##### Table of Contents





UNITED STATES SECURITIES AND
    EXCHANGE COMMISSIONWashington, D.C.
    20549
  Form 10-K
  þ

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the fiscal
    year ended January 30,
    2010oro

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934   Commission File Number 1-31340
  The Cato Corporation
 Registrant
  DelawareState of Incorporation

56-0484485I.R.S. Employer
    Identification Number8100 Denmark Road
    Charlotte, North Carolina
    28273-5975Address of Principal
    Executive Offices

704/554-8510Registrants Telephone
    Number   Securities registered pursuant to Section 12(b) of the
    Act:
  Title of Class

Name of Exchange on Which RegisteredClass A Common Stock

New York Stock ExchangePreferred Share Purchase Rights

New York Stock Exchange   Securities registered pursuant to Section 12(g) of the
    Act:
   o þ
  o þ
  þ o
  Regulation S-T o o
  Regulation S-K Form 10-K Form 10-K. o
  Rule 12b-2
  Large accelerated filer o

Accelerated filer þ

Non-accelerated filero
    (Do not check if a smaller reporting company)

Smaller reporting company o   Rule 12b-2).  Yes o þ
      DOCUMENTS
    INCORPORATED BY REFERENCE
    Part III 
    Items 10, 11, 12, 13 and 14




---



##### 





THE CATO
    CORPORATION
  FORM 10-K
  TABLE OF
    CONTENTS
  
  PagePART IItem 1.


Business


3  7Item 1A.


Risk Factors


7  12Item 1B.


Unresolved Staff Comments


12Item 2.


Properties


12Item 3.


Legal Proceedings


12Item 3A.


Executive Officers of the Registrant


13PART IIItem 5.


Market for Registrants Common Equity and
    Related Stockholder Matters


14  15Item 6.


Selected Financial Data


16Item 7.


Managements Discussion and Analysis of
    Financial Condition and Results of Operations


17  24Item 7A.


Quantitative and Qualitative Disclosures about
    Market Risk


24Item 8.


Financial Statements and Supplementary Data


25  48Item 9.


Changes in and Disagreements with Accountants on
    Accounting and Financial Disclosure


49Item 9A.


Controls and Procedures


49Item 9B.


Other Information


49PART IIIItem 10.


Directors, Executive Officers and Corporate
    Governance


49Item 11.


Executive Compensation


49Item 12.


Security Ownership of Certain Beneficial Owners
    and Management and Related Stockholder Matters


50Item 13.


Certain Relationships and Related Transactions,
    and Director Independence


50Item 14.


Principal Accountant Fees and Services


50PART IVItem 15.


Exhibits and Financial Statement Schedule


51  59EX-21EX-23.1EX-31.1EX-31.2EX-32.1EX-32.2   1




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##### Table of Contents



Forward-looking
    Information
  Form 10-K Form 10-K
  www.catocorp.com Form 10-K, Form 10-Q, Form 8-K,
 2




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##### Table of Contents



PART I  Item 1.
    Business:  General
    Business
    Merchandise Assortment.
  Value Pricing.
  Strip Shopping Center Locations.
  Customer Service.
  Credit and Layaway Programs.
  Merchandising
  Merchandising
     3




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##### Table of Contents



Purchasing,
    Allocation and Distribution
    Point-of-sale store-by-store
    Advertising
    Store
    Operations
   4




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##### Table of Contents



Store
    Locations
        Store
    Development
  Number of StoresBeginning of

Number

Number

Number of StoresFiscal Year

Year

Opened

Closed

End of Year2005


1,177



82



15



1,2442006


1,244



58



26



1,2762007


1,276



62



20



1,3182008


1,318



65



102



1,2812009


1,281



35



45



1,271        5




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##### Table of Contents



Credit
    and Layaway
  Credit
    Card Program
      Layaway
    Plan
    Information
    Technology Systems
      Competition
    Seasonality
   6




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##### Table of Contents



Regulation
    Associates
    Item 1A.
    Risk
    Factors:    Risks
    Relating To Our Business:
  If we
    are unable to anticipate, identify and respond to rapidly
    changing fashion trends and customer demands in a timely manner,
    our business and results of operations could materially
    suffer.
    Existing
    and increased competition in the womens retail apparel
    industry may negatively impact our business, results of
    operations, financial condition and market share.
   7




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##### Table of Contents



Unusual
    weather, natural disasters or similar events may adversely
    affect our sales or operations.
    We
    source a significant portion of our merchandise directly and
    indirectly from overseas, and changes, disruptions or other
    problems affecting the Companys merchandise supply chain,
    could materially and adversely affect the Companys
    business, results of operations and financial
    condition.
    Our
    costs are affected by foreign currency
    fluctuations.
    A
    continuation of, or further deterioration in, the current
    adverse economic conditions and the general economy or outlook
    and its related impact on consumer confidence and spending may
    materially and adversely affect consumer demand for our apparel
    and accessories and our results of operations.
   8




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The
    failure, disruption or security breach relating to our
    information technology systems could adversely affect our
    business.
    A
    disruption or shutdown of our centralized distribution center or
    transportation network could materially and adversely affect our
    business and results of operations.
    Our
    ability to attract consumers and grow our revenues is dependant
    on the success of our store location strategy and our ability to
    successfully open new stores as planned.
     9




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##### Table of Contents



Failure
    to attract, train, and retain skilled personnel could adversely
    affect our business and our financial condition.
      Our
    business operations subject us to legal compliance and
    litigation risks that could result in increased costs or
    liabilities, divert our managements attention or otherwise
    adversely affect our business.
    If we
    fail to protect our trademarks or other intellectual property
    rights or avoid infringing the intellectual property rights of
    others, our business, brand image, growth strategy, results of
    operations and financial condition could be adversely
    affected.
      We may
    continue to experience market conditions that could adversely
    impact the valuation and liquidity of, and our ability to
    access, our short-term investments and cash and cash
    equivalents.
   10




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Maintaining
    and improving our internal control over financial reporting and
    other requirements necessary to operate as a public company may
    strain our resources and any material failure in these controls
    may negatively impact our business, the price of our common
    stock and market confidence in our reported financial
    information.
    Risks
    Relating To Our Common Stock:
  Our
    operating results are subject to seasonal and quarterly
    fluctuations, which could adversely affect the market price of
    our common stock.
    The
    interests of a principal shareholder may limit the ability of
    other shareholders to influence the direction of the
    Company.
    Conditions
    in the stock market, generally or particularly relating to our
    Company or common stock, may materially and adversely affect the
    market price of our common stock and make its trading price more
    volatile.
   11




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##### Table of Contents



Item 1B.
    Unresolved
    Staff Comments:    Item 2.
    Properties:  15-acre 2-acre
    Item 3.
    Legal
    Proceedings:   12




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##### Table of Contents



Item 3A.
    Executive
    Officers of the Registrant:    Name

Age

PositionJohn P. D. Cato


59


Chairman, President and Chief Executive OfficerMichael T. Greer


47


Executive Vice President, Director of StoresJohn R. Howe


47


Executive Vice President, Chief Financial OfficerHoward A. Severson


62


Executive Vice President, Chief Real Estate and Store
    Development OfficerSally Almason


56


Executive Vice President, General Merchandise
    Manager  Cato Division   John P. D. Cato
  Michael T. Greer
  John R. Howe
  Howard A. Severson
  Sally Almason
 13




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##### Table of Contents



PART II  Item 5.
    Market
    for Registrants Common Equity, Related Stockholder Matters
    and Issuer Purchases of Equity Securities:  Market &
    Dividend Information
    Price2009

High

Low

DividendFirst quarter

$
19.61


$
13.13


$
.165Second quarter


20.84



15.32



.165Third quarter


22.86



16.46



.165Fourth quarter


21.84



18.67



.165   Price2008

High

Low

DividendFirst quarter

$
17.98


$
14.05


$
.165Second quarter


18.94



14.03



.165Third quarter


19.38



11.99



.165Fourth quarter


15.20



12.06



.165    14




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##### Table of Contents



Stock
    Performance Graph
    The Cato Corporation
 Stock Performance Graph
  
   STOCK PERFORMANCE TABLE
 (BASE 100  IN DOLLARS)
  DOW JONESLAST TRADING DAY

THE CATO

U.S. RETAILERS,

RUSSELL 2000OF THE FISCAL YEAR

CORPORATION

APPL INDEX

INDEX1/28/05

100

100

1001/27/06

116

114

1212/02/07

130

138

1352/01/08

86

109

1231/30/09

63

57

761/29/10

131

109

105    15




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##### Table of Contents



Item 6.
    Selected
    Financial Data:    Fiscal Year(1)

2009

2008

2007

2006

2005(Dollars in thousands, except per share data and selected
    operating data)STATEMENT OF OPERATIONS DATA:Retail sales

$
872,132


$
845,676


$
834,341


$
862,813


$
821,639Other income


11,863



12,042



12,096



13,072



14,742Total revenues


883,995



857,718



846,437



875,885



836,381Cost of goods sold (exclusive of depreciation shown below)


552,016



562,056



572,309



572,712



546,955Selling, general and administrative (exclusive of depreciation
    shown below)


245,483



227,645



210,892



212,157



203,156Selling, general and administrative percent of retail sales


28.2
%


26.9
%


25.3
%


24.6
%


24.7
%Depreciation


21,829



22,572



22,212



20,941



20,275Interest expense


66



53



9



41



183Interest and other income


(4,313
)


(7,218
)


(8,218
)


(9,597
)


(4,563
)Income before income taxes


68,914



52,610



49,233



79,631



70,375Income tax expense


23,149



18,976



16,914



28,181



25,546Net income

$
45,765


$
33,634


$
32,319


$
51,450


$
44,829Basic earnings per share(2)

$
1.55


$
1.14


$
1.02


$
1.64


$
1.44Diluted earnings per share(2)

$
1.55


$
1.14


$
1.02


$
1.61


$
1.41Cash dividends paid per share

$
.660


$
.660


$
.645


$
.580


$
.507SELECTED OPERATING DATA:Stores open at end of year


1,271



1,281



1,318



1,276



1,244Average sales per store(3)

$
678,000


$
640,000


$
640,000


$
685,000


$
684,000Average sales per square foot of selling space

$
165


$
162


$
165


$
175


$
173BALANCE SHEET DATA (at period end):Cash, cash equivalents, short-term investments and restricted
    cash

$
200,915


$
144,803


$
114,578


$
123,542


$
107,819Working capital


202,299



164,639



144,114



176,464



139,114Total assets


480,990



435,353



420,792



432,322



406,636Total stockholders equity


291,312



261,813



247,370



276,793



239,948     (1)
    
    The fiscal year 2006 contained 53 weeks versus
    52 weeks for all other years shown.(2)
    
    Per share amounts for 2008 and earlier periods have been
    retroactively restated for the adoption of guidance related to
    participating dividends on unvested restricted stock awards. See
    Note 1 to the Consolidated Financial Statements.(3)
    
    Calculated using actual sales volume for stores open for the
    full year and an estimated annual sales volume for new stores
    opened during the year. 16




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##### Table of Contents



Item 7.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations:  Results
    of Operations
    January 30,

January 31,

February 2,Fiscal Year Ended

2010

2009

2008Retail sales


100.0
%


100.0
%


100.0
%Other income


1.4



1.4



1.4Total revenues


101.4



101.4



101.4Cost of goods sold


63.3



66.5



68.6Selling, general and administrative


28.2



26.9



25.3Depreciation


2.5



2.7



2.7Interest and other income


(0.5
)


(0.9
)


(1.0
)Income before income taxes


7.9



6.2



5.9Net income


5.2
%


4.0
%


3.9
%   Fiscal
    2009 Compared to Fiscal 2008
             17




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##### Table of Contents



Fiscal
    2008 Compared to Fiscal 2007
           18




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##### Table of Contents



Off-Balance
    Sheet Arrangements
    Critical
    Accounting Policies
      Allowance
    for Doubtful Accounts
    Merchandise
    Inventories
  (first-in,
 19




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##### Table of Contents



Lease
    Accounting
  Leases.
  Impairment
    of Long-Lived Assets
    Insurance
    Liabilities
   20




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##### Table of Contents



Uncertain
    Tax Positions
    Revenue
    Recognition
        Liquidity,
    Capital Resources and Market Risk
         21




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##### Table of Contents



available-for-sale
    Fair Value Measurements at Reporting Date UsingDescription

Total

(Level 1)

(Level 2)

(Level 3)Assets:Short-term investments

$
147,955


$
147,955


$



$
Restricted cash and short-term investments


2,485



2,485







Other assets


5,797



407







5,390     Fair Value Measurements at Reporting Date UsingDescription

Total

(Level 1)

(Level 2)

(Level 3)Assets:Short-term investments

$
93,452


$
90,002


$
3,450


$
Restricted cash and short-term investments


9,089



9,089







Other assets


2,258



303







1,955    22




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##### Table of Contents



available-for-sale
  available-for-sale.
        PrivateAuction


AdvisorsRate


ManagedSecurity


Fund


Total(In thousands)Balance at January 31, 2009

$



$
1,955


$
1,955Transfer into Level 3


3,450







3,450Gain (loss) on asset held






(15
)


(15
)Balance at January 30, 2010

$
3,450


$
1,940


$
5,390     Payments Due During One Year Fiscal Period EndingContractual Obligations

Total


2010


2011


2012


2013


2014


ThereafterMerchandise letters of credit

$
8,232


$
8,232


$



$



$



$



$
Operating leases


145,768



55,132



41,857



27,595



15,968



5,092



124Total Contractual Obligations

$
154,000


$
63,364


$
41,857


$
27,595


$
15,968


$
5,092


$
124     (1)
    
    In addition to the amounts shown in the table above,
    $15.2 million of unrecognized tax benefits have been
    recorded as liabilities in accordance with ASC 740 and we are
    uncertain as to if or when such amounts may be settled. See
    Note 13, Income Taxes, of the Consolidated Financial
    Statements for additional information. 23




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##### Table of Contents



Recent
    Accounting Pronouncements
        other-than-temporary
    Item 7A.
    Quantitative
    and Qualitative Disclosures About Market Risk:   24




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##### Table of Contents



Item 8.
    Financial
    Statements and Supplementary Data:  INDEX TO
    FINANCIAL STATEMENTS AND SCHEDULE
  PageReport of Independent Registered Public
    Accounting Firm


26Consolidated Statements of Income and
    Comprehensive Income for the fiscal years ended
    January 30, 2010, January 31, 2009 and
    February 2, 2008


27Consolidated Balance Sheets at January 30,
    2010 and January 31, 2009


28Consolidated Statements of Cash Flows for the
    fiscal years ended January 30, 2010, January 31, 2009
    and February 2, 2008


29Consolidated Statements of Stockholders
    Equity for the fiscal years ended January 30, 2010,
    January 31, 2009 and February 2, 2008


30Notes to Consolidated Financial Statements


31Schedule II  Valuation and
    Qualifying Accounts for the fiscal years ended January 30,
    2010, January 31, 2009 and February 2, 2008


S-2  25




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##### Table of Contents



Report of
    Independent Registered Public Accounting Firm     Internal Control 
    Integrated Framework
         26




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##### Table of Contents



THE CATO
    CORPORATION
  CONSOLIDATED STATEMENTS OF INCOME AND
 COMPREHENSIVE
    INCOME
  Fiscal Year EndedJanuary 30,


January 31,


February 2,2010


2009


2008(Dollars in thousands, except per share data)REVENUESRetail sales

$
872,132


$
845,676


$
834,341Other income (principally finance charges, late fees and layaway
    charges)


11,863



12,042



12,096Total revenues


883,995



857,718



846,437COSTS AND EXPENSES, NETCost of goods sold (exclusive of depreciation shown below)


552,016



562,056



572,309Selling, general and administrative (exclusive of depreciation
    shown below)


245,483



227,645



210,892Depreciation


21,829



22,572



22,212Interest expense


66



53



9Interest and other income


(4,313
)


(7,218
)


(8,218
)815,081



805,108



797,204Income before income taxes


68,914



52,610



49,233Income tax expense


23,149



18,976



16,914Net income

$
45,765


$
33,634


$
32,319Basic earnings per share

$
1.55


$
1.14


$
1.02Diluted earnings per share

$
1.55


$
1.14


$
1.02Dividends per share

$
.660


$
.660


$
.645Comprehensive income:Net income

$
45,765


$
33,634


$
32,319Unrealized gains (losses) on
    available-for-sale
    securities, net of deferred income tax liability or benefit


121



(296
)


484Comprehensive income

$
45,886


$
33,338


$
32,803    27




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##### Table of Contents



THE CATO
    CORPORATION
  CONSOLIDATED BALANCE SHEETS
  January 30,


January 31,2010


2009(Dollars in thousands)ASSETSCurrent Assets:Cash and cash equivalents

$
50,385


$
42,262Short-term investments


147,955



93,452Restricted cash and short-term investments


2,575



9,089Accounts receivable, net of allowance for doubtful accounts of
    $3,274 at January 30, 2010 and $3,723 at January 31,
    2009


40,154



44,136Merchandise inventories


118,628



112,290Deferred income taxes


7,812



6,403Prepaid expenses


3,258



7,737Total Current Assets


370,767



315,369Property and equipment  net


102,769



116,262Other assets


7,454



3,722Total Assets

$
480,990


$
435,353LIABILITIES AND STOCKHOLDERS EQUITYCurrent Liabilities:Accounts payable

$
103,627


$
102,971Accrued expenses


31,615



29,946Accrued bonus and benefits


22,286



6,307Accrued income taxes


10,940



11,506Total Current Liabilities


168,468



150,730Deferred income taxes


4,087



2,528Other noncurrent liabilities (primarily deferred rent)


17,123



20,282Commitments and contingenciesStockholders Equity:Preferred stock, $100 par value per share,
    100,000 shares authorized, none issued






Class A common stock, $.033 par value per share,
    50,000,000 shares authorized; 27,842,587 and
    36,303,922 shares issued at January 30, 2010 and
    January 31, 2009, respectively


928



1,210Convertible Class B common stock, $.033 par value per
    share, 15,000,000 shares authorized; 1,743,525 shares
    issued at January 30, 2010 and January 31, 2009


58



58Additional paid-in capital


64,706



61,608Retained earnings


225,086



354,333Accumulated other comprehensive income


534



413291,312



417,622Less Class A common stock in treasury, at cost (-0- shares
    at January 30, 2010 and 8,660,333 shares at
    January 31, 2009)






(155,809
)Total Stockholders Equity


291,312



261,813Total Liabilities and Stockholders Equity

$
480,990


$
435,353    28




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##### Table of Contents



THE CATO
    CORPORATION
  CONSOLIDATED STATEMENTS OF CASH
    FLOWS
  Fiscal Year EndedJanuary 30,


January 31,


February 2,2010


2009


2008(Dollars in thousands)OPERATING ACTIVITIESNet income

$
45,765


$
33,634


$
32,319Adjustments to reconcile net income to net cash provided by
    operating activities:Depreciation


21,829



22,572



22,212Provision for doubtful accounts


3,643



3,825



2,844Share-based compensation


2,063



2,208



1,694Excess tax benefits from share-based compensation


(201
)


(66
)


(5,964
)Deferred income taxes


113



1,175



(6,358
)Loss on disposal of property and equipment


1,624



3,799



1,163Changes in operating assets and liabilities which provided
    (used) cash:Accounts receivable


339



(2,679
)


(2,168
)Merchandise inventories


(6,338
)


6,389



(2,761
)Prepaid and other assets


1,072



848



(1,372
)Accrued income taxes


(365
)


3,644



8,533Accounts payable, accrued expenses and other liabilities


15,145



(3,782
)


24,022Net cash provided by operating activities


84,689



71,567



74,164INVESTING ACTIVITIESExpenditures for property and equipment


(9,960
)


(19,443
)


(18,330
)Purchases of short-term investments


(162,957
)


(169,979
)


(313,761
)Sales of short-term investments


108,287



160,136



319,960Change in restricted cash


6,514







Net cash used in investing activities


(58,116
)


(29,286
)


(12,131
)FINANCING ACTIVITIESChange in cash overdrafts included in accounts payable






(500
)


(1,000
)Dividends paid


(19,481
)


(19,389
)


(20,277
)Purchases of treasury stock


(49
)


(2,435
)


(58,561
)Proceeds from employee stock purchase plan


412



432



481Excess tax benefits from share-based compensation


201



66



5,964Proceeds from stock options exercised


467



224



8,110Net cash used in financing activities


(18,450
)


(21,602
)


(65,283
)Net increase (decrease) in cash and cash equivalents


8,123



20,679



(3,250
)Cash and cash equivalents at beginning of year


42,262



21,583



24,833Cash and cash equivalents at end of year

$
50,385


$
42,262


$
21,583    29




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##### Table of Contents



THE CATO
    CORPORATION
  CONSOLIDATED STATEMENTS OF STOCKHOLDERS
    EQUITY
  Convertible








AccumulatedClass A


Class B


Additional





Other





TotalCommon


Common


Paid-in


Retained


Comprehensive


Treasury


StockholdersStock


Stock


Capital


Earnings


Income


Stock


Equity(Dollars in thousands)Balance  February 3, 2007

$
1,199


$
23


$
42,475


$
327,684


$
225


$
(94,813
)

$
276,793Comprehensive income:Net income














32,319











32,319Unrealized gains on
    available-for-sale
    securities, net of deferred income tax liability of $247


















484







484Dividends paid ($.645 per share)














(20,277
)










(20,277
)Class A common stock sold through employee stock purchase
    plan  27,164 shares


1







565















566Class A common stock sold through stock option
    plans  39,200 shares


1







514















515Class B common stock sold through stock option plans
    1,053,000 shares






35



7,677















7,712Class A common stock issued through restricted stock grant
    plans 87,085 shares


3







1,490















1,493Windfall tax benefit from equity compensation plans










5,964















5,964Repurchase of treasury shares  3,368,006 shares






















(58,561
)


(58,561
)Adoption of ASC 740














362











362Balance  February 2, 2008


1,204



58



58,685



340,088



709



(153,374
)


247,370Comprehensive income:Net income














33,634











33,634Unrealized losses on
    available-for-sale
    securities, net of deferred income tax benefit of ($138)


















(296
)






(296
)Dividends paid ($.66 per share)














(19,389
)










(19,389
)Class A common stock sold through employee stock purchase
    plan  32,830 shares


1







505















506Class A common stock sold through stock option
    plans  23,875 shares


1







314















315Class A common stock issued through restricted stock grant
    plans 137,953 shares


4







2,038















2,042Windfall tax benefit from equity compensation plans










66















66Repurchase of treasury shares  198,718 shares






















(2,435
)


(2,435
)Balance  January 31, 2009


1,210



58



61,608



354,333



413



(155,809
)


261,813Comprehensive income:Net income














45,765











45,765Unrealized gains on
    available-for-sale
    securities, net of deferred income tax liability of $37


















121







121Dividends paid ($.66 per share)














(19,443
)










(19,443
)Class A common stock sold through employee stock purchase
    plan  27,051 shares


1







483















484Class A common stock sold through stock option
    plans  43,600 shares


2







535















537Class A common stock issued through restricted stock grant
    plans 130,916 shares


4







1,879















1,883Windfall tax benefit from equity compensation plans










201















201Repurchase of treasury shares  2,569 shares






















(49
)


(49
)Retirement of treasury shares  8,662,902 shares


(289
)










(155,569
)






155,858



-0-Balance  January 30, 2010

$
928


$
58


$
64,706


$
225,086


$
534


$



$
291,312    30




---



##### Table of Contents



THE CATO
    CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
  1.
    Summary
    of Significant Accounting Policies:  Principles of Consolidation:
  Description of Business and Fiscal Year:
  Use of Estimates:
  Cash and Cash Equivalents and Short-Term
    Investments:
  available-for-sale. Available-for-sale
  Concentration of Credit Risk:
  Supplemental Cash Flow Information:
  Inventories: (first-in,
  Property and Equipment:
 31




---



##### Table of Contents



THE CATO
    CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    EstimatedClassification

Useful LivesLand improvements


10 yearsBuildings


30-40 yearsLeasehold improvements


5-10 yearsFixtures and equipment


3-10 yearsInformation Technology equipment and software


3-10 years   Impairment
    of Long-Lived Assets
    Leases
  Leases
      Revenue
    Recognition
   32




---



##### Table of Contents



THE CATO
    CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      Cost of Goods Sold:
  Credit Sales:
  Advertising:
  Stock Repurchase Program:
  Earnings Per Share: Earnings Per Share
 33




---



##### Table of Contents



THE CATO
    CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Fiscal Year EndedJanuary 30,


January 31,


February 2,2010


2009


2008Basic earnings per share:Net earnings

$
45,765


$
33,634


$
32,319Earnings allocated to non-vested equity awards


(654
)


(425
)


(271
)Net earnings available to common stockholders

$
45,111


$
33,209


$
32,048Basic weighted average common shares outstanding


29,036,549



29,065,594



31,279,918Basic earnings per share

$
1.55


$
1.14


$
1.02Diluted earnings per share:Net earnings

$
45,765


$
33,634


$
32,319Earnings allocated to non-vested equity awards


(654
)


(425
)


(270
)Net earnings available to common stockholders

$
45,111


$
33,209


$
32,049Basic weighted average common shares outstanding


29,036,549



29,065,594



31,279,918Dilutive effect of stock options and restricted stock


18,203



13,095



187,593Diluted weighted average common shares outstanding


29,054,752



29,078,689



31,467,511Diluted earnings per share

$
1.55


$
1.14


$
1.02   Vendor Allowances:
  Income Taxes:
    Store Opening and Closing Costs:
  Closed Store Lease Obligations:
 34




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##### Table of Contents



THE CATO
    CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Insurance:
      Fair Value of Financial Instruments: and/or
  Stock Based Compensation: Compensation  Stock Compensation.
  Recent
    Accounting Pronouncements
       35




---



##### Table of Contents



THE CATO
    CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    other-than-temporary
    2.
    Interest
    and Other Income:    January 30,


January 31,


February 2,2010


2009


2008Dividend income

$
(15
)

$
(10
)

$
(17
)Interest income


(1,426
)


(4,617
)


(5,729
)Visa/Mastercard claims settlement


(414
)






Miscellaneous income


(2,445
)


(2,709
)


(2,207
)(Gain)/loss on investment sales


(13
)


118



(265
)Interest and other income

$
(4,313
)

$
(7,218
)

$
(8,218
)   3.
    Short-Term
    Investments:  available-for-sale
    January 30, 2010


January 31, 2009Unrealized


Estimated





Unrealized


EstimatedSecurity Type:

Cost


Gain/(Loss)


Fair Value


Cost


Gain/(Loss)


Fair ValueDebt Securities issued by states of the United States and
    political subdivisions of the states:With unrealized gain

$
132,629


$
485


$
133,114


$
92,778


$
674


$
93,452With unrealized (loss)


6,119



(8
)


6,111











Corporate debt securities:With unrealized gain


8,696



34



8,730











Total

$
147,444


$
511


$
147,955


$
92,778


$
674


$
93,452  36




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##### Table of Contents



THE CATO
    CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
        4.
    Fair
    Value Measurements:    Fair Value Measurements at Reporting Date UsingDescription

Total

(Level 1)

(Level 2)

(Level 3)Assets:Short-term investments

$
147,955


$
147,955


$



$
Restricted cash and short-term investments


2,485



2,485







Other assets


5,797



407







5,390     Fair Value Measurements at Reporting Date UsingDescription

Total

(Level 1)

(Level 2)

(Level 3)Assets:Short-term investments

$
93,452


$
90,002


$
3,450


$
Restricted cash and short-term investments


9,089



9,089







Other assets


2,258



303







1,955   available-for-sale
  available-for-sale.
   37




---



##### Table of Contents



THE CATO
    CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
        Auction Rate


Private AdvisorsSecurity


Managed Fund


Total(In thousands)Balance at January 31, 2009

$



$
1,955


$
1,955Transfer into Level 3


3,450







3,450Gain (loss) on asset held






(15
)


(15
)Balance at January 30, 2010

$
3,450


$
1,940


$
5,390   5.
    Accounts
    Receivable:    January 30,


January 31,2010


2009Customer accounts  principally deferred payment
    accounts

$
38,047


$
40,516Miscellaneous trade receivables


5,381



7,343Total


43,428



47,859Less allowance for doubtful accounts


3,274



3,723Accounts receivable  net

$
40,154


$
44,136    38




---



##### Table of Contents



THE CATO
    CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   6.
    Property
    and Equipment:    January 30,


January 31,2010


2009Land and improvements

$
3,694


$
3,694Buildings


19,121



18,926Leasehold improvements


57,960



56,224Fixtures and equipment


166,490



164,136Information Technology equipment and software


51,309



50,575Construction in progress


377



865Total


298,951



294,420Less accumulated depreciation


196,182



178,158Property and equipment  net

$
102,769


$
116,262     7.
    Accrued
    Expenses:    January 30,


January 31,2010


2009Accrued payroll and related items

$
4,854


$
4,491Property and other taxes


12,275



11,978Accrued insurance


6,556



6,264Other


7,930



7,213Total

$
31,615


$
29,946   8.
    Financing
    Arrangements:      9.
    Stockholders
    Equity:   39




---



##### Table of Contents



THE CATO
    CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
        10.
    Employee
    Benefit Plans:        11.
    Leases:   40




---



##### Table of Contents



THE CATO
    CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Fiscal Year2010

$
55,1322011


41,8572012


27,5952013


15,9682014


5,092Thereafter


124Total minimum lease payments

$
145,768     January 30,


January 31,


February 2,Fiscal Year Ended

2010


2009


2008Minimum rentals

$
51,978


$
52,762


$
51,142Contingent rent


25



28



54Total rental expense

$
52,003


$
52,790


$
51,196   12.
    Related
    Party Transactions:    13.
    Income
    Taxes:   41




---



##### Table of Contents



THE CATO
    CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    January 30,


January 31,


February 2,2010


2009


2008Balances, beginning

$
9,522


$
9,180


$
6,193Additions for tax positions of the current year


3,901



1,394



1,686Additions for tax positions prior years






35



1,301Reduction for tax positions of prior years for:Changes in judgement


(200
)






Settlements during the period


(2,561
)


(571
)


Lapses of applicable statue of limitations


(331
)


(516
)


Balance, ending

$
10,331


$
9,522


$
9,180     January 30,


January 31,


February 2,Fiscal Year Ended

2010


2009


2008Current income taxes:Federal

$
20,603


$
15,895


$
23,800State


2,667



1,768



(280
)Total


23,270



17,663



23,520Deferred income taxes:Federal


(133
)


1,173



(5,902
)State


12



140



(704
)Total


(121
)


1,313



(6,606
)Total income tax expense

$
23,149


$
18,976


$
16,914  42




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##### Table of Contents



THE CATO
    CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    January 30,


January 31,2010


2009Deferred tax assets:Allowance for doubtful accounts

$
1,231


$
1,467Inventory valuation


1,984



2,263Capital loss carryover






232Deferred lease liability


6,547



10,251Non-deductible accrued liabilities


1,661



1,721Other taxes


1,465



1,282Federal benefit of uncertain tax positions


3,531



4,320Equity compensation expense


1,795



2,109Accrued bonus


2,760



Other


1,766



Total deferred tax assets


22,740



23,645Deferred tax liabilities:Property and equipment


15,764



19,381Unrealized gains on short-term investments


270



233Health care expense


1,091



408Other


1,890



(252
)Total deferred tax liabilities


19,015



19,770Net deferred tax liabilities (assets)

$
(3,725
)

$
(3,875
)     January 30,


January 31,


February 2,Fiscal Year Ended

2010


2009


2008Federal income tax rate


35.0
%


35.0
%


35.0
%State income taxes


0.3



5.7



2.9Tax credits


(2.2
)


(2.5
)


(3.1
)Tax exempt interest


(0.7
)


(2.6
)


(3.4
)Effects of other permanent differences


0.6



0.5



0.4Other


0.6



0.0



2.6Effective income tax rate


33.6
%


36.1
%


34.4
%  43




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##### Table of Contents



THE CATO
    CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   14.
    Quarterly
    Financial Data (Unaudited):    Fiscal 2009

First

Second

Third

FourthRetail sales

$
238,055


$
225,368


$
190,966


$
217,743Total revenues


241,027



228,266



193,820



220,882Cost of goods sold (exclusive of depreciation)


141,913



143,459



124,545



142,099Income before income taxes


29,986



23,706



4,272



10,950Net income


18,813



16,658



2,983



7,311Basic earnings per share

$
0.64


$
0.57


$
0.10


$
0.25Diluted earnings per share

$
0.64


$
0.56


$
0.10


$
0.25   Fiscal 2008

First

Second

Third

FourthRetail sales

$
225,791


$
230,957


$
179,838


$
209,091Total revenues


228,828



233,868



182,785



212,238Cost of goods sold (exclusive of depreciation)


141,620



148,020



127,172



145,245Income before income taxes


27,182



18,320



1,274



5,834Net income


16,853



12,091



823



3,866Basic earnings per share

$
0.57


$
0.41


$
0.03


$
0.13Diluted earnings per share

$
0.57


$
0.41


$
0.03


$
0.13   15.
    Reportable
    Segment Information:      Fiscal 2009

Retail

Credit

TotalRevenues

$
874,555


$
9,440


$
883,995Depreciation


21,799



30



21,829Interest and other income


(4,313
)






(4,313
)Income before taxes


66,064



2,850



68,914Total assets


408,842



72,148



480,990Capital expenditures


9,957



3



9,960   Fiscal 2008

Retail

Credit

TotalRevenues

$
847,606


$
10,112


$
857,718Depreciation


22,531



41



22,572Interest and other income


(7,218
)






(7,218
)Income before taxes


49,499



3,111



52,610Total assets


361,697



73,656



435,353Capital expenditures


19,443







19,443   44




---



##### Table of Contents



THE CATO
    CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Fiscal 2007

Retail

Credit

TotalRevenues

$
836,023


$
10,414


$
846,437Depreciation


22,112



100



22,212Interest and other income


(8,218
)






(8,218
)Income before taxes


44,983



4,250



49,233Total assets


354,001



68,491



422,492Capital expenditures


18,211



119



18,330       January 30,


January 31,


February 2,2010


2009


2008Bad debt expense

$
3,643


$
3,844


$
2,844Payroll


969



1,000



983Postage


901



979



985Other expenses


1,047



1,137



1,252Total expenses

$
6,560


$
6,960


$
6,064   16.
    Stock
    Based Compensation:         45




---



##### Table of Contents



THE CATO
    CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      5-year
      1987


1999


2004Plan


Plan


Plan


TotalOptions and/or restricted stock initially authorized


5,850,000



1,500,000



1,350,000



8,700,000Options and/or restricted stock available for grant:January 31, 2009


18,627







868,078



886,705January 30, 2010


18,627







737,162



755,789    46




---



##### Table of Contents



THE CATO
    CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Weighted AverageGrant Date FairNumber of Shares


Value Per ShareRestricted stock awards at February 3, 2007


214,882


$
22.92Granted


102,399



21.14Vested






Forfeited


(15,314
)


19.90Restricted stock awards at February 2, 2008


301,967



22.56Granted


156,795



16.88Vested






Forfeited


(18,841
)


22.55Restricted stock awards at January 31, 2009


439,921



20.46Granted


158,225



18.91Vested


(61,781
)


22.34Forfeited


(39,937
)


20.35Restricted stock awards at January 30, 2010


496,428


$
19.74     WeightedRange of


AverageOptions


Option Prices


PriceOutstanding options,February 3, 2007


1,236,675


$
5.50-21.75


$
8.01Granted










Exercised


(1,092,200
)


5.50-17.84



7.41Forfeited or expired


(5,400
)


13.52-19.53



17.45Outstanding options,February 2, 2008


139,075



6.39-21.75



12.41Granted










Exercised


(23,875
)


8.19-13.97



9.36Forfeited or expired


(7,250
)


8.71-21.72



17.78Outstanding options,January 31, 2009


107,950



6.39-19.99



12.72Granted










Exercised


(43,600
)


6.39-15.08



10.71Forfeited or expired










Outstanding options,January 30, 2010


64,350


$
11.10-19.99


$
14.08  47




---



##### Table of Contents



THE CATO
    CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Weighted Average


AggregateWeighted Average


Remaining Contractual


IntrinsicShares


Exercise Price


Term


Value(a)Options outstanding at January 31, 2009


107,950


$
12.72



4.07 years


$
124,257Granted














Forfeited or expired


Exercised


43,600Outstanding at January 30, 2010


64,350


$
14.08



4.02 years


$
398,312Vested and exercisable at January 30, 2010


64,050


$
14.07



4.02 years


$
397,352     (a)
    
    The intrinsic value of a stock option is the amount by which the
    market value of the underlying stock exceeds the exercise price
    of the option.    Options Outstanding


Options ExercisableWeighted Average


Weighted





WeightedRange of





Remaining


Average





AverageExercise Prices


Options


Contractual Life


Exercise Price


Options


Exercise Price$
11.10  $14.56



48,150



3.75 years


$
13.23



48,150


$
13.2315.08   19.99



16,200



4.83 years



16.60



15,900



16.59$
11.10  $19.99



64,350



4.02 years


$
14.08



64,050


$
14.07       17.
    Commitments
    and Contingencies:         48




---



##### Table of Contents



Item 9.
    Changes
    in and Disagreements with Accountants on Accounting and
    Financial Disclosure:    Item 9A.
    Controls
    and Procedures:  Conclusion
    Regarding the Effectiveness of Disclosure Controls and
    Procedures
  Rule 13a-15(e),
  Managements
    Report on Internal Control Over Financial Reporting
  Rule 13a-15(f). Internal
    Control  Integrated Framework
    Changes
    in Internal Control Over Financial Reporting
  Rule 13a-15(f))
  Item 9B.
    Other
    Information:   PART III Item 10.
    Directors,
    Executive Officers and Corporate Governance:    Item 11.
    Executive
    Compensation:   49




---



##### Table of Contents



Item 12.
    Security
    Ownership of Certain Beneficial Owners and Management and
    Related Stockholder Matters:  Equity
    Compensation Plan Information.
    (c)Number of SecuritiesRemaining Available for(a)


(b)


Future Issuance UnderNumber of Securities to be


Weighted-Average


Equity CompensationIssued upon Exercise of


Exercise Price of


Plans (ExcludingOutstanding Options,


Outstanding Options,


Securities Reflected inPlan Category

Warrants and Rights(1)


Warrants and Rights(1)


Column (a))(2)Equity compensation plans approved by security holders


64,350


$
14.08



949,813Equity compensation plans not approved by security holders










Total


64,350


$
14.08



949,813     (1)
    
    This column contains information regarding employee stock
    options only; there are no outstanding warrants or stock
    appreciation rights.(2)
    
    Includes the following:737,162 shares available for grant under the Companys
    stock incentive plan, referred to as the 2004 Incentive
    Compensation Plan. Under this plan, non-qualified stock options
    may be granted to key associates.18,627 shares available for grant under the Companys
    stock incentive plan, referred to as the 1987
    Non-qualified Stock Option Plan. Stock options have terms
    of 10 years, vest evenly over 5 years, and are
    assigned an exercise price of not less than the fair market
    value of the Companys stock on the date of grant; and194,024 shares available under the 2003 Employee Stock
    Purchase Plan. Eligible associates may participate in the
    purchase of designated shares of the Companys common
    stock. The purchase price of this stock is equal to 85% of the
    lower of the closing price at the beginning or the end of each
    semi-annual stock purchase period.Information contained under Security Ownership of Certain
    Beneficial Owners and Management in the 2010 Proxy
    Statement is incorporated by reference in response to this Item.  Item 13.
    Certain
    Relationships and Related Transactions and Director
    Independence:  Matters-Director
  Item 14.
    Principal
    Accountant Fees and Services:   50




---



##### Table of Contents



PART IV  Item 15.
    Exhibits
    and Financial Statement Schedules:      PageReport of Independent Registered Public Accounting Firm


26Consolidated Statements of Income and Comprehensive Income for
    the fiscal years ended January 30, 2010, January 31,
    2009 and February 2, 2008


27Consolidated Balance Sheets at January 30, 2010 and
    January 31, 2009


28Consolidated Statements of Cash Flows for the fiscal years ended
    January 30, 2010, January 31, 2009, and
    February 2, 2008


29Consolidated Statements of Stockholders Equity for the
    fiscal years ended January 30, 2010, January 31, 2009,
    and February 2, 2008


30Notes to Consolidated Financial Statements


31(2) Financial Statement Schedule: The following report and
    financial statement schedule is filed herewith:Schedule II  Valuation and Qualifying Accounts


S-2     http://www.sec.gov. (1-31340).
  ExhibitNumber

Description of Exhibit3
.1

Registrants Restated Certificate of Incorporation of the
    Registrant dated March 6, 1987, incorporated by reference to
    Exhibit 4.1 to Form S-8 of the Registrant filed February 7, 2000
    (SEC File No. 333-96283).3
.2

Registrants By Laws incorporated by reference to Exhibit
    4.2 to Form S-8 of the Registrant filed February 7, 2000 (SEC
    File No. 333-96283).4
.1

Rights Agreement dated December 18, 2003, incorporated by
    reference to Exhibit 4.1 to Form 8-A12G of the Registrant filed
    December 22, 2003 and as amended in Form 8-A12B/A filed on
    January 6, 2004.10
.2*

1999 Incentive Compensation Plan dated August 26, 1999,
    incorporated by reference to  Exhibit 4.3 to Form S-8 of the
    Registrant filed February 7, 2000 (SEC File No. 333-96283).10
.3*

2004 Incentive Compensation Plan, amended and restated as of May
    22, 2008, incorporated by reference to Appendix A to Definitive
    Proxy Statement on Schedule 14A filed April 11, 2008.10
.4*

Form of Agreement, dated as of August 29, 2003, between the
    Registrant and Wayland H. Cato, Jr., incorporated by reference
    to Exhibit 99(c) to Form 8-K of the Registrant filed on July 22,
    2003.10
.5*

Form of Agreement, dated as of August 29, 2003, between the
    Registrant and Edgar T. Cato, incorporated by reference to
    Exhibit 99(d) to Form 8-K of the Registrant filed on July 22,
    2003.10
.6*

Retirement Agreement between Registrant and Wayland H. Cato, Jr.
    dated August 29, 2003 incorporated by reference to Exhibit 10.1
    to Form 10-Q of the Registrant for quarter ended August 2, 2003. 51




---



##### Table of Contents



ExhibitNumber

Description of Exhibit10
.7*

Retirement Agreement between Registrant and Edgar T. Cato dated
    August 29, 2003, incorporated by reference to Exhibit 10.2 to
    Form 10-Q of the Registrant for the quarter ended August 2, 2003.10
.9*

Letter Agreement between the Registrant and John R. Howe dated
    as of August 28, 2008, incorporated by Reference to Exhibit 99.1
    to Form 8-K of the Registrant filed September 3, 2008.21


Subsidiaries of Registrant.23
.1

Consent of Independent Registered Public Accounting Firm.31
.1

Rule 13a-14(a)/15d-14(a) Certification of Principal Executive
    Officer.31
.2

Rule 13a-14(a)/15d-14(a) Certification of Principal Financial
    Officer.32
.1

Section 1350 Certification of Chief Executive Officer.32
.2

Section 1350 Certification of Chief Financial Officer.     *
    
    Management contract or compensatory plan required to be filed
    under Item 15 of this report and Item 601 of
    Regulation S-K.  EXHIBIT INDEX
  Designationof Exhibit



Page21


Subsidiaries of the Registrant


5423
.1

Consent of Independent Registered Public Accounting Firm


5531
.1

Rule 13a-14(a)/15d-14(a)
    Certification of Principal Executive Officer


5631
.2

Rule 13a-14(a)/15d-14(a)
    Certification of Principal Financial Officer


5732
.1

Section 1350 Certification of Chief Executive Officer


5832
.2

Section 1350 Certification of Chief Financial Officer


59  52




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##### Table of Contents



SIGNATURES
    The Cato
    Corporation
  By /s/  JOHN
    P. D. CATOJohn
    P. D. Cato
    Chairman, President and
    Chief Executive Officer

By /s/  JOHN
    R. HOWEJohn
    R. Howe
    Executive Vice President
    Chief Financial OfficerBy /s/  JEFFREY
    R. SHOCKJeffrey
    R. Shock
    Senior Vice President
    Controller       /s/  JOHN
    P. D. CATOJohn
    P. D. Cato
    (President and Chief Executive Officer
    (Principal Executive Officer) and Director)

/s/  BAILEY
    W. PATRICKBailey
    W. Patrick
    (Director)/s/  JOHN
    R. HOWEJohn
    R. Howe
    (Executive Vice President
    Chief Financial Officer (Principal Financial Officer))

/s/  GRANT
    L. HAMRICKGrant
    L. Hamrick
    (Director)/s/  JEFFREY
    R. SHOCKJeffrey
    R. Shock
    (Senior Vice President
    Controller (Principal Accounting Officer))

/s/  BRYAN
    F. KENNEDY IIIBryan
    F. Kennedy III
    (Director)/s/  THOMAS
    E. MECKLEYThomas
    E. Meckley
    (Director)

/s/  A.F.
    (PETE) SLOANA.F.
    (Pete) Sloan
    (Director)/s/  GEORGE
    S. CURRINGeorge
    S. Currin
    (Director)

/s/  D.
    HARDING STOWED.
    Harding Stowe
    (Director)  53




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##### Table of Contents



SCHEDULE II  VALUATION
    AND QUALIFYING ACCOUNTS
  AllowanceforDoubtful


Self Insurance


InventoryAccounts(a)


Reserves(b)


Reserves(c)Balance at February 3, 2007

$
3,554



4,602



3,140Additions charged to costs and expenses


2,844



4,739



1,350Additions (reductions) charged to other accounts


1,038
(d)


(1,134
)


Deductions


(4,173
)(e)


(4,080
)


(664
)Balance at February 2, 2008


3,263



4,127



3,826Additions charged to costs and expenses


3,825



4,959



747Additions (reductions) charged to other accounts


933
(d)


(809
)


Deductions


(4,298
)(e)


(3,388
)


(1,142
)Balance at January 31, 2009


3,723



4,889



3,431Additions charged to costs and expenses


3,643



4,003



225Additions (reductions) charged to other accounts


846
(d)


(922
)


Deductions


(4,938
)(e)


(3,049
)


(782
)Balance at January 30, 2010

$
3,274


$
4,921


$
2,874     (a)
    
    Deducted from trade accounts receivable.(b)
    
    Reserve for Workers Compensation and General Liability.(c)
    
    Reserves for inventory shortage and markdowns.(d)
    
    Recoveries of amounts previously written off.(e)
    
    Uncollectible accounts written off. S-2