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

Exhibit 99.1

FOR IMMEDIATE RELEASE	NEWS RELEASE
	CEO Approval _________
For Further Information Contact:
Stuart L. Uselton
Vice President
Treasurer
704-940-7832

CATO REPORTS 4Q EPS UP 42%
FULL YEAR EPS UP 27%
Provides 2006 Outlook

Charlotte, NC (March 14, 2006) — The Cato Corporation (NYSE: CTR) today reported net income for the fourth quarter and year ended January 28, 2006. For the fourth quarter 2005, net income was $11.6 million or $.37 per diluted share. Fourth quarter 2005 net income increased 44% and earnings per diluted share increased 42% versus fourth quarter 2004. Full year 2005 net income was $44.8 million or $1.41 per diluted share. Full year 2005 net income increased 29% and earnings per diluted share increased 27% versus 2004.

Sales for the fourth quarter were $220.5 million, as compared to sales of $207.9 million for the fourth quarter last year. Total sales for the fourth quarter increased 6% and comparable store sales increased 2%. Sales for the year were $821.6 million as compared to 2004 sales of $773.8 million. For the year, total sales increased 6% and comparable store sales increased 1%.

“The increase in our 2005 results was primarily driven by better margins,” said John Cato, Chairman, President and Chief Executive Officer. “In 2006 we will continue to grow our business by executing our long term strategies of improving the merchandise and customer service, strengthening the infrastructure, and expanding the store base.”

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

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2005 HIGHLIGHTS

For 2005, gross margin increased 180 basis points to 33.4% of sales; selling, general and administrative expenses increased 50 basis points to 24.7% of sales primarily due to increased incentive compensation; and net income increased to 5.5% of sales.

During 2005, the Company:

• Returned $15.9 million in dividends to shareholders. The Company’s annualized dividend of $.52 per share increased 11% in 2005, representing a yield of approximately 2.5% at the current share price;

• Repaid a $30 million term loan two and a half years early and ended the year with over $107 million in cash and short term investments; and

• Continued its geographic expansion by opening 82 stores and relocating 16 stores. The Company closed 15 stores.

2006 OUTLOOK

The Company estimates comparable store sales to be in the range of flat to up 2% for the full year 2006 and the first quarter. The Company estimates 2006 net income to be in the range of $46.4 to $49.3 million, an increase of 4% to 10%, and 2006 earnings per diluted share to be in the range of $1.46 to $1.55, an increase of 4% to 10%. The Company is projecting first quarter net income in the range of $17.6 to $18.4 million, a 4% decrease to flat to 2005, and earnings per diluted share to be in the range of $.55 to $.58, a 5% decrease to flat to 2005.

• The Company expects to open 90 new stores during the year. The Company’s estimate reflects the impact of closing 10 stores by year-end. At this time, two stores have been closed, but no other stores have been identified for closure.

• Capital expenditures are projected to be $45 million, including $15 million for store development and $27 million for technology. Expected technology investments include the completion of the point of sale system begun in 2005 and other store improvements.

• Depreciation is expected to be $22.2 million for the year.

• The effective tax rate is expected to be 36.5%.

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

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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, every day. As of January 28, 2006, the Company operated 1,244 stores in 31 states, compared to 1,177 stores in 29 states as of January 29, 2005. 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 fiscal 2006 and the first quarter of 2006, including various components of net income, comparable store sales, expected capital expenditures, and store openings and closings 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.

# # #

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 JANUARY 28, 2006 AND JANUARY 29, 2005
(Dollars in thousands, except per share data)

	Quarter Ended												Twelve Months Ended
	January 28,			%			January 29,			%			January 28,			%			January 29,			%
	2006			Sales			2005			Sales			2006			Sales			2005			Sales
REVENUES
Retail sales	$	220,497			100.0	%	$	207,937			100.0	%	$	821,639			100.0	%	$	773,809			100.0	%
Other income (principally finance, late fees and layaway charges)		3,639			1.6	%		4,068			2.0	%		14,742			1.8	%		15,795			2.0	%
Total revenues		224,136			101.6	%		212,005			102.0	%		836,381			101.8	%		789,604			102.0	%
GROSS MARGIN (Memo)		70,271			31.9	%		63,244			30.4	%		274,684			33.4	%		244,893			31.6	%
COSTS AND EXPENSES, NET
Cost of goods sold		150,226			68.1	%		144,693			69.6	%		546,955			66.6	%		528,916			68.4	%
Selling, general and administrative		51,828			23.5	%		50,100			24.1	%		203,156			24.7	%		187,618			24.2	%
Depreciation		5,118			2.3	%		5,187			2.5	%		20,275			2.5	%		20,397			2.6	%
Interest expense		10			0.0	%		205			0.1	%		183			0.0	%		717			0.1	%
Interest and other income		(1,316	)		-0.6	%		(901	)		-0.4	%		(4,563	)		-0.6	%		(2,739	)		-0.4	%
Cost and expenses, net		205,866			93.3	%		199,284			95.9	%		766,006			93.2	%		734,909			94.9	%
Income Before Income Taxes		18,270			8.3	%		12,721			6.1	%		70,375			8.6	%		54,695			7.1	%
Income Tax Expense		6,632			3.0	%		4,618			2.2	%		25,546			3.1	%		19,854			2.6	%
Net Income	$	11,638			5.3	%	$	8,103			3.9	%	$	44,829			5.5	%	$	34,841			4.5	%
Basic Earnings Per Share	$	0.37					$	0.26					$	1.44					$	1.13
Basic Weighted Average Shares		31,049,631						31,008,396						31,117,214						30,876,393
Diluted Earnings Per Share	$	0.37					$	0.26					$	1.41					$	1.11
Diluted Weighted Average Shares		31,708,829						31,681,293						31,789,887						31,478,061

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

	January 28,		January 29,
	2006		2005
	(Unaudited)
ASSETS
Current Assets
Cash and cash equivalents	$	21,734	$	18,640
Short-term investments		86,085		88,588
Accounts receivable — net		49,644		50,889
Merchandise inventories		103,370		100,538
Other current assets		10,844		7,767
Total Current Assets		271,677		266,422
Property and Equipment — net		124,104		117,590
Other Assets		10,855		10,122
TOTAL	$	406,636	$	394,134
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities	$	132,563	$	132,631
Noncurrent Liabilities		34,125		34,328
Long Term Debt		0		16,000
Stockholders’ Equity		239,948		211,175
TOTAL	$	406,636	$	394,134

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