CATO CORP
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
20549
FORM
QUARTERLY REPORT PURSUANT
TO SECTION
13 OR 15(d)
OF THE SECURITIES
EXCHANGE
ACT OF
1934
For the quarterly period ended
OR
TRANSITION
REPORT PURSUANT
TO SECTION
13 OR 15(d)
OF THE SECURITIES
EXCHANGE
ACT OF
1934
For the transition period from ________________to__________________
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
☑
No
As of
May 3,
2025, there
were
1
THE CATO CORPORATION
FORM 10-Q
Quarter Ended May 3, 2025
Table
of Contents
Page No.
PART
I – FINANCIAL INFORMATION
(UNAUDITED)
Item 1.
Financial Statements (Unaudited):
Condensed Consolidated Statements of Income and Comprehensive Income
2
For the Three Months Ended
May 3, 2025 and May 4, 2024
Condensed Consolidated Balance Sheets
3
At May 3, 2025 and
February 1, 2025
Condensed Consolidated Statements of Cash Flows
4
For the Three Months Ended May 3, 2025 and
May 4, 2024
Condensed Consolidated Statements of Stockholders’ Equity
5
For the Three Months Ended May 3, 2025 and
May 4, 2024
Notes to Condensed Consolidated Financial Statements
6 - 19
Item 2.
Management’s Discussion and Analysis
of Financial Condition and Results
of Operations
20 - 26
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
27
Item 4.
Controls and Procedures
27
PART
II – OTHER INFORMATION
Item 1.
Legal Proceedings
28
Item 1A.
Risk Factors
28
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
28
Item 3.
Defaults Upon Senior Securities
28
Item 4.
Mine Safety Disclosures
29
Item 5.
Other Information
29
Item 6.
Exhibits
29
Signatures
30
2
PART
I FINANCIAL INFORMATION
ITEM 1.
FINANCIAL STATEMENTS
THE CATO CORPORATION
CONDENSED CONSOLIDATED STATEMENTS
OF INCOME AND
COMPREHENSIVE INCOME
(UNAUDITED)
Three Months Ended
May 3, 2025
May 4, 2024
(Dollars in thousands, except per share data)
REVENUES
$
$
COSTS AND EXPENSES, NET
(
1,202
)
(
5,821
)
Income before income taxes
Income tax expense
Net income
$
$
Basic earnings per share
$
$
Diluted earnings per share
$
$
Comprehensive income:
Net income
$
$
Unrealized gain (loss) on available-for-sale securities, net
(
748
)
Comprehensive income
$
$
See notes to condensed consolidated financial statements (unaudited).
3
THE CATO CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
May 3, 2025
February 1, 2025
(Dollars in thousands)
ASSETS
Current Assets:
Cash and cash equivalents
$
$
Short-term investments
Restricted cash
Accounts receivable, net of allowance for customer credit losses of
Merchandise inventories
Prepaid expenses and other current assets
Property and equipment – net
Other assets
Right-of-Use assets – net
$
$
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable
$
$
Accrued expenses
Accrued bonus and benefits
Accrued income taxes
Current lease liability
Other noncurrent liabilities
Lease liability
Stockholders' Equity:
Preferred stock, $
Class A common stock, $
Convertible Class B common stock, $
Additional paid-in capital
Retained earnings
Accumulated other comprehensive income
$
$
See notes to condensed consolidated financial statements (unaudited).
4
THE CATO CORPORATION
CONDENSED CONSOLIDATED STATEMENTS
OF CASH FLOWS
(UNAUDITED)
Three Months Ended
May 3, 2025
May 4, 2024
(Dollars in thousands)
Operating Activities:
Net income
$
$
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation
Provision for customer credit losses
Purchase premium and premium amortization of investments
(
81
)
(
136
)
Gain on sale of assets held for investment
(
34
)
(
4,093
)
Share-based compensation
(
38
)
(Gain) Loss on disposal of property and equipment
(
30
)
Changes in operating assets and liabilities which provided (used) cash:
(
2,505
)
(
1,836
)
(
2,714
)
(
38
)
(
156
)
(
435
)
(
878
)
Net cash provided by operating activities
Investing Activities:
Expenditures for property and equipment
(
1,019
)
(
3,261
)
Purchase of short-term investments
(
2,262
)
(
8,572
)
Sales of short-term investments
Sales of other assets
Net cash provided by investing activities
Financing Activities:
Dividends paid
(
3,523
)
Repurchase of common stock
(
935
)
(
2,237
)
Proceeds from employee stock purchase plan
Net cash used by financing activities
(
873
)
(
5,599
)
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 — February 1, 2025
$
$
$
$
$
Comprehensive income:
Class A common stock sold through employee stock purchase
plan
Share-based compensation issuances and exercises
(
2
)
(
2
)
Share-based compensation expense
(
73
)
Repurchase and retirement of treasury shares
(
10
)
(
897
)
(
907
)
Balance — May 3, 2025
$
$
$
$
$
Accumulated
Additional
Other
Total
Common
Paid-in
Retained
Comprehensive
Stockholders'
Stock
Capital
Earnings
Income (Loss)
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
)
$
See notes to condensed consolidated financial statements (unaudited).
THE CATO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
6
NOTE 1 - GENERAL
:
The condensed consolidated
financial statements as
of May 3,
2025 and for
the three months
ended May
3, 2025 and May 4, 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.
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 period may not be indicative of the results expected
for the entire year.
The interim financial
statements should be read
in conjunction with
the consolidated financial statements
and
notes
thereto,
included
in
the
Company’s
Annual
Report
on
Form
10-K
for
the
fiscal
year
ended
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 and Comprehensive Income
for the period ended May 4, 2024.
THE CATO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
7
NOTE 2 - EARNINGS PER SHARE:
Accounting Standard Codification (“ASC”) 260 –
Earnings Per Share
diluted Earnings Per Share
(“EPS”) on the face of
all income statements for
all entities with complex
capital
structures.
The Company has presented one basic EPS and one diluted EPS amount for all common shares in
the accompanying
Condensed Consolidated
Statements of
Income and
Comprehensive Income.
While the
Company’s certificate
of incorporation
provides the
right for
the Board of
Directors to
declare dividends
on
Class
A
shares
without
declaration
of
commensurate
dividends
on
Class
B
shares,
the
Company
has
historically paid the same dividends to both Class A and Class B shareholders and the
Board of Directors has
resolved to continue this practice.
Accordingly, the Company’s allocation of income for purposes of the EPS
computation is the same
for Class A and
Class B shares and
the EPS amounts reported
herein are applicable
to both Class A and Class B
shares.
Basic
EPS
is
computed
as
net
income
less
earnings
allocated
to
non-vested
equity
awards
divided
by
the
weighted average
number of
common shares
outstanding for
the period.
Diluted EPS
reflects the
potential
dilution
that
could
occur
from
common
shares
issuable
through
stock
options
and
the
Employee
Stock
Purchase Plan.
Three Months Ended
May 3, 2025
May 4, 2024
(Dollars in thousands, except per share data)
Numerator
Net earnings
$
$
Earnings allocated to non-vested equity awards
(
192
)
(
557
)
Net earnings available to common stockholders
$
$
Denominator
Basic weighted average common shares outstanding
Diluted weighted average common shares outstanding
Net income per common share
Basic earnings per share
$
$
Diluted earnings per share
$
$
THE CATO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
8
NOTE 3 – ACCUMULATED OTHER COMPREHENSIVE INCOME:
The
following
table
sets
forth
information
regarding
the
reclassification
out
of
Accumulated
other
comprehensive income (loss) (in thousands) for
the three months ended May 3,
2025:
Changes in Accumulated Other
Comprehensive Income (Loss) (a)
Unrealized Gains
and (Losses) on
Available-for-Sale
Securities
Beginning Balance at February 1, 2025
$
(
34
)
Net current-period other comprehensive income (loss)
Ending Balance at May 3, 2025
$
(a) All amounts are net-of-tax. Amounts in parentheses indicate a debit/reduction to accumulated other comprehensive income.
(b) Includes $
income for net realized gains on available-for-sale securities. The tax impact of this reclassification was $
.
The
following
table
sets
forth
information
regarding
the
reclassification
out
of
Accumulated
other
comprehensive income (loss) (in thousands) for
the three months ended May 4,
2024:
Changes in Accumulated Other
Comprehensive Income (Loss) (a)
Unrealized Gains
and (Losses) on
Available-for-Sale
Securities
Beginning Balance at February 3, 2024
$
(
1,434
)
Net current-period other comprehensive income (loss)
(
748
)
Ending Balance at May 4, 2024
$
(
353
)
(a) All amounts are net-of-tax. Amounts in parentheses indicate a debit/reduction to accumulated other comprehensive income.
+
(b) Includes $
income for net gains on available-for-sale securities. The tax impact of this reclassification was $
.
THE CATO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
9
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
$
be used to provide funding for ongoing working capital and general corporate
purposes.
The ABL
Credit Agreement
is committed
through
May 2027
third-party credit
card receivables.
There
were
facility was
$
borrowing availability to
$
credit facility was
NOTE 5 – REPORTABLE SEGMENT INFORMATION:
The
Company
has
determined
that
it
has
Segment
Reporting
, including Cato,
It’s Fashion, Versona
and Credit.
As outlined in
ASC 280-10, the Company
has
including
e-commerce,
based
on the
aggregation
criteria
outlined in
ASC
280-10, which
states that
two
or
more operating segments may be aggregated into a single reportable segment if aggregation is consistent with
the
objective
and
basic
principles
of
ASC
280-10,
which
require
the
segments
to
have
similar
economic
characteristics, products, production processes, clients and
methods of distribution.
The
Company’s
retail
operating
segments
have
similar
economic
characteristics
and
similar
operating,
financial and
competitive risks.
The products
sold in each
retail operating
segment are
similar in
nature, as
they
all
offer
women’s
apparel,
shoes
and
accessories.
Merchandise
inventory
of
the
Company’s
retail
operating
segments
is
sourced
from
the
same
countries
and
some
of
the
same
vendors,
using
similar
production processes.
Merchandise for the Company’s retail operating segments is distributed to retail stores
in
a
similar
manner
through
the
Company’s
single
distribution
center
and
is
subsequently
distributed
to
customers in a
similar manner. The
Company operates
its
women’s
fashion
specialty
retail
stores
in
states as of May 3, 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, expenses,
and
profit
or
loss
from
operations
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
THE CATO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
10
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
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 performance based
on profit or loss from
operations before income taxes.
THE CATO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
11
NOTE 5 – REPORTABLE SEGMENT INFORMATION
(CONTINUED):
The following schedule summarizes certain segment
information (in thousands):
Three Months Ended
May 3, 2025
Retail
Credit
Total
Revenues
$
$
$
Cost of goods sold
Selling, general, and administrative (a)
Corporate overhead
Depreciation
Interest and other income
(
105
)
(
303
)
(
408
)
Income (loss) before income taxes
$
$
$
Corporate interest and other income
(
794
)
Income (loss) before income taxes
$
Capital expenditures
$
$
$
Three Months Ended
May 4, 2024
Retail
Credit
Total
Revenues
$
$
$
Cost of goods sold
Selling, general, and administrative (a)
Corporate overhead
Depreciation
Interest and other income
(
90
)
(
235
)
(
325
)
Income (loss) before income taxes
$
$
$
Corporate interest and other income
(
5,496
)
Income (loss) before income taxes
$
Capital expenditures
$
$
$
(a) Selling, general, and administrative expense
include corporate and store payroll, related
THE CATO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
12
NOTE 6 – SHARE-BASED COMPENSATION:
As
of
May
3,
2025,
the
Company
had
the
2018
Incentive
Compensation
Plan
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 May 3, 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 May 3,
2025
and
February
1,
2025,
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 months ended May 3, 2025 was $
ended
May
4,
2024.
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 three months ended May
3, 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
(
68,274
)
Restricted stock awards at May 3, 2025
$
THE CATO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
13
NOTE 6 – SHARE-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
three months ended May 3, 2025
and May 4, 2024, the
Company sold
respectively, under
the Employee
Stock Purchase
Plan. The
compensation expense
recognized for
the
%
discount
given
under
the
Employee
Stock
Purchase
Plan
was
approximately
$
three
months
ended
May
3,
2025
and
May
4,
2024,
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 May 3, 2025 and
February 1, 2025:
Quoted
Prices in
Active
Significant
Markets for
Other
Significant
Identical
Observable
Unobservable
May 3, 2025
Assets
Inputs
Inputs
Description
Level 1
Level 2
Level 3
Assets:
$
$
$
$
Total Assets
$
$
$
$
Liabilities:
$
(
8,236
)
$
$
$
(
8,236
)
Total Liabilities
$
(
8,236
)
$
$
$
(
8,236
)
THE CATO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
14
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 May 3, 2025
and February
1,
2025.
The
state,
municipal
and corporate
bonds and
asset-backed securities
have
contractual
maturities
which
range
from
maturities which range from
Additionally,
at
May
3,
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
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
three months ended May 3, 2025
and the year ended February 1,
2025
(dollars in thousands):
THE CATO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
15
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
Additions
(
117
)
Ending Balance at May 3, 2025
$
Fair Value
Measurements Using
Significant Unobservable
Liability Inputs (Level 3)
Deferred Compensation
Beginning Balance at February 1, 2025
$
(
8,548
)
Redemptions
Additions
(
38
)
Ending Balance at May 3, 2025
$
(
8,236
)
Fair Value
Measurements Using
Significant Unobservable
Asset Inputs (Level 3)
Cash Surrender Value
Beginning Balance at February 3, 2024
$
Redemptions
Additions
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
)
Redemptions
Additions
(
220
)
(
849
)
Ending Balance at February 1, 2025
$
(
8,548
)
THE CATO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
16
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, with early adoption and
retrospective application 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.
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 quarter of 2025 of
% compared to an effective tax
rate of
% for the first
quarter of 2024.
Income tax expense for the
quarter increased to $
2025 from $
state income taxes.
THE CATO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
17
NOTE 10 – COMMITMENTS AND CONTINGENCIES:
The Company is, from time to time, involved in routine litigation incidental to the conduct of its business,
including
litigation
regarding
the
merchandise
that
it
sells,
litigation
regarding
intellectual
property,
litigation instituted
by persons
injured upon
premises under
its control,
litigation with
respect to
various
employment
matters,
including
alleged
discrimination and
wage
and
hour
litigation,
and
litigation
with
present or former employees.
Although such
litigation is
routine and
incidental to
the conduct
of the
Company’s business,
as with
any
business
of
its
size
with
a
significant
number
of
employees
and
significant
merchandise
sales,
such
litigation could
result in
large
monetary awards.
Based on
information currently
available, management
does
not
believe
that
any
reasonably
possible
losses
arising
from current
pending litigation
will
have a
material adverse
effect
on its
condensed consolidated
financial statements.
However,
given the
inherent
uncertainties
involved
in
such
matters,
an
adverse
outcome
in
one
or
more
of
such
matters
could
materially and adversely affect the Company’s
financial condition, results of operations and cash flows in
any
particular
reporting
period.
The
Company
accrues
for
these
matters
when
the
liability
is
deemed
probable and reasonably estimable.
NOTE 11 – REVENUE RECOGNITION:
The
Company
recognizes
sales
at
the
point
of
purchase
when
the
customer
takes
possession
of
the
merchandise
and
pays
for
the
purchase,
generally
with
cash
or
credit.
Sales
from
purchases
made
with
Cato
credit,
gift
cards
and
layaway
sales
from
stores
are
also
recorded
when
the
customer
takes
possession of
the merchandise. E-commerce
sales are
recorded when the
risk of
loss is
transferred to the
customer.
Gift cards
are recorded
as deferred
revenue until they
are redeemed
or forfeited.
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.
ne
of the
credit card
receivables are
secured.
The
Company
estimated customer credit losses of $
2024, respectively,
on sales purchased
by the Company’s
proprietary credit card of
$
million for the periods ended May 3, 2025 and May 4, 2024, respectively.
The
following
table
provides
information
about
receivables
and
contract
liabilities
from
contracts
with
customers (in thousands):
Balance as of
May 3, 2025
February 1, 2025
Proprietary Credit Card Receivables, net
$
$
Gift Card Liability
$
$
THE CATO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
18
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
May 3, 2025
May 4, 2024
Operating lease cost
$
$
Variable
lease cost (a)
$
$
(a) Primarily relates to monthly percentage rent for stores not presented on the balance sheet.
THE CATO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
19
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
May 3, 2025
May 4, 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
May 3, 2025
May 4, 2024
Weighted-average remaining lease term
Weighted-average discount rate
As of May 3, 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 3 months ended May 3, 2025.
20
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
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 the
COVID-19 or other
pandemics and related
responses
and
mitigation
efforts,
as
well
as
the
potential
impact
of
supply
chain
disruptions,
extreme
weather conditions,
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
conditions
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 new information, future events, or
otherwise.
THE CATO CORPORATION
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)
21
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.
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)
22
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
May 3, 2025
May 4, 2024
Total retail sales
100.0
%
100.0
%
Other revenue
1.1
1.0
Total revenues
101.1
101.0
Cost of goods sold (exclusive of depreciation)
64.9
64.2
Selling, general and administrative (exclusive of depreciation)
32.8
32.4
Depreciation
1.5
1.2
Interest and other income
(0.7)
(3.3)
Income before income taxes
2.5
6.6
Net income
2.0
6.3
THE CATO CORPORATION
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)
23
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 quarter, only products from China were subject to the
Section 301
ad
valorem
tariffs.
These
tariffs
increased
our
costs
associated
with
receipted
products
made
in
these
countries in the latter half of
the first quarter and will continue
to do so in the
second quarter.
These
cost increases
will
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 will
be difficult
to source
in
countries with lower tariffs.
Additionally, our supply
chain may be impacted
in the second quarter
as the flow of
Chinese products to the
United States
was reduced
due to
the high
reciprocal tariffs
that were
only recently
decreased in
mid-May.
Potential supply chain
issues such as
products delivered late
due to port
congestion, longer transit
times and
dwell times at port, and container availability may impact the costs we pay for
ocean freight or the timeliness
of
our
product
deliveries,
any
of
which
may
negatively
impact
our
results
of
operations
and
financial
condition.
Pricing
Pressures
The pressure on our customers’ discretionary income continued into fiscal 2025.
As the cost of tariffs begins
to
impact
retail
pricing,
our
customers
may
become
more
cautious
with
their
discretionary
spending.
The
customers’
caution
in
regard
to
their
discretionary
spending
will
put
additional
pressure
on
our
ability
to
mitigate the cost increases caused by
tariffs.
Comparison of First Quarter of 2025
with 2024
Total retail sales for the first quarter
were $168.4 million compared to
last year’s first quarter sales of
$175.3
million.
Sales
decreased
primarily
due
to
stores
that
were
closed
in
the
past
12
months.
Same-store
sales
were flat
for the
quarter. 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 5.0%
of sales for the first quarter of
fiscal 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,
shipping
charged
to
customers
for
e-
THE CATO CORPORATION
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)
24
commerce
purchases
and
layaway
fees),
were
$170.2
million
for
the
first
quarter
ended
May
3,
2025,
compared to $177.1
million for
the first
quarter ended May
4, 2024. The
Company operated
1,109 stores
at
May 3, 2025 compared
to 1,171 stores at
the end of last fiscal
year’s first quarter.
For the first three
months
of
fiscal
2025,
the
Company
permanently
closed
eight
stores.
The
Company
currently
expects
to
close
approximately 50 stores in fiscal 2025.
Other revenue, a component of
total revenues, was $1.8 million for the first
quarter of fiscal 2025, compared
to $1.8
million for
the prior
year’s comparable
first quarter.
Included in
Other revenue
is credit
revenue of
$0.7 million
which represented
0.4% of
total revenues
in the
first quarter
of fiscal
2025, flat
both in
dollars
and percentage compared
to 2024.
Credit revenue is comprised
of interest earned on
the Company’s private
label credit card
portfolio and related
fee income.
Related expenses include
principally payroll, postage
and
other administrative
expenses, and
totaled $0.4
million in
the first
quarter of
2025, compared
to last
year’s
first quarter expenses of $0.4 million.
Cost of goods
sold was $109.3
million, or 64.9%
of retail sales for
the first quarter of
fiscal 2025, compared
to $112.5
million, or
64.2% of
retail sales
in the
first quarter
of fiscal
2024.
The increase
in cost
of goods
sold as a
percent of sales
was due to increased
sales of marked down
goods, partially offset by
lower buying
and freight
costs. Cost
of goods
sold includes
merchandise costs
(net of
discounts and
allowances), buying
costs,
distribution
costs,
occupancy
costs,
freight
and
inventory
shrinkage.
Net
merchandise
costs
and
in-
bound freight are capitalized as inventory
costs.
Buying and distribution costs include payroll, payroll-related
costs and
operating expenses
for the
buying departments
and distribution
center.
Occupancy costs
include
rent,
real
estate
taxes,
insurance,
common
area
maintenance,
utilities
and
maintenance
for
stores
and
distribution
facilities.
Total
gross
margin
dollars
(retail
sales
less
cost
of
goods
sold
exclusive
of
depreciation)
decreased
by
5.8%
to
$59.1
million
for
the
first
quarter
of
fiscal
2025
compared
to
$62.8
million in the first quarter of fiscal 2024.
Gross margin as presented may not be comparable to those of other
entities.
Selling, general and administrative expenses (“SG&A”) primarily include corporate and store payroll, related
payroll taxes and benefits, insurance, supplies, advertising,
and bank and credit card processing fees.
SG&A
expenses were
$55.3 million,
or 32.8%
of retail
sales for
the first
quarter of
fiscal 2025,
compared to
$56.8
million,
or
32.4%
of
retail
sales
in
the
first
quarter
of
fiscal
2024.
SG&A
expense
was
lower
in
the
first
quarter of fiscal
2025 compared to
the first quarter
of fiscal 2024
primarily due to
lower corporate and
field
payroll
expense,
as
well
as
lower
insurance
costs
and
store
expenses,
partially
offset
by
increases
in
equipment maintenance.
Depreciation expense was $2.6 million, or 1.5% of retail sales for the first quarter of fiscal 2025, compared to
$2.0 million,
or 1.2% of
retail sales
for the first
quarter of
fiscal 2024.
The increase in
depreciation expense
was due to the distribution center
automation implementation at the end
of the second quarter of 2024.
Interest
and
other
income
was
$1.2
million,
or
0.7%
of
retail
sales
for
the
first
quarter
of
fiscal
2025,
compared
to
$5.8
million,
or
3.3%
of
retail
sales
for
the
first
quarter
of
fiscal
2024.
The
decrease
was
primarily
due
to
a
$3.2
million
net
gain
on
the
sale
of
land
held
for
investment
and
the
sale
of
equity
securities recorded in the first quarter
of 2024.
Income tax expense
was $0.9 million or
0.6% of retail sales
for the first quarter
of fiscal 2025, compared
to
income
tax
expense
of
$0.6
million,
or
0.4%
of
retail
sales
for
the
first
quarter
of
fiscal
2024.
The
effective
income
tax
rate
for
the
first
quarter
of
fiscal
2025
was
21.9%
compared
to
5.6%
for
the
first
THE CATO CORPORATION
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)
25
quarter of
2024. The
increase in
tax expense
was primarily
due to
increases in
foreign and
state income
taxes.
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
new 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.
Cash
provided
by
operating
activities
for
the
first
three
months
of
fiscal
2025
was
primarily generated
by
earnings
adjusted
for
depreciation
and
changes
in
working
capital.
The
decrease
in
cash
provided
of
$1.8
million
for
the
first
three
months
of
fiscal
2025
as
compared
to
the
first
three
months
of
fiscal
2024
was
primarily attributable to
lower net income,
partially offset by
the relative change
in inventory from
year-end
to the first
quarter for both
years and non-operating
gain on the
sale of assets
held for investment
in the first
quarter of fiscal 2024.
At May 3, 2025, the Company had working capital of $43.9 million compared to $34.9 million at February 1,
2025.
The increase was primarily attributable to an increase in cash and lower current lease
liability, partially
offset by lower short-term investments and higher
accounts payable.
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
May 3,
2025.
The weighted
average interest rate
under the
credit facility was zero at May 3, 2025 due to no outstanding borrowings.
Expenditures
for
property
and
equipment
totaled
$1.0
million
in
the
first
three
months
of
fiscal
2025,
compared
to
$3.3
million
in
last
year’s
first
three
months.
The
decrease
in
expenditures
for
property
and
equipment
was
primarily
due
to
lower
capital
investments
in
information
technology
and
the
distribution
center, as well
as no new
store openings in
the first quarter
of fiscal 2025.
For the full
fiscal 2025 year,
the
Company expects
to invest
approximately $7.3
million in
capital expenditures,
including distribution
center
automation projects.
Net
cash
provided
by
investing
activities
totaled
$7.9
million
in
the
first
three
months
of
fiscal
2025
compared to $14.6 million provided in the comparable period of fiscal 2024. The decrease
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
three months of fiscal
2025 compared to
$5.6
illion used in the comparable
period of fiscal
2024. The decrease was
primarily due to
no dividends
paid and reduced stock repurchases.
THE CATO CORPORATION
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)
26
As
of
May
3,
2025,
the
Company
had
703,419
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 May 3, 2025
and February
1,
2025.
The
state,
municipal
and corporate
bonds and
asset-backed securities
have
contractual
maturities
which
range
from
10
days
to
2.9
years.
The
U.S.
Treasury/Agencies
notes
and
bonds
have
contractual
maturities which range from 3 months to
1.0 year.
Additionally,
at
May
3,
2025,
the
Company
had
deferred
compensation
plan
assets
of
$9.2
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.
RECENT ACCOUNTING PRONOUNCEMENTS:
See Note 8, Recent Accounting Pronouncements.
THE CATO CORPORATION
QUANTITATIVE
AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK
27
ITEM 3. QUANTITATIVE
AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK:
The
Company
is
subject
to
market
rate
risk
from
exposure
to
changes
in
interest
rates
related
to
its
financing, investing and
cash management activities,
but the Company
does not
believe such exposure
is
material.
ITEM 4. CONTROLS AND PROCEDURES:
We carried out an evaluation, with the
participation of our Principal Executive Officer and
Principal Financial
Officer,
of
the
effectiveness
of
our
disclosure
controls
and
procedures
as
of
May
3,
2025.
Based
on
this
evaluation, our Principal Executive Officer and Principal
Financial Officer concluded that, as of May
3, 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 May 3, 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
28
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 May 3, 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
of Shares
Price Paid
Announced Plans or
Yet be Purchased
Under
Period
Purchased
per Share (1)
Programs (2)
The Plans or Programs (2)
February 2025
135,279
$
3.35
135,279
March 2025
129,603
2.91
129,603
April 2025
29,154
2.37
29,154
Total
294,036
$
3.06
294,036
703,419
(1)
Prices include trading costs.
(2)
As of February
1, 2025, the
Company’s share
repurchase program had
997,455 shares remaining
in
open authorizations.
During
the
first
quarter
ended
May
3,
2025,
the
Company repurchased
and retired
294,036 shares under
this program
for approximately
$899,087 or
an average
market
price of $3.06 per share.
As of May 3, 2025, the Company had 703,419 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
29
ITEM 4.
MINE SAFETY DISCLOSURES:
No matters requiring disclosure.
ITEM 5.
OTHER INFORMATION:
During the
three months
ended May
3, 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)
trading arrangement” or
a “
of Regulation S-K).
ITEM 6.
EXHIBITS:
Exhibit No.
Item
10.1
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*)
THE CATO CORPORATION
PART
II OTHER
INFORMATION
30
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this
report to be signed on its behalf by the undersigned thereunto duly
authorized.
May 29, 2025
/s/ John P.
D. Cato
Date
John P.
D. Cato
Chairman, President and
Chief Executive Officer
May 29, 2025
/s/ Charles D. Knight
Date
Charles D. Knight
Executive Vice President
Chief Financial Officer
TABLE OF CONTENTS
Part I Financial InformationItem 1. Financial StatementsNote 1 - General:Note 1 - GeneralNote 2 - Earnings Per Share:Note 3 Accumulated Other Comprehensive Income:Note 4 Financing Arrangements:Note 5 Reportable Segment Information:Note 5 Reportable Segment Information (continued):Note 6 Share-based Compensation:Note 6 Share-based Compensation (continued):Note 7 Fair Value Measurements:Note 7 Fair Value Measurements (continued):Note 8 Recent Accounting Pronouncements:Note 9 Income Taxes:Note 10 Commitments and Contingencies:Note 11 Revenue Recognition:Note 12 Leases:Note 12 Leases (continued):Item 2. Management S Discussion and Analysis Of FinancialItem 3. Quantitative and Qualitative Disclosures About Market Risk:Item 4. Controls and Procedures:Part II Other InformationItem 1. Legal Proceedings:Item 1A. Risk Factors:Item 2. Unregistered Sales Of Equity Securities and Use Of Proceeds:Item 3. Defaults Upon Senior Securities:Item 4. Mine Safety Disclosures:Item 5. Other Information:Item 6. Exhibits: