The Cato Corporation (CATO) 8-K CATO REPORTS 1Q EPS UP 12% Provides 2Q Guidance

Exhibit 99.1

NEWS RELEASE

FOR IMMEDIATE RELEASE CEO Approval___

For Further Information Contact:
          Stuart Uselton
          Vice President
          Treasurer
          704-940-7832

CATO REPORTS 1Q EPS UP 12%
Provides 2Q Guidance

Charlotte, NC (May 16, 2006) — The Cato Corporation (NYSE: CTR) today reported net income of $20.8 million or $.65 per diluted share for the first quarter ended April 29, 2006, compared to net income of $18.4 million or $.58 per diluted share for the first quarter ended April 30, 2005. Net income increased 13% and earnings per diluted share increased 12% from the prior year. Sales for the first quarter were $229.7 million, a 7% increase over sales of $215.1 million for the first quarter last year. The Company’s first quarter comparable store sales increased 2%.

“Our first quarter results slightly exceeded our revised EPS range of $.62 to $.64,” said John Cato, Chairman, President, and Chief Executive Officer. “Gross margin improved over the prior year due to better sell-throughs. We expect second quarter earnings per diluted share to be in the range of $.34 to $.37 versus $.34 last year. For the year, we are estimating earnings per diluted share to be in the range of $1.57 to $1.63 versus $1.41 last year. Comparable store sales are estimated to be in the range of flat to up 2% for the second quarter and balance of the year.”

During the first quarter, the Company opened 11 stores, relocated seven stores, and closed three stores. As of April 29, 2006, the Company operated 1,252 stores in 31 states, compared to 1,188 stores in 31 states as of April 30, 2005.

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. 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 second quarter and year 2006 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 APRIL 29, 2006 AND APRIL 30, 2005
(Dollars in thousands, except per share data)

	Quarter Ended
	April 29,			%			April 30,			%
	2006			Sales			2005			Sales
REVENUES
Retail sales	$	229,741			100.0	%	$	215,064			100.0	%
Other income (principally finance, late fees and layaway charges)		3,319			1.5	%		3,863			1.8	%
Total revenues		233,060			101.5	%		218,927			101.8	%
GROSS MARGIN (Memo)		87,628			38.2	%		78,630			36.6	%
COSTS AND EXPENSES, NET
Cost of goods sold		142,113			61.8	%		136,434			63.4	%
Selling, general and administrative		54,567			23.8	%		49,333			22.9	%
Depreciation		5,168			2.3	%		5,038			2.3	%
Interest expense		10			0.0	%		152			0.1	%
Interest and other income		(1,552	)		-0.7	%		(941	)		-0.4	%
Cost and expenses, net		200,306			87.2	%		190,016			88.3	%
Income Before Income Taxes		32,754			14.3	%		28,911			13.5	%
Income Tax Expense		11,955			5.2	%		10,495			4.9	%
Net Income	$	20,799			9.1	%	$	18,416			8.6	%
Basic Earnings Per Share	$	0.67					$	0.59
Basic Weighted Average Shares		31,084,206						31,104,326
Diluted Earnings Per Share	$	0.65					$	0.58
Diluted Weighted Average Shares		31,814,193						31,793,139

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

	April 29,		April 30,		January 28,
	2006		2005		2006
	(Unaudited)		(Unaudited)
ASSETS
Current Assets
Cash and cash equivalents	$	25,319	$	22,773	$	21,734
Short-term investments		95,752		71,472		86,085
Accounts receivable — net		47,791		49,534		49,644
Merchandise inventories		103,145		105,084		103,370
Other current assets		11,379		12,112		10,844
Total Current Assets		283,386		260,975		271,677
Property and Equipment — net		131,516		118,727		124,104
Other Assets		10,799		10,391		10,855
TOTAL	$	425,701	$	390,093	$	406,636
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities	$	135,515	$	128,771	$	132,563
Noncurrent Liabilities		32,787		34,268		34,125
Stockholders’ Equity		257,399		227,054		239,948
TOTAL	$	425,701	$	390,093	$	406,636

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