cato24qtr3q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.

20549

FORM

10-Q

☑

QUARTERLY REPORT PURSUANT

TO SECTION

13 OR 15(d)

OF THE SECURITIES

EXCHANGE

ACT OF

1934

For the quarterly period ended

November 2, 2024

☐

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

1-31340

THE CATO CORPORATION

(Exact name of registrant as specified in its

charter)

Delaware

56-0484485

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

8100 Denmark Road

Charlotte

North Carolina

28273-5975

(Address of principal executive offices)

(Zip Code)

(704)

554-8510

(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

Class A - Common Stock, par value $.033 per share

CATO

New York Stock Exchange

Indicate

by check

mark

whether

the

registrant

(1)

has

filed

all

reports

required

filed

by Section

15(d)

the

Securities

Exchange Act of 1934

during the preceding 12

months (or for such shorter

period that the registrant

was required to file such

reports),

and (2) has been subject to such filing requirements for the past 90 days.

Yes

Indicate

check

mark

whether

the

registrant

has

submitted

electronically

every

Interactive

Data

File

required

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).

Yes

Indicate by

check mark

whether the

registrant is

a large

accelerated filer,

an accelerated

filer, a

non-accelerated filer,

a smaller

reporting

company,

emerging

growth

company.

See

the

definitions

“large

accelerated

filer,”

“accelerated

filer,”

“smaller

reporting

company,” and “emerging growth

company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☐

Accelerated filer

☑

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

emerging

growth

company,

indicate

check

mark

the

registrant

has

elected

not

use

the

extended

transition

period

for

complying with any new or revised financial accounting standards provided

pursuant to Section 13(a) of the Exchange Act.

☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b

-2 of the Exchange Act). Yes

☐

☒

November

2024,

there

were

18,774,124

Class A

common

stock

and

1,763,652

Class B

common

stock

outstanding.

THE CATO CORPORATION

FORM 10-Q

Quarter Ended November 2, 2024

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)

For the Three Months and Nine Months Ended November

2, 2024 and October 28,

2023

Condensed Consolidated Balance Sheets

At November 2, 2024 and February 3, 2024

Condensed Consolidated Statements of Cash Flows

For the Nine Months Ended November 2, 2024 and

October 28, 2023

Condensed Consolidated Statements of Stockholders’ Equity

5 – 6

For the Three Months and Nine Months Ended November

2, 2024 and October 28,

2023

Notes to Condensed Consolidated Financial Statements

7 – 21

For the Three Months and Nine Months Ended November

2, 2024 and October 28,

2023

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

Item 4.

Controls and Procedures

PART

II – OTHER INFORMATION

Item 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

Signatures

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 2,

2024

October 28,

2023

November 2,

2024

October 28,

2023

(Dollars in thousands, except per share data)

REVENUES

Retail sales

144,642

156,682

486,848

528,174

Other revenue (principally finance charges, late fees and

layaway charges)

1,528

1,574

5,049

5,003

Total revenues

146,170

158,256

491,897

533,177

COSTS AND EXPENSES, NET

Cost of goods sold (exclusive of depreciation shown

below)

102,955

105,832

324,582

345,536

Selling, general and administrative (exclusive of

depreciation

shown below)

57,876

61,792

172,809

185,344

Depreciation

2,737

2,504

7,106

7,371

Interest and other income

(2,646)

(1,523)

(10,209)

(3,754)

Costs and expenses, net

160,922

168,605

494,288

534,497

Loss before income taxes

(14,752)

(10,349)

(2,391)

(1,320)

Income tax (benefit) expense

322

(4,272)

1,614

(797)

Net loss

(15,074)

(6,077)

(4,005)

(523)

Basic loss per share

(0.79)

(0.30)

(0.24)

(0.02)

Diluted loss per share

(0.79)

(0.30)

(0.24)

(0.02)

Comprehensive income:

Net loss

(15,074)

(6,077)

(4,005)

(523)

Unrealized gain (loss) on available-for-sale securities, net of

deferred income taxes of $

and $

217

for

the three and nine months ended October 28, 2023,

respectively

(151)

201

(223)

723

Comprehensive income (loss)

(15,225)

(5,876)

(4,228)

200

See notes to condensed consolidated financial statements (unaudited).

THE CATO CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

November 2, 2024

February 3, 2024

ASSETS

(Dollars in thousands)

Current Assets:

Cash and cash equivalents

20,216

23,940

Short-term investments

65,994

79,012

Restricted cash

3,355

3,973

Accounts receivable, net of allowance for customer credit losses of

670

and $

705

at November 2, 2024 and February 3, 2024, respectively

24,776

29,751

Merchandise inventories

107,159

98,603

Prepaid expenses and other current assets

8,705

7,783

Total Current Assets

230,205

243,062

Property and equipment – net

62,648

64,022

Other assets

19,783

25,047

Right-of-Use assets – net

111,769

154,686

Total Assets

424,405

486,817

LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:

Accounts payable

84,169

87,821

Accrued expenses

38,158

37,404

Accrued employee benefits and bonus

1,370

1,675

Current lease liability

45,836

61,108

Total Current Liabilities

169,533

188,008

Other noncurrent liabilities

14,555

14,475

Lease liability

63,218

92,013

Stockholders' Equity:

Preferred stock, $

100

par value per share,

100,000

authorized,

none

issued

Class A common stock, $

0.033

par value per share,

50,000,000

shares authorized;

18,774,124

shares and

18,802,742

issued at November 2, 2024 and February 3, 2024, respectively

634

635

Convertible Class B common stock, $

0.033

par value per share,

15,000,000

shares authorized;

1,763,652

issued at November 2, 2024 and February 3, 2024

Additional paid-in capital

128,827

126,953

Retained earnings

47,407

64,279

Accumulated other comprehensive income

172

395

Total Stockholders' Equity

177,099

192,321

Total Liabilities and Stockholders' Equity

424,405

486,817

See notes to condensed consolidated financial statements (unaudited).

THE CATO CORPORATION

CONDENSED CONSOLIDATED STATEMENTS

OF CASH FLOWS

(UNAUDITED)

Nine Months Ended

November 2, 2024

October 28, 2023

(Dollars in thousands)

Operating Activities:

Net loss

(4,005)

(523)

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

by operating activities:

Depreciation

7,106

7,371

Provision for customer credit losses

492

397

Purchase premium and discount accretion of investments

(848)

(226)

Gain on sale of assets held for investment

(5,350)

Share-based compensation

1,581

3,189

Deferred income taxes

(1,981)

Loss on disposal of property and equipment

116

Changes in operating assets and liabilities which provided

(used) cash:

Accounts receivable

1,283

(1,815)

Merchandise inventories

(8,556)

13,184

Prepaid and other assets

(1,315)

(1,716)

Operating lease right-of-use assets and liabilities

(1,151)

(1,499)

Accrued income taxes

1,375

Accounts payable, accrued expenses and other liabilities

(2,619)

(6,099)

Net cash (used in) provided by operating activities

(13,266)

11,670

Investing Activities:

Expenditures for property and equipment

(6,509)

(10,271)

Purchase of short-term investments

(38,659)

(44,595)

Sales of short-term investments

52,994

60,999

Sales of other assets

13,674

Net cash provided by investing activities

21,500

6,133

Financing Activities:

Dividends paid

(10,516)

(10,457)

Repurchase of common stock

(2,398)

(2,563)

Proceeds from employee stock purchase plan

338

357

Net cash used in financing activities

(12,576)

(12,663)

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

(4,342)

5,140

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

27,913

23,792

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

23,571

28,932

Non-cash activity:

Accrued other assets and property and equipment expenditures

440

1,100

See notes to condensed consolidated financial statements (unaudited).

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

694

126,953

64,279

395

192,321

Comprehensive income:

Net income

10,974

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

deferred income tax expense of $0

(748)

Dividends paid ($

0.17

per share)

(3,523)

Class A common stock sold through employee stock purchase

plan

189

190

Share-based compensation issuances and exercises

Share-based compensation expense

(84)

Repurchase and retirement of treasury shares

(14)

(2,223)

(2,237)

Balance — May 4, 2024

694

127,058

69,512

(353)

196,911

Comprehensive income:

Net income

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

deferred income tax expense of $0

676

Dividends paid ($

0.17

per share)

(3,527)

Class A common stock sold through employee stock purchase

plan

Share-based compensation expense

858

872

Balance — August 3, 2024

694

127,951

66,094

323

195,062

Comprehensive income:

Net loss

(15,074)

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

deferred income tax expense of $0

(151)

Dividends paid ($

0.17

per share)

(3,466)

Class A common stock sold through employee stock purchase

plan

172

173

Share-based compensation expense

(1)

704

714

Repurchase and retirement of treasury shares

(1)

(158)

(159)

Balance — November 2, 2024

693

128,827

47,407

172

177,099

See notes to condensed consolidated financial statements (unaudited).

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 — January 28, 2023

691

122,431

104,709

(1,238)

226,593

Comprehensive income:

Net income

4,428

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

deferred income tax expense of $

107

355

Dividends paid ($

0.17

per share)

(3,455)

Class A common stock sold through employee stock purchase

plan

195

Share-based compensation issuances and exercises

Share-based compensation expense

929

Repurchase and retirement of treasury shares

(8)

(2,259)

(2,267)

Balance — April 29, 2023

683

123,555

103,426

(883)

226,781

Comprehensive income:

Net income

1,127

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

deferred income tax expense of $

167

Dividends paid ($

0.17

per share)

(3,507)

Class A common stock sold through employee stock purchase

plan

Share-based compensation expense

1,212

1,227

Repurchase and retirement of treasury shares

(1)

(293)

(294)

Balance — July 29, 2023

695

124,798

100,756

(716)

225,533

Comprehensive income:

Net loss

(6,077)

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

deferred income tax expense of $

201

Dividends paid ($

0.17

per share)

(3,495)

Class A common stock sold through employee stock purchase

plan

188

189

Share-based compensation expense

(1)

963

967

Balance — October 28, 2023

695

125,949

91,189

(515)

217,318

See notes to condensed consolidated financial statements (unaudited).

THE CATO CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

FOR THE THREE MONTHS AND NINE MONTHS ENDED

NOVEMBER 2, 2024 AND

OCTOBER 28, 2023

NOTE 1 - GENERAL

The

condensed

consolidated

financial

statements

November

2024

and

for

the

three

and

nine

months ended

November 2, 2024

and October 28,

2023 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

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

the

Company’s

Annual

Report

Form

10-K

for

the

fiscal

year

ended

February 3, 2024.

Amounts as of February 3, 2024 have been derived from the audited balance sheet, 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 $

3.2

million and

was included

in Interest

and other

income in

the accompanying

Condensed

Consolidated Statements of Income

(Loss) and Comprehensive

Income (Loss) for

the nine months

ended

November 2, 2024.

During the current quarter of the fiscal year,

the Company received $

8.6

million from the insurance claim

settlement and sale of its corporate jet.

THE CATO CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

FOR THE THREE MONTHS AND NINE MONTHS ENDED

NOVEMBER 2, 2024 AND

OCTOBER 28, 2023

NOTE 2 - EARNINGS PER SHARE:

Accounting Standard Codification (“ASC”) 260 –

Earnings Per Share

requires dual presentation of basic and

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

incorporation

provides

the

right

for

the

Board

Directors

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

the

same

for

Class

and

Class

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

the

weighted

average

number

common

outstanding

for

the

period.

Diluted

EPS

reflects

the

potential

dilution

that

could

occur

from

common

issuable

through

stock

options

and

the

Employee

Stock Purchase Plan.

Three Months Ended

Nine Months Ended

November 2,

2024

October 28,

2023

November 2,

2024

October 28,

2023

(Dollars in thousands, except per share data)

Numerator

Net loss

(15,074)

(6,077)

(4,005)

(523)

Earnings (loss) allocated to non-vested equity awards

(200)

346

(548)

Net loss available to common stockholders

(15,274)

(5,731)

(4,553)

(474)

Denominator

Basic weighted average common shares outstanding

19,302,107

19,421,701

19,318,794

19,373,411

Diluted weighted average common shares outstanding

19,302,107

19,421,701

19,318,794

19,373,411

Net loss per common share

Basic loss per share

(0.79)

(0.30)

(0.24)

(0.02)

Diluted loss per share

(0.79)

(0.30)

(0.24)

(0.02)

THE CATO CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

FOR THE THREE MONTHS AND NINE MONTHS ENDED

NOVEMBER 2, 2024 AND

OCTOBER 28, 2023

NOTE 3 – ACCUMULATED OTHER COMPREHENSIVE INCOME:

The

following

table

sets

forth

information

regarding

the

reclassification

out

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

323

Other comprehensive income (loss) before

reclassification

(151)

Amounts reclassified from accumulated

other comprehensive income to net income

Net current-period other comprehensive income (loss)

(151)

Ending Balance at November 2, 2024

172

(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

reclassification

out

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

395

Other comprehensive income (loss) before

reclassification

563

Amounts reclassified from accumulated

other comprehensive income to net income (b)

(786)

Net current-period other comprehensive income (loss)

(223)

Ending Balance at November 2, 2024

172

(a) All amounts are net-of-tax. Amounts in parentheses indicate a debit/reduction to accumulated other comprehensive income.

(b) Includes

$1,022

impact of Accumulated other comprehensive income reclassifications into Interest and other

income for net realized gains on available-for-sale securities. The tax impact of this reclassification was $

236

THE CATO CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

FOR THE THREE MONTHS AND NINE MONTHS ENDED

NOVEMBER 2, 2024 AND

OCTOBER 28, 2023

NOTE 3 – ACCUMULATED OTHER COMPREHENSIVE INCOME

(CONTINUED):

The

following

table

sets

forth

information

regarding

the

reclassification

out

Accumulated

other

comprehensive income (in thousands) for the

three months ended October 28, 2023:

Changes in Accumulated Other

Comprehensive Income (a)

Unrealized Gains

and (Losses) on

Available-for-Sale

Securities

Beginning Balance at July 29, 2023

(716)

Other comprehensive income (loss) before

reclassification

185

Amounts reclassified from accumulated

other comprehensive income to net income (b)

Net current-period other comprehensive income (loss)

201

Ending Balance at October 28, 2023

(515)

(a) All amounts are net-of-tax. Amounts in parentheses indicate a debit/reduction to accumulated other comprehensive income.

(b) Includes $

impact of Accumulated other comprehensive income reclassifications into Interest and other

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

Accumulated

other

comprehensive income (in thousands) for the

nine months ended October 28, 2023:

Changes in Accumulated Other

Comprehensive Income (a)

Unrealized Gains

and (Losses) on

Available-for-Sale

Securities

Beginning Balance at January 28, 2023

(1,238)

Other comprehensive income (loss) before

reclassification

704

Amounts reclassified from accumulated

other comprehensive income to net income (b)

Net current-period other comprehensive income (loss)

723

Ending Balance at October 28, 2023

(

SEC Form 10-Q filed by Cato Corporation