What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-11-25 compared with 2025-08-28 · 239 added, 240 removed, 180 unchanged (73% of the section changed)

3 unchanged sentences

“forward-looking”

reflect projections

or expectations

projections or

expectations of

future financial

9 unchanged sentences

to, statements

policies, inflationary

pressures and

other economic

conditions on

our business,

operations and

financial condition

and statements regarding

development strategy;

(5) statements

to our future

efforts, as well as the potential impact of supply chain disruptions, extreme weather conditions, tariffs and

contingencies.

When possible, we

have attempted to

identify forward-looking statements by

“anticipates,”

“approximates,”

“intends,” “may,”

“plans,” “could,” “would,”

“should” and any

variations or negative

formations of such

forward-looking

statements by

“will,” “expects,”

“anticipates,” “approximates,”

negative formations

similar expressions.

forward-looking

Forward-looking statements included in this report are based on information available to us as

unknown risks,

uncertainties and

other factors

forward-looking

include, but are

not limited to,

the following:

any actual or

perceived deterioration in the

conditions that

political and public health

threats and uncertainties, levels of

unemployment, fuel, energy and

inflation, wage rates, tax rates, tariffs, interest rates, home values, consumer net worth and the

government policies

business, including

uncertainties regarding

any governmental

action regarding,

implement our new store development strategy to increase new store openings and

our ability of any such

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,

costs, inflation, wage

rates, tariffs,

interest rates, home

values, consumer

net worth and

the availability of credit;

changes in laws, regulations

or government policies affecting

uncertainties

governmental action regarding,

or responses to,

the foregoing conditions;

factors and pricing

rapidly changing

fashion trends

our ability to

successfully implement our

new store development

strategy to increase

new store openings

underperformance

continuation or acceleration

closures and negatively

Company’s profitability,

profitability,

(including the

other pandemics),

aggression or

similar conditions

financial services industry or

broader financial markets;

other factors discussed under

“Risk Factors”

our annual report

ended February 1,

supplemented,

other reports

2025 (“fiscal

supplemented, and

Securities and

undertake, and

any obligation

such forward-looking information contained

in this report,

result of new

information, future

events, or otherwise.

obligation to update any such

forward-looking information contained in this report,

whether as a result of

ew information, future events, or otherwise.

THE CATO CORPORATION

8 unchanged sentences

statements in

with generally

accepted accounting

16 unchanged sentences

compensation,

The Company’s critical accounting policies and

he Company’s critical accounting policies and

estimates are discussed with the Audit Committee.

3 unchanged sentences

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:

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

Six Months Ended

August 2, 2025

August 3, 2024

August 2, 2025

August 3, 2024

Nine Months Ended

November 1, 2025

November 2, 2024

November 1, 2025

November 2, 2024

Total retail sales

6 unchanged sentences

Interest and other income

Income before income taxes

Income (loss) before income taxes

et income (loss)

THE CATO CORPORATION

4 unchanged sentences

condition and results of

We recommend reading

this MD&A in conjunction

with our Condensed

We recommend reading this

MD&A in conjunction with

our Condensed

Consolidated Financial

9 unchanged sentences

an additional Section

valorem tariffs

products sourced

other countries

Southeast Asia.

Excluding China,

reciprocal tariffs

20%, depending

anticipate that

the remainder

additional costs.

These cost increases will negatively impact our results of operations and financial condition unless we are

valorem tariff on

Chinese products.

In the third quarter,

products from China were subject

to the Section

India’s tariffs

increased to 50% from 10% in

Though China’s tariffs

remained at 30% during

negatively impacted by these additional costs.

increases will

negatively impact

of operations

and financial

successfully mitigate

3 unchanged sentences

without losing

predominately made in China, will be difficult to source in countries with lower tariffs.

Pricing Pressures

of tariffs begins

to impact retail

pricing, our customers may

become more cautious

discretionary

additional pressure on our ability to mitigate the cost increases caused by

Comparison of the Three and Six

Months ended August 2, 2025

with August 3, 2024

Total retail sales

for the second

$174.7 million

compared to last

year’s second

quarter sales

$166.9 million, a 5% increase.

Company’s sales increased in the second

quarter of fiscal 2025 primarily

due to a 9% increase in same-store sales, partially offset by stores that were closed in

the past 12 months.

comparable six month sales of $342.2 million,

a 0.3% increase.

The increase in sales

in the first six months of

and/or sharing these

product categories,

such as shoes

and handbags that

are predominately made in China, will be difficult to source in countries with lower

Comparison of the Three and Nine

Months ended November 1, 2025 with November

Total retail sales for the

third quarter were $153.7 million compared to

last year’s third quarter sales

million, a 6%

Company’s sales increased

quarter of fiscal

2025 primarily due

in same-store

sales, partially

comparable nine month sales

of $486.8 million, a

in sales in the

first nine months

due primarily

in same-store

sales, offset

sales include

5 unchanged sentences

As a result, our

same-store sales calculation may not be comparable to similarly titled measures reported by other companies.

E-commerce sales were less than 5% of total sales for the six months ended August 2,

2025 and are included

same-store sales

Total revenues,

revenue (principally

finance charges

customer accounts

receivable and

layaway fees),

$346.8 million

$168.6 million

same-store sales calculation may not be comparable to similarly titled measures reported

by other companies.

(principally finance

accounts receivable

respectively.

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

he Company currently expects to close

approximately 50 stores in fiscal 2025.

THE CATO CORPORATION

1 unchanged sentence

CONDITION AND RESULTS OF OPERATIONS

million for the three and six months ended August 3, 2024, respectively.

The Company operated 1,101 stores

year’s second

months of fiscal 2025,

the Company permanently closed

The Company currently expects

approximately 50 stores in fiscal 2025.

Other revenue, a component of total revenues, was $1.9 million and $3.7 million for the

three and six months

respectively,

comparable three

month periods.

Other revenue is

credit revenue of

months ended November 1, 2025, respectively, compared to $1.5 million and $5.0 million for the prior

comparable three and nine month periods.

Included in Other revenue is credit revenue of $0.7 million, which

percentage compared to fiscal 2024.

Credit revenue is comprised of interest earned on the Company’s private

label credit card

portfolio and related

Related expenses principally

include payroll, postage

other administrative

year’s third quarter expense of

$0.4 million.

represented 0.4%

and percentage

compared to fiscal 2024.

Credit revenue is comprised of interest earned on the Company’s private label credit

administrative expenses and totaled $0.4 million

in the second quarter of fiscal 2025,

compared to last year’s

second quarter expense of $0.4 million.

64.4% of retail

and $325.3 million,

for the three and

nine months ended November

1, 2025, respectively, compared

to $103.0 million, or

of retail sales and $324.6 million, or 66.7% of retail sales for the comparable three and nine month periods of

third quarter

comparable three

The overall decrease in

cost of goods sold

as a percent of

retail sales for the

second quarter and

primarily from lower buying and distribution costs, partially offset by increased sales of marked down goods.

includes merchandise

and allowances),

buying costs,

payroll-related

month periods

2024 resulted

primarily from lower

buying, distribution and

occupancy costs, partially

offset by increased

sales of marked

Cost of goods sold includes merchandise costs (net of discounts and allowances), buying costs,

freight are capitalized as

inventory costs.

Buying and distribution costs

include payroll, payroll-related costs

and operating

buying departments

distribution center.

include rent,

taxes, insurance,

maintenance, utilities

and maintenance

and distribution

3 unchanged sentences

exclusive of depreciation)

by 9.3% to $63.2 million for

the second quarter of fiscal 2025 and

by 1.4% to $122.3 million for

the first six

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

$41.7 million

year’s comparable

and nine months

of fiscal 2024,

respectively.

be comparable

Gross margin as

presented may not

be comparable to

other entities.

Selling, general and administrative expenses (“SG&A”) primarily include corporate and store payroll, related

Selling, general and administrative (“SG&A”) expenses primarily include corporate and store payroll, related

payroll taxes and

3 unchanged sentences

processing fees.

second quarter and first six months of fiscal 2025, respectively, compared to $58.2 million, or

34.9% of retail

sales and $114.9 million, or 33.6% of retail sales for the prior year’s comparable three and

six month periods,

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,

$172.8 million,

comparable three

respectively.

The decrease in SG&A expenses for the

second quarter and first six months of fiscal

increases in advertising and general corporate

Depreciation expense was $2.5 million, or 1.4% of retail sales and $5.1 million, or 1.5% of

retail sales for the

second quarter

The decrease in SG&A

expenses for the third

quarter and first nine

months of fiscal 2025

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

2025, respectively,

$2.7 million,

sales and $4.4

million or 1.3%

of retail sales

for the comparable

three and six

month periods of

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 $1.4 million, or 0.8% of retail sales and $2.6 million, or 0.8% of retail sales for

the three and six months ended August

2, 2025, respectively, compared to $1.7 million,

or 1.0% of retail sales

Interest and other income was $2.2 million, or 1.4% of retail sales and $4.8 million, or 1.0% of retail sales

the three and nine months ended November 1, 2025, respectively, compared to $2.6 million, or 1.8% of retail

respectively.

for the first

six months of

fiscal 2025 compared

to fiscal 2024

was primarily due

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

1 unchanged sentence

CONDITION AND RESULTS OF OPERATIONS

to a $3.2 million

net gain on the

held for investment and

the sale of equity securities

the first quarter of 2024.

second quarter

million for the

third quarter

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.

comparable three and six month periods of fiscal 2024, respectively.

The effective income tax rate

primarily due

reductions in

foreign income

adjustment to the federal net operating loss carryback claim as

a result of the Coronavirus Aid, Relief and

2025, the One Big

Beautiful Bill Act (the

“OBBBA”) was signed into

Company has considered

and concluded the

The effective income tax

first nine months of

considered the

material impact on the Company’s effective tax rate.

The Company continues to monitor impacts moving

LIQUIDITY, CAPITAL

4 unchanged sentences

from operations and its asset-backed revolving line of credit, will be adequate to fund the Company’s

operating requirements and expected capital expenditures

for the next 12 months.

cash provided

operating activities of $6.8

million for the first

six months of fiscal

2025 as compared to

the first six months

non-operating gain

investment in

fiscal 2024, partially offset by the relative change

of accounts payable from year-end to the second quarter

At August 2, 2025, the Company had working capital of $50.5 million compared to

$34.9 million at February

financial statements.

was primarily

attributable to

current fiscal

year compared

loss for the prior fiscal year, the relative change in inventory from year-end to the third quarter for both years

non-operating

offset by the relative change of

accounts payable from year-end to

the third quarter for both

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

18 unchanged sentences

outstanding letter

availability to $27.0 million as of August 2, 2025.

The weighted average interest rate under the credit facility

was zero at August 2, 2025 due

to no outstanding borrowings.

Expenditures for property and equipment totaled $2.4 million in the first six months of fiscal 2025, compared

to $4.8 million in last fiscal

year’s first six months.

The decrease in

expenditures for property and equipment

$27.0 million

weighted average

interest rate

facility was zero at November 1, 2025

due to no outstanding borrowings.

compared to $6.5 million in last fiscal year’s first nine months.

The decrease in expenditures for property and

nformation technology

during fiscal

store openings

THE CATO CORPORATION

1 unchanged sentence

CONDITION AND RESULTS OF OPERATIONS

technology, as

store openings

current fiscal

fiscal 2025 year, the Company expects

to invest approximately $5.9 million for capital

expenditures.

investing activities

2025 compared

$6.7 million net cash

provided in the comparable

Company expects

approximately $5.9

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 increase in net

cash used in investing

The decrease in net

cash provided by investing

partially offset by lower capital

expenditures.

financing activities

2025 compared

Net cash used

in financing activities

totaled $0.9 million

nine months of

fiscal 2025 compared

activities in fiscal

2 unchanged sentences

stock repurchases.

authorizations

As of November

1, 2025, the Company

had 680,740 shares remaining

in open authorizations under

repurchase program.

1 unchanged sentence

derivative financial instruments.

maturities which

Treasury/Agencies

contractual maturity of up to 7 months.

Additionally,

compensation plan

contractual maturity of up to 3.5

Additionally, at November 1, 2025, the

Company had deferred compensation plan assets

of $9.8 million.

Measurements, included in Part 1, Item 1 Financial Statements (Unaudited) in this Quarterly Report on Form

14 unchanged sentences

but the Company

believe such exposure

does not believe

such exposure is

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis