

their

interests. The

concentration of

voting power

held by

Mr.

Cato could

discourage potential

investors from

acquiring our

common stock

and could

also

have the

effect of

preventing, discouraging or

deferring a

change in

control of

the Company,

even if

the

change in

control might

benefit the

shareholders generally.

This ownership

concentration may adversely

impact the trading

of our

Class A common stock

because of

perceptions of a

conflict of interest,

thereby

depressing

the

value

our

Class

common

stock.

Mr.

Cato

also

has

the

ability

control

the

management of

the Company

as a

result

of his

position as

Chief Executive

Officer.

Further,

we qualify

for

exemption

“controlled

company”

from

compliance

with

certain

New

York

Stock

Exchange

corporate

governance

listing

standards,

including

the

requirements

that

have

majority

independent

directors

our

Board,

independent

compensation

committee

and

independent

corporate

governance

and

nominating

committee.

Although

currently

intend

continue

comply

with these listing

standards even though

we are a

controlled company,

there can be

no assurance that

will continue

to comply

with these

optional listing

standards in

the future.

If we

elected to

utilize these

“controlled

company”

exceptions,

our

other

shareholders

could

lose

the

benefit

these

corporate

governance requirements and the market value of our common

stock could be adversely affected.

Our operating results are subject to seasonal and quarterly fluctuations,

which could adversely

affect the market price of our common stock.

Our business

varies with

general seasonal

trends that

are characteristic

of the

retail apparel

industry.

As a

result, our

stores typically

generate a

higher percentage

of our

annual net

sales and

profitability in

the

first

and

second

quarters

our

fiscal

year

compared

other

quarters.

Accordingly,

our

operating

results for

any one

fiscal period

are not

necessarily indicative

of results

be expected

from any

future

period,

and

such

seasonal

and

quarterly

fluctuations

could

adversely

affect

the

market

price

our

common stock.

We cannot provide assurance that we will pay dividends, or that if paid, any dividend payments will

be consistent with historical levels.

The declaration and payment of any dividend is subject to the approval of our Board of Directors.

Our

Board of

Directors regularly

evaluates

our ability

pay a

dividend based

on many

factors,

such as

but

not

limited

to,

applicable

legal

requirements,

the

financial

position

the

Company,

contractual

restrictions

and

our

capital

allocation

strategy.

Our

Board

Directors

most

recently

suspended

the

payment of quarterly dividends in November 2024 and may continue to suspend the payment

of dividends

if it deems such an action to

be in the best interests of the

Company and its shareholders. There can be no

assurance that a cash dividend will be declared in the future in any particular

amount, or at all.

Conditions in the stock market generally, or particularly relating to our industry, Company or

common stock, may materially and adversely affect the market price of our

common stock and

make its trading price more volatile.

The trading

price of

our common

stock at

times has

been, and

is likely

to continue

to be,

subject to

significant volatility.

A variety of

factors may cause

the price

of our

common stock to

fluctuate, perhaps

substantially,

including,

but

not

limited

to,

those

discussed

elsewhere

this

report,

well

the

following: low

trading volume;

general market

fluctuations resulting

from factors

not directly

related to

our operations or the inherent value of

our common stock; announcements of developments related to our

business; fluctuations in our reported operating results; general conditions or trends affecting or perceived

to affect

the fashion and

retail industry; conditions or

trends affecting or

perceived to affect

the domestic

or global

economy or

the domestic

or global

credit or

capital markets;

changes in

financial estimates

the scope

of coverage

given to

our Company

by securities

analysts; negative

commentary regarding

our

Company

and

corresponding

short-selling

market

behavior;

adverse

customer

relations

developments;

significant changes in our senior management team; and legal proceedings.

Over the past several years the

stock market in general, and the market for shares of equity securities of many retailers in particular,

have

experienced extreme price

fluctuations that

have at times

been unrelated to

the operating

performance of

those companies.

Such fluctuations

and market

volatility based

on these

or other

factors may

materially

and adversely

affect the

market price

of our

common stock.

Further,

securities class

action litigation

has

often

been

initiated

against

companies

following

periods

volatility

their

stock

price.

This

type

litigation,

should

materialize,

could

result

substantial

costs

and

divert

our

management’s

attention

and

resources,

and

could

also

require

make substantial

payments

justify

judgments

settle

litigation. The threat of class action litigation could also cause the price of

our common stock to decline.

Item 1B.

of our common stock.

on all matters to be voted on by our common shareholders. All of the shares of Class B common stock are

Unresolved Staff Comments:

Not applicable.

Item 1C.

Cybersecurity:

Risk Management Strategy

recognize

the

importance

effectively

managing

cybersecurity

risk

protecting

our

business,

customers

and

employees,

and

manage

cybersecurity

risk

part

our

overall

risk

management

strategy

and

compliance

processes.

maintain

process

designed

identify,

assess

and

manage

material

risks

from

cybersecurity

threats,

including

risks

relating

theft

customer

data,

primarily

payment cards, disruption to

business operations or financial

reporting systems, fraud, extortion,

external

exposure

employee

data

and

violation

privacy

laws.

recent

years,

have

increased

our

investments

cybersecurity risk

management and

have developed

enterprise cybersecurity

program

designed

detect,

identify,

classify

and

mitigate

cybersecurity

and

other

data

security

threats.

This

program classifies potential

threats by risk

levels, and we

typically prioritize our

threat mitigation efforts

based on those risk classifications. In the event we identify a potential cybersecurity, privacy or other data

security

issue,

have

defined

procedures

for

responding

such

issues,

including

procedures

that

address

when and

how to

engage with

Company executives,

our

Board of

Directors, other

stakeholders

and law

enforcement when

responding to

such issues.

Additionally,

various aspects

of our

cybersecurity

program,

particularly

compliance

with

the

Payment

Card

Industry

standards,

are

regularly

reviewed

independent

third

parties.

also

maintain

cybersecurity

insurance,

which

believe

commensurate

with

our

size

and

the

nature

our

operations,

part

our

comprehensive

insurance

portfolio.

utilize

third-party

intrusion

detection

and

prevention

systems

and

vulnerability

and

penetration

testing to

monitor our

environment. We

also use

third-party

software to

test our

employees' responses to

suspicious emails and to

inform targeted cyber

awareness training.

Our information security and

privacy

policies

are

informed

regulatory

requirements

and

are

reviewed

periodically

for

compliance

and

alignment

with

current

state

and

federal

laws

and

regulations.

comply

with

applicable

industry

security

standards,

including the

Payment Card

Industry

Data

Security

Standard (“PCI

DSS”).

Because

are

aware

the

risks

associated

with

third-party

service

providers,

also

have

implemented

processes

oversee

and manage

these

risks.

conduct

security

assessments

third-party

providers

before

engagement

and

maintain ongoing

monitoring to

help

ensure

compliance with

our

cybersecurity

standards.

Additionally,

we maintain and

regularly review a

cybersecurity incident response

plan that

provides a

framework for

handling and

escalating cybersecurity

incidents based

on the

severity of

the incident

and

facilitates cross-functional coordination across the Company.

Through the

processes described

above,

did

not

identify

risks

during the

year

ended January

31,

2026 from current or

past cybersecurity threats or cybersecurity

incidents that have materially affected

are

reasonably

likely

materially

affect

our

business

strategy,

results

operations,

financial

condition.

However,

face

ongoing

risks

from

certain

cybersecurity

threats

that,

realized,

are

reasonably likely

materially affect

our

business strategy,

results

operations, or

financial condition.

See

the

risk

factors

discussed

under

the

heading,

“Risk

Factors

—

Risks

Relating

Our

Information

Technology,

Related Systems and Cybersecurity” for further information.

Governance

Our

Board

Directors

recognizes

the

important

roles

that

information

security

and

mitigating

cybersecurity and other data security threats

play in our efforts

to protect and maintain the

confidentiality

and security of

customer, employee and

vendor information, as

well as non-public

information about our

Company.

Although

the

Board

whole

ultimately

responsible

for

the

oversight

our

risk

management

function,

the

Board

has

delegated

its

Audit

Committee

primary

responsibility

for

oversight

risk

assessment

and

risk

management,

including

risks

cybersecurity

and

other

technology

issues.

The

Audit

Committee

also

oversees

the

Company’s

internal

control

over

financial

reporting, including

with respect

to financial

reporting-related information

systems. The

Chief Financial

Officer (CFO) and Chief

Accounting Officer (CAO) meet regularly

with the Audit Committee and

Board

of Directors.

The

Audit

Committee

reviews

quarterly

our

cybersecurity

activities,

including

review

annual

external assessment

results, training

results, and

discussion of

cybersecurity risks

and resolutions,

and is

responsible

for elevating significant

matters to the

Board as events

arise.

The Audit

Committee receives

reports

from

our

Chief

Information

Officer

(CIO)

annually

regarding

our

cybersecurity

framework,

well as our plans to mitigate cybersecurity risks and respond to any data breaches.

From

management

perspective,

our

enterprise

cybersecurity

overseen

our

cybersecurity

committee, which is chaired by our CFO

and includes our CAO, CIO, Chief Information

Security Officer

(CISO),

well

key

members

financial

management,

information

technology

and

audit.

Our

cybersecurity infrastructure

overseen by

our

CISO, who

reports

our

CIO.

Our

CIO reports

our

CFO

and

has

served

various

roles

information

technology

and

information

security

for

over

years.

Item 2.

Properties:

The Company’s

distribution center

and general

offices

are located

in a

Company-owned building

approximately

552,000

square

feet

located

15-acre

tract

Charlotte,

North

Carolina.

The

Company’s

automated

merchandise

handling

and

distribution

activities

occupy

approximately

418,000

square

feet

this

building

and

its

general

offices

and

corporate

training

center

are

located

the

remaining 134,000

square feet.

A building

of approximately

24,000 square

feet located

on a

2-acre tract

adjacent

the

Company’s

existing

location is

used

for

e-commerce

storage.

The

Company also

owns

approximately 185 acres of land in York County,

South Carolina.

Item 3.

distribution center.

Legal Proceedings:

From time

to time,

claims are

asserted against

the Company

arising out

of operations

in the

ordinary

course

business.

The

Company

currently

not

party

any

pending

litigation

that

believes

likely to have a

material adverse effect on

the Company’s

financial position, results of

operations or cash

flows. See Note 15, “Commitments and Contingencies,” for more

information.

2625

Item 3A.

Executive Officers of the Registrant:

The executive officers of the Company and their ages as of March 25, 2026

are as follows:

Name

Age

Position

John P.

D. Cato............................

Chairman, President and Chief Executive Officer

Charles D. Knight........................

Executive Vice President, Chief Financial Officer

Gordon Smith

..............................

Executive Vice President, Chief Real Estate and

Store Development Officer

John P.

D. Cato

has been employed

as an officer

of the Company since

1981 and has

been a director

the

Company

since

1986.

Since

January

2004,

has

served

Chairman,

President

and

Chief

Executive Officer.

From May 1999 to

January 2004, he served

as President, Vice

Chairman of the

Board

and Chief Executive Officer.

From June 1997 to May 1999,

he served as President, Vice

Chairman of the

Board and

Chief Operating Officer.

From August 1996

to June

1997, he served

as Vice

Chairman of the

Board

and Chief

Operating Officer.

From 1989

1996, he

managed the

Company’s

off-price

concept,

serving

Executive Vice

President

and

President and

General Manager

the

It’s

Fashion

concept

from 1993

August 1996.

Mr. Cato

a former

director of

Harris Teeter

Supermarkets, Inc.,

formerly

Ruddick Corporation.

Charles

Knight

has

been

employed

Executive

Vice

President,

Chief

Financial

Officer

the

Company

since

January

2022.

From

2018

2020,

served

various

roles

with

The

Vitamin

Shoppe,

first

Senior

Vice

President,

Chief

Accounting

Officer

from

2018

2019,

and

then

Executive Vice

President, Chief Financial

Officer from 2019

to 2020.

Prior to

that, he served

in various

roles with Toys

“R” Us for 28

years, including as Senior Vice

President, Corporate Controller from 2010

to 2018.

Gordon

Smith

has

been

employed

the

Company

since

1989.

Since

July

2011,

has

served

Executive Vice

President, Chief

Real

Estate and

Store Development

Officer.

From February

2008 until

July 2011,

Mr. Smith served as

Senior Vice President, Real

Estate. From October 1989 to February 2008,

Mr. Smith served as Assistant Vice President, Corporate Real Estate.

Item 4.

Mine Safety Disclosures:

Not applicable.

2726

PART

Item 5.

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of

Equity Securities:

Market & Dividend Information

The

Company’s

Class A Common

Stock

trades

on the

New York

Stock

Exchange (“NYSE”) under

the symbol CATO.

As of March 23, 2026,

the approximate number of record holders of the Company’s Class A Common

Stock was 5,000 and there were 2 record holders of the Company’s Class B Common Stock.

2827

Stock Performance Graph

The

following

graph

compares

the

yearly

change

the

Company’s

cumulative

total

shareholder

return on

the Company’s

Common Stock (which

includes Class

A Stock

and Class

B Stock)

for each

the

Company’s

last

five

fiscal

years

with

(i)

the

Dow

Jones

U.S.

Retailers,

Apparel

Index

and

(ii)

the

Russell 2000 Index.

THE CATO

CORPORATION

STOCK PERFOMANCE TABLE

(BASE 100 – IN DOLLARS)

LAST TRADING DAY

OF THE FISCAL YEAR

THE CATO

CORPORATION

DOW JONES U.S.

RETAILERS,

APPL

INDEX

RUSSELL 2000

INDEX

1/3129/~~2020~~2021

100

1/29/2021

107

130

1/28/2022

~~108~~149

~~118~~111

~~129~~99

1/27/2023

6996

~~129~~121

~~124~~95

2/2/2024

5171

~~145~~135

~~127~~98

1/31/2025

173

116

1/30/2026

209

135

The graph assumes an initial investment of $100 on January 29, 2021,

the last trading day prior to the

commencement of the Company’s 2021 fiscal year, and that all dividends were reinvested.

184

152

commencement of the Company’s 2020 fiscal year, and that all dividends were reinvested.

Issuer Purchases of Equity Securities

The following table summarizes the Company’s purchases of its common stock for the three months

ended ~~February~~January 131, ~~2025~~2026:

Total Number of

Maximum Number

Shares Purchased as

(or Approximate Dollar

Total Number

Part of Publicly

Value) of Shares that may

of Shares

Average Price

Announced Plans or

yet be Purchased Under

Period

Purchased

Paid per Share (1)

Programs (2)

the Plans or Programs (2)

November ~~2024~~2025

~~96,306~~-

~~3.32~~-

~~96,306~~-

December ~~2024~~2025

~~320,271~~-

~~3.35~~-

~~320,271~~-

January ~~2025~~2026

~~28,799~~-

~~3.50~~-

~~28,799~~-

Total

~~445,376~~-

~~3.35~~-

~~445,376~~-

~~997~~680,~~455~~740

(1)

Prices include trading costs.

(2)

30As of November 1, 2025, the Company’s share repurchase program had 680,740 shares remaining in

open

authorizations.

During

the

fourth

quarter

ended

January

31,

2026,

the

Company

did

not

repurchase or retire any shares

under this program. As

of the fourth quarter ended

January 31, 2026,

the Company had

680,740 shares remaining

in open authorizations.

There is no

specified expiration

~~Form~~date ~~10-K~~ for the ~~fiscal~~Company’s ~~year~~repurchase ~~ended February 3, 2024~~program.

Item 7.

Management's Discussion and Analysis of Financial Condition and Results

of Operations:

Management’s

Discussion and

Analysis of

Financial Condition

and Results

of Operations

is intended

to provide information to assist readers in better

understanding and evaluating our financial condition and

results

operations.

The

following

information

should

read

conjunction

with

the

Consolidated

Financial Statements, including the accompanying Notes appearing in

Part II, Item 8 of this

annual report

on Form 10-K.

This section of the annual report

on Form 10-K generally discusses fiscal 2025

and fiscal

2024

and

year-to-year

comparisons

between

fiscal

2025

and

fiscal

2024,

well

certain

fiscal

2023

items.

Discussions

fiscal

2023

items

and

year-to-year

comparisons

between

fiscal

2024

and

fiscal

2023 that are not included

in this Form 10-K can

be found in “Management’s

Discussion and Analysis of

Financial

Condition

and

Results

Operations”

Part

II,

Item

the

Company’s

annual

report

Form 10-K for the fiscal year ended February 1, 2025.

Recent Developments

Tariff

Uncertainties and Pressures

significant

quantity

our

products are

made

China

and

Southeast Asia.

These

products

were

subject

reciprocal

tariffs

throughout

fiscal

2025.

February

20,

2026,

the

Supreme

Court

struck

down

these

tariffs.

The

ruling

does

not

establish

refund

process,

and

significant

uncertainty

remains

regarding how

and when

any amounts

may be

refunded.

are evaluating

the ruling

and any

potential

actions

available

us.

are

unable

estimate

the

financial

impact,

any,

this

time

due

uncertainties regarding the process, timing and amounts of any

refunds.

On February 20, 2026,

after the Supreme Court

ruling, a 10% tariff

under Section 122 was

enacted for

150 days.

On March 11

2026, the U.S.

Trade Representative

announced Section 301

investigations into

various countries, including countries where much of our products are manufactured.

The extent to which

these Section

301 investigations will

result in

additional tariffs,

and the

timing of any

potential tariffs,

currently unknown.

Although the tariff amounts are reduced from their levels in the second half of 2025,

the

current

tariff

regime

higher

than

the

beginning

2025,

which

will

negatively

impact

our

acquisition costs in the first half of 2026 and possibly the second half

of 2026.

Inflationary Cost Pressure and High Interest Rates

of fiscal 2025.

Merchandise Supply Chain and Tariff Pressures

Suez Canal are causing container ships to travel longer distances around the Cape of Good Hope, which is

condition for the foreseeable future.

with products made in China are likely to increase. These cost increases will negatively impact our results

Results of Operations

The table below sets forth certain financial data of the Company

expressed as a percentage of

retail sales for the years indicated:

Fiscal Year Ended

January 31, 2026

February 1, 2025

February 3, 2024

Retail sales …………………………………………………………..

100.0

Other revenue…………………………………………………………

1.2

1.1

1.2

Total revenues ……………………………………………………….

101.2

101.1

101.2

Cost of goods sold …………………………………………………..

66.7

68.0

66.3

Selling, general and administrative………………………………….

35.0

36.1

Depreciation …………………………………………………………

1.5

1.45

Interest and other income ……………………………………………

1.0

1.8

0.7

Loss before income taxes …………………………………………

(1.2)

(2.5)

(2.0)

Net loss…………………………………………………………..

(0.9)

(2.8)

~~(3.4)~~Fiscal 2025 Compared to Fiscal 2024

Retail sales

increased by

0.7% to

$646.8 million

in fiscal

2025 compared

to $642.1

million in

fiscal

2024. The increase in

retail sales in fiscal

2025 was primarily due

to a 4.5%

increase in same-store sales,

partially

offset

closed stores in

2024

and

2025.

Same-store

sales

for

the

fiscal

year

2025

increased

% 30

primarily due to

higher transactions volume and

slightly higher average sales

per transaction. Same-store

sales

includes

stores

that

have

been

open

than

months.

Stores

that

have

been

relocated

expanded

are

also

included in

the

same-store sales

calculation

after

they

have

been

open

than

months.

In fiscal 2025 and fiscal 2024, e-commerce sales were less than 5%

of total sales and same-store

sales. 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.

Total

revenues, comprised of

retail sales

and other

revenue (principally finance

charges and

late fees

customer accounts receivable,

gift card breakage, shipping

charges for e-commerce purchases

and layaway

fees), increased by 0.6%

to $653.8

million in fiscal

2025 compared to

$649.8 million in

fiscal 2024. The

Company

operated

1,069

stores

January

31,

2026

compared

1,117

stores

operated

February

~~Fiscal~~2025. ~~2024 Compared to Fiscal 2023~~

In fiscal 2025, the Company opened no new stores and closed 48 stores.

Other

revenue,

component

total

revenues,

was

$7.0

million

fiscal

2025

compared

$7.7

~~transactions,~~million ~~partially~~in ~~offset~~fiscal ~~by fewer returns and slightly higher average sales per transaction~~2024. ~~Same-store~~

Credit revenue

of $2.7

million represented 0.4%

of total

revenue in

fiscal 2025,

relatively

flat both in

dollars and percentage compared

fiscal

2024.

Credit

revenue

comprised

interest

earned

the

Company’s

private

label

credit

card

portfolio

and

fee

income.

expenses

include

principally

payroll,

postage

and

other

administrative

expenses

and

totaled

$1.7

million

fiscal

2025

compared to

$1.6 million

in fiscal

2024.

Total

credit segment

income before

taxes

was $2.2

million in

fiscal 2025, relatively flat in dollars compared to fiscal 2024.

Cost

goods sold

was $431.6

million, or

66.7% of

retail

sales, in

fiscal

2025 compared

$436.4

million, or 68.0% of retail sales, in fiscal 2024. The decrease in cost of goods sold as a percentage of sales

toresulted ~~fiscal~~primarily ~~2023.~~from lower buying, distribution and occupancy costs, partially offset by increased sales of

markdown

priced goods.

Cost of goods

sold includes merchandise

costs, net of

discounts and allowances,

buying costs,

distribution costs,

occupancy costs,

and freight

and inventory

shrinkage. Net

merchandise

costs

and

in-bound

freight

are

capitalized

inventory

costs.

Buying

and

distribution

costs

include

payroll, payroll-related

costs and

operating expenses

for the

buying departments

and distribution

center.

Occupancy

expenses

include

rent,

real

estate

taxes,

insurance,

common

area

maintenance,

utilities

and

32maintenance for stores and distribution facilities. Total gross margin dollars (retail sales less cost of goods

sold and excluding

depreciation) increased by

4.7% to $215.3

million in fiscal

2025 from $205.7

million

in fiscal 2024. Gross margin as presented may not be comparable to that of other companies.

Selling, general

and administrative expenses

(“SG&A”), which

primarily include corporate

and store

payroll,

payroll

taxes

and

benefits,

insurance,

supplies,

advertising,

bank

and

credit

card

processing fees were

$226.4 million in

fiscal 2025 compared

to $231.5 million

in fiscal 2024,

a decrease

2.2%.

percent

retail

sales,

SG&A

was

35.0%

compared

36.1%

the

prior

year.

The

decrease

SG&A

expense

fiscal

2025

was

primarily

attributable

lower

payroll

costs

and

lower

~~million,~~closed orstore ~~66.3%~~and ofimpairment ~~retail sales, in fiscal 2023~~expenses. ~~The increase in cost of goods sold as a percentage of sales~~

Depreciation

expense

was

$10.0

million

fiscal

2025

compared

$9.8

million

fiscal

2024.

Depreciation

expense

increased

slightly

from

fiscal

2024

due

additional

distribution

center

and

information

technology

depreciation,

partially

offset

decrease

leasehold

improvements

and

~~distribution~~fixtures ~~costs~~depreciation. ~~include payroll, payroll-related costs and operating expenses for the buying departments~~

Interest and other income decreased

to $6.7 million in

fiscal 2025 compared to

$11.8 million in

fiscal

2024. The

decrease is

primarily attributable

gains on

the

sale of

land

held for

investment and

on the

~~decrease~~disposal inof ~~SG&A~~the ~~expense~~Company’s incorporate ~~fiscal~~aircraft in 2024. ~~was primarily attributable to decreased incentive compensation,~~

Income tax

benefit was

$1.6 million,

0.2% of

retail sales

fiscal 2025

compared to

income tax

~~information technology expenditures.~~ 31

expense of

$1.9 million, or

0.3% of

retail sales in

fiscal 2024.

The effective

income tax

rate was

21.2%

(Benefit) in fiscal 2025 compared to

(12.1%)

(Expense) in fiscal 2024.

The income tax expense decrease

~~interest~~was ~~earned~~primarily ondue ~~the~~to ~~Company’s~~a ~~investments.~~reduction in foreign income taxes and a larger release of reserves related to expired

statute of

limitations for

uncertain tax

positions in

fiscal 2025.

On July

4, 2025,

the One

Big Beautiful

Bill Act (the “OBBBA”) was signed into law.

The Company considered the impact of the OBBBA in the

second quarter of fiscal 2025.

The changes do not have a material impact on the Company’s

effective tax

rate.

The

Company

continues

monitor

impacts

moving

forward.

See

Note

the

Consolidated

~~Consolidated~~ Financial Statements, “Income Taxes,” for further details.

Off-Balance Sheet Arrangements

Not applicable.

Critical Accounting Policies and Estimates

The Company’s

accounting policies are

more fully described

in Note

1 to the

Consolidated Financial

Statements.

disclosed

Note

the

Consolidated

Financial

Statements,

the

preparation

the

Company’s

financial

statements

conformity

with

generally

accepted

accounting

principles

the

United

States

(“GAAP”)

requires

management

make

estimates

and

assumptions

about

future

events

that

affect

the

amounts reported

the

financial statements

and

accompanying notes.

Future events

and

their

effects

cannot

determined

with

absolute

certainty.

Therefore,

the

determination

estimates

requires

the

exercise

judgment.

Actual

results

inevitably

will

differ

from

those

estimates,

and

such

differences

may

material

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.

Allowance for Customer Credit Losses

The Company evaluates

the collectability

of customer

accounts receivable

and records

an allowance

for customer

credit losses

based on

the accounts

receivable aging and

estimates of

actual write-offs.

The

allowance is

reviewed for

adequacy and

adjusted, as

necessary,

on a

quarterly basis.

The Company

also

provides

for

estimated

uncollectible

late

fees

charged

based

historical

write-offs.

The

Company’s

financial results

can be

impacted by

changes in

customer loss

write-off experience

and the

aging of

the

accounts receivable portfolio.

Merchandise Inventories

The Company’s

inventory is

valued using

the weighted-average

cost method

and is

stated at

the net

realizable value. Physical inventories

are conducted throughout the

year to calculate actual

shrinkage and

inventory on hand. Actual shrinkage results are used to estimate inventory shrinkage, which is accrued for

the

period between

the

last physical

inventory and

the

financial reporting

date. The

Company regularly

reviews

its

inventory

levels

identify

slow

moving

merchandise

and

uses

markdowns

clear

slow

moving inventory.

Lease Accounting

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

one

year to 10 years, some of which

include options to extend the lease term for

up to five years, and some of

which

include

options

terminate

the

lease

within

one

year.

The

Company considers

these

options

determining

the

lease term

used

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.

most

the

Company’s

leases

not

provide

implicit

rate,

the

Company

uses

its

estimated

incremental

borrowing

rate

based

the

information

available

commencement

date

the

lease

determining the present

value of lease

payments.

See Note 11

to the

Consolidated Financial Statements,

“Leases,” for further information.

Impairment of Long-Lived Assets

The

Company invests

leaseholds,

right-of use

assets

and

equipment primarily

connection

with

the opening and remodeling of stores

and in computer software and hardware. The

Company periodically

reviews its store

locations and estimates

the recoverability of

its long-lived assets,

which primarily relate

Fixtures

and

equipment,

Leasehold

improvements,

Right-of-use

assets

net

Lease

liabilities

and

Information

technology

equipment

and

software.

impairment

charge

recorded

for

the

amount

which the

carrying value

exceeds the

estimated fair

value when

the Company

determines that

projected

cash flows associated with those long-lived assets will not be sufficient to recover the carrying value.

This

determination is based on a

number of factors, including the store’s

historical operating results and future

projected cash flows, which include contribution margin projections.

The Company assesses the fair value

of each lease

by considering market

rents and

any lease terms

that may adjust

market rents under

certain

conditions, such as the loss of

an anchor tenant or a leased

space in a shopping center not

meeting certain

criteria. Further,

in determining when

to close a

store, the Company considers

real estate development

the

area and

perceived local

market conditions,

which can

be difficult

predict and

may be

subject

change.

Insurance Liabilities

The

Company

primarily

self-insured

for

healthcare,

workers’

compensation

and

general

liability

costs. These costs are

significant primarily due to the

large number of the

Company’s retail locations

and

associates. The Company’s

self-insurance liabilities are

based on the

total estimated costs

of claims filed

and

estimates

claims

incurred

but

not

reported,

less

amounts

paid

against

such

claims,

and

are

not

discounted.

Management

reviews

current

and

historical

claims

data

developing

its

estimates.

The

Company

also

uses

information

provided

outside

actuaries

with

respect

healthcare,

workers’

compensation and general liability claims.

If the underlying facts and

circumstances of the claims change

the

historical

experience

upon

which

insurance

provisions

are

recorded

not

indicative

future

trends, then

the Company

may be

required to

make adjustments

to the

provision for

insurance costs

that

could

material

the

Company’s

reported

financial condition

and

results

operations.

Historically,

actual results have not significantly deviated from estimates.

Uncertain Tax Positions

The Company records

liabilities for

uncertain tax

positions primarily

related to

state income

taxes as

of the balance sheet

date.

These liabilities reflect the

Company’s best

estimate of its ultimate

income tax

liability

based

the

tax

codes,

regulations,

and

pronouncements

the

jurisdictions

which

business.

Estimating our ultimate tax liability involves significant judgments regarding the

application of

complex tax

regulations across

many jurisdictions.

Despite the

Company’s

belief that

the estimates

and

judgments

are

reasonable,

differences

between

the

estimated

and

actual

tax

liabilities

can

and

exist

from time to time.

These differences may arise from settlements

of tax audits, expiration of the statute of

limitations, and the evolution and application of the

various jurisdictional tax codes and regulations.

Any

differences will

be recorded

in the

period in

which they become

known and

could have

a material

effect

on the results of operations in the period the adjustment is recorded.

Deferred Tax Valuation

Allowance

The

Company

assesses

the

likelihood

that

deferred

tax

assets

will

realized

light

the

Company’s

current

financial

performance

and

projected

future

financial

performance.

Based

this

assessment, the

Company then

determines if

a valuation

allowance should

be recorded.

If the

Company

concludes

that

likely

than

not

that

the

Company

will

not

able

realize

its

tax

deferred

assets, a valuation allowance is recorded for the proportion of the deferred tax asset it determines may not

be realized.

This evaluation

requires significant

judgment and

involves the

consideration of

all available

positive

and

negative

evidence,

including

our

historical

operating

results,

the

existence

cumulative

losses

recent

years,

ongoing

prudent

and

feasible

tax

planning

strategies,

and

projections

future

taxable income.

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

its

asset-backed

revolving

line

credit,

will

adequate

fund

the

Company’s

regular

operating

requirements,

including

$64.0

million

lease

obligations

and

planned

investments of

$7.4 million of

capital expenditures,

for the

next twelve

months from the

issuance of

this

ofannual ~~this~~ report on Form 10-K.

Cash

used

operating

activities

during

fiscal

2025

was

$1.5

million

compared

$19.7 million

~~provided~~used in fiscal ~~2023~~2024 and $130.45 million provided in fiscal ~~2022~~2023. Cash used in operating activities during 2025

was primarily attributable to

net loss adjusted for

depreciation,

stock-based compensation and changes

working

capital.

The

decrease

$18.2

million

cash

used

for

fiscal

2025

compared to

fiscal

2024

primarily due to a lower net loss and a decrease

in merchandise inventory, partially offset by a decrease in

35accounts payable.

At January

31,

2026, the

Company had

working

capital

$37.4 million compared

$34.9 million

and $55.1 million at

February 1, 2025 and

February 3, 2024, respectively.

The increase

in working

capital

in fiscal

2025 compared

to the

prior year

is primarily

due to

lower accounts

payable, accrued

liabilities and

current lease liability, partially offset by

lower cash and cash equivalents and merchandise

inventory.

The

ABL

Credit

Agreement

(“ABL

Facility”)

$35.0

million

committed

through

March

2028 and is secured primarily by inventory

and third-party credit card receivables. The proceeds

from the

ABL

Facility

may

used

provide

funding

for

ongoing

working

capital

and

general

corporate

purposes. There were

no borrowings outstanding and

the availability under the

facility was $30.0

million

before

giving effect

$3.0

million

outstanding letter

credit

that

reduced

borrowing availability

$27.0

million

January

31,

2026.

The

weighted

average

interest

rate

under

the

credit

facility

was

~~payable~~zero at January 31, 2026 due to no outstanding borrowings.

Expenditures for property and equipment totaled $3.8 million, $7.9 million

and $12.5 million in fiscal

2025,

2024

and

2023,

respectively.

The

decrease

expenditures

for

fiscal

2025

was

primarily

due to

finishing projects related to investments in

the distribution center and information technology.

Net

cash

used

investing

activities

totaled

$1.3

million

for

fiscal

2025

compared to

$29.0

million

provided in

fiscal

2024 and

$19.8

million provided

fiscal

2023.

In fiscal

2025, the

decrease in

cash

provided

was

primarily

attributable

lower

sales

other

assets

and

short-term investments,

partially

offset by a decrease in expenditures for property and equipment and purchases of short-term

investments.

Net cash

used in financing

activities totaled

$0.9 million in

fiscal 2025

compared to net

cash used of

$14.1

million

for

fiscal

2024

and

$16.1

million

for

fiscal

2023.

The decrease in

cash used during

fiscal

2025 was primarily due to the

elimination of dividend payments and a

decrease in share repurchases.

~~additional information regarding the ABL Facility, see Note 1 to the Consolidated Financial Statements.~~ 34

The Company does not use derivative financial instruments.

See

Note

the

Consolidated

Financial

Statements,

“Fair

Value

Measurements,”

for

information

investments and other assets, partially offset by expenditures for property and equipment.

amounts.

regarding the Company’s financial assets that are measured at fair value.

The

Company’s

investment

portfolio

was

primarily

invested

corporate

bonds

and

taxable

governmental debt

securities held in

managed accounts with

underlying ratings of

A or

better at

January

31,

2026. The

corporate bonds

have contractual

maturities which

range

from 14

days

2.6

years.

The

U.S. Treasury notes have a contractual maturity of 15 days.

Level

investment

securities

January

31,

2026

primarily

include

corporate

bonds

for

which

quoted

prices

may

not

available

active

exchanges

for

identical

instruments.

Their

fair

value

principally

based on market values determined by management with the assistance of a third-party pricing service.

Since

quoted

prices

active

markets

for

identical

assets

are

not

available,

these

prices

are

determined

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

primarily of

life

insurance

policies. These

life

insurance

from 13 days to 2.5 years. These securities are classified as available-for-sale and are recorded as Short-term

observable market information such as quotes from less active markets and/or quoted prices of securities with

similar characteristics, among other factors.

policies are valued based on the cash surrender value of the insurance contract, which is determined based

such

factors

the

fair

value

the

underlying

assets

and

discounted

cash

flow

and

are

therefore

classified

within

Level

the

valuation

hierarchy.

The

Level

liability

associated

with

the

life

insurance

policies

represents

deferred

compensation

obligation,

the

value

which

tracked

via

underlying

insurance

funds’

net

asset

values,

recorded

Other

noncurrent

liabilities

the

Consolidated Balance Sheets. These

funds are designed

to mirror the

return of existing

mutual funds and

money market funds that are observable and actively traded.

Contractual Obligations

Contractual

obligations

for

future

payments

January

31,

2026

relate

primarily

operating

lease

commitments for

store leases.

Operating leases

represent minimum

required lease

payments under

non-

cancellable

lease

terms.

Most

store

leases

also

require

payment

operating

expenses

such

taxes, utilities, insurance and maintenance, which are not included in our estimated lease obligations.

See

Note

the

Consolidated

Financial

Statements,

“Leases”,

for

the

maturities

our

operating

lease

obligations.

Recent Accounting Pronouncements

See Note 1 to

the Consolidated Financial Statements,

“Summary of Significant Accounting Policies—

Recently Adopted Accounting Policies” and “—Recently Issued Accounting

Pronouncements.”

Item 7A.

Quantitative and Qualitative Disclosures About Market Risk:

The

Company

subject

market

rate

risk

from

exposure

changes

interest

rates

based

its

financing, investing and

cash management activities,

but the Company

does not

believe such

exposure is

material.

3735

Item 8.

Financial Statements and Supplementary Data:

INDEX TO FINANCIAL STATEMENTS AND SCHEDULE

Page

Report of Independent Registered Public Accounting Firm (PCAOB ID

238

) .....................................

3836

Consolidated Statements of Income (Loss) and Comprehensive Income (Loss)

for the fiscal

years ended January 31, 2026, February 1, 2025 and February 3, 2024 ................................

...........

Consolidated Balance Sheets at January 31, 2026 and February 1, 2025

.............................................

Consolidated Statements of Cash Flows for the fiscal years ended January 31, 2026,

February 1, 2025

and February 3, 2024 ................................

................................................................

........................

Consolidated Statements of Stockholders’ Equity for the fiscal years ended January 31,

2026,

February 1, 2025 and February 3, 2024 ................................................................

............................

Notes to Consolidated Financial Statements ..........................................................................................

Schedule II — Valuation

and Qualifying Accounts for the fiscal years ended January 31, 2026,

February 1, 2025 and February 3, 2024 ................................................................

............................

4476

45 36

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of The Cato Corporation

Opinions on the Financial Statements and Internal Control over Financial

Reporting

We have audited the accompanying consolidated balance sheets of The Cato Corporation and its

subsidiaries (the "Company") as of January 31, 2026 and February 1, 2025,

and the related consolidated

statements of income (loss) and comprehensive income (loss), of stockholders’

equity and of cash flows

for each of the three years in the period ended January 31, 2026, including

the related notes and financial

statement schedule listed in the accompanying index (collectively referred

to as the "consolidated

financial statements"). We also have audited the Company's internal control over financial reporting as of

January 31, 2026, based on criteria established in Internal Control - Integrated

Framework (2013) issued

February 1, 2025, based on criteria established in

Internal Control - Integrated Framework

by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the consolidated financial statements referred to above

present fairly, in all material

respects, the financial position of the Company as of January 31, 2026

and February 1, 2025, and the

results of its operations and its cash flows for each of the three years

in the period ended January 31, 2026

in conformity with accounting principles generally accepted in the United

States of America. Also in our

opinion, the Company maintained, in all material respects, effective internal control

over financial

reporting as of January 31, 2026, based on criteria established in Internal

Control - Integrated Framework

Internal Control - Integrated Framework

(2013) issued by the COSO.

Basis for Opinions

The Company's management is responsible for these consolidated financial

statements, for maintaining

effective internal control over financial reporting, and for its assessment of the effectiveness of internal

control over financial reporting, included in Management’s Report on Internal Control Over Financial

Reporting appearing under Item 9A. Our responsibility is to express opinions

on the Company’s

consolidated financial statements and on the Company's internal control over

financial reporting based on

our audits. We are a public accounting firm registered with the Public Company Accounting Oversight

Board (United States) (PCAOB) and are required to be independent with

respect to the Company in

accordance with the U.S. federal securities laws and the applicable rules and

regulations of the Securities

and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that

we plan and perform the audits to obtain reasonable assurance about

whether the consolidated financial

statements are free of material misstatement, whether due to error or fraud,

and whether effective internal

control over financial reporting was maintained in all material respects.

Our audits of the consolidated financial statements included performing

procedures to assess the risks of

material misstatement of the consolidated financial statements, whether due

to error or fraud, and

performing procedures that respond to those risks. Such procedures

included examining, on a test basis,

evidence regarding the amounts and disclosures in the consolidated financial

statements. Our audits also

included evaluating the accounting principles used and significant

estimates made by management, as

well as evaluating the overall presentation of the consolidated

financial statements. Our audit of internal

control over financial reporting included obtaining an understanding of

internal control over financial

reporting, assessing the risk that a material weakness exists, and testing

and evaluating the design and

operating effectiveness of internal control based on the assessed risk. Our audits also

included performing

such other procedures as we considered necessary in the circumstances. We believe that our audits

provide a reasonable basis for our opinions.

3937

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed 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. A company’s internal

control over financial reporting includes those policies and procedures

that (i) pertain to the maintenance

of records that, in reasonable detail, accurately and fairly reflect the transactions

and dispositions of the

assets of the company; (ii) provide reasonable assurance that transactions

are recorded as necessary to

permit preparation of financial statements in accordance with generally

accepted accounting principles,

and that receipts and expenditures of the company are being made

only in accordance with authorizations

of management and directors of the company; and (iii) provide

reasonable assurance regarding prevention

or timely detection of unauthorized acquisition, use, or disposition

of the company’s assets that could

have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting

may not prevent or detect

misstatements. Also, projections of any evaluation of effectiveness to future periods

are subject to the risk

that controls may become inadequate because of changes in conditions, or

that the degree of compliance

with the policies or procedures may deteriorate.

Critical Audit Matters

The critical audit matter communicated below is a matter arising

from the current period audit of the

consolidated financial statements that was communicated or required to

be communicated to the audit

committee and that (i) relates to accounts or disclosures that are material

to the consolidated financial

statements and (ii) involved our especially challenging, subjective, or

complex judgments. The

communication of critical audit matters does not alter in any way our opinion on

the consolidated

financial statements, taken as a whole, and we are not, by communicating

the critical audit matter below,

providing a separate opinion on the critical audit matter or on the accounts

or disclosures to which it

relates.

Impairment of Long-Lived Assets - Store Location Asset Groupings

As described in Notes 1 and 6 to the consolidated financial statements,

the Company’s consolidated

property and equipment, net balance was $53.7 million, of which the store

locations were a portion, and

consolidated operating lease right-of-use assets, net balance was $153.9 million

as of January 31, 2026.

The Company invests in leaseholds, right-of-use assets and equipment,

primarily in connection with the

opening and remodeling of stores, and in computer software and hardware.

The Company periodically

reviews its store locations and estimates the recoverability

of its long-lived assets, which primarily relate

to fixtures and equipment, leasehold improvements, right-of-use assets net

of lease liabilities, and

information technology equipment and software. An impairment charge is recorded

for the amount by

which the carrying value exceeds the estimated fair value when management

determines that projected

cash flows associated with those long-lived assets will not be sufficient to recover

the carrying value. This

determination is based on a number of factors, including the store’s historical operating results and future

projected cash flows, which include contribution margin projections. The Company

assesses the fair value

of each lease by considering market rents and any lease terms that may

adjust market rents under certain

conditions such as the loss of an anchor tenant or a leased space in a shopping

center not meeting certain

criteria. An impairment charge for store assets of $0.2 million was recorded during

the year ended

January 31, 2026.

The principal considerations for our determination that performing

procedures relating to impairment of

long-lived assets – store location asset groupings is a critical audit matter

are (i) the significant judgment

by management when determining the fair value measurement of the

store location asset groupings,

February 1, 2025.

which led to (ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and

evaluating management’s projected cash flow assumptions related to contribution margin projections.

4038

Addressing the matter involved performing procedures and evaluating

audit evidence in connection with

forming our overall opinion on the consolidated financial statements.

These procedures included testing

the effectiveness of controls relating to management’s long-lived assets – store location recoverability test

and determination of the fair value of the asset groupings.

These procedures also included, among others,

(i) testing the completeness and accuracy of underlying data used in

the projected cash flows and store

location asset groupings, (ii) evaluating the reasonableness of management’s assumptions related to

contribution margin projections by considering current and historical performance

of the store location

asset groupings and whether the assumptions were consistent with evidence

obtained in other areas of the

audit, (iii) evaluating the appropriateness of the projected cash flow model,

and (iv) evaluating

management’s assessment of the fair value of the leased assets included in the store location asset

groupings.

/s/

PricewaterhouseCoopers LLP

Charlotte, North Carolina

March 3125, ~~2025~~2026

We have served as the Company’s

auditor since 2003.

4139

THE CATO CORPORATION

CONSOLIDATED STATEMENTS

OF INCOME (LOSS) AND

COMPREHENSIVE INCOME (LOSS)

Fiscal Year Ended

January 31, 2026

February 1, 2025

February 3, 2024

January 28, 2023

(Dollars in thousands, except per share data)

REVENUES

Retail sales

646,830

642,140

700,318

Other revenue (principally finance charges,

late fees and layaway charges)

$ 6,982

752,370

7,666

7,741

Total revenues

6653,~~890~~812

649,806

708,059

759,260

COSTS AND EXPENSES, NET

Cost of goods sold (exclusive of

depreciation shown below)

431,551

436,440

464,313

Selling, general and administrative (exclusive

of depreciation shown below)

~~509~~226,~~664~~347

231,430

252,742

Depreciation

~~242~~9,~~561~~986

9,817

9,871

Interest expense

~~11,080~~115

Interest and other income

87(6,687)

(11,827)

(5,101)

Costs and expenses, net

(5661,~~902)~~312

665,919

721,860

~~757,490~~Loss before income taxes

~~Income~~ (~~loss~~7,500) ~~before income taxes~~

(16,113)

(13,801)

~~1,770~~Income tax (benefit) expense

~~Income tax expense~~ (1,591)

1,944

10,140

~~1,741~~Net loss

Net income (loss)

(5,909)

(18,057)

(23,941)

Basic earnings (loss) per share

(0.31)

(0.97)

(1.17)

Diluted earnings (loss) per share

(0.31)

(0.97)

(1.17)

Dividends per share

0.51

0.68

Comprehensive income (loss):

Net loss

~~0.68~~(5,909)

Comprehensive income:

Net income (loss)

(18,057)

(23,941)

$Net unrealized gain (loss) on available-for-sale

securities for fiscal years 2025, 2024,

and 2023, respectively

29121

Unrealized gain (loss) on available-for-sale

, $

489

, and ($

287

) for fiscal 2024, 2023

(242)

1,633

(958)

Comprehensive loss

(5,788)

(18,299)

(22,308)

(929)

See notes to consolidated financial statements.

4240

THE CATO CORPORATION

CONSOLIDATED BALANCE SHEETS

January 31, 2026

February 1, 2025

~~February~~(Dollars 3in thousands, ~~2024~~except share and per share data)

(Dollars in thousands)

ASSETS

Current Assets:

Cash and cash equivalents

2016,~~279~~788

2320,~~940~~279

Short-term investments

56,859

57,423

79,012

Restricted cash

2,675

2,799

3,973

Accounts receivable, net of allowance for customer credit losses of $

682

January 31, 2026 and $

581

at February 1, 2025

~~705~~25,462

24,540

Merchandise inventories

2983,~~751~~696

110,739

98,603

Prepaid expenses and other current assets

7,787

7,406

Total Current Assets

7193,~~783~~267

223,186

Property and equipment – net

~~243~~53,~~062~~748

60,326

Other assets

6420,~~022~~471

19,979

25,047

Right-of-Use assets - net

153,933

148,870

Total Assets

154,686

~~452~~421,~~361~~419

~~486~~452,~~817~~361

LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:

Accounts payable

8864,~~641~~958

8788,~~821~~641

Accrued expenses

37,101

41,717

Accrued bonus and benefits

37,404

326

~~1,675~~326

Current lease liability

53,507

57,555

Total Current Liabilities

61155,~~108~~892

188,239

188,008

Other noncurrent liabilities

11,272

13,485

14,475

Lease liability

96,941

88,341

92,013

Commitments and contingencies

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;

17,976,854

and

18,313,929

shares issued at

January 31, 2026 and February 1, 2025, respectively

~~18,802,742~~608

619

635

Convertible Class B common stock, $

0.033

par value per share,

15,000,000

shares authorized;

1,763,652

shares issued at

January 31, 2026 and February 1, 2025

Additional paid-in capital

131,347

129,530

Retained earnings

~~126~~25,~~953~~026

31,935

Accumulated other comprehensive income

~~64,279~~274

153

Total Stockholders' Equity

~~395~~157,314

162,296

Total Liabilities and Stockholders’ Equity

192,321

~~452~~421,~~361~~419

~~486~~452,~~817~~361

See notes to consolidated financial statements.

4341

THE CATO CORPORATION

CONSOLIDATED STATEMENTS

OF CASH FLOWS

Fiscal Year Ended

January 31, 2026

February 1, 2025

February 3, 2024

January 28, 2023

(Dollars in thousands)

Operating Activities:

Net ~~income (~~loss)

(5,909)

(18,057)

(23,941)

$Adjustments to reconcile net loss to net cash (used in) provided

by operating activities:

Depreciation

299,986

Adjustments to reconcile net income (loss) to net cash (used in) provided

9,817

9,871

Provision for customer credit losses

~~11,080~~856

654

554

Purchase premium and premium amortization of investments

~~280~~(908)

(1,131)

(711)

(Gain) Loss on sale of assets held for investment

~~537~~(37)

(5,343)

Share based compensation

-1,672

2,283

4,170

Deferred income taxes

2,606

8,724

(Gain) loss on disposal of property and equipment

~~386~~(668)

192

Impairment of assets

~~199~~202

786

1,811

Changes in operating assets and liabilities which provided

(used) cash:

Accounts receivable

~~884~~(1,412)

1,357

(608)

Merchandise inventories

2927,~~034~~043

(12,136)

13,453

Prepaid and other assets

12(1,~~851~~237)

(212)

(216)

Operating lease right-of-use assets and liabilities

~~1,543~~(511)

(1,410)

(2,056)

Accrued income taxes

(2,573)

(613)

Accounts payable, accrued expenses and other liabilities

(~~307~~30,538)

3,455

(10,053)

(43,179)

Net cash (used in) provided by operating activities

(1,461)

(19,745)

477

13,370

Investing Activities:

Expenditures for property and equipment

(3,763)

(7,872)

(12,532)

(19,433)

Purchase of short-term investments

(25,446)

(39,612)

(48,055)

(54,734)

Sales of short-term investments

27,039

62,782

80,371

90,190

Sales of other assets

867

13,667

(8)

-Net cash (used in) provided by investing activities

~~Net cash provided by investing activities~~ (1,303)

28,965

19,776

16,023

Financing Activities:

Dividends paid

(10,516)

(13,954)

(14,369)

Repurchase of common stock

(995)

(3,877)

(2,562)

(15,216)

Proceeds from employee stock purchase plan

144

338

384

307

Net cash used in financing activities

(851)

(14,055)

(16,132)

(29,278)

Net (decrease) increase in cash, cash equivalents, and restricted cash

(3,615)

(4,835)

4,121

115

Cash, cash equivalents, and restricted cash at beginning of period

23,078

27,913

23,792

Cash, cash equivalents, and restricted cash at end of period

23,677

19,463

23,078

27,913

23,792

Non-cash activity:

Accrued property and equipment expenditures

337

329

942

685

Accrued treasury stock

Life insurance receivable

372

See notes to consolidated financial statements.

4442

THE CATO CORPORATION

CONSOLIDATED STATEMENTS

OF STOCKHOLDERS' EQUITY

Accumulated

Additional

Other

Total

Common

Paid-In

Retained

Comprehensive

Stockholders'

Stock

Capital

Earnings

Income

Equity

(Dollars in thousands, except per share data)

Balance — January 29, 2022

728

119,540

134,208

(280)

254,196

Comprehensive income:

287

(958)

Dividends paid ($

0.68

(14,369)

360

Share-based compensation expense

2,531

2,552

Repurchase and retirement of treasury shares

(41)

(15,176)

(15,217)

Balance — January 28, 2023

691

122,431

104,709

(1,238)

226,593

Comprehensive income:

Net loss

(23,941)

Unrealized gain on available-for-sale securities, net of

deferred income tax expense of $

489

1,633

Dividends paid ($

0.68

per share)

(13,954)

Class A common stock sold through employee stock purchase

plan

445

447

Share-based compensation expense

4,077

4,105

Repurchase and retirement of treasury shares

(9)

(2,553)

(2,562)

Balance — February 3, 2024

694

126,953

64,279

395

192,321

Comprehensive income:

Net loss

(18,057)

Unrealized loss on available-for-sale securities, net of

deferred income tax of $

(242)

Dividends paid ($

0.51

per share)

(10,516)

Class A common stock sold through employee stock purchase

plan

395

397

Share-based compensation expense

2,182

2,270

Repurchase and retirement of treasury shares

(30)

(3,847)

(3,877)

Balance — February 1, 2025

678

129,530

31,935

153

162,296

Comprehensive income:

Net loss

(5,909)

Unrealized gain on available-for-sale securities, net of

deferred income tax of $

121

Class A common stock sold through employee stock purchase

plan

168

170

Share-based compensation expense

(2)

1,649

1,647

Repurchase and retirement of treasury shares

(11)

(984)

(995)

Other

(16)

Balance — January 31, 2026

667

131,347

25,026

274

157,314

See notes to consolidated financial statements.

THE CATO CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

4543

Summary of Significant Accounting Policies:

Principles of Consolidation:

The Consolidated Financial Statements include the accounts of The Cato

Corporation and

its

wholly-owned subsidiaries

(the “Company”).

All

significant intercompany

accounts

and transactions have been eliminated.

Description

Business

and

Fiscal

Year:

The

Company

has

two

reportable

segments

—

the

operation

fashion

specialty

stores

segment

(“Retail

Segment”)

and

credit

card

segment

(“Credit

Segment”). The

fashion specialty

stores operate

under the

names “Cato,”

“Cato Fashions,”

“Cato Plus,”

“It’s Fashion,” “It’s

Fashion Metro,” “Versona

”

and “Cache,” including e-commerce websites. The stores

are

located

primarily

strip

shopping

centers

principally

the

southeastern

United

States.

The

Company’s fiscal

year ends

on the

Saturday nearest January

31 of

the subsequent

year.

Fiscal year

2025

~~Company’s~~and ~~fiscal year ends on the Saturday nearest January 31 of the subsequent year. Fiscal year~~ 2024 isare

-week ~~year,~~years and 2023 is a

-week year and 2022 is a

-week year.

Use

Estimates:

The

preparation

the

Company’s

financial

statements

conformity

with

accounting

principles

generally accepted

the

United

States

(“GAAP”)

requires

management to

make

estimates

and

assumptions

that

affect

the

reported

amounts

assets

and

liabilities

and

disclosure

contingent

assets

and

liabilities

the

date

the

financial

statements

and

the

reported

amounts

revenues

and

expenses

during

the

reporting

period.

Actual

results

could

differ

from

those

estimates.

Significant accounting

estimates reflected

in the

Company’s

financial statements

include the

calculation

potential

asset

impairment,

income

tax

valuation

allowances,

reserves

relating

self-insured

health

insurance,

workers’

compensation,

general

and

auto

insurance

liabilities,

uncertain

tax

positions,

the

allowance for customer credit losses, and inventory shrinkage.

Cash

and

Cash

Equivalents:

Cash

and

cash

equivalents

consist

highly

liquid

investments

with

original maturities of three months or less.

Short-Term

Investments:

Investments with

original maturities

beyond three

months are

classified

as short-term

investments. See

Note 3

for the

Company’s

estimated fair

value of,

and other

information

regarding,

its

short-term

investments.

The

Company’s

short-term

investments

are

all

classified

available-for-sale.

they

are

available

for

current

operations,

they

are

classified

the

Consolidated

Balance Sheets

Current Assets.

Available-for-sale

securities are

carried at

fair value,

with

unrealized

gains

and

temporary

losses,

net

income

taxes,

reported

component

Accumulated

other

comprehensive income.

Other than

temporary declines

in the

fair value

of investments

are recorded

as a

reduction

the

cost

the

investments

the

accompanying

Consolidated

Balance

Sheets

and

reduction

Interest and

other

income in

the

accompanying Consolidated

Statements of

Income (Loss)

and Comprehensive

Income (Loss).

The cost

of debt

securities is

adjusted for

amortization of

premiums

and accretion of discounts to maturity.

The amortization of premiums, accretion of discounts

and realized

gains and losses are included in Interest and other income.

Restricted Cash:

The Company had $

2.7

million and $

2.8

million in escrow at January 31, 2026 and

February 1, 2025, respectively, as security and collateral for administration of the Company’s

self-insured

workers’

compensation

and

general

liability

coverage,

which

reported

Restricted

cash

the

4.0

Consolidated Balance Sheets.

Supplemental Cash Flow

Information:

Income tax

payments, net

of refunds

received, for

the fiscal

years ended January 31, 2026, February 1, 2025, and February

3, 2024 are detailed in the table below:

~~1,874,000~~THE CATO CORPORATION

,NOTES aTO CONSOLIDATED FINANCIAL STATEMENTS

~~payment of $~~44

~~4,121,000~~`

Fiscal Year

Ended

29January 31,~~206,000~~ 2026

February 1, ~~respectively.~~2025

February 3, 2024

(Dollars in thousands)

Federal taxes

(314)

(860)

(1)

State taxes

Kentucky

North Carolina

(174)

174

462

South Carolina

116

366

207

Tennessee

160

209

Texas

268

260

261

Other

230

Foreign taxes

Hong Kong

709

1,529

2,816

Other

Total

income taxes paid

918

1,874

4,120

Inventories:

Merchandise

inventories

are

stated

the

net

realizable

value

determined

the

weighted-average cost method.

THE CATO CORPORATION

Property and Equipment:

Property and equipment are

recorded at cost, including

land. Maintenance

and repairs are expensed to operations as incurred; renewals and betterments are capitalized. Depreciation

determined on

the

straight-line method

over the

estimated useful

lives of

the

related assets

excluding

leasehold improvements.

Leasehold improvements are amortized over the

shorter of the estimated useful

life or lease term.

For leases with renewal periods at

the Company’s

option, the Company generally uses

the

original

lease

term

plus

reasonably

assured

renewal

option

periods

(generally

one

five-year

option

period) to determine estimated useful lives.

Typical estimated useful lives are as follows:

Estimated

Classification

Useful Lives

Land improvements

years

Buildings

years

Leasehold improvements

years

Fixtures and equipment

years

Information technology equipment and software

years

Impairment

Long-Lived

Assets:

The

Company

invests

leaseholds,

right-of-use

assets

and

equipment primarily

in connection

with the

opening and

remodeling of

stores and

in computer

software

Aircraft

and hardware. The Company periodically reviews its store locations and estimates the recoverability of its

long-lived assets,

which primarily

relate to

Fixtures and

equipment, Leasehold

improvements, Right-of-

use

assets

net

Lease

liabilities

and

Information

technology

equipment

and

software.

impairment

charge is

recorded for the

amount by which

the carrying value

exceeds the estimated

fair value when

the

Company determines

that undiscounted

projected cash

flows associated

with those long-lived

assets will

not

sufficient

recover

the

carrying

value.

This

determination

based

number

factors,

including

each

store’s

historical

operating

results

and

future

projected

cash

flows,

which

include

contribution margin projections. The Company assesses the fair value of each lease by considering market

rents

and

any

lease

terms

that

may adjust

market

rents

under

certain

conditions, such

the

loss

anchor tenant

or a

leased space

in a

shopping center not

meeting certain

criteria. Further,

in determining

when

store,

the

Company

considers

real

estate

development

the

area

and

perceived

local

market

conditions,

which

can

difficult

predict

and

may

subject

change.

Asset

impairment

charges of

202,000

, $

786,000

and $

1,811,000

were incurred in

fiscal 2025, fiscal

2024 and fiscal

2023,

~~884,000~~respectively.

Other Assets:

Other assets are comprised

of long-term assets,

primarily insurance contracts related to

deferred compensation assets and land held for investment purposes.

THE CATO CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

— (Continued)

Balance as of

January 31, 2026

February 1, 2025

February 3, 2024

(Dollars in thousands)

Other Assets

Deferred Compensation Investments

9,~~301~~693

89,~~586~~301

Land Held for Investment

8,679

98,~~334~~679

Miscellaneous Investments

1,139

21,~~076~~139

Other Deposits

-696

4,183

596

Other

604

264

Total

Other Assets

1920,~~979~~471

2519,~~047~~979

Leases:

The

Company

leases

all

its

retail

stores.

Most

lease

agreements

contain

construction

allowances and rent escalations.

For purposes of recognizing incentives and minimum rental expenses on

a straight-line basis over the terms of the leases, including renewal periods considered reasonably

assured,

the Company begins amortization as of the

initial possession date, which is when the

Company enters the

THE CATO CORPORATION

space and begins to make improvements in preparation for intended use.

Revenue

Recognition:

The

Company

recognizes

sales

the

point

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

the

merchandise.

E-commerce sales

are

recorded

when

the

risk

loss

transferred

the

customer.

Gift

cards

are

recorded

deferred

revenue

until

they

are

redeemed

forfeited. Gift

cards do

not have

expiration dates.

Layaway sales

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.

In addition, a provision is made for estimated rewards cards issued to

customers based

on their

purchases with the

Company’s propriety

credit card.

The rewards

cards issued

by the Company have a

-day expiration.

Amounts related to shipping and handling billed to

customers

sales

transaction

are

classified

Other

revenue

and

the

costs

shipping

product

customers (billed and accrued) are classified as Cost of goods sold.

In accordance with ASU 2014-09,

Revenue from Contracts with Customers (Topic

606)

(“Topic 606”),

fiscal

2025,

2024

and

2023,

the

Company

recognized

1,~~447~~034,~~934~~000

1,448,000

and

1,116,000

256,000

respectively,

income

unredeemed

gift

cards

(“gift

card

breakage”)

component

Other

Revenue

the

Consolidated

Statements

Income (Loss)

and

Comprehensive Income

(Loss).

Under

Topic

606, the

Company recognizes

gift card

breakage using

an expected

breakage percentage

based on

historical redeemed gift cards. See Note 2 for further information on miscellaneous

income.

The Company

offers

its own

proprietary credit

card to

customers. All

credit activity

is performed

the

Company’s

wholly-owned

subsidiaries.

None

the

credit

card

receivables

are

secured.

The

Company

estimated

customer

credit

losses

856,000

and

654,000

for

the

twelve

months

ended

January 31, 2026 and February 1, 2025,

respectively, on sales purchased using the Company’s

proprietary

credit

card

~~578,000~~21.4

million

and

21.8

million

for

the

twelve

months

ended

January

31,

2026

and

23February 1, 2025, respectively.5

The following table provides information about receivables

and contract liabilities from contracts with

February 3, 2024, respectively.

customers (in thousands):

THE CATO CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

— (Continued)

Balance as of

January 31, 2026

February 1, 2025

February 3, 2024

Proprietary Credit Card Receivables, net

10,~~848~~711

10,~~909~~848

Gift Card Liability

7,~~541~~475

87,~~143~~541

Cost of Goods Sold:

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

inventory

costs.

Buying

and

distribution

costs

include

payroll,

payroll-related

costs

and

operating

expenses

for

the

Company’s

buying

departments

and

distribution

center.

Occupancy expenses include rent, real

estate taxes, insurance, common area

maintenance, utilities

and

maintenance

for

stores

and

distribution

facilities.

Buying,

distribution,

occupancy

and

internal

transfer

costs

are

treated

period

costs

and

are

not

capitalized

part

inventory.

The

direct

costs

associated with shipping goods to customers are recorded as a component

of Cost of goods sold.

THE CATO CORPORATION

Advertising:

Advertising

costs

are

expensed

the

period

which

they

are

incurred.

Advertising

expense was approximately $

4,~~686~~908,000

, $

4,686,000

and $

6,277,000

for the fiscal years ended January 31,

62026,~~868~~ February 1,~~000~~ 2025 and February 3, 2024, respectively.

Stock Repurchase Program:

For the fiscal year ended January

31, 2026, the Company had

~~2025~~680, ~~February 3, 2024 and January 28, 2023, respectively.~~740

remaining

open

authorizations.

There

specified

expiration

date

for

the

Company’s

repurchase program. Share repurchases are recorded in Retained

earnings, net of par value.

Earnings (Loss) Per

ASC 260

–

Earnings Per

requires dual

presentation of basic

EPS

and diluted 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

the

accompanying 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

EPS

computation is

the

same for

Class

A and

Class B

shares and

the

EPS

amounts reported

herein are

997,455

264,282

828,181

1,000,000

December 23, 2024.

applicable to both Class A and Class B shares.

Basic

EPS

computed

net

earnings

(loss)

less

earnings

allocated

non-vested

equity

awards

divided

the

weighted

average

number

common

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.

The following

table reflects

the basic

and diluted

EPS calculations

for the

fiscal years

ended January

131, ~~2025~~2026, February 31, ~~2024~~2025 and ~~January~~February 283, ~~2023~~2024:

THE CATO CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

— (Continued)

Fiscal Year Ended

January 31, 2026

February 1, 2025

February 3, 2024

January 28, 2023

Numerator

(Dollars in thousands)

Net earnings (loss)

(5,909)

(18,057)

(23,941)

(Earnings) loss allocated to non-vested equity awards

(548)

1,347

Net earnings (loss) available to common stockholders

(5,909)

(18,605)

(22,594)

Denominator

Basic weighted average common shares outstanding

18,786,674

19,249,081

19,389,907

19,930,960

Diluted weighted average common shares outstanding

18,786,674

19,249,081

19,389,907

19,930,960

Net income (loss) per common share

Basic earnings (loss) per share

(0.31)

(0.97)

(1.17)

Diluted earnings (loss) per share

(0.31)

(0.97)

(1.17)

Unvested

restricted

stock

excluded

from

the

calculation

diluted

EPS

for

the

fiscal

years

ended

January

31,

2026,

February

2025,

and

February

2024

were

$ 974,000

~~THE CATO CORPORATION~~1,200,000

and

491,100,000

respectively,

because

the

effect

including

them

the

calculation

diluted

EPS

would

have

been

antidilutive.

ndor

Allowances:

The

Company

receives

certain

allowances

from

vendors

primarily

purchase discounts and markdown and

damage allowances. All allowances are

reflected in Cost of

goods

sold

earned

when

the

products

are

sold.

Cash

consideration

received

from

vendor

presumed

reduction

the

purchase

cost

merchandise

and

reflected

reduction

inventory.

The Company does not receive cooperative advertising allowances.

Income

Taxes:

The

Company

files

consolidated

federal

income

tax

return.

Income

taxes

are

provided

based

the

asset

and

liability

method

accounting,

whereby

deferred

income

taxes

are

provided

for

temporary

differences

between

the

financial

reporting

basis

and

the

tax

basis

the

Company’s assets and liabilities.

Unrecognized tax

benefits for

uncertain tax

positions are

established

accordance

with

ASC 740

–

Income

Taxes

(“ASC

740”)

when,

despite

the

fact

that

the

tax

return

positions

are

supportable,

the

Company believes these positions may be challenged and

the results are uncertain.

The Company adjusts

these

liabilities

light

changing

facts

and

circumstances.

Potential

accrued

interest

and

penalties

unrecognized tax

benefits

within operations

are

recognized as

a component

Income before

income taxes.

The Tax

Cuts and Jobs

Act implemented a

new minimum tax

on global intangible

low-taxed income

(“GILTI”). The Company has elected to account for GILTI

tax in the period in which it is incurred, which

~~Income~~is ~~Taxes~~included as a component of its current year provision for income taxes.

Deferred

Tax

Valuation

Allowance:

The

Company assesses

the

likelihood

that

deferred

tax

assets

will

realized

light

the

Company’s

current

financial

performance

and

projected

future

financial

performance. Based on this

assessment, the Company then

determines if a valuation

allowance should be

recorded.

If the

Company concludes that

it is

more likely than

not that

the Company will

not be

able to

realize its tax deferred assets, a valuation allowance is recorded for

the proportion of the deferred tax asset

it determines may not be realized.

Store

Opening

Costs:

Costs

relating

the

opening

new

stores

the

relocating

expanding

existing

stores

are

expensed

incurred.

portion

construction,

design,

and

site

selection costs are capitalized to new, relocated and remodeled stores.

THE CATO CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

— (Continued)

Insurance:

The Company is self-insured with respect to employee health care, workers’ compensation

and

general

liability.

The

Company’s

self-insurance

liabilities

are

based

the

total

estimated

cost

claims filed and estimates of

claims incurred but not reported, less

amounts paid against such claims,

and

are

not discounted.

Management reviews

current and

historical claims

data in

developing its

estimates.

The Company has stop-loss

insurance coverage for individual claims in

excess of $

375,000

for employee

healthcare, $

350,000

for workers’ compensation and $

250,000

for general liability.

Fair Value

of Financial Instruments:

The Company’s

carrying values of

financial instruments, such

cash

and

cash

equivalents,

short-term

investments,

and

restricted

cash,

approximate their

fair

values

due to their short terms to maturity and/or their variable interest rates.

Stock Based

Compensation:

The Company records

compensation expense associated

with restricted

stock

and

other

forms

equity

compensation

accordance

with

ASC

718

Compensation

–

Stock

Compensation.

Compensation

cost

associated

with

stock

awards

recognized

all

years

presented

includes: 1) amortization related to

the remaining unvested portion of

all stock awards based

on the grant

date fair value and 2) adjustments for the effects of actual forfeitures versus initial

estimated forfeitures.

Recently Adopted

Accounting Pronouncements:

In December

2023, the

FASB

issued ASU

2023-

09,

“Income

Taxes

(Topic

740):

Improvements

Income

Tax

Disclosures,”

which

modifies

the

requirements

income

tax

disclosures

require

disaggregated

information

about

reporting

entity’s

effective tax

rate reconciliation, as

well as information

on income taxes

paid.

The Company adopted

the

standard

retrospective basis

effective

for

its

annual

period

ended January

31,

2026.

See

Note 12,

~~establish an asset-based revolving credit facility (the~~ “~~ABL~~Income ~~Facility~~Taxes.”) ~~in an amount up to $~~

THE CATO CORPORATION

the time of its termination on March 13, 2025.

a maximum principal amount of $

10.0

% of the lesser

of the borrowing base described below and $

described below. The ABL Facility includes a $

Facility at closing of the ABL Credit Agreement was $

●

% of net recovery percentage of eligible inventory multiplied by most recent appraised value of

market value (net of intercompany profits and certain other adjustments), minus

●

federal funds rate plus

1/2%

%) and

150

37.5

THE CATO CORPORATION

15.0

and in the case of when Excess Availability falls below the threshold described in the first sentence of this

paragraph, when Excess Availability exceeds such threshold for a period of

●

incur additional indebtedness;

●

create liens on its assets;

●

make acquisitions; and

●

additional information related to segment expenses.

Recently Issued Accounting Pronouncements:

In November 2024, the FASB

issued ASU 2024-03,

“Income Statement – Reporting Comprehensive Income –

Expense Disaggregation Disclosures (Subtopic

~~THE~~220-40): ~~CATO~~Disaggregation ~~CORPORATION~~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

52on its consolidated financial statements and related disclosures.

The

Company has

reviewed

all

other

recently

issued

accounting

pronouncements and

believes

none

~~guidance~~will ishave ~~effective~~a ~~for~~material ~~annual~~impact ~~periods~~on ~~beginning~~the ~~after~~Company’s ~~December~~financial ~~15, 2026 and for interim periods within~~ statements.

Interest and Other Income:

financial statements and related disclosures.

The components of Interest and other income are shown below (in thousands):

Fiscal Year Ended

January 31, 2026

February 1, 2025

February 3, 2024

January 28, 2023

Dividend income

(57)

(75)

(78)

(47)

Interest income

(4,002)

(5,019)

(3,919)

(1,876)

State recovery grant

(1,431)

Insurance proceeds

(1,683)

Miscellaneous income

(1,779)

(1,389)

(1,079)

~~(896)~~Net gain on investment sales

~~Net loss~~ (~~gain~~849) ~~on investment sales~~

(5,344)

(25)

Interest and other income

(6,687)

(11,827)

(5,101)

During fiscal

2024, the

Company received

$ 8.6

million from

the insurance

claim settlement

and sale

of its corporate jet, which had sustained damage in fiscal 2023.

The Company recorded a net gain of $

~~(5,902)~~3.2

million which

is included

in Interest

and other

income in

the accompanying

Consolidated Statements

Income (Loss) and Comprehensive Income (Loss) for the year ended February

1, 2025.

~~1.4~~THE CATO CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

— (Continued)

$49

Short-Term Investments:

January

31,

2026,

the

Company’s

investment

portfolio

was

primarily

invested

corporate

and

governmental debt

securities held

in managed

accounts.

These securities

are classified

as available-for-

1.7

in 2021 and 2020.

sale as they are highly liquid and are recorded on the Consolidated Balance Sheets at estimated fair value,

with

unrealized

gains

and

temporary

losses

reported

net

taxes

Accumulated

other

comprehensive

income.

The

table

below

reflects

gross

accumulated

unrealized

gains

(losses)

short-term

investments

~~February~~January 131, ~~2025~~2026 and February 31, ~~2024~~2025 (in thousands):

January 31, 2026

February 1, 2025

February 3, 2024

Debt securities

issued by the U.S.

Government, its various

States, municipalities

Corporate

States, municipalities

Corporate

and agencies

debt

and agencies

debt

of each

securities

Total

of each

securities

Total

Cost basis

52,~~878~~037

5154,~~392~~548

5756,~~270~~585

305,~~989~~878

4851,~~320~~392

7957,~~309~~270

Unrealized gains

274

163

Unrealized (loss)

(10)

(335)

(~~335~~10)

Estimated fair value

52,~~868~~037

5154,~~555~~822

5756,~~423~~859

305,~~654~~868

4851,~~358~~555

7957,~~012~~423

Accumulated

other

comprehensive

income

the

Consolidated

Balance

Sheets

reflects

the

accumulated

unrealized

gains

and

losses

short-term investments

addition

unrealized

gains

and

losses

from

equity

investments

and

restricted

cash

investments.

The

table

below

reflects

gross

accumulated unrealized

gains and

losses in

these investments

at January

31, 2026

and February

1, 2025

(in thousands):

THE CATO CORPORATION

January 31, 2026

February 1, 2025

February 3, 2024

Deferred

Unrealized

Deferred

Unrealized

Tax Benefit/

Net Gain/

Unrealized

Tax Benefit/

Net Gain/

Security Type

Gain/(Loss)

(Expense)

(Loss)

Gain/(Loss)

(Expense)

(Loss)

Short-Term Investments

~~153~~274

274

153

(297)

(229)

Equity Investments

811

(187)

624

Total

153

Total

274

153

~~514~~-

~~(119)~~153

395

THE CATO CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

— (Continued)

5450

Fair Value Measurements:

The following tables set forth information regarding the Company’s financial

assets that are measured

at fair value as of ~~February~~January 131, ~~2025~~2026 and February 31, ~~2024~~2025 (in thousands):

Prices in

Active

Significant

Markets for

Other

Significant

Identical

Observable

Unobservable

~~February~~January 131, ~~2025~~2026

Assets

Inputs

Description

Level 1

Level 2

Level 3

Assets:

Corporate Bonds

154,~~244~~822

U.S. Treasury/Agencies Notes and Bonds

512,~~326~~037

Cash Surrender Value of Life Insurance

49,~~624~~693

4,624

9,~~301~~693

9,301

229

Total Assets

66,~~724~~552

5756,~~423~~859

9,~~301~~693

Liabilities:

Deferred Compensation

(8,~~548~~383)

Total Liabilities

(8,~~548~~383)

Prices in

Active

Significant

Markets for

Other

Significant

Identical

Observable

Unobservable

February 31, ~~2024~~2025

Assets

Inputs

Description

Level 1

Level 2

Level 3

Assets:

State/Municipal Bonds

121,~~540~~244

Corporate Bonds

4551,~~400~~326

U.S. Treasury/Agencies Notes and Bonds

184,~~114~~624

Cash Surrender Value of Life Insurance

89,~~586~~301

Asset-backed Securities (ABS)

~~2,958~~229

1,084

Total Assets

8866,~~682~~724

~~1,084~~-

7957,~~012~~423

89,~~586~~301

Liabilities:

Deferred Compensation

(8,~~654~~548)

Total Liabilities

(8,~~654~~548)

The

Company’s

investment portfolio

at January

31, 2026

was primarily

invested in

corporate bonds

~~which~~and ~~range~~taxable ~~from~~governmental debt securities held in managed accounts with underlying ratings of A or better.

The

corporate

bonds

have

contractual

maturities

which

range

from

~~nine~~14 days

2.86 years

The

U.S.

~~. The U.S.~~ Treasury notes have a contractual ~~maturities~~maturity ~~which~~of ~~range~~

~~from~~15 days

13. ~~days~~

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

2.5 years

comprehensive income.

0.0

1.1

Consolidated Balance Sheets.

THE CATO CORPORATION

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

primarily

life

insurance

policies.

These

life

insurance

policies are valued based on the cash surrender value of the insurance contract, which is determined based

such

factors

the

fair

value

the

underlying

assets

and

discounted

cash

flow

and

are

therefore

classified

within

Level

the

valuation

hierarchy.

The

Level

liability

associated

with

the

life

insurance

policies

represents

deferred

compensation

obligation,

the

value

which

tracked

via

THE CATO CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

— (Continued)

underlying

insurance

funds’

net

asset

values,

recorded

Other

noncurrent

liabilities

the

Consolidated Balance Sheets. These

funds are designed

to mirror the

return of existing

mutual funds and

money market funds that are observable and actively traded.

THE CATO CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

— (Continued)

5652

The following tables summarize

the change in fair

value of the Company’s

financial assets and liabilities

measured using Level 3 inputs for the

years ended January 31, 2026 and

February 31, ~~2024~~2025

(in thousands):

Fair Value

Measurements Using

Significant Unobservable

Asset Inputs (Level 3)

Cash

Surrender Value

Beginning Balance at February 31, ~~2024~~2025

8,586

715

Ending Balance at February 1, 2025

9,301

Redemptions

(365)

Total gains or (losses)

Included in interest and other income (or

changes in net assets)

757

Ending Balance at January 31, 2026

9,693

Fair Value

Measurements Using

Significant Unobservable

Liability Inputs (Level 3)

Deferred

Compensation

Beginning Balance at February 31, ~~2024~~2025

(8,654)

1,175

(220)

(849)

Ending Balance at February 1, 2025

(8,548)

Redemptions

1,246

Additions

(206)

Total (gains) or losses

Included in interest and other income (or

changes in net assets)

(875)

Ending Balance at January 31, 2026

(8,383)

Fair Value

Measurements Using

Significant Unobservable

Asset Inputs (Level 3)

Cash

Surrender Value

Beginning Balance at ~~January~~February 283, ~~2023~~2024

9,274

(1,168)

480

Ending Balance at February 3, 2024

8,586

Total gains or (losses)

Included in interest and other income (or

changes in net assets)

715

Ending Balance at February 1, 2025

9,301

Fair Value

Measurements Using

Significant Unobservable

Liability Inputs (Level 3)

Deferred

Compensation

Beginning Balance at ~~January~~February 283, ~~2023~~2024

(8,903)

1,119

(292)

(578)

Ending Balance at February 3, 2024

(8,654)

Redemptions

1,175

Additions

(220)

Total (gains) or losses

Included in interest and other income (or

changes in net assets)

(849)

Ending Balance at February 1, 2025

(8,548)

THE CATO CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

— (Continued)

5753

Accounts Receivable:

Accounts receivable consist of the following (in thousands):

January 31, 2026

February 1, 2025

Customer accounts — principally deferred payment accounts

February 3, 2024

11,~~428~~393

11,~~614~~428

Income tax receivable

5,739

5,425

Miscellaneous receivables

65,~~285~~066

3,365

7,171

Bank card receivables

3,946

4,903

Total

526,~~386~~144

25,121

30,456

Less allowance for customer credit losses

682

581

Accounts receivable — net

705

2425,~~540~~462

2924,~~751~~540

Finance charge

and late

charge

revenue on

customer deferred

payment accounts

totaled $

2,~~696~~654,000

2,696,000

and $

2,640,000

for the fiscal

years ended January 31, 2026, February 1, 2025

and February 3,

2024,

respectively,

and

charges

against

the

allowance

for

customer

credit

losses

were

approximately

2,243,000

856,000

654,000

and

554,000

for

the

fiscal

years

ended

January

31,

2026,

February

2025

and

February

2024,

respectively.

Expenses

relating

the

allowance

for

customer

credit

losses

are

classified

component

Selling,

general

and

administrative

expense

the

accompanying

Consolidated Statements of Income (Loss) and Comprehensive Income

(Loss).

280,000

8.6

3.2

Property and Equipment:

Property and equipment consist of the following (in thousands):

January 31, 2026

February 1, 2025

Land and improvements

February 3, 2024

13,593

13,~~755~~593

Buildings

35,601

35,950

Leasehold improvements

3572,~~756~~407

72,608

Fixtures and equipment

74156,~~782~~916

161,950

155,357

Information technology equipment and software

35,659

33,751

Construction in progress

~~39,904~~179

928

Total

18314,~~034~~355

318,780

Less accumulated depreciation

~~337~~260,~~588~~607

258,454

Property and equipment — net

273,566

6053,~~326~~748

6460,~~022~~326

Construction in progress primarily represents costs related to new

store development,

distribution center improvements and investments in new technology.

Accrued Expenses:

Accrued expenses consist of the following (in thousands):

January 31, 2026

February 1, 2025

Accrued employment and related items

February 3, 2024

87,~~189~~456

48,~~736~~189

Property and other taxes

11,784

13,261

Accrued self-insurance

138,~~544~~592

8,593

Other

9,~~500~~269

~~Fixed assets~~ 11,674

Total

329

942

11,345

8,682

4137,~~717~~101

3741,~~404~~717

THE CATO CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

— (Continued)

5854

Financing Arrangements:

On March 13, 2025,

the Company,

as borrower,

and certain other domestic subsidiaries, as

borrowers

and

guarantors,

entered

into

Credit

Agreement

(the

“ABL

Credit

Agreement”)

and

loan

documents, by and among the Company, certain other of the Company’s

domestic subsidiaries, and Wells

Fargo

Bank,

National

Association,

the

lender

(the

“Lender”),

establish

asset-based

revolving

credit facility (the “ABL Facility”) in an amount up to $

35.0

million. The proceeds from the ABL Facility

may be used to provide funding for ongoing working capital and general

corporate purposes.

The ABL Credit

Agreement is committed

through

~~May~~March ~~2027~~2028

and is secured

primarily by inventory

and third-party

credit card

receivables. There

were

borrowings outstanding

and the

availability under

the

facility

was

35.0

30.0

million

before

giving

effect

~~additional information regarding the ABL Facility, see Note 1 to the Consolidated Financial Statements~~3.0

million

outstanding

letter

credit

that

reduced

borrowing availability

27.0

million as

of January

31,

2026.

The

weighted average

interest

rate under the credit facility was

zero

at January 31, 2026 due to

outstanding borrowings.

Stockholders’ Equity:

The

holders

Class A

Common

Stock

are

entitled

one vote per share

whereas

the

holders

Class B Common Stock are entitled

ten votes per share

. Each share of

Class B Common Stock may be

converted at any time into one share of Class A Common Stock. Subject to the rights of

the holders of any

shares of

Preferred Stock

that may

be outstanding

at the

time, in

the event

of liquidation,

dissolution or

winding

the

Company,

holders

Class A

Common

Stock

are

entitled

receive

preferential

distribution of $

1.00

per share of the

net assets of the Company.

Cash dividends on the

Class B Common

Stock cannot be

paid unless cash

dividends of at

least an equal

amount are paid

on the Class A

Common

Stock.

The

Company’s

certificate of

incorporation

provides that

Class B Common

Stock

may be

transferred

only

certain

“Permitted

Transferees”

consisting

generally

the

lineal

descendants

holders

Class B

Common

Stock,

trusts

for

their

benefit,

corporations

and

partnerships controlled

them and the

Company’s employee benefit

plans. Any transfer

of Class B Common Stock

in violation of

these

restrictions,

including

transfer

the

Company,

results

the

automatic

conversion

the

transferred

Class B

Common

Stock

held

the

transferee

into

equal

number

Class A Common Stock.

The changes

in the

number of

shares outstanding

for

the three

fiscal years

ended January

31, 2026,

February 1, 2025, and February 3, 2024 are presented below (in thousands):

Convertible

Class A

Class B

Common Stock

January 28, 2023

18,723

1,764

Repurchases

(288)

Share-based compensation

368

February 3, 2024

18,803

1,764

Repurchases

(912)

Share-based compensation

423

February 1, 2025

18,314

1,764

Repurchases

(317)

Share-based compensation

(20)

January 31, 2026

17,977

1,764

THE CATO CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

— (Continued)

10.

Employee Benefit Plans:

The

Company

has

defined

contribution

retirement

savings

plan

(“401(k)

plan”)

which

covers

all

associates

who

meet

minimum

age

and

service

requirements.

The 401(k) plan allows participants to

contribute up to 75% of their annual compensation up to the maximum elective deferral, designated by

the Internal Revenue Service.

The Company

is obligated

to make

a minimum

contribution to

cover plan

administrative expenses.

Further Company

contributions

are

at the

discretion of

the

Board of

Directors.

The Company

contributed $

~~THE CATO CORPORATION~~310,000

for the

year ended

January 31,

2026. The

Company’s

contributions

for

the

years

ended

February

2025

and

February

2024

were

approximately

590

and

1,099,000

~~1,184,000~~respectively.

, respectively.

The Company has a trusteed, non-contributory Employee Stock Ownership Plan (“ESOP”), which

covers substantially all associates who meet minimum age and service requirements.

The amount

of the

Company’s discretionary

contribution to the ESOP

is determined by the

Compensation Committee of the

Board of

Directors and

can be

made in

Company Class

A Common

stock or

cash. Due

to net

operating

losses in

fiscal 2025,

fiscal 2024,

and fiscal

2023, the

Committee did

not

approve a

contribution to

the

ESOP for the years ended January 31, 2026, February 1, 2025, and February

3, 2024.

The Company is primarily self-insured for healthcare.

These costs are significant primarily due to the

large

number of

the Company’s

retail locations

and associates.

The Company’s

self-insurance liabilities

are

based

on the

total

estimated costs

claims filed

and estimates

claims incurred

but not

reported,

less

amounts

paid

against

such

claims.

Management

reviews

current

and

historical

claims

data

developing its

estimates. If

the underlying

facts and

circumstances of

the claims

change or

the historical

trend is not indicative of future trends, then the Company may be required to record

additional expense or

reduction

expense

which

could

material

the

Company’s

reported

results

operations

the

period recorded. The Company funds healthcare contributions to a

third-party provider.

32,510

11.

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

one

year

10 years

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