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

Exhibit 99.1

The CATO Corporation

	NEWS RELEASE
FOR IMMEDIATE RELEASE
	CEO Approval

For Further Information Contact:

           Stuart L. Uselton

           Vice President

           Treasurer

           704-940-7832

CATO REPORTS 2Q EPS UP 12%
Provides Second Half Guidance

Charlotte, NC (August 15, 2006) – The Cato Corporation (NYSE: CTR) today reported net income of $12.1 million or $.38 per diluted share for the second quarter ended July 29, 2006, compared to net income of $10.7 million or $.34 per diluted share for the second quarter ended July 30, 2005. Net income increased 13% and earnings per diluted share increased 12% over last year. Sales for the second quarter were $214.6 million, a 3% increase over sales of $208.3 million last year. The Company’s second quarter comparable store sales decreased 1%.

For the six months ended July 29, 2006, the Company earned net income of $32.9 million or $1.04 per diluted share, compared with net income of $29.1 million or $.92 per diluted share for the six months ended July 30, 2005, a net income increase of 13% and an earnings per diluted share increase of 13%. Sales for the first half of 2006 were $444.4 million, a 5% increase over sales of $423.4 million in the first half of 2005. Comparable store sales for the first half were flat compared to the prior year.

“The growth in second quarter earnings was primarily a result of higher merchandise gross margin due to better sell-throughs of regular priced merchandise,” said John Cato, Chairman, President, and Chief Executive Officer.

During the first half, the Company opened 21 stores, relocated 11 stores, and closed six stores. As of July 29, 2006, the Company operated 1,259 stores in 31 states, compared to 1,197 stores

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

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in 31 states as of July 30, 2005.

The Company’s expectations for third quarter earnings per diluted share are in the range of $.15 to $.17 versus $.13 in 2005. For the fourth quarter, the Company expects earnings per diluted share to be in the range of $.42 to $.44 versus $.37 in 2005. Both quarterly estimates assume comparable store sales in the range of flat to up 2%. For the year, earnings per diluted share are expected to be in the range of $1.60 to $1.64 versus $1.41 last year, an increase of 13% to 16%. The Company’s guidance does not account for proceeds from insurance claims related to last year’s hurricanes, which are uncertain at this time.

The Company’s fourth quarter includes 14 weeks compared to 13 weeks in 2005 and the fiscal year includes 53 weeks compared to 52 weeks in 2005. The additional week is expected to have a positive earnings effect of approximately $.05 per diluted share. Earnings guidance both for the fourth quarter and year reflects this impact.

Due to delays in its store development process, the Company now expects to open approximately 60 stores during 2006 as compared to its original estimate of 90 new stores for the year. Additionally, the Company is now estimating approximately 15 store closings during 2006 as compared to its original estimate of 10 closings.

Mr. Cato commented, “We remain committed to our strategy of expanding through new store growth. In 2007, we anticipate returning to a more normalized pace of 80 to 100 new store openings. The effect of the reduced number of 2006 store openings and the additional week in 2006 will make 2007 a more challenging year for earnings growth.”

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 or estimated financial results for the third quarter, fourth quarter and full year and any related assumptions, as well as the Company’s expected plans for full year store openings and

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

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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 and other factors discussed under “Risk Factors” in Part I, Item 1A of the Company’s most recently filed annual report on Form 10-K, as amended or supplemented, and in other reports the Company files with or furnishes to the SEC from time to time. 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 JULY 29, 2006 AND JULY 30, 2005
(Dollars in thousands, except per share data)

	Quarter Ended												Six Months Ended
	July 29,			%			July 30,			%			July 29,			%			July 30,			%
	2006			Sales			2005			Sales			2006			Sales			2005			Sales
REVENUES
Retail sales	$	214,633			100.0	%	$	208,316			100.0	%	$	444,374			100.0	%	$	423,380			100.0	%
Other income (principally finance, late fees and layaway charges)		3,212			1.5	%		3,648			1.7	%		6,531			1.5	%		7,511			1.8	%
Total revenues		217,845			101.5	%		211,964			101.7	%		450,905			101.5	%		430,891			101.8	%
GROSS MARGIN (Memo)		70,887			33.0	%		67,890			32.6	%		158,516			35.7	%		146,520			34.6	%
COSTS AND EXPENSES, NET
Cost of goods sold		143,746			67.0	%		140,426			67.4	%		285,858			64.3	%		276,860			65.4	%
Selling, general and administrative		51,762			24.1	%		50,765			24.4	%		106,329			23.9	%		100,097			23.6	%
Depreciation		5,223			2.4	%		5,025			2.4	%		10,391			2.4	%		10,064			2.4	%
Interest expense		10			0.0	%		10			0.0	%		20			0.0	%		162			0.0	%
Interest and other income		(1,940	)		-0.9	%		(1,071	)		-0.5	%		(3,492	)		-0.8	%		(2,012	)		-0.4	%
Cost and expenses, net		198,801			92.6	%		195,155			93.7	%		399,106			89.8	%		385,171			91.0	%
Income Before Income Taxes		19,044			8.9	%		16,809			8.0	%		51,799			11.7	%		45,720			10.8	%
Income Tax Expense		6,951			3.3	%		6,102			2.9	%		18,907			4.3	%		16,596			3.9	%
Net Income	$	12,093			5.6	%	$	10,707			5.1	%	$	32,892			7.4	%	$	29,124			6.9	%
Basic Earnings Per Share	$	0.39					$	0.34					$	1.05					$	0.94
Basic Weighted Average Shares		31,267,637						31,188,146						31,250,921						31,146,236
Diluted Earnings Per Share	$	0.38					$	0.34					$	1.04					$	0.92
Diluted Weighted Average Shares		31,803,684						31,828,039						31,778,546						31,811,183

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

	July 29,		July 30.
	2006 (Unaudited)		2005 (Unaudited)		January 28 2006
ASSETS
Current Assets
Cash and cash equivalents	$	21,809	$	23,884	$	21,734
Short-term investments		94,171		86,140		86,085
Accounts receivable - net		46,436		48,229		49,644
Merchandise inventories		91,989		84,904		103,370
Other current assets		10,970		7,944		10,844
Total Current Assets		265,375		251,101		271,677
Property and Equipment - net		130,422		118,599		124,104
Other Assets		11,201		10,818		10,855
TOTAL	$	406,998	$	380,518	$	406,636
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities	$	108,764	$	112,636	$	132,563
Noncurrent Liabilities		32,491		33,904		34,125
Stockholders’ Equity		265,743		233,978		239,948
TOTAL	$	406,998	$	380,518	$	406,636

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