The Cato Corporation (CATO) 8-K CATO REPORTS 2Q EPS UP 3% Reaffirms Second Half Guidance

Exhibit 99.1

The CATO Corporation

NEWS RELEASE

FOR IMMEDIATE RELEASE

CEO Approval ________

For Further Information Contact:
     Thomas W. Stoltz
     Executive Vice President
     Chief Financial Officer
     704-551-7201

CATO REPORTS 2Q EPS UP 3%
Reaffirms Second Half Guidance

Charlotte, NC (August 23, 2007) — The Cato Corporation (NYSE: CTR) today reported net income of $12.5 million or $.39 per diluted share for the second quarter ended August 4, 2007, compared to net income of $12.1 million or $.38 per diluted share for the second quarter ended July 29, 2006. Both net income and earnings per diluted share increased 3% over last year. Sales for the second quarter were $219.0 million, a 2% increase over sales of $214.6 million last year. Second quarter comparable store sales decreased 1%.

For the six months ended August 4, 2007, the Company earned net income of $31.2 million or $.97 per diluted share, compared with net income of $32.9 million or $1.04 per diluted share for the six months ended July 29, 2006, a decrease in net income of 5% and a decrease in earnings per diluted share of 7%. Sales for the first half were $443.1 million, flat compared to the prior year’s first half sales of $444.4 million. Comparable store sales for the first half decreased 3% from first half 2006.

“Our results through the first half reflect the challenging apparel retail environment,” said John Cato, Chairman, President, and Chief Executive Officer. “Sell-throughs of regular priced goods have been below last year and, when coupled with higher markdowns, are the primary reason for the decrease in gross margin. Our inventory is in line with sales as we begin the third quarter.”

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

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The Company’s income from operations was in line with previous guidance. Second quarter results were $.02 above the Company’s estimate due primarily to an effective tax rate lower than anticipated due to volatility between quarters and higher tax credits. When compared to the prior year, second quarter and first half SG&A costs decreased from 24.1% to 23.9% and 23.9% to 23.4%, respectively, due primarily to a reduction in accrued incentive compensation.

The Company’s expectations for earnings per diluted share in the second half are unchanged from previous guidance. Comparable store sales for both the third and fourth quarters are estimated to be in the range of down 3% to flat. For the third quarter, earnings per diluted share are estimated to be in the range of $.10 to $.15 versus $.18 in 2006. For the fourth quarter, the Company expects earnings per diluted share to be in the range of $.15 to $.25 versus $.40 in 2006. Fourth quarter 2006 included 14 weeks and several positive one-time adjustments. For the year, after adjusting for second quarter actual results, earnings per diluted share are expected to be in the range of $1.23 to $1.38 versus $1.62 last year, a decrease of 24% to 15%.

During the first half, the Company opened 31 new stores, relocated 10 stores, and closed one store. The Company now expects to open approximately 70 stores during 2007 as compared to its previous guidance of 80 stores. As of August 4, 2007, The Cato Corporation operated 1,306 stores in 31 states, compared to 1,259 stores in 31 states as of July 29, 2006.

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 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

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

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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.

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THE CATO CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
FOR THE PERIODS ENDED AUGUST 4, 2007 AND JULY 29, 2006
(Dollars in thousands, except per share data)

	Quarter Ended												Six Months Ended
	August 4,			%			July 29,			%			August 4,			%			July 29,			%
	2007			Sales			2006			Sales			2007			Sales			2006			Sales
REVENUES
Retail sales	$	218,973			100.0	%	$	214,633			100.0	%	$	443,107			100.0	%	$	444,374			100.0	%
Other income (principally finance, late fees and layaway charges)		2,961			1.3	%		3,212			1.5	%		6,056			1.4	%		6,531			1.5	%
Total revenues		221,934			101.3	%		217,845			101.5	%		449,163			101.4	%		450,905			101.5	%
GROSS MARGIN (Memo)		71,459			32.6	%		70,887			33.0	%		152,171			34.3	%		158,516			35.7	%
COSTS AND EXPENSES, NET
Cost of goods sold		147,514			67.4	%		143,746			67.0	%		290,936			65.7	%		285,858			64.3	%
Selling, general and administrative		52,463			23.9	%		51,772			24.1	%		103,599			23.4	%		106,349			23.9	%
Depreciation		5,623			2.6	%		5,223			2.4	%		11,014			2.5	%		10,391			2.4	%
Interest and other income		(2,316	)		-1.1	%		(1,940	)		-0.9	%		(4,209	)		-1.0	%		(3,492	)		-0.8	%
Cost and expenses, net		203,284			92.8	%		198,801			92.6	%		401,340			90.6	%		399,106			89.8	%
Income Before Income Taxes		18,650			8.5	%		19,044			8.9	%		47,823			10.8	%		51,799			11.7	%
Income Tax Expense		6,140			2.8	%		6,951			3.3	%		16,642			3.8	%		18,907			4.3	%
Net Income	$	12,510			5.7	%	$	12,093			5.6	%	$	31,181			7.0	%	$	32,892			7.4	%
Basic Earnings Per Share	$	0.39					$	0.39					$	0.99					$	1.05
Basic Weighted Average Shares		31,897,365						31,267,637						31,624,979						31,250,921
Diluted Earnings Per Share	$	0.39					$	0.38					$	0.97					$	1.04
Diluted Weighted Average Shares		32,189,903						31,803,875						32,040,169						31,765,992

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

	August 4,		July 29,		February 3,
	2007		2006		2007
	(Unaudited)		(Unaudited)
ASSETS
Current Assets
Cash and cash equivalents	$	19,929	$	21,809	$	24,833
Short-term investments		150,387		94,171		98,709
Accounts receivable — net		45,533		46,436		45,958
Merchandise inventories		99,236		91,989		115,918
Other current assets		14,719		10,970		14,095
Total Current Assets		329,804		265,375		299,513
Property and Equipment — net		126,573		130,422		128,461
Other Assets		4,279		11,201		4,348
TOTAL	$	460,656	$	406,998	$	432,322
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities	$	120,180	$	108,764	$	123,049
Noncurrent Liabilities		32,103		32,491		32,480
Stockholders’ Equity		308,373		265,743		276,793
TOTAL	$	460,656	$	406,998	$	432,322

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