Form 10-Q CATO CORP For: Aug 01
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E-mailUNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the quarterly period ended
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the transition period from ________________to__________________
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(Exact name of registrant as specified in its charter)
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(Address of principal executive offices)
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(Registrant's telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
X
No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted
pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit such files).
X
No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting
company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting
company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for
complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b -2 of the Exchange Act). Yes
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As of August 1, 2026, there were
1
THE CATO CORPORATION
FORM 10-Q
Quarter Ended August 1, 2026
Table of Contents
Page No.
PART I – FINANCIAL INFORMATION (UNAUDITED)
Item 1.
Financial Statements (Unaudited):
Condensed Consolidated Statements of Income and Comprehensive Income
2
For the Three Months and Six Months Ended August 1, 2026 and August 2, 2025
Condensed Consolidated Balance Sheets
3
At August 1, 2026 and January 31, 2026
Condensed Consolidated Statements of Cash Flows
4
For the Six Months Ended August 1, 2026 and August 2, 2025
Condensed Consolidated Statements of Stockholders’ Equity
5 – 6
For the Three Months and Six Months Ended August 1, 2026 and August 2, 2025
Notes to Condensed Consolidated Financial Statements
7 – 23
Item 2.
Management’s Discussion and Analysis of Financial Condition and
Results of Operations
24 – 30
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
31
Item 4.
Controls and Procedures
31
PART II – OTHER INFORMATION
Item 1.
Legal Proceedings
32
Item 1A.
Risk Factors
32
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
32
Item 3.
Defaults Upon Senior Securities
32
Item 4.
Mine Safety Disclosures
33
Item 5.
Other Information
33
Item 6.
Exhibits
33
Signatures
34
2
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
THE CATO CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND
COMPREHENSIVE INCOME
(UNAUDITED)
Three Months Ended
Six Months Ended
August 1, 2026
August 2, 2025
August 1, 2026
August 2, 2025
(Dollars in thousands, except per share data)
REVENUES
$
$
$
$
COSTS AND EXPENSES, NET
(2,268 )
(1,393 )
(3,501 )
(2,594 )
Income before income taxes
Income tax expense (benefit)
(293 )
Net income
$
$
$
$
Basic earnings per share
$
$
$
$
Diluted earnings per share
$
$
$
$
Comprehensive income:
Net income
$
$
$
$
Net unrealized gain (loss) on available-for-sale securities, net of
(231 )
(491 )
Comprehensive income
$
$
$
$
See notes to condensed consolidated financial statements (unaudited).
3
THE CATO CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
August 1, 2026
January 31, 2026
(Dollars in thousands, except per share data)
ASSETS
Current Assets:
Cash and cash equivalents
$
$
Short-term investments
Restricted cash
Accounts receivable, net of allowance for customer credit losses of
Merchandise inventories
Prepaid expenses and other current assets
Property and equipment – net
Other assets
Right-of-Use assets – net
$
$
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable
$
$
Accrued expenses
Accrued bonus and benefits
Accrued income taxes
Current lease liability
Other noncurrent liabilities
Lease liability
Commitments and contingencies (Note 10)
-
-
Stockholders' Equity:
Preferred stock, $
Class A common stock, $
Convertible Class B common stock, $
Additional paid-in capital
Retained earnings
Accumulated other comprehensive income (loss)
(217 )
$
$
See notes to condensed consolidated financial statements (unaudited).
4
THE CATO CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Six Months Ended
August 1, 2026
August 2, 2025
(Dollars in thousands)
Operating Activities:
Net income
$
$
Adjustments to reconcile net income to net cash provided by
(94 )
(464 )
(34 )
(13 )
(37 )
(2,054 )
(1,761 )
(1,756 )
(189 )
(357 )
(9,383 )
Net cash provided by operating activities
Investing Activities:
Expenditures for property and equipment
(2,410 )
(2,362 )
Purchase of short-term investments
(15,963 )
(12,906 )
Sales of short-term investments
Sales of other assets
Proceeds from life insurance policy
Net cash used in investing activities
(3,861 )
(885 )
Financing Activities:
Repurchase of common stock
(422 )
(995 )
Proceeds from employee stock purchase plan
Net cash used in financing activities
(349 )
(933 )
Net increase in cash, cash equivalents, and restricted cash
Cash, cash equivalents, and restricted cash at beginning of period
Cash, cash equivalents, and restricted cash at end of period
$
$
Non-cash activity:
Accrued other assets and property and equipment expenditures
$
$
See notes to condensed consolidated financial statements (unaudited).
5
THE CATO CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(UNAUDITED)
Accumulated
Additional
Other
Total
Common
Paid-in
Retained
Comprehensive
Stockholders'
Stock
Capital
Earnings
Income (Loss)
Equity
(Dollars in thousands, except per share data)
Balance — January 31, 2026
$
$
$
$
$
Comprehensive income:
(260 )
(260 )
Class A common stock sold through employee stock purchase plan
Share-based compensation issuances and exercises
(10 )
Share-based compensation expense
Repurchase and retirement of treasury shares
(4 )
(307 )
(311 )
Balance — May 2, 2026
$
$
$
$
$
Comprehensive income:
(231 )
(231 )
Share-based compensation issuances and exercises
(1 )
(1 )
Share-based compensation expense
Repurchase and retirement of treasury shares
(1 )
(111 )
(112 )
Balance — August 1, 2026
$
$
$
$
(217 )
$
See notes to condensed consolidated financial statements (unaudited).
6
THE CATO CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(UNAUDITED)
Accumulated
Additional
Other
Total
Common
Paid-in
Retained
Comprehensive
Stockholders'
Stock
Capital
Earnings
Income
Equity
(Dollars in thousands, except per share data)
Balance — February 1, 2025
$
$
$
$
$
Comprehensive income:
Class A common stock sold through employee stock purchase plan
Other
(73 )
(73 )
Share-based compensation issuances and exercises
(2 )
(2 )
Share-based compensation expense
Repurchase and retirement of treasury shares
(10 )
(897 )
(907 )
Balance — May 3, 2025
$
$
$
$
$
Comprehensive income:
Other
Share-based compensation expense
Repurchase and retirement of treasury shares
(60 )
(60 )
Balance — August 2, 2025
$
$
$
$
$
See notes to condensed consolidated financial statements (unaudited).
THE CATO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
7
NOTE 1 - GENERAL
:
The condensed consolidated financial statements as of August 1, 2026 and for the three and six months
ended August 1, 2026 and August 2, 2025 have been prepared from the accounting records of The Cato
Corporation and its wholly-owned subsidiaries (the “Company”), and all amounts shown are unaudited.
In the opinion of management, all adjustments considered necessary for a fair statement of the financial
statements have been included. All such adjustments are of a normal, recurring nature unless otherwise
noted. The results of the interim periods may not be indicative of the results expected for the entire year.
The interim financial statements should be read in conjunction with the consolidated financial statements
and notes thereto, included in the Company’s Annual Report on Form 10-K for the fiscal year ended
January 31, 2026. Amounts as of January 31, 2026 have been derived from the audited annual financial
statements, but do not include all disclosures required by accounting principles generally accepted in the
United States of America.
In February 2026, the U.S. Supreme Court issued a ruling that tariffs imposed under the International
Emergency Economic Powers Act (“IEEPA”) on goods imported into the United States were
unauthorized, effectively invalidating IEEPA tariffs. In April 2026, following the Supreme Court’s
invalidation of the IEEPA tariffs and the establishment of procedures for processing tariff refunds, the
Company submitted a refund claim and recorded a $
quarter of fiscal 2026. During the second quarter of fiscal 2026, the Company received full payment of its
tariff refund claim.
THE CATO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
8
NOTE 2 - EARNINGS PER SHARE:
Accounting Standard Codification (“ASC”) 260 –
Earnings Per Share
diluted Earnings Per Share (“EPS”) on the face of all income statements for all entities with complex capital
structures. The Company has presented one basic EPS and one diluted EPS amount for all common shares in
the accompanying Condensed Consolidated Statements of Income and Comprehensive Income. While the
Company’s certificate of incorporation provides the right for the Board of Directors to declare dividends on
Class A shares without declaration of commensurate dividends on Class B shares, the Company has
historically paid the same dividends to both Class A and Class B shareholders and the Board of Directors has
resolved to continue this practice. Accordingly, the Company’s allocation of income for purposes of the EPS
computation is the same for Class A and Class B shares and the EPS amounts reported herein are applicable
to both Class A and Class B shares.
Basic EPS is computed as net income less earnings allocated to non-vested equity awards divided by the
weighted average number of common shares outstanding for the period. Diluted EPS reflects the potential
dilution that could occur from common shares issuable through stock options and the Employee Stock
Purchase Plan.
Three Months Ended
Six Months Ended
August 1, 2026
August 2, 2025
August 1, 2026
August 2, 2025
(Dollars in thousands, except per share data)
Numerator
Net earnings
$
$
$
$
Earnings allocated to non-vested equity awards
(53 )
(319 )
(483 )
(531 )
Net earnings available to common stockholders
$
$
$
$
Denominator
Basic weighted average common shares outstanding
Diluted weighted average common shares outstanding
Net income per common share
Basic earnings per share
$
$
$
$
Diluted earnings per share
$
$
$
$
Unvested restricted stock excluded from the calculation of diluted EPS was
the three and six month periods ended August 1, 2026, respectively, and
three and six month periods ended August 2, 2025, respectively, because the effect of including them in the
calculation of diluted EPS would have been antidilutive.
THE CATO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
9
NOTE 3 – ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS):
The following table sets forth information regarding the changes in Accumulated other comprehensive
income (loss) (in thousands) for the three months ended August 1, 2026:
Changes in Accumulated Other
Comprehensive Income (Loss) (a)
Unrealized Gains
and (Losses) on
Available-for-Sale
Securities
Beginning Balance at May 2, 2026
$
(231 )
Net current-period other comprehensive loss
(231 )
Ending Balance at August 1, 2026
$
(217 )
(a) All amounts are net-of-tax. Amounts in parentheses indicate a debit/reduction to accumulated other comprehensive income.
The following table sets forth information regarding the changes in Accumulated other comprehensive
income (loss) (in thousands) for the six months ended August 1, 2026:
Changes in Accumulated Other
Comprehensive Income (Loss) (a)
Unrealized Gains
and (Losses) on
Available-for-Sale
Securities
Beginning Balance at January 31, 2026
$
(491 )
Net current-period other comprehensive loss
(491 )
Ending Balance at August 1, 2026
$
(217 )
(a) All amounts are net-of-tax. Amounts in parentheses indicate a debit/reduction to accumulated other comprehensive income.
THE CATO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
10
NOTE 3 – ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) (CONTINUED):
The following table sets forth information regarding the changes in Accumulated other comprehensive
income (in thousands) for the three months ended August 2, 2025:
Changes in Accumulated Other
Comprehensive Income (a)
Unrealized Gains
and (Losses) on
Available-for-Sale
Securities
Beginning Balance at May 3, 2025
$
Net current-period other comprehensive income
Ending Balance at August 2, 2025
$
(a) All amounts are net-of-tax.
The following table sets forth information regarding the changes in Accumulated other comprehensive
income (in thousands) for the six months ended August 2, 2025:
Changes in Accumulated Other
Comprehensive Income (a)
Unrealized Gains
and (Losses) on
Available-for-Sale
Securities
Beginning Balance at February 1, 2025
$
(34 )
Net current-period other comprehensive income
Ending Balance at August 2, 2025
$
(a) All amounts are net-of-tax. Amounts in parentheses indicate a debit/reduction to accumulated other comprehensive income.
(b) Includes $
available-for-sale securities. The tax impact of this reclassification was $
.
THE CATO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
11
NOTE 4 – FINANCING ARRANGEMENTS:
On March 13, 2025, the Company, as borrower, and certain other domestic subsidiaries, as borrowers and
guarantors, entered into a Credit Agreement (the “ABL Credit Agreement”) and related loan documents, by
and among the Company, certain other of the Company’s domestic subsidiaries, and Wells Fargo Bank,
National Association, as the lender (the “Lender”), to establish an asset-based revolving credit facility (the
“ABL Facility”) in an amount up to $
provide funding for ongoing working capital and general corporate purposes.
The ABL Credit Agreement is committed through
March 2028
third-party credit card receivables. There were
facility was $
borrowing availability to $
interest rate under the credit facility was
borrowings.
THE CATO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
12
NOTE 5 – REPORTABLE SEGMENT INFORMATION:
The Company has determined that it has
Segment
Reporting
segments: Retail and Credit. The Company has aggregated its
the e-commerce activities of each retail operating segment, based on the aggregation criteria outlined in ASC
280-10, which states that two or more operating segments may be aggregated into a single reportable segment
if aggregation is consistent with the objective and basic principles of ASC 280-10, which require the
segments to have similar economic characteristics, products, production processes, clients and methods of
distribution.
The Company’s retail operating segments have similar economic characteristics and similar operating,
financial and competitive risks. The products sold in each retail operating segment are similar in nature, as
they all offer women’s apparel, shoes and accessories. Merchandise inventory of the Company’s retail
operating segments is sourced from the same countries and some of the same vendors, using similar
production processes. Merchandise for the Company’s retail operating segments is distributed to retail stores
in a similar manner through the Company’s single distribution center and is subsequently distributed to
customers in a similar manner. The Company operates its women’s fashion specialty retail stores in
states as of August 1, 2026, principally in the southeastern United States.
The Company offers its own credit card to its customers and all credit authorizations, payment processing
and collection efforts are performed by a wholly-owned subsidiary of the Company. The Company does
not allocate certain corporate expenses to the Credit segment.
The Company’s President and Chief Executive Officer is the Company’s chief operating decision maker
(“CODM”). The structure described above reflects the manner in which the CODM regularly assesses
information for decision-making purposes, including the allocation of resources. The Company also
provides corporate services, including finance, information technology, and corporate administration, to
its segments which are fully allocated to the retail segment. Interest and other income from assets held for
investment and sale are not included in assessing the segments’ performance and, therefore, not allocated
to either segment.
The CODM manages and evaluates the segments’ operating performance based on segment sales,
expenses, and segment income before income taxes as presented in the Company’s annual budget and
forecasting process, as well as monthly analyses of budget-to-actual and prior year variances. Segment
expenses and other items primarily include cost of goods sold, selling, general and administrative
expenses, depreciation and interest and other income. Assessment and approval of all capital
expenditures are determined to be in support of and based on the needs of the retail segment; however, the
CODM does not evaluate performance or allocate resources based on segment asset balances and,
therefore, total segment assets are not presented in the tables below. The measure of segment assets is
reported on the balance sheet as total consolidated assets.
The accounting policies of the segments are the same as those described in the Summary of Significant
Accounting Policies in Note 1 of the consolidated financial statements included in the Company’s Annual
Report on Form 10-K for the fiscal year ended January 31, 2026.
THE CATO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
13
NOTE 5 – REPORTABLE SEGMENT INFORMATION (CONTINUED):
The following schedule summarizes certain segment information (in thousands):
Three Months Ended
August 1, 2026
Retail
Credit
Total
Revenues
$
$
$
Cost of goods sold (a)
Selling, general, and administrative (b)
Corporate overhead
Depreciation
Interest and other income, net
(88 )
(266 )
(354 )
Segment income (loss) before income taxes
$
(1,112 )
$
$
(618 )
Corporate interest and other income
(1,914 )
Income before income taxes
$
Capital expenditures
$
$
$
Six Months Ended
August 1, 2026
Retail
Credit
Total
Revenues
$
$
$
Cost of goods sold (a)
Selling, general, and administrative (b)
Corporate overhead
Depreciation
Interest and other income, net
(173 )
(538 )
(711 )
Segment income before income taxes
$
$
$
Corporate interest and other income
(2,790 )
Income before income taxes
$
Capital expenditures
$
$
$
(a) Cost of goods sold includes merchandise costs, net of discounts and allowances, buying costs, distribution
(b) Selling, general, and administrative expense include corporate and store payroll, related payroll taxes and
THE CATO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
14
NOTE 5 – REPORTABLE SEGMENT INFORMATION (CONTINUED):
Three Months Ended
August 2, 2025
Retail
Credit
Total
Revenues
$
$
$
Cost of goods sold (a)
Selling, general, and administrative (b)
Corporate overhead
Depreciation
Interest and other income, net
(89 )
(288 )
(377 )
Segment income before income taxes
$
$
$
Corporate interest and other income
(1,016 )
Income before income taxes
$
Capital expenditures
$
$
$
Six Months Ended
August 2, 2025
Retail
Credit
Total
Revenues
$
$
$
Cost of goods sold (a)
Selling, general, and administrative (b)
Corporate overhead
Depreciation
Interest and other income, net
(192 )
(592 )
(784 )
Segment income before income taxes
$
$
$
Corporate interest and other income
(1,810 )
Income before income taxes
$
Capital expenditures
$
$
$
(a) Cost of goods sold includes merchandise costs, net of discounts and allowances, buying costs, distribution
(b) Selling, general, and administrative expense include corporate and store payroll, related payroll taxes and
THE CATO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
15
NOTE 6 – STOCK-BASED COMPENSATION:
As of August 1, 2026, the Company’s 2018 Incentive Compensation Plan allows for the granting of various
forms of equity-based awards, including restricted stock and stock options for grant to officers, directors and
key employees.
The following table presents the number of options and shares of restricted stock initially authorized and
available for grant under this plan as of August 1, 2026:
2018
Plan
Options and/or restricted stock initially authorized
Options and/or restricted stock available for grant
In accordance with ASC 718 –
Compensation–Stock Compensation
, the fair value of current restricted
stock awards is estimated on the date of grant based on the market price of the Company’s stock and is
amortized to compensation expense on a straight-line basis over the related vesting periods. As of August
1, 2026 and January 31, 2026, there was $
, respectively, of total unrecognized
compensation expense related to unvested restricted stock awards, which had a remaining weighted-
average vesting period of
the three and six months ended August 1, 2026 was $
, respectively, compared to a
total compensation expense of $
2025, respectively. This compensation activity is classified as a component of Selling, general and
administrative expenses in the Condensed Consolidated Statements of Income.
The following summary shows the changes in the number of shares of unvested restricted stock outstanding
during the six months ended August 1, 2026:
Weighted Average
Number of
Grant Date Fair
Shares
Value Per Share
Restricted stock awards at January 31, 2026
$
Granted
Vested
(269,829 )
Forfeited or expired
(11,584 )
Restricted stock awards at August 1, 2026
$
THE CATO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
16
NOTE 6 – STOCK BASED-COMPENSATION (CONTINUED):
The Company’s Employee Stock Purchase Plan allows eligible full-time employees to purchase a limited
number of shares of the Company’s Class A Common Stock during each semi-annual offering period at a
% discount through payroll deductions. During the six months ended August 1, 2026 and August 2, 2025,
the Company sold
share, respectively, under the Employee Stock Purchase Plan. The compensation expense recognized for the
% discount given under the Employee Stock Purchase Plan was approximately $
the six months ended August 1, 2026 and August 2, 2025, respectively. These expenses are classified as a
component of Selling, general and administrative expenses in the Condensed Consolidated Statements of
Income.
NOTE 7 – FAIR VALUE MEASUREMENTS:
The following tables set forth information regarding the Company’s financial assets and liabilities that are
measured at fair value (in thousands) as of August 1, 2026 and January 31, 2026:
Quoted
Prices in
Active
Significant
Markets for
Other
Significant
Identical
Observable
Unobservable
August 1, 2026
Assets
Inputs
Inputs
Description
Level 1
Level 2
Level 3
Assets:
$
$
$
$
Total Assets
$
$
$
$
Liabilities:
$
(8,289 )
$
$
$
(8,289 )
Total Liabilities
$
(8,289 )
$
$
$
(8,289 )
THE CATO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
17
NOTE 7 – FAIR VALUE MEASUREMENTS (CONTINUED):
Quoted
Prices in
Active
Significant
Markets for
Other
Significant
Identical
Observable
Unobservable
January 31, 2026
Assets
Inputs
Inputs
Description
Level 1
Level 2
Level 3
Assets:
Total Assets
$
$
$
$
Liabilities:
$
(8,383 )
$
$
$
(8,383 )
Total Liabilities
$
(8,383 )
$
$
$
(8,383 )
The Company’s investment portfolio was primarily invested in corporate bonds held in managed accounts
with underlying ratings of A or better at August 1, 2026. The corporate bonds have contractual maturities
which range from
Additionally, at August 1, 2026, the Company had deferred compensation plan assets of $
January 31, 2026, the Company had deferred compensation plan assets of $
recorded within Other assets in the Condensed Consolidated Balance Sheets.
Level 2 investment securities at August 1, 2026 include corporate bonds for which quoted prices may not be
available on active exchanges for identical instruments. Their fair value is principally based on market values
determined by management with the assistance of a third-party pricing service. Since quoted prices in active
markets for identical assets are not available, these prices are determined by the pricing service using
observable market information such as quotes from less active markets and/or quoted prices of securities with
similar characteristics, among other factors.
Deferred compensation plan assets consist of life insurance policies. These life insurance policies are valued
based on the cash surrender value of the insurance contract, which is determined based on such factors as the
fair value of the underlying assets and discounted cash flow and are therefore classified within Level 3 of the
valuation hierarchy. The Level 3 liability associated with the life insurance policies represents a deferred
compensation obligation, the value of which is tracked via underlying insurance funds’ net asset values, as
recorded in Other noncurrent liabilities in the Condensed Consolidated Balance Sheets. These funds are
designed to mirror mutual funds and money market funds that are observable and actively traded.
The following tables summarize the change in fair value of the Company’s financial assets and liabilities
measured using Level 3 inputs for the six months ended August 1, 2026 and the year ended January 31, 2026
(in thousands):
THE CATO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
18
NOTE 7 – FAIR VALUE MEASUREMENTS (CONTINUED):
Fair Value
Measurements Using
Significant Unobservable
Asset Inputs (Level 3)
Cash Surrender Value
Beginning Balance at January 31, 2026
$
Redemptions
Additions
Total gains or (losses):
changes in net assets)
Ending Balance at August 1, 2026
$
Fair Value
Measurements Using
Significant Unobservable
Liability Inputs (Level 3)
Deferred Compensation
Beginning Balance at January 31, 2026
$
(8,383 )
(111 )
changes in net assets)
(343 )
Ending Balance at August 1, 2026
$
(8,289 )
THE CATO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
19
NOTE 7 – FAIR VALUE MEASUREMENTS (CONTINUED):
Fair Value
Measurements Using
Significant Unobservable
Asset Inputs (Level 3)
Cash Surrender Value
Beginning Balance at February 1, 2025
$
Redemptions
(365 )
Additions
Total gains or (losses):
changes in net assets)
Ending Balance at January 31, 2026
$
Fair Value
Measurements Using
Significant Unobservable
Liability Inputs (Level 3)
Deferred Compensation
Beginning Balance at February 1, 2025
$
(8,548 )
(206 )
changes in net assets)
(875 )
Ending Balance at January 31, 2026
$
(8,383 )
THE CATO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
20
NOTE 8 – RECENT ACCOUNTING PRONOUNCEMENTS:
In September 2025, the FASB issued ASU 2025-06,
Intangibles – Goodwill and Other – Internal-Use
Software (Subtopic 350-40) – Targeted Improvements to the Accounting for Internal-Use Software
(ASU
2025-06). The FASB issued ASU 2025-06 to modernize the accounting for costs related to internal-use
software to better align with how software is developed and to clarify the threshold to be applied to begin
capitalizing costs. ASU 2025-06 is effective for our annual and quarterly reporting periods beginning
January 30, 2028. Early adoption is permitted. The Company is currently assessing the impact that the
adoption of ASU 2025-06 will have on our consolidated financial statements.
In November 2024, the FASB issued ASU 2024-03,
Income Statement – Reporting Comprehensive
Income – Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement
Expenses
, which requires public entities to disclose, on an annual and interim basis, disaggregated
information in the footnotes about specified information related to certain costs and expenses. This
guidance is effective for annual periods beginning after December 15, 2026, and interim periods
beginning after December 15, 2027, with early adoption permitted. The Company is currently in the
process of evaluating the potential impact of adoption of this new guidance on its consolidated financial
statements and related disclosures.
NOTE 9 – INCOME TAXES:
The Company had an effective tax rate for the first six months of fiscal 2026 of
% compared to an
effective tax rate of
% for the first six months of fiscal 2025. Income tax expense for the first six
months increased to $
expense is due to the non-recurring prior year favorable adjustment to the federal net operating loss
carryback claim as a result of the Coronavirus Aid, Relief and Economic Security Act (CARES Act),
partially offset by lower foreign and state income taxes.
During the second quarter of fiscal 2026, the Company received a $
outstanding balance of its income tax refund receivable due from the IRS.
NOTE 10 – COMMITMENTS AND CONTINGENCIES:
The Company is, from time to time, involved in routine litigation incidental to the conduct of its business,
including litigation regarding the merchandise that it sells, litigation regarding intellectual property,
litigation instituted by persons injured upon premises under its control, litigation with respect to various
employment matters, including alleged discrimination and wage and hour litigation, and litigation with
present or former employees.
Although such litigation is routine and incidental to the conduct of the Company’s business, as with any
business of its size with a significant number of employees and significant merchandise sales, such
litigation could result in large monetary awards. Based on information currently available, management
does not believe that any reasonably possible losses arising from current pending litigation will have a
material adverse effect on its condensed consolidated financial statements. However, given the inherent
uncertainties involved in such matters, an adverse outcome in one or more of such matters could
materially and adversely affect the Company’s financial condition, results of operations and cash flows in
any particular reporting period. The Company accrues for these matters when the liability is deemed
probable and reasonably estimable.
THE CATO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
21
NOTE 11 – REVENUE RECOGNITION:
The Company recognizes sales at the point of purchase when the customer takes possession of the
merchandise and pays for the purchase, generally with cash or credit. Sales from purchases made with
Cato credit, gift cards and layaway sales from stores are also recorded when the customer takes
possession of the merchandise. E-commerce sales are recorded when the risk of loss is transferred to the
customer. Gift cards are recorded as deferred revenue until they are redeemed or forfeited. Gift cards do
not have expiration dates. Layaway transactions are recorded as deferred revenue until the customer takes
possession or forfeits the merchandise. A provision is made for estimated merchandise returns based on
sales volumes and the Company’s experience; actual returns have not varied materially from historical
amounts. A provision is made for estimated write-offs associated with sales made with the Company’s
proprietary credit card.
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 90-day expiration.
Amounts related to shipping and handling billed to
customers in a sales transaction are classified as Other revenue and the costs related to shipping product
to customers (billed and accrued) are classified as Cost of goods sold.
The Company offers its own proprietary credit card to customers. All credit activity is performed by the
Company’s wholly-owned subsidiaries.
estimated customer credit losses of $
2026, respectively, compared to $
2025, respectively. Sales purchased on the Company’s proprietary credit card for the three and six
months ended August 1, 2026 were $
million and $
The following table provides information about receivables and contract liabilities from contracts with
customers (in thousands):
Balance as of
August 1, 2026
January 31, 2026
Proprietary Credit Card Receivables, net
$
$
Gift Card Liability
$
$
THE CATO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
22
NOTE 12 – LEASES:
The Company determines whether an arrangement is a lease at inception. The Company has operating
leases for stores, offices, warehouse space and equipment. Its leases have remaining lease terms of
, some of which include options to extend the lease term for
, and
some of which include options to terminate the lease
. The Company considers these
options in determining the lease term used to establish its right-of-use assets and lease liabilities. The
Company’s lease agreements do not contain any material residual value guarantees or material restrictive
covenants.
As most of the Company’s leases do not provide an implicit rate, the Company uses its estimated
incremental borrowing rate based on the information available at commencement date of the lease in
determining the present value of lease payments.
The components of lease cost are shown below (in thousands):
Three Months Ended
August 1, 2026
August 2, 2025
Operating lease cost
$
$
Variable lease cost (a)
$
$
(a) Primarily related to monthly percentage rent for stores not presented on the balance sheet.
Six Months Ended
August 1, 2026
August 2, 2025
Operating lease cost
$
$
Variable lease cost (a)
$
$
(a) Primarily related to monthly percentage rent for stores not presented on the balance sheet.
THE CATO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
23
NOTE 12 – LEASES (CONTINUED:
Supplemental cash flow information and non-cash activity related to the Company’s operating leases are
as follows (in thousands):
Operating cash flow information:
Three Months Ended
August 1, 2026
August 2, 2025
Cash paid for amounts included in the measurement of lease liabilities
$
$
Non-cash activity:
Right-of-use assets obtained in exchange for lease obligations, net of rent violations
$
$
Six Months Ended
August 1, 2026
August 2, 2025
Cash paid for amounts included in the measurement of lease liabilities
$
$
Non-cash activity:
Right-of-use assets obtained in exchange for lease obligations, net of rent violations
$
$
Weighted-average remaining lease term and discount rate for the Company’s operating leases are as
follows:
As of
August 1, 2026
August 2, 2025
Weighted-average remaining lease term
Weighted-average discount rate
As of August 1, 2026, the maturities of lease liabilities by fiscal year for the Company’s operating leases
are as follows (in thousands):
Fiscal Year
2026 (a)
$
2027
2028
2029
2030
Thereafter
Total lease payments
Less: Imputed interest
Present value of lease liabilities
$
(a) Excluding the six months ended August 1, 2026
24
THE CATO CORPORATION
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
FORWARD-LOOKING INFORMATION:
The following information should be read along with the unaudited Condensed Consolidated Financial
Statements, including the accompanying Notes appearing in this report. Any of the following are
“forward-looking” statements within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended: (1) statements in this
Form 10-Q that reflect projections or expectations of our future financial or economic performance; (2)
statements that are not historical information; (3) statements of our beliefs, intentions, plans and
objectives for future operations, including those contained in “Management’s Discussion and Analysis of
Financial Condition and Results of Operations”; (4) statements relating to our operations or activities for
our fiscal year ending 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 of public health threats and related responses and
mitigation efforts, as well as the potential impact of supply chain disruptions, extreme weather conditions,
tariffs and other trade policies, inflationary pressures and other economic conditions on our business,
results of operations and financial condition and statements regarding new store development strategy;
and (5) statements relating to our future risks or contingencies. When possible, we have attempted to
identify forward-looking statements by using words such as “will,” “expects,” “anticipates,”
“approximates,” “believes,” “estimates,” “hopes,” “intends,” “may,” “plans,” “could,” “would,” “should”
and any variations or negative formations of such words and similar expressions. We can give no
assurance that actual results or events will not differ materially from those expressed or implied in any
such forward-looking statements. Forward-looking statements included in this report are based on
information available to us as of the filing date of this report, but subject to known and unknown risks,
uncertainties and other factors that could cause actual results to differ materially from those contemplated
by the forward-looking statements. Such factors include, but are not limited to, the following: any actual
or perceived deterioration in the conditions that drive consumer confidence and spending, including, but
not limited to, prevailing social, economic, political and public health threats and uncertainties, war or
similar hostilities and their collateral effects, levels of unemployment, fuel, energy and food costs,
inflation, wage rates, tax rates, tariff rates, interest rates, home values, consumer net worth and the
availability of credit; changes in laws, regulations or government policies affecting our business,
including but not limited to tariffs, taxes and customs enforcement; uncertainties regarding the impact of
any governmental action regarding, or responses to, the foregoing conditions; competitive factors and
pricing pressures; our ability to predict and respond to rapidly changing fashion trends and consumer
demands; our ability to successfully open new stores in attractive locations and the ability of any such
new stores to grow and perform as expected; underperformance or other factors that may lead to a
continuation or acceleration of store closures and negatively affect the Company’s profitability, financial
condition or prospects; adverse weather, public health threats, acts of war or aggression or similar
conditions and related consequences that may affect our sales or operations; inventory risks due to shifts
in market demand, including the ability to liquidate excess inventory at anticipated margins; adverse
developments or volatility affecting the financial services industry or broader financial markets; and other
factors discussed under “Risk Factors” in Part I, Item 1A of the Company’s Annual Report on Form 10-K
for the fiscal year ended January 31, 2026 (“fiscal 2025”), as amended or supplemented, and in other
reports we file with or furnish to the Securities and Exchange Commission (“SEC”) from time to time.
We do not undertake, and expressly decline, any obligation to update any such forward-looking
information contained in this report, whether as a result of new information, future events, or otherwise.
THE CATO CORPORATION
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
25
CRITICAL ACCOUNTING POLICIES AND ESTIMATES:
The Company’s critical accounting policies and estimates are more fully described in “Management’s
Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 in the
Company’s Annual Report on Form 10-K for the fiscal year ended January 31, 2026. The preparation of the
Company’s financial statements in conformity with generally accepted accounting principles in the United
States (“GAAP”) requires management to make estimates and assumptions about future events that affect the
amounts reported in the financial statements and accompanying notes. Future events and their effects cannot
be determined with absolute certainty. Therefore, the determination of estimates requires the exercise of
judgment. Actual results inevitably will differ from those estimates, and such differences may be material to
the financial statements. The most significant accounting estimates inherent in the preparation of the
Company’s financial statements include the calculation of potential asset impairment, income tax valuation
allowances, reserves relating to self-insured health insurance, workers’ compensation, general and auto
insurance liabilities, uncertain tax positions, the allowance for customer credit losses, and inventory
shrinkage.
The Company’s critical accounting policies and estimates are discussed with the Audit Committee.
THE CATO CORPORATION
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
26
RESULTS OF OPERATIONS:
The following table sets forth, for the periods indicated, certain items in the Company's unaudited Condensed
Consolidated Statements of Income as a percentage of total retail sales:
Three Months Ended
Six Months Ended
August 1, 2026
August 2, 2025
August 1, 2026
August 2, 2025
Total retail sales
100.0
%
100.0
%
100.0
%
100.0
%
Other revenue
1.0
1.1
1.0
1.1
Total revenues
101.0
101.1
101.0
101.1
Cost of goods sold (exclusive of
depreciation)
67.2
63.8
65.0
64.4
Selling, general and administrative
(exclusive of depreciation)
33.0
32.8
32.4
32.8
Depreciation
1.4
1.4
1.3
1.5
Interest and other income
(1.4)
(0.8)
(1.1)
(0.8)
Income before income taxes
0.8
3.7
3.3
3.1
Net income
0.7
3.9
3.1
3.0
THE CATO CORPORATION
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
27
RESULTS OF OPERATIONS (CONTINUED):
Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is
intended to provide information to assist readers in better understanding and evaluating our financial
condition and results of operations. We recommend reading this MD&A in conjunction with our Condensed
Consolidated Financial Statements and the Notes to those statements included in the “Financial Statements”
section of this Quarterly Report on Form 10-Q, as well as our Annual Report on Form 10-K for fiscal 2025.
Recent Developments
Pricing Pressures
Our second quarter results were negatively impacted by the continued pressure on our customers’
discretionary income. Higher fuel prices, persistent inflation and ongoing elevated interest rates continue to
exert downward pressure on our customers’ discretionary income, which we believe will continue to make
our customers more cautious with their discretionary spending into the foreseeable future. In addition, our
ability to pass through cost increases caused by rising fuel prices, potential increased tariffs or other factors
will be limited due in part to the pressure on our customers’ discretionary spending.
Tariff Pressures
On July 24, 2026, the Office of the U.S. Trade Representative (“USTR”) imposed tariffs ranging from
10% to 12.5% under Section 301 of the Trade Act of 1974 on various countries, including countries
where a significant portion of our products are manufactured, following investigation of these countries’
efforts to prohibit the import of products made with forced labor. The USTR is conducting additional
investigations regarding excess capacity, which could also result in increased tariffs. Although it
currently appears that the production of garments, shoes and handbags are not being targeted by these
additional investigations, that may change in the future.
Increased Customs Enforcement
On June 3, 2026, President Trump issued an executive order “Strengthening Customs Enforcement.” The
executive order instructs the Department of Homeland Security and U.S. Customs and Border Protection
to overhaul import regulations, target foreign importers of record and raise bonding minimums, among
other items. As a result of this executive order, containers that we import directly and containers
imported by our suppliers are being subjected to additional U.S. Customs review and inspections, which
in some cases are resulting in delays in our receipt of these containers. These delays, depending on their
timing and duration, could cause us to take additional markdowns due to the seasonality of our products.
These additional inspections and potential new regulations may also cause additional compliance costs.
Comparison of the Three and Six Months ended August 1, 2026 with August 2, 2025
Total retail sales for the second quarter were $163.9 million compared to last year’s second quarter sales of
$174.7 million, a 6% decrease. The Company’s sales decreased in the second quarter of fiscal 2026 primarily
due to a 3.7% decrease in same-store sales, as well as stores that were closed in the past 12 months. For the
six months ended August 1, 2026, total retail sales were $333.3 million compared to last year’s comparable
six month sales of $343.1 million, a 2.9% decrease. The decrease in sales in the first six months of fiscal 2026
was due primarily to flat same-store sales and the impact of store closures. Same-store sales include stores
that have been open more than 15 months. Stores that have been relocated or expanded are also included in
THE CATO CORPORATION
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
28
the same-store sales calculation after they have been open more than 15 months. The method of calculating
same-store sales varies across the retail industry. As a result, our same-store sales calculation may not be
comparable to similarly titled measures reported by other companies. E-commerce sales were less than 5% of
total sales for the six months ended August 1, 2026 and are included in the same-store sales calculation.
Total revenues, comprised of retail sales and other revenue (principally finance charges and late fees on
customer accounts receivable and layaway fees), were $165.5 million and $336.6 million for the three and six
months ended August 1, 2026, compared to $176.5 million and $346.8 million for the three and six months
ended August 2, 2025, respectively. The Company operated 1,057 stores at August 1, 2026 compared to
1,101 stores at the end of last fiscal year’s second quarter. For the first six months of fiscal 2026, the
Company opened two new stores and closed 14 stores. The Company currently expects to open up to 10 new
stores and close approximately 50 stores in fiscal 2026.
Other revenue, a component of total revenues, was $1.6 million and $3.3 million for the three and six months
ended August 1, 2026, respectively, compared to $1.9 million and $3.7 million for the prior year’s
comparable three and six month periods. The decrease in Other revenue was due to lower layaway income
and e-commerce shipping revenue for the three and six months ended August 1, 2026 compared to the three
and six months ended August 2, 2025. Included in Other revenue is credit revenue of $0.7 million, which
represented 0.4% of total revenues in the second quarter of fiscal 2026, relatively flat both in dollars and
percentage compared to fiscal 2025.
Credit revenue is comprised of interest earned on the Company’s private
label credit card portfolio and related fee income. Related expenses principally include payroll, postage and
other administrative expenses and totaled $0.4 million in the second quarter of fiscal 2026, compared to last
year’s second quarter expense of $0.4 million.
Cost of goods sold was $110.2 million, or 67.2% of retail sales and $216.5 million, or 65.0% of retail sales
for the three and six months ended August 1, 2026, respectively, compared to $111.5 million, or 63.8% of
retail sales and $220.8 million, or 64.4% of retail sales for the comparable three and six month periods of
fiscal 2025. The overall increase in cost of goods sold as a percent of retail sales for the second quarter and
first six months of fiscal 2026 versus the comparable three and six month periods of fiscal 2025 resulted
primarily from increased sales of marked down goods and deleveraging of our occupancy costs. In addition,
for the six months ended August 1, 2026, cost of goods sold benefited from an IEEPA tariff refund, which
reduced cost of goods sold by $5.7 million, or 1.7% of retail sales. Cost of goods sold includes merchandise
costs (net of discounts and allowances), buying costs, distribution costs, occupancy costs, freight and
inventory shrinkage. Net merchandise costs and in-bound freight are capitalized as inventory costs. Buying
and distribution costs include payroll, payroll-related costs and operating expenses for the buying
departments and distribution center. Occupancy costs include rent, real estate taxes, insurance, common area
maintenance, utilities and maintenance for stores and distribution facilities. Total gross margin dollars (retail
sales less cost of goods sold exclusive of depreciation) decreased by 15.0% to $53.7 million for the second
quarter of fiscal 2026 and by 4.5% to $116.8 million for the first six months of fiscal 2026, compared to
$63.2 million and $122.3 million for the prior year’s comparable three and six months of fiscal 2025,
respectively. Gross margin as presented may not be comparable to those of other entities.
Selling, general and administrative (“SG&A”) expenses primarily include corporate and store payroll, related
payroll taxes and benefits, insurance, supplies, advertising, and bank and credit card processing fees. SG&A
expenses were $54.0 million, or 33.0% of retail sales and $108.0 million, or 32.4% of retail sales for the
second quarter and first six months of fiscal 2026, respectively, compared to $57.4 million, or 32.8% of retail
sales, and $112.7 million, or 32.8% of retail sales for the prior year’s comparable three and six month periods,
respectively. The decrease in SG&A expenses for the second quarter and first six months of fiscal 2026 was
primarily due to lower payroll costs and equipment costs partially offset by litigation and professional fees.
THE CATO CORPORATION
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
29
Depreciation expense was $2.2 million, or 1.4% of retail sales and $4.5 million, or 1.3% of retail sales for the
second quarter and first six months of fiscal 2026, respectively, compared to $2.5 million, or 1.4% of retail
sales and $5.1 million, or 1.5% of retail sales for the comparable three and six month periods of fiscal 2025,
respectively.
Interest and other income was $2.3 million, or 1.4% of retail sales and $3.5 million, or 1.1% of retail sales for
the three and six months ended August 1, 2026, respectively, compared to $1.4 million, or 0.8% of retail sales
and $2.6 million, or 0.8% of retail sales for the comparable three and six month periods of fiscal 2025,
respectively. The increase for the three and six months ended August 1, 2026 compared to the three and six
months ended August 2, 2025 was primarily due to interest income received as part of the Company’s IEEPA
tariff refund and interest on an IRS refund.
Income tax expense was $0.1 million and an expense of $0.7 million for the second quarter and first six
months of fiscal 2026, respectively, compared to an income tax benefit of $0.3 million and income tax
expense of $0.6 million for the comparable three months and six months of fiscal 2025. The increase in tax
expense is due to the non-recurring prior year favorable adjustment to the federal net operating loss carryback
claim as a result of the Coronavirus Aid, Relief and Economic Security Act (CARES Act), partially offset by
lower foreign and state income taxes.
During the second quarter of fiscal 2026, the Company received a $5.6 million payment for the outstanding
balance of its income tax refund receivable due from the IRS.
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 availability under its asset-backed revolving line of credit, will be adequate to fund the
Company’s regular operating requirements and expected capital expenditures for the next 12 months from the
issuance of this quarterly report on Form 10-Q.
Cash provided by operating activities during the first six months of fiscal 2026 was $22.5 million as
compared to $15.6 million provided in the first six months of fiscal 2025. The increase in cash provided by
operating activities of $6.9 million for the first six months of fiscal 2026 as compared to the first six months
of fiscal 2025 was primarily attributable to a decrease in accounts receivable in 2026 and the relative change
of accounts payable from year-end to the second quarter for both years, partially offset by the relative change
in inventories from year-end to the second quarter for both years. The decrease in accounts receivable is due
in large part to receiving the remaining IRS refund pertaining to the 2020 tax year.
On August 1, 2026, the Company had working capital of $55.0 million compared to $37.4 million at January
31, 2026. The increase in working capital was primarily attributable to an increase in cash and cash
equivalents and decreases in accrued expenses and current lease liability, partially offset by a decrease in
inventories and an increase in accounts payables.
The ABL Credit Agreement (“ABL Facility”) of up to $35.0 million is committed through March 2028 and is
secured primarily by inventory and third-party credit card receivables. The proceeds from the ABL Facility
may be used to 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 to a $3.0
million outstanding letter of credit that reduced borrowing availability to $27.0 million as of August 1, 2026
and January 31, 2026. The weighted average interest rate under the credit facility was zero at August 1, 2026
and January 31, 2026 due to no outstanding borrowings.
THE CATO CORPORATION
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
30
Expenditures for property and equipment totaled $2.4 million in the first six months of fiscal 2026, compared
to $2.4 million in last fiscal year’s first six months. The Company expects to invest approximately $7.4
million for capital expenditures for the full fiscal 2026 year.
Net cash used in investing activities was $3.9 million for the first six months of fiscal 2026 compared to $0.9
million net cash used in the comparable period of 2025. The increase in net cash used by investing activities
in 2026 was primarily due to an increase in the purchase of short-term investments, partially offset by lower
sales of short-term investments and proceeds from life insurance policies.
Net cash used in financing activities totaled $0.3 million in the first six months of fiscal 2026 compared to
$0.9 million used in the comparable period of fiscal 2025. The decrease in net cash used in financing
activities in fiscal 2026 was primarily due to lower stock repurchases.
The Company purchased 39,147 shares in the second quarter of fiscal 2026. As of August 1, 2026, the
Company had 533,770 shares remaining in open authorizations under its share repurchase program.
The Company does not use derivative financial instruments.
The Company’s investment portfolio was primarily invested in corporate bonds held in managed accounts
with underlying ratings of A or better at August 1, 2026. The corporate bonds have contractual maturities
which range from two days to 2.7 years.
Additionally, at August 1, 2026, the Company had deferred compensation plan assets of $10.0 million. At
January 31, 2026, the Company had deferred compensation plan assets of $9.7 million. These assets are
recorded within Other assets in the Condensed Consolidated Balance Sheets. See Note 7, Fair Value
Measurements, in the “Financial Statements” section of this Quarterly Report on Form 10-Q.
RECENT ACCOUNTING PRONOUNCEMENTS:
See Note 8, Recent Accounting Pronouncements, in the “Financial Statements” section of this Quarterly
Report on Form 10-Q.
THE CATO CORPORATION
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
31
ITEM 3. QUANTITATI VE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK:
The Company is subject to market rate risk from exposure to changes in interest rates related to its
financing, investing and cash management activities, but the Company does not believe such exposure is
material.
ITEM 4. CONTROLS AND PROCEDURES:
We carried out an evaluation, with the participation of our Principal Executive Officer and Principal Financial
Officer, of the effectiveness of our disclosure controls and procedures as of August 1, 2026. Based on this
evaluation, our Principal Executive Officer and Principal Financial Officer concluded that, as of August 1,
2026, our disclosure controls and procedures, as defined in Rule 13a-15(e), under the Securities Exchange
Act of 1934 (the “Exchange Act”), were effective to ensure that information we are required to disclose in the
reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported
within the time periods specified in the SEC’s rules and forms and that such information is accumulated and
communicated to our management, including our Principal Executive Officer and Principal Financial Officer,
as appropriate to allow timely decisions regarding required disclosure.
CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING:
No change in the Company’s internal control over financial reporting (as defined in Exchange Act Rule 13a-
15(f)) has occurred during the Company’s fiscal quarter ended August 1, 2026 that has materially affected, or
is reasonably likely to materially affect, the Company’s internal control over financial reporting.
THE CATO CORPORATION
PART II OTHER INFORMATION
32
ITEM 1. LEGAL PROCEEDINGS:
Not Applicable.
ITEM 1A. RISK FACTORS:
In addition to the other information in this report, you should carefully consider the factors discussed in Part I,
“Item 1A. Risk Factors” in our Annual Report on Form 10-K for our fiscal year ended January 31, 2026.
These risks could materially affect our business, financial condition or future results; however, they are not
the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem
to be immaterial may also materially adversely affect our business, financial condition or results of
operations.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS:
The following table summarizes the Company’s purchases of its common stock for the three months
ended August 1, 2026:
ISSUER PURCHASES OF EQUITY SECURITIES
Total Number of
Maximum Number
Shares Purchased as
(or Approximate Dollar
Total Number
Average
Part of Publicly
Value) of Shares that may
Fiscal
of Shares
Price Paid
Announced Plans or
Yet be Purchased Under
Period
Purchased
per Share (1)
Programs (2)
The Plans or Programs (2)
May 2026
39,147
$
2.88
39,147
June 2026
-
-
-
July 2026
-
-
-
Total
39,147
$
2.86
39,147
533,770
(1)
Prices include trading costs.
(2)
As of May 2, 2026, the Company’s share repurchase program had 572,917 shares remaining in
open authorizations. During the second quarter ended August 1, 2026, the Company repurchased
and retired 39,147 shares under this program for approximately $112,692 or an average market
price of $2.86 per share. As of August 1, 2026, the Company had 533,770 shares remaining in
open authorizations. There is no specified expiration date for the Company’s repurchase program.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES:
Not Applicable.
THE CATO CORPORATION
PART II OTHER INFORMATION
33
ITEM 4. MINE SAFETY DISCLOSURES:
No matters requiring disclosure.
ITEM 5. OTHER INFORMATION:
During the three months ended August 1, 2026, none of the Company’s directors or officers (as defined in
Rule 16a-1(f) of the Securities Exchange Act of 1934, as amended)
trading arrangement” or a “
of Regulation S-K).
ITEM 6. EXHIBITS:
Exhibit No.
Item
101.INS
Inline XBRL Instance Document
101.SCH
Inline XBRL Taxonomy Extension Schema Document
101.CAL
Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF
Inline XBRL Taxonomy Extension Definitions Linkbase Document
101.LAB
Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE
Inline XBRL Taxonomy Extension Presentation Linkbase Document
104.1
Cover Page Interactive Data File (Formatted in Inline XBRL and contained in
the Interactive Data Files submitted as Exhibits 101.*)
* Submitted electronically herewith.
THE CATO CORPORATION
PART II OTHER INFORMATION
34
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this
report to be signed on its behalf by the undersigned thereunto duly authorized.
August 27, 2026
/s/ John P. D. Cato
Date
John P. D. Cato
Chairman, President and
Chief Executive Officer
August 27, 2026
/s/ Charles D. Knight
Date
Charles D. Knight
Executive Vice President
Chief Financial Officer
ATTACHMENTS / EXHIBITS
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