The Cato Corporation (CATO) 8-K Results of Operations and Financial Condition

Exhibit 99.1

NEWS RELEASE

FOR IMMEDIATE RELEASE CEO Approval___

For Further Information Contact:

Michael O. Moore
Executive Vice President
Chief Financial Officer
704-551-7201

CATO REPORTS 2Q EPS UP 31%
Exceeds Previous Estimate
Provides Second Half Guidance

Charlotte, NC (August 16, 2005) – The Cato Corporation (NYSE: CTR) today reported net income of $10.7 million or $.34 per diluted share for the second quarter ended July 30, 2005, compared to net income of $8.1 million or $.26 per diluted share for the second quarter ended July 31, 2004. Net income increased 32% and earnings per diluted share increased 31% from last year. Sales for the second quarter were $208.3 million, a 6% increase over sales of $197.1 million last year. The Company’s second quarter comparable store sales were flat to the prior year.

The Company’s previous estimate of second quarter earnings per diluted share was $.30 to $.31.

For the six months ended July 30, 2005, the Company earned net income of $29.1 million or $.92 per diluted share, compared with net income of $24.9 million or $.80 per diluted share for the six months ended July 31, 2004, a net income increase of 17% and a per diluted share increase of 15%. Sales for the first half of 2005 were $423.4 million, a 5% increase over sales of $402.3 million in the first half of 2004. Comparable store sales for the first half were flat to the prior year.

“Our second quarter earnings improvement was primarily a result of higher merchandise gross

8100 Denmark Road
P. O. Box 34216
Charlotte, NC 28234
(704) 554-8510

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margin due to better sell throughs of regular priced merchandise,” said John Cato, Chairman, President, and Chief Executive Officer. “In July, we successfully implemented a new warehouse management system. This paperless, radio frequency based system will improve accuracy, reduce costs, and speed the flow of merchandise to stores.”

The Company’s expectations for third quarter earnings per diluted share are in the range of $.02 to $.05 versus $.06 in 2004. For the fourth quarter, the Company expects earnings per diluted share to be in the range of $.28 to $.30 versus $.26 last year. Both quarters’ estimates are based on comparable store sales in the range of down 2% to up 2%. For the year, earnings per diluted share are estimated to be in the range of $1.22 to $1.27 versus $1.11 last year, an increase of 10% to 14%.

During the first half, the Company opened 27 stores, relocated seven stores, and closed seven stores. The Company expects to meet its original estimate of 90 new stores for the year. As of July 30, 2005, The Cato Corporation operated 1,197 stores in 31 states, compared to 1,132 stores in 28 states as of July 31, 2004.

The Cato Corporation is a leading specialty retailer of value-priced women’s fashion apparel operating two divisions, “Cato” and “It’s Fashion!”. The Company offers exclusive merchandise with fashion and quality comparable to mall specialty stores at low prices, everyday. Additional information on The Cato Corporation is available at www.catocorp.com.

Statements in this press release not historical in nature including, without limitation, statements regarding the Company’s expected financial results for the third quarter, fourth quarter and full year and expected plans for full year store openings are considered “forward-looking” within the meaning of The Private Securities Litigation Reform Act of 1995. Such forward-looking statements are based on current expectations that are 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: general economic conditions; competitive factors and pricing pressures; the Company’s ability to predict fashion trends; consumer apparel buying patterns; adverse weather conditions and inventory risks due to shifts in market demand. The Company does not undertake to publicly update or revise the forward-looking statements even if experience or future changes make it clear that the projected results expressed or implied therein will not be realized. The Company is not responsible for any changes made to this press release by wire or Internet services.

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8100 Denmark Road
P. O. Box 34216
Charlotte, NC 28234
(704) 554-8510

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THE CATO CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
FOR THE PERIODS ENDED JULY 30, 2005 AND JULY 31, 2004
(Dollars in thousands, except per share data)

	Quarter Ended												Six Months Ended
	July 30,			%			July 31,			%			July 30,			%			July 31,			%
	2005			Sales			2004			Sales			2005			Sales			2004			Sales
							(Restated)												(Restated)
REVENUES
Retail sales	$	208,316			100.0	%	$	197,068			100.0	%	$	423,380			100.0	%	$	402,261			100.0	%
Other income (principally finance, late fees and layaway charges)		3,648			1.7	%		3,816			1.9	%		7,511			1.8	%		7,824			1.9	%
Total revenues		211,964			101.7	%		200,884			101.9	%		430,891			101.8	%		410,085			101.9	%
GROSS MARGIN (Memo)		67,890			32.6	%		60,883			30.9	%		146,520			34.6	%		133,678			33.2	%
COSTS AND EXPENSES, NET
Cost of goods sold		140,426			67.4	%		136,185			69.1	%		276,860			65.4	%		268,583			66.8	%
Selling, general and administrative		50,765			24.4	%		47,320			24.0	%		100,097			23.6	%		93,116			23.1	%
Depreciation		5,025			2.4	%		5,091			2.5	%		10,064			2.4	%		10,070			2.5	%
Interest expense		10			0.0	%		167			0.1	%		162			0.0	%		329			0.1	%
Interest and other income		(1,071	)		-0.5	%		(656	)		-0.3	%		(2,012	)		-0.4	%		(1,162	)		-0.3	%
Cost and expenses, net		195,155			93.7	%		188,107			95.4	%		385,171			91.0	%		370,936			92.2	%
Income Before Income Taxes		16,809			8.0	%		12,777			6.5	%		45,720			10.8	%		39,149			9.7	%
Income Tax Expense		6,102			2.9	%		4,638			2.4	%		16,596			3.9	%		14,211			3.5	%
Net Income	$	10,707			5.1	%	$	8,139			4.1	%	$	29,124			6.9	%	$	24,938			6.2	%
Basic Earnings Per Share	$	0.34					$	0.26					$	0.94					$	0.81
Basic Weighted Average Shares		31,188,146						30,772,526						31,146,236						30,791,747
Diluted Earnings Per Share	$	0.34					$	0.26					$	0.92					$	0.80
Diluted Weighted Average Shares		31,828,039						31,320,047						31,811,183						31,336,248

THE CATO CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)

	July 30,		July 31,		January 29,
	2005		2004		2005
	(Unaudited)		(Unaudited)
			(Restated)
ASSETS
Current Assets
Cash and cash equivalents	$	23,884	$	29,439	$	18,640
Short-term investments		86,140		76,494		88,588
Accounts receivable — net		48,229		50,260		50,889
Merchandise inventories		84,904		86,355		100,538
Other current assets		7,944		10,758		7,767
Total Current Assets		251,101		253,306		266,422
Property and Equipment — net		118,599		114,783		117,590
Other Assets		10,818		10,195		10,122
TOTAL	$	380,518	$	378,284	$	394,134
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities	$	112,636	$	119,140	$	132,631
Noncurrent Liabilities		33,904		34,631		34,328
Long Term Debt		0		18,500		16,000
Stockholders’ Equity		233,978		206,013		211,175
TOTAL	$	380,518	$	378,284	$	394,134

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