The Cato Corporation (CATO) 8-K CATO REPORTS 2Q EPS UP 5% Provides Second Half Guidance

Exhibit 99.1

NEWS RELEASE

FOR IMMEDIATE RELEASE

CEO Approval                    

For Further Information Contact:
      Stuart L. Uselton
      Executive Vice President
      Chief Administrative Officer
      704-940-7832

CATO REPORTS 2Q EPS UP 5%
Provides Second Half Guidance

Charlotte, NC (August 21, 2008) – The Cato Corporation (NYSE: CTR) today reported net income of $12.1 million or $.41 per diluted share for the second quarter ended August 2, 2008, compared to net income of $12.5 million or $.39 per diluted share for the second quarter ended August 4, 2007. Net income decreased 3% and earnings per diluted share increased 5% over last year. Sales for the second quarter were $231.0 million, a 5% increase over sales of $219.0 million last year. Second quarter comparable store sales increased 2%.

For the six months ended August 2, 2008, the Company earned net income of $28.9 million or $.99 per diluted share, compared with net income of $31.2 million or $.97 per diluted share for the six months ended August 4, 2007, a 7% decrease in net income and a 2% increase in earnings per diluted share. Sales for the first half were $456.7 million, an increase of 3% over the prior year’s first half sales of $443.1 million. Comparable store sales for the first half were flat compared to first half 2007.

“Second quarter results benefited from tight inventory management, better sell-throughs of regular priced merchandise and the impact on overall sales from stimulus checks,” said John Cato, Chairman, President, and Chief Executive Officer. “We expect the remainder of the year to be difficult as our customer continues to face difficult economic conditions. We remain comfortable with our original guidance for the second half of the year with earnings per diluted share in a range of ($.06) to $.04 versus $.03 last year.”

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

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Second quarter gross margin was 35.9 % compared to 32.6% last year due primarily to better merchandise margins. Second quarter SG&A costs as a percent of sales increased to 27.5% from 23.9% last year. The increase in SG&A for the quarter was primarily a result of the costs associated with closing 47 underperforming stores, higher than expected medical costs and an increase in accrued incentive compensation.

Based on year-to-date results and our original guidance for the second half, we estimate earnings per diluted share for the year to be in the range of $.93 to $1.03 versus $1.03 last year, a decrease of 10% to flat. By quarter, earnings per diluted share are estimated to be in the range of ($.05) to $.00 versus $.09 last year for the third quarter and ($.01) to $.04 versus ($.06) last year for the fourth quarter. Comparable store sales for both the third and fourth quarters are estimated to be in the range of down 3% to flat.

During the first half, the Company opened 32 new stores and closed 63 stores. The Company continues to expect to open approximately 70 stores during 2008. As of August 2, 2008, The Cato Corporation operated 1,287 stores in 31 states, compared to 1,306 stores in 31 states as of August 4, 2007.

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 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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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 AUGUST 2, 2008 AND AUGUST 4, 2007
(Dollars in thousands, except per share data)

	Quarter Ended												Six Months Ended
	August 2,			%			August 4,			%			August 2,			%			August 4,			%
	2008			Sales			2007			Sales			2008			Sales			2007			Sales
REVENUES
Retail sales	$	230,957			100.0	%	$	218,973			100.0	%	$	456,748			100.0	%	$	443,107			100.0	%
Other income (principally finance, late fees and layaway charges)		2,911			1.3	%		2,961			1.3	%		5,948			1.3	%		6,056			1.4	%
Total revenues		233,868			101.3	%		221,934			101.3	%		462,696			101.3	%		449,163			101.4	%
GROSS MARGIN (Memo)		82,937			35.9	%		71,459			32.6	%		167,108			36.6	%		152,171			34.3	%
COSTS AND EXPENSES, NET
Cost of goods sold		148,020			64.1	%		147,514			67.4	%		289,640			63.4	%		290,936			65.7	%
Selling, general and administrative		63,580			27.5	%		52,463			23.9	%		119,896			26.2	%		103,599			23.4	%
Depreciation		5,657			2.5	%		5,623			2.6	%		11,267			2.5	%		11,014			2.5	%
Interest and other income		(1,709	)		-0.7	%		(2,316	)		-1.1	%		(3,609	)		-0.8	%		(4,209	)		-1.0	%
Cost and expenses, net		215,548			93.4	%		203,284			92.8	%		417,194			91.3	%		401,340			90.6	%
Income Before Income Taxes		18,320			7.9	%		18,650			8.5	%		45,502			10.0	%		47,823			10.8	%
Income Tax Expense		6,229			2.7	%		6,140			2.8	%		16,558			3.6	%		16,642			3.8	%
Net Income	$	12,091			5.2	%	$	12,510			5.7	%	$	28,944			6.4	%	$	31,181			7.0	%
Basic Earnings Per Share	$	0.42					$	0.39					$	0.99					$	0.99
Basic Weighted Average Shares		29,113,017						31,897,365						29,104,465						31,624,979
Diluted Earnings Per Share	$	0.41					$	0.39					$	0.99					$	0.97
Diluted Weighted Average Shares		29,200,726						32,189,903						29,180,499						32,040,169

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

	August 2,		August 4,
	2008		2007		February 2,
	(Unaudited)		(Unaudited)		2008
ASSETS
Current Assets
Cash and cash equivalents	$	45,371	$	19,929	$	21,583
Short-term investments		107,952		150,387		92,995
Accounts receivable — net		44,026		45,533		45,282
Merchandise inventories		96,864		99,236		118,679
Other current assets		14,784		14,719		14,511
Total Current Assets		308,997		329,804		293,050
Property and Equipment — net		119,952		126,573		123,190
Other Assets		4,482		4,279		4,552
TOTAL	$	433,431	$	460,656	$	420,792
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities	$	143,214	$	120,180	$	148,936
Noncurrent Liabilities		22,465		32,103		24,486
Stockholders’ Equity		267,752		308,373		247,370
TOTAL	$	433,431	$	460,656	$	420,792