Form 10-Q CATO CORP For: Nov 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__________________
Commission file number
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
,
,
(Address of principal executive offices)
(Zip Code)
(
)
(Registrant's telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
X
No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted
pursuant to Rule 405 of Regulation S-T (§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
☐
☑
☐
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.
☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
☐
☒
As of November 1, 2025, there were
o
utstanding.
1
THE CATO CORPORATION
FORM 10-Q
Quarter Ended November 1, 2025
Table of Contents
Page No.
PART I – FINANCIAL INFORMATION (UNAUDITED)
Item 1.
Financial Statements (Unaudited):
Condensed Consolidated Statements of Income (Loss) and Comprehensive Income (Loss)
2
For the Three Months and Nine Months Ended November 1, 2025 and November
2, 2024
Condensed Consolidated Balance Sheets
3
At November 1, 2025 and February 1, 2025
Condensed Consolidated Statements of Cash Flows
4
For the Nine Months Ended November 1, 2025 and November 2, 2024
Condensed Consolidated Statements of Stockholders’ Equity
5 – 6
For the Three Months and Nine Months Ended November 1, 2025 and November
2, 2024
Notes to Condensed Consolidated Financial Statements
7 – 21
Item 2.
Management’s Discussion and Analysis of Financial Condition and
Results of Operations
22 – 29
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
30
Item 4.
Controls and Procedures
30
PART II – OTHER INFORMATION
Item 1.
Legal Proceedings
31
Item 1A.
Risk Factors
31
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
31
Item 3.
Defaults Upon Senior Securities
31
Item 4.
Mine Safety Disclosures
32
Item 5.
Other Information
32
Item 6.
Exhibits
32
Signatures
33
2
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
THE CATO CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS) AND
COMPREHENSIVE INCOME (LOSS)
(UNAUDITED)
Three Months Ended
Nine Months Ended
November 1,
2025
November 2,
2024
November 1,
2025
November 2,
2024
(Dollars in thousands, except per share data)
REVENUES
$
$
$
$
COSTS AND EXPENSES, NET
(2,181 )
(2,646 )
(4,775 )
(10,209 )
(Loss) income before income taxes
(6,352 )
(14,752 )
(2,391 )
Income tax (benefit) expense
(1,163 )
(528 )
Net (loss) income
$
(5,189 )
$
(15,074 )
$
$
(4,005 )
Basic (loss) earnings per share
$
(0.28 )
$
(0.79 )
$
$
(0.24 )
Diluted (loss) earnings per share
$
(0.28 )
$
(0.79 )
$
$
(0.24 )
Comprehensive income:
Net (loss) income
$
(5,189 )
$
(15,074 )
$
$
(4,005 )
Net unrealized gain (loss) on available-for-sale securities
(151 )
(223 )
Comprehensive (loss) income
$
(5,170 )
$
(15,225 )
$
$
(4,228 )
S
ee notes to condensed consolidated financial statements (unaudited).
3
THE CATO CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
November 1, 2025
February 1, 2025
ASSETS
(Dollars in thousands)
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 employee benefits and bonus
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
$
$
S
ee notes to condensed consolidated financial statements (unaudited).
4
THE CATO CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Nine Months Ended
November 1, 2025
November 2, 2024
(Dollars in thousands)
Operating Activities:
Net income (loss)
$
$
(4,005 )
Adjustments to reconcile net income (loss) to net cash provided
(655 )
(848 )
(34 )
(5,350 )
(843 )
(2,208 )
(8,556 )
(1,868 )
(1,315 )
(306 )
(1,151 )
(21,791 )
(2,619 )
Net cash provided (used) in operating activities
(13,266 )
Investing Activities:
Expenditures for property and equipment
(2,892 )
(6,509 )
Purchase of short-term investments
(19,761 )
(38,659 )
Sales of short-term investments
Sales of other assets
Net cash (used) provided by investing activities
(28 )
Financing Activities:
Dividends paid
(10,516 )
Repurchase of common stock
(995 )
(2,398 )
Proceeds from employee stock purchase plan
Net cash used in financing activities
(851 )
(12,576 )
Net increase (decrease) in cash, cash equivalents, and restricted cash
(4,342 )
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
$
$
S
ee notes to condensed consolidated financial statements (unaudited).
5
THE CATO CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(UNAUDITED)
Accumulated
Additional
Other
Total
Common
Paid-in
Retained
Comprehensive
Stockholders'
Stock
Capital
Earnings
Income
Equity
(Dollars in thousands, 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
$
$
$
$
$
Comprehensive income:
(5,189 )
(5,189 )
Class A common stock sold through employee stock purchase plan
Share-based compensation expense
Balance — November 1, 2025
$
$
$
$
$
S
ee 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 3, 2024
$
$
$
$
$
Comprehensive income:
(748 )
(748 )
Dividends paid ($
(3,523 )
(3,523 )
Class A common stock sold through employee stock purchase plan
Share-based compensation issuances and exercises
Share-based compensation expense
(84 )
(84 )
Repurchase and retirement of treasury shares
(14 )
(2,223 )
(2,237 )
Balance — May 4, 2024
$
$
$
$
(353 )
$
Comprehensive income:
Dividends paid ($
(3,527 )
(3,527 )
Class A common stock sold through employee stock purchase plan
Share-based compensation expense
Balance — August 3, 2024
$
$
$
$
$
Comprehensive income:
(15,074 )
(15,074 )
(151 )
(151 )
Dividends paid ($
(3,466 )
(3,466 )
Class A common stock sold through employee stock purchase plan
Share-based compensation expense
(1 )
Repurchase and retirement of treasury shares
(1)
-
(158)
-
(159)
Balance — November 2, 2024
$
$
$
$
$
S
ee 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 November 1, 2025 and for the three and nine
months ended November 1, 2025 and November 2, 2024 have been prepared from the accounting records
of The Cato Corporation and its wholly-owned subsidiaries (the “Company”), and all amounts shown are
unaudited.
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
February 1, 2025. Amounts as of February 1, 2025 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.
On February 16, 2024, the Company closed on the sale of land held for investment. The sale resulted in a
net gain of $
Consolidated Statements of Income (Loss) and Comprehensive Income (Loss) for the nine months ended
November 2, 2024.
During the third quarter of fiscal 2024, the Company received $
settlement and sale of its corporate jet.
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 (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 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 (loss) 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, of which there were none for the periods presented below.
Three Months Ended
Nine Months Ended
November 1,
2025
November 2,
2024
November 1,
2025
November 2,
2024
(Dollars in thousands, except per share data)
Numerator
Net earnings (loss)
$
(5,189 )
$
(15,074 )
$
$
(4,005 )
Less: Earnings allocated to non-vested equity awards
(200 )
(250 )
(548 )
Net earnings (loss) available to common stockholders
$
(5,189 )
$
(15,274 )
$
$
(4,553 )
Denominator
Basic weighted average common shares outstanding
Diluted weighted average common shares outstanding
Net income per common share
Basic earnings (loss) per share
$
(0.28 )
$
(0.79 )
$
$
(0.24 )
Diluted earnings (loss) per share
$
(0.28 )
$
(0.79 )
$
$
(0.24 )
THE CATO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
9
NOTE 3 – ACCUMULATED OTHER COMPREHENSIVE INCOME:
The following table sets forth information regarding the changes in Accumulated other comprehensive
income (in thousands) for the three months ended November 1, 2025:
Changes in Accumulated Other
Comprehensive Income (a)
Unrealized Gains
and (Losses) on
Available-for-Sale
Securities
Beginning Balance at August 2, 2025
$
Net current-period other comprehensive income
Ending Balance at November 1, 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 nine months ended November 1, 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 November 1, 2025
$
(a) All amounts are net-of-tax. Amounts in parentheses indicate a debit/reduction to accumulated other comprehensive income.
(b) Includes $
i
ncome for net realized gains on available-for-sale securities. The tax impact of this reclassification was
$0
.
THE CATO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
10
NOTE 3 – ACCUMULATED OTHER COMPREHENSIVE INCOME (CONTINUED):
The following table sets forth information regarding the changes in Accumulated other comprehensive
income (in thousands) for the three months ended November 2, 2024:
Changes in Accumulated Other
Comprehensive Income (a)
Unrealized Gains
and (Losses) on
Available-for-Sale
Securities
Beginning Balance at August 3, 2024
$
(151 )
Net current-period other comprehensive income
(151 )
Ending Balance at November 2, 2024
$
(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 (in thousands) for the nine months ended November 2, 2024:
Changes in Accumulated Other
Comprehensive Income (a)
Unrealized Gains
and (Losses) on
Available-for-Sale
Securities
Beginning Balance at February 3, 2024
$
(786 )
Net current-period other comprehensive loss
(223 )
Ending Balance at November 2, 2024
$
(a) All amounts are net-of-tax. Amounts in parentheses indicate a debit/reduction to accumulated other comprehensive income.
(b) Includes
$1,022
i
ncome for net realized gains on 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
May 2027
party credit card receivables. There were
was $
availability to $
facility was
NOTE 5 – REPORTABLE SEGMENT INFORMATION:
The Company has determined that it has
Segment
Reporting
segments: Retail and Credit. The Company has aggregated its
commerce, based on the aggregation criteria outlined in ASC 280-10, which states that two or more operating
segments may be aggregated into a single reportable segment if aggregation is consistent with the objective
and basic principles of ASC 280-10, which require the segments to have similar economic characteristics,
products, production processes, clients and methods of distribution.
The Company’s retail operating segments have similar economic characteristics and similar operating,
financial and competitive risks. The products sold in each retail operating segment are similar in nature, as
they all offer women’s apparel, shoes and accessories. Merchandise inventory of the Company’s retail
operating segments is sourced from the same countries and some of the same vendors, using similar
production processes. Merchandise for the Company’s retail operating segments is distributed to retail stores
in a similar manner through the Company’s single distribution center and is subsequently distributed to
customers in a similar manner. The Company operates its women’s fashion specialty retail stores in
states as of November 1, 2025, 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,
e
xpenses, and profit or loss from operations before income taxes as presented in the Company’s annual
THE CATO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
12
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 February 1, 2025. The Company evaluates segment
performance based on segment income before income taxes.
The following schedule summarizes certain segment information (in thousands):
Three Months Ended
November 1, 2025
Retail
Credit
Total
Revenues
$
$
$
Cost of goods sold
Selling, general, and administrative (a)
Corporate overhead
Depreciation
Interest and other income
(88 )
(286 )
(374 )
Segment income (loss) before income taxes
$
(8,697 )
$
$
(8,159 )
Corporate interest and other income
(1,807 )
Loss before income taxes
$
(6,352 )
Capital expenditures
$
$
$
Nine Months Ended
November 1, 2025
Retail
Credit
Total
Revenues
$
$
$
Cost of goods sold
Selling, general, and administrative (a)
Corporate overhead
Depreciation
Interest and other income
(282 )
(877 )
(1,159 )
Segment income (loss) before income taxes
$
(838 )
$
$
Corporate interest and other income
(3,616 )
Income before income taxes
$
Capital expenditures
$
$
$
(a) Selling, general, and administrative expense include corporate and store payroll, related payroll taxes and
THE CATO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
13
NOTE 5 – REPORTABLE SEGMENT INFORMATION (CONTINUED):
Three Months Ended
November 2, 2024
Retail
Credit
Total
Revenues
$
$
$
Cost of goods sold
Selling, general, and administrative (a)
Corporate overhead
Depreciation
Interest and other income
(105 )
(319 )
(424 )
Segment income (loss) before income taxes
$
(17,549 )
$
$
(16,974 )
Corporate interest and other income
(2,222 )
Loss before income taxes
$
(14,752 )
Capital expenditures
$
$
$
Nine Months Ended
November 2, 2024
Retail
Credit
Total
Revenues
$
$
$
Cost of goods sold
Selling, general, and administrative (a)
Corporate overhead
Depreciation
Interest and other income
(292 )
(838 )
(1,130 )
Segment income (loss) before income taxes
$
(13,082 )
$
$
(11,470 )
Corporate interest and other income
(9,079 )
Loss before income taxes
$
(2,391 )
Capital expenditures
$
$
$
(a) 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 6 – STOCK-BASED COMPENSATION:
As of November 1, 2025, 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 November 1, 2025:
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
November 1, 2025 and February 1, 2025, there was $
, respectively, of total
unrecognized compensation expense related to nonvested restricted stock awards, which had a remaining
weighted-average vesting period of
during the three and nine months ended November 1, 2025 was $
, respectively,
compared to a total compensation expense of $
ended November 2, 2024, respectively. This compensation activity is classified as a component of
Selling, general and administrative expenses in the Condensed Consolidated Statements of Income
(Loss).
The following summary shows the changes in the number of shares of unvested restricted stock outstanding
during the nine months ended November 1, 2025:
Weighted Average
Number of
Grant Date Fair
Shares
Value Per Share
Restricted stock awards at February 1, 2025
$
Granted
Vested
(225,924 )
Forfeited or expired
(76,105 )
R
estricted stock awards at November 1, 2025
$
THE CATO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
15
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 nine months ended November 1, 2025 and November
2, 2024, the Company sold
per share, respectively, under the Employee Stock Purchase Plan. The compensation expense recognized for
the
% discount given under the Employee Stock Purchase Plan was $
months ended November 1, 2025 and November 2, 2024, respectively. These expenses are classified as a
component of Selling, general and administrative expenses in the Condensed Consolidated Statements of
Income (Loss).
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 November 1, 2025 and February 1, 2025:
Quoted
Prices in
Active
Significant
Markets for
Other
Significant
Identical
Observable
Unobservable
November 1,
2025
Assets
Inputs
Inputs
Description
Level 1
Level 2
Level 3
Assets:
$
$
$
$
Total Assets
$
$
$
$
Liabilities:
$
(8,677 )
$
$
$
(8,677 )
Total Liabilities
$
(8,677 )
$
$
$
(8,677 )
THE CATO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
16
NOTE 7 – FAIR VALUE MEASUREMENTS (CONTINUED):
Quoted
Prices in
Active
Significant
Markets for
Other
Significant
Identical
Observable
Unobservable
February 1, 2025
Assets
Inputs
Inputs
Description
Level 1
Level 2
Level 3
Assets:
$
$
$
$
Total Assets
$
$
$
$
Liabilities:
$
(8,548 )
$
$
$
(8,548 )
Total Liabilities
$
(8,548 )
$
$
$
(8,548 )
The Company’s investment portfolio was primarily invested in corporate bonds and taxable governmental
debt securities held in managed accounts with underlying ratings of A or better at November 1, 2025 and
February 1, 2025. The state, municipal and corporate bonds and asset-backed securities have contractual
maturities which range from
1.1 months
contractual maturity of up to
3.5 months
.
Additionally, at November 1, 2025, the Company had deferred compensation plan assets of $
February 1, 2025, the Company had deferred compensation plan assets of $
recorded within Other assets in the Condensed Consolidated Balance Sheets.
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
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 Sheet. These funds are
designed to mirror mutual funds and money market funds that are observable and actively traded.
The following tables summarize the change in fair value of the Company’s financial assets and liabilities
measured using Level 3 inputs for the nine months ended November 1, 2025 and the year ended February 1,
2
025 (in thousands):
THE CATO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
17
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
$
Total gains or (losses):
changes in net assets)
Ending Balance at November 1, 2025
$
Fair Value
Measurements Using
Significant Unobservable
Liability Inputs (Level 3)
Deferred Compensation
Beginning Balance at February 1, 2025
$
(8,548 )
(167 )
changes in net assets)
(634 )
Ending Balance at November 1, 2025
$
(8,677 )
Fair Value
Measurements Using
Significant Unobservable
Asset Inputs (Level 3)
Cash Surrender Value
Beginning Balance at February 3, 2024
$
Total gains or (losses):
changes in net assets)
Ending Balance at February 1, 2025
$
Fair Value
Measurements Using
Significant Unobservable
Liability Inputs (Level 3)
Deferred Compensation
Beginning Balance at February 3, 2024
$
(8,654 )
(220 )
changes in net assets)
(849 )
E
nding Balance at February 1, 2025
$
(8,548 )
THE CATO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
18
NOTE 8 – RECENT ACCOUNTING PRONOUNCEMENTS:
In December 2023, the FASB issued ASU 2023-09,
Income Taxes (Topic 740): Improvements to Income
Tax Disclosures
, which modifies the requirements on income tax disclosures to require disaggregated
information about a reporting entity’s effective tax rate reconciliation as well as information on income
taxes paid. This guidance is effective for fiscal years beginning after December 15, 2024 for all public
business entities. The Company is currently in the process of evaluating the potential impact of adoption
of this new guidance on its income tax related disclosures. The required disclosures will be included in
our 2025 Annual Report on Form 10-K.
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 for interim periods within
fiscal years 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 nine months of 2025 of (
%) compared to an
effective tax rate of (
%) for the first nine months of fiscal 2024. Income tax benefit for the first nine
months was $
income tax benefit in fiscal 2025 is primarily due to a reduction in foreign income taxes and a larger
release of reserves related to expired statute of limitations for uncertain tax positions compared to the
prior year. 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 to monitor impacts
moving forward.
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 the Company’s 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
d
eemed probable and reasonably estimable.
THE CATO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
19
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. 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 $
November 1, 2025, respectively, compared to $
ended November 2, 2024, respectively. Sales purchased on the Company’s proprietary credit card for the
three and nine months ended November 1, 2025 were $
compared to $
respectively.
The following table provides information about receivables and contract liabilities from contracts with
customers (in thousands):
Balance as of
November 1, 2025
February 1, 2025
Proprietary Credit Card Receivables, net
$
$
G
ift Card Liability
$
$
THE CATO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
20
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
one
, 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
November 1, 2025
November 2, 2024
Operating lease cost
$
$
Variable lease cost (a)
$
$
(a) Primarily related to monthly percentage rent for stores not presented on the balance sheet.
Nine Months Ended
November 1, 2025
November 2, 2024
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)
21
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
November 1, 2025
November 2, 2024
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
$
$
Nine Months Ended
November 1, 2025
November 2, 2024
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
November 1, 2025
November 2, 2024
Weighted-average remaining lease term
Weighted-average discount rate
As of November 1, 2025, the maturities of lease liabilities by fiscal year for the Company’s operating
leases are as follows (in thousands):
Fiscal Year
2025 (a)
$
2026
2027
2028
2029
Thereafter
Total lease payments
Less: Imputed interest
Present value of lease liabilities
$
(a) Excluding the nine months ended November 1, 2025
22
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 Form 10-Q. 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; (4) statements relating to our operations or activities for our fiscal year
ending January 31, 2026 (“fiscal 2025”) 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 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, levels of unemployment,
fuel, energy and food costs, inflation, wage rates, tax rates, tariffs, 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 and taxes; uncertainties regarding the impact of any
governmental action regarding, or responses to, the foregoing conditions; competitive factors and pricing
pressures; our ability to predict and respond to rapidly changing fashion trends and consumer demands;
our ability to successfully implement our new store development strategy to increase new store openings
and our ability of any such new stores to grow and perform as expected; underperformance or other
factors that may lead to a continuation or acceleration of store closures and negatively affect the
Company’s profitability, financial condition and prospects; adverse weather, public health threats
(including the COVID-19 or other pandemics), acts of war or aggression or similar conditions that may
affect our sales or operations; inventory risks due to shifts in market demand, including the ability to
liquidate excess inventory at anticipated margins; adverse developments or volatility affecting the
financial services industry or broader financial markets; and other factors discussed under “Risk Factors”
in Part I, Item 1A of our annual report on Form 10-K for the fiscal year ended February 1, 2025 (“fiscal
2024”), 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
n
ew information, future events, or otherwise.
THE CATO CORPORATION
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
23
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 February 1, 2025. 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.
T
he 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)
24
RESULTS OF OPERATIONS:
The following table sets forth, for the periods indicated, certain items in the Company's unaudited Condensed
Consolidated Statements of Income (Loss) as a percentage of total retail sales:
Three Months Ended
Nine Months Ended
November 1, 2025
November 2, 2024
November 1, 2025
November 2, 2024
Total retail sales
100.0
%
100.0
%
100.0
%
100.0
%
Other revenue
1.1
1.1
1.1
1.0
Total revenues
101.1
101.1
101.1
101.0
Cost of goods sold (exclusive of
depreciation)
68.0
71.2
65.5
66.7
Selling, general and administrative
(exclusive of depreciation)
37.1
40.0
34.2
35.5
Depreciation
1.6
1.9
1.5
1.5
Interest and other income
(1.4)
(1.8)
(1.0)
(2.1)
Income (loss) before income taxes
(4.1)
(10.2)
0.9
(0.5)
N
et income (loss)
(3.4)
(10.4)
1.0
(0.8)
THE CATO CORPORATION
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
25
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 2024 Annual Report on Form 10-K.
Recent Developments
Tariff Pressures
A significant quantity of our products are made in China and Southeast Asia. The products from these
countries are subject to the newly implemented reciprocal tariffs, as well as an additional Section 301 ad
valorem tariff on Chinese products. In the third quarter, products from China were subject to the Section
301 ad valorem tariffs and products sourced from all other countries were subject to reciprocal tariffs.
During the quarter, most of the countries from which we source product, excluding China and India,
finalized trade deals with the U.S. The additional tariffs range from 10% to 20% for those countries.
India’s tariffs increased to 50% from 10% in the quarter. Though China’s tariffs remained at 30% during
the quarter, effective November 10, 2025 they were reduced to 20%. These tariffs increased our
inventory costs associated with products made in China and Southeast Asia in the third quarter. We
anticipate that our product acquisition costs for the remainder of the fiscal year and into 2026 will be
negatively impacted by these additional costs.
These cost increases will continue to negatively impact our results of operations and financial condition
unless we are able to successfully mitigate their effects by increasing retail pricing without losing sales
and/or sharing these costs with our vendors. Certain product categories, such as shoes and handbags that
are predominately made in China, will be difficult to source in countries with lower tariffs.
Comparison of the Three and Nine Months ended November 1, 2025 with November 2, 2024
Total retail sales for the third quarter were $153.7 million compared to last year’s third quarter sales of $144.6
million, a 6% increase. The Company’s sales increased in the third quarter of fiscal 2025 primarily due to a
10% increase in same-store sales, partially offset by stores that were closed in the past 12 months. For the
nine months ended November 1, 2025, total retail sales were $496.8 million compared to last year’s
comparable nine month sales of $486.8 million, a 2% increase. The increase in sales in the first nine months
of fiscal 2025 was due primarily to a 6% increase in same-store sales, offset mainly by 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 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 nine months ended November 1, 2025 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 $155.4
million and $502.2 million for the three and nine months ended November 1, 2025, compared to $146.2
million and $491.9 million for the three and nine months ended November 2, 2024, respectively. The
Company operated 1,101 stores at November 1, 2025 compared to 1,167 stores at the end of last fiscal year’s
third quarter. For the first nine months of fiscal 2025, the Company permanently closed 16 stores. In total,
t
he Company currently expects to close approximately 50 stores in fiscal 2025.
THE CATO CORPORATION
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
26
Other revenue, a component of total revenues, was $1.7 million and $5.3 million for the three and nine
months ended November 1, 2025, respectively, compared to $1.5 million and $5.0 million for the prior year’s
comparable three and nine month periods. Included in Other revenue is credit revenue of $0.7 million, which
represented 0.4% of total revenues in the third quarter of fiscal 2025, relatively flat both in dollars and
percentage compared to fiscal 2024.
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 third quarter of fiscal 2025, compared to last
year’s third quarter expense of $0.4 million.
Cost of goods sold was $104.5 million, or 68.0% of retail sales and $325.3 million, or 65.5% of retail sales
for the three and nine months ended November 1, 2025, respectively, compared to $103.0 million, or 71.2%
of retail sales and $324.6 million, or 66.7% of retail sales for the comparable three and nine month periods of
fiscal 2024. The overall decrease in cost of goods sold as a percent of retail sales for the third quarter and
first nine months of fiscal 2025 versus the comparable three and nine month periods of fiscal 2024 resulted
primarily from lower buying, distribution and occupancy costs, partially offset by increased sales of marked
down goods. 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) increased
by 18.0% to $49.2 million for the third quarter of fiscal 2025 and by 5.7% to $171.5 million for the first nine
months of fiscal 2025, compared to $41.7 million and $162.3 million for the prior year’s comparable three
and nine months of fiscal 2024, 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 $57.0 million, or 37.1% of retail sales and $169.7 million, or 34.2% of retail sales for the third
quarter and first nine months of fiscal 2025, respectively, compared to $57.9 million, or 40.0% of retail sales,
and $172.8 million, or 35.5% of retail sales for the prior year’s comparable three and nine month periods,
respectively. The decrease in SG&A expenses for the third quarter and first nine months of fiscal 2025 was
primarily due to lower corporate and field payroll expense, as well as lower insurance costs.
Depreciation expense was $2.4 million, or 1.6% of retail sales and $7.5 million, or 1.5% of retail sales for the
third quarter and first nine months of fiscal 2025, respectively, compared to $2.7 million, or 1.9% of retail
sales and $7.1 million, or 1.5% of retail sales for the comparable three and nine month periods of fiscal 2024,
respectively.
Interest and other income was $2.2 million, or 1.4% of retail sales and $4.8 million, or 1.0% of retail sales for
the three and nine months ended November 1, 2025, respectively, compared to $2.6 million, or 1.8% of retail
sales and $10.2 million, or 2.1% of retail sales for the comparable three and nine month periods of fiscal
2024, respectively. The decrease for the first nine months of fiscal 2025 compared to fiscal 2024 was
primarily due to a net gain on the sale of land held for investment and the sale of equity securities recorded in
the first quarter of 2024, as well as a net gain on the disposal of the Company’s corporate aircraft recorded in
the third quarter of 2024.
THE CATO CORPORATION
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
27
Income tax benefit was $1.2 million and $0.5 million for the third quarter and first nine months of fiscal
2025, respectively, compared to tax expense of $0.3 million and $1.6 million for the comparable three and
nine month periods of fiscal 2024, respectively. The effective income tax rate for the first nine months of
fiscal 2025 was (11.9%) compared to (67.5%) for the first nine months of fiscal 2024. The income tax
benefit in fiscal 2025 is primarily due to a reduction in foreign income taxes and a larger release of
reserves related to expired statute of limitations for uncertain tax positions compared to the prior year.
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 to monitor impacts moving
forward.
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 of credit, will be adequate to fund the Company’s regular
operating requirements and expected capital expenditures for the 12 months from the issuance of these
financial statements.
Cash provided by operating activities during the first nine months of fiscal 2025 was $3.2 million as
compared to $13.3 million used in the first nine months of fiscal 2024. The increase in cash provided by
operating activities of $16.5 million for the first nine months of fiscal 2025 as compared to the first nine
months of fiscal 2024 was primarily attributable to net income for the current fiscal year compared to a net
loss for the prior fiscal year, the relative change in inventory from year-end to the third quarter for both years
and a non-operating gain on sale of assets held for investment in the first quarter of fiscal 2024, partially
offset by the relative change of accounts payable from year-end to the third quarter for both years.
At November 1, 2025, the Company had working capital of $58.3 million compared to $34.9 million at
February 1, 2025.
The increase in working capital was primarily attributable to an increase in cash and cash
equivalents and decreases in accrued expenses, current lease liability and accounts payable, partially offset by
a decrease in inventories.
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 $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 2027 and is secured primarily by inventory and third-
party credit card receivables. 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 November 1, 2025. The weighted average interest rate under the credit
facility was zero at November 1, 2025 due to no outstanding borrowings.
Expenditures for property and equipment totaled $2.9 million in the first nine months of fiscal 2025,
compared to $6.5 million in last fiscal year’s first nine months. The decrease in expenditures for property and
equipment was primarily due to finishing projects related to investments in the distribution center and
i
nformation technology during fiscal 2024, as well as no new store openings in the first nine months of the
THE CATO CORPORATION
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
28
current fiscal year. For the full fiscal 2025 year, the Company expects to invest approximately $5.9 million
for capital expenditures.
Net cash used in investing activities was negligible for the first nine months of fiscal 2025 compared to $21.5
million net cash provided in the comparable period of 2024. The decrease in net cash provided by investing
activities in 2025 was primarily due to a decrease in the sales of short-term investments and other assets,
partially offset by lower capital expenditures.
Net cash used in financing activities totaled $0.9 million in the first nine months of fiscal 2025 compared to
$12.6 million used in the comparable period of fiscal 2024. The decrease in net cash used in financing
activities in fiscal 2025 was primarily due to the elimination of dividend payments in fiscal 2025 and lower
stock repurchases.
As of November 1, 2025, the Company had 680,740 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 and taxable governmental
debt securities held in managed accounts with underlying ratings of A or better at November 1, 2025 and
February 1, 2025. The state, municipal and corporate bonds and asset-backed securities have contractual
maturities which range from 1.1 months to 2.9 years. The U.S. Treasury/Agencies notes and bonds have a
contractual maturity of up to 3.5 months.
Additionally, at November 1, 2025, the Company had deferred compensation plan assets of $9.8 million. At
February 1, 2025, the Company had deferred compensation plan assets of $9.3 million. These assets are
recorded within Other assets in the Condensed Consolidated Balance Sheets. See Note 7, Fair Value
Measurements, included in Part 1, Item 1 Financial Statements (Unaudited) in this Quarterly Report on Form
1
0-Q.
THE CATO CORPORATION
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
29
RECENT ACCOUNTING PRONOUNCEMENTS:
See Note 8, Recent Accounting Pronouncements, included in Part 1, Item 1 Financial Statements
(
Unaudited) in this Quarterly Report on Form 10-Q.
THE CATO CORPORATION
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
30
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK:
The Company is subject to market rate risk from exposure to changes in interest rates based on 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 November 1, 2025. Based on this
evaluation, our Principal Executive Officer and Principal Financial Officer concluded that, as of November 1,
2025, 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 November 1, 2025 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
31
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 February 1, 2025.
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 November 1, 2025:
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)
September 2025
-
$
-
-
October 2025
-
-
-
November 2025
-
-
-
Total
-
$
-
-
680,740
(1)
Prices include trading costs.
(2)
As of August 2, 2025, the Company’s share repurchase program had 680,740 shares remaining in
open authorizations. During the third quarter ended November 1, 2025, the Company did not
repurchase or retire any shares under this program. As of November 1, 2025, the Company had
680,740 shares remaining in open authorizations. There is no specified expiration date for the
Company’s repurchase program.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES:
N
ot Applicable.
THE CATO CORPORATION
PART II OTHER INFORMATION
32
ITEM 4. MINE SAFETY DISCLOSURES:
No matters requiring disclosure.
ITEM 5. OTHER INFORMATION:
During the three months ended November 1, 2025, none of the Company’s directors or officers (as
defined in Rule 16a-1(f) of the Securities Exchange Act of 1934, as amended)
“Rule 10b5-1 trading arrangement” or a “
defined in Item 408 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 Exhibit 101.1*)
* Submitted electronically herewith.
THE CATO CORPORATION
PART II OTHER INFORMATION
33
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.
November 25, 2025
/s/ John P. D. Cato
Date
John P. D. Cato
Chairman, President and
Chief Executive Officer
November 25, 2025
/s/ Charles D. Knight
Date
Charles D. Knight
Executive Vice President
Chief Financial Officer
ATTACHMENTS / EXHIBITS
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