The CATO Corporation

NEWS RELEASE

FOR IMMEDIATE RELEASE

CEO Approval                     

For Further Information Contact:

John R. Howe
Executive Vice President
Chief Financial Officer
704-551-7315

CATO REPORTS 3Q EARNINGS
Reconfirms 4Q and Updates Full Year Guidance

Charlotte, NC (November 20, 2008) – The Cato Corporation (NYSE: CTR) today reported net income of $0.8 million for the third quarter ended November 1, 2008, compared to net income of $2.9 million for the third quarter ended November 3, 2007, a decrease of 72%. Earnings per diluted share for the third quarter were $0.03, compared to $0.09 last year, a decrease of 67%. Sales for the third quarter were $179.8 million, a decrease of 1% from sales of $181.9 million last year. Comparable store sales for the quarter decreased 2%.

The Company earned net income of $29.8 million for the nine months ended November 1, 2008, compared to net income of $34.1 million for the nine months ended November 3, 2007, a decrease of 13%. Earnings per diluted share were $1.02 compared to $1.07 last year, a 5% decrease. Sales were $636.6 million for the first nine months of 2008, a 2% increase over sales of $625.0 million last year. Year-to-date comparable store sales decreased 1%.

For the quarter, the gross margin rate decreased to 29.3% versus 30.7% last year, primarily due to increased markdowns. The SG&A rate for the quarter increased slightly to 28.3% from 28.2% last year. Increases in operating costs from new stores, higher bad debt expense and costs associated with store closings were offset by the reversal of incentive compensation accrued in the first half of the year. The Company’s effective tax rate was

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

35.4% as the net effect of quarterly adjustments was lower than previously expected.

Year-to-date, the gross margin rate increased to 34.5% versus 33.3% last year due to better merchandise margins in the first half of the year which were somewhat offset by the increased markdowns in the third quarter mentioned above. The year-to-date SG&A rate increased to 26.8% from 24.8% last year primarily as a result of increased operating costs from new stores, higher medical and worker’s compensation costs, accrued incentive compensation, increased bad debt expense and the costs associated with store closings.

“Third quarter results reflect that our business remains very difficult,” commented John Cato, Chairman, President, and Chief Executive Officer. “Our results were slightly above our expectations due to non-operational items and better than expected October sales due to a favorable weather comparison. We continue to expect fourth quarter earnings per diluted share will be in the range of ($0.01) to $0.04 per diluted share versus ($0.06) last year. This estimate is based on comparable store sales in the range of down 3% to flat for the quarter. For the year, earnings per diluted share are estimated to be in the range of $1.01 to $1.06 versus $1.03 last year.”

Year-to-date, the Company has opened 57 new stores, relocated four stores, and closed 70 stores. As of November 1, 2008, the Company operated 1,305 stores in 31 states, compared to 1,321 stores in 31 states as of November 3, 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 Cato division offers exclusive merchandise with fashion and quality comparable to mall specialty stores at low prices every day. The It’s Fashion division offers fashion with a focus on the latest trendy styles and nationally recognized urban brands for the entire family 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 or estimated financial results for the fourth quarter and full year and any related assumptions are considered “forward-looking” within the meaning of The Private Securities Litigation Reform Act of 1995. Such forward-looking statements are based on current

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

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

THE CATO CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
FOR THE PERIODS ENDED NOVEMBER 1, 2008 AND NOVEMBER 3, 2007
(Dollars in thousands, except per share data)

	Quarter Ended												Nine Months Ended
	November 1,			%			November 3,			%			November 1,			%			November 3,			%
	2008			Sales			2007			Sales			2008			Sales			2007			Sales
REVENUES
Retail sales	$	179,838			100.0	%	$	181,870			100.0	%	$	636,585			100.0	%	$	624,977			100.0	%
Other income (principally finance, late fees and layaway charges)		2,947			1.6	%		2,968			1.6	%		8,895			1.4	%		9,024			1.4	%
Total revenues		182,785			101.6	%		184,838			101.6	%		645,480			101.4	%		634,001			101.4	%
GROSS MARGIN (Memo)		52,666			29.3	%		55,790			30.7	%		219,774			34.5	%		207,962			33.3	%
COSTS AND EXPENSES, NET
Cost of goods sold		127,172			70.7	%		126,080			69.3	%		416,811			65.5	%		417,015			66.7	%
Selling, general and administrative		50,908			28.3	%		51,303			28.2	%		170,804			26.8	%		154,903			24.8	%
Depreciation		5,614			3.1	%		5,684			3.1	%		16,881			2.6	%		16,698			2.6	%
Interest and other income		(2,183	)		-1.2	%		(2,176	)		-1.2	%		(5,792	)		-0.9	%		(6,385	)		-1.0	%
Cost and expenses, net		181,511			100.9	%		180,891			99.4	%		598,704			94.0	%		582,231			93.1	%
Income Before Income Taxes		1,274			0.7	%		3,947			2.2	%		46,776			7.4	%		51,770			8.3	%
Income Tax Expense		451			0.2	%		1,011			0.6	%		17,009			2.7	%		17,654			2.8	%
Net Income	$	823			0.5	%	$	2,936			1.6	%	$	29,767			4.7	%	$	34,116			5.5	%
Basic Earnings Per Share	$	0.03					$	0.09					$	1.02					$	1.08
Basic Weighted Average Shares		29,108,130						31,891,308						29,105,686						31,713,755
Diluted Earnings Per Share	$	0.03					$	0.09					$	1.02					$	1.07
Diluted Weighted Average Shares		29,223,218						31,988,081						29,188,880						32,020,584

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

	November 1,		November 3,
	2008		2007		February 2,
	(Unaudited)		(Unaudited)		2008
ASSETS
Current Assets
Cash and cash equivalents	$	35,959	$	20,187	$	21,583
Short-term investments		99,869		126,797		92,995
Accounts receivable — net		43,267		44,470		45,282
Merchandise inventories		110,282		114,066		118,679
Other current assets		14,684		14,623		14,511
Total Current Assets		304,061		320,143		293,050
Property and Equipment — net		120,859		125,377		123,190
Other Assets		4,317		4,617		4,552
TOTAL	$	429,237	$	450,137	$	420,792
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities	$	144,523	$	126,955	$	148,936
Noncurrent Liabilities		22,771		32,083		24,486
Stockholders’ Equity		261,943		291,099		247,370
TOTAL	$	429,237	$	450,137	$	420,792