##### 





UNITED STATES SECURITIES AND
    EXCHANGE COMMISSION
 Washington, 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
    February 2, 2008oro

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:
  Class 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-K Form 10-K Form 10-K. o
  Rule 12b-2
  Large accelerated
    filer þ

Accelerated
    filer o

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

Smaller reporting
    company o   Rule 12b-2).  Yes o þ
      DOCUMENTS
    INCORPORATED BY REFERENCE




---



##### 





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


Business


3  7Item 1A.


Risk Factors


7  9Item 1B.


Unresolved Staff Comments


9Item 2.


Properties


9Item 3.


Legal Proceedings


9Item 4.


Submission of Matters to a Vote of Security Holders


9Item 4A.


Executive Officers of the Registrant


10PART IIItem 5.


Market for Registrants Common Equity, Related Stockholder
    Matters and Issuer Purchases of Equity Securities


11  13Item 6.


Selected Financial Data


14Item 7.


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


15  22Item 7A.


Quantitative and Qualitative Disclosures about Market Risk


22Item 8.


Financial Statements and Supplementary Data


23  46Item 9.


Changes in and Disagreements with Accountants on Accounting and
    Financial Disclosure


47Item 9A.


Controls and Procedures


47Item 9B.


Other Information


47PART IIIItem 10.


Directors, Executive Officers and Corporate Governance


47Item 11.


Executive Compensation


47Item 12.


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


48Item 13.


Certain Relationships and Related Transactions, and Director
    Independence


48Item 14.


Principal Accountant Fees and Services


48PART IVItem 15.


Exhibits and Financial Statement Schedule


49  58  1




---



##### 



Forward-looking
    Information
  Form 10-K Form 10-K
  www.catocorp.com Form 10-K, Form 10-Q, Form 8-K, 28273-5975.
 2




---



##### 



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




---



##### 



Purchasing,
    Allocation and Distribution
    store-by-store
    Advertising
   4




---



##### 



Store
    Operations
      Store
    Locations
        Store
    Development
  Number of StoresBeginning of


Number


Number


Number of StoresFiscal Year

Year


Opened


Closed


End of Year2003


1,022



87



7



1,1022004


1,102



80



5



1,1772005


1,177



82



15



1,2442006


1,244



58



26



1,2762007


1,276



62



20



1,318        5




---



##### 



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




---



##### 



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.
    Unusual
    weather, natural disasters or similar events may adversely
    affect our sales or operations.
   7




---



##### 



Changes
    or other disruptions in the Companys merchandise supply
    chain, including those affecting the pricing or importation of
    goods from the foreign markets that supply a significant amount
    of the Companys merchandise, could materially and
    adversely affect the Companys costs and results of
    operations.
    Our
    costs are affected by foreign currency
    fluctuations.
    An
    actual or perceived decline in general economic conditions or
    outlook may reduce consumer demand for our apparel and
    accessories.
    A
    disruption or shutdown of our centralized distribution center
    could materially and adversely affect our business and results
    of operations.
    A
    delay in the successful opening of the number of new stores we
    have planned could adversely affect our business and results of
    operations.
   8




---



##### 



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.
    Item 1B.
    Unresolved
    Staff Comments:    Item 2.
    Properties:  15-acre 2-acre
    Item 3.
    Legal
    Proceedings:    Item 4.
    Submission
    of Matters to a Vote of Security Holders:   9




---



##### 



Item 4A.
    Executive
    Officers of the Registrant:    Name

Age

PositionJohn P. D. Cato


57


Chairman, President and Chief Executive OfficerMichael T. Greer


45


Executive Vice President, Director of StoresHoward A. Severson


60


Executive Vice President, Chief Real Estate and Store
    Development OfficerThomas W. Stoltz


47


Executive Vice President, Chief Financial OfficerStuart L. Uselton


47


Executive Vice President, Chief Administrative OfficerB. Allen Weinstein


61


Executive Vice President, Chief Merchandising Officer   John P. D. Cato
  Michael T. Greer
  Howard A. Severson
  Thomas W. Stoltz
  Stuart L. Uselton
  B. Allen Weinstein
 10




---



##### 



PART II  Item 5.
    Market
    for Registrants Common Equity, Related Stockholder Matters
    and Issuer Purchases of Equity Securities:  Market &
    Dividend Information
    Price2007

High


Low


DividendFirst quarter

$
24.19


$
20.38


$

.15Second quarter


25.01



20.54




.165Third quarter


22.07



17.86




.165Fourth quarter


19.85



13.49




.165   Price2006

High


Low


DividendFirst quarter

$
23.86


$
19.80


$
.13Second quarter


26.25



21.86



.15Third quarter


25.52



21.91



.15Fourth quarter


24.94



21.70



.15    11




---



##### 



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

INDEX1/31/03

100

100

1001/30/04

118

134

1581/28/05

168

162

1691/27/06

182

184

2042/02/07

192

223

2282/01/08

140

176

208    12




---



##### 



Securities
    Authorized For Issuance Under Equity Compensation
    Plans
    (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


Warrants and Rights


column (a))Equity compensation plans approved by security holders


139,075


$
12.41



1,272,220Equity compensation plans not approved by security holders










Total


139,075


$
12.41



1,272,220   Issuer
    Purchases of Equity Securities
    Total Number of


Maximum NumberShares Purchased as


(or Approximate DollarTotal Number





Part of Publicly


Value) of Shares that mayof Shares


Average Price


Announced Plans or


Yet be Purchased UnderPeriod

Purchased


Paid per Share(2)


Programs(1)


The Plans or Programs(1)November 2007


691,900


$
18.87



691,900December 2007


1,455,100



15.35



1,455,100January 2008


186,600



15.33



186,600Total


2,333,600


$
16.39



2,333,600



394,660 shares     (1)
    
    On August 30, 2007, the Companys Board of Directors
    authorized an increase in the share repurchase program of two
    million shares. At fiscal year end February 2, 2008, the
    Company had 394,660 shares remaining in open
    authorizations. There is no specified expiration date for the
    Companys repurchase program. In fiscal 2007, the Company
    repurchased 3.162 million shares under this program for
    approximately $54.1 million or an average market price per
    share of $17.11. In addition, 205,891 shares at an average
    market price per share of $21.70 were tendered as partial
    payment of the exercise price of an employee stock option and
    the related tax withholding.(2)
    
    Prices include trading costs. 13




---



##### 



Item 6.
    Selected
    Financial Data:      Fiscal Year

2007


2006


2005


2004


2003(Dollars in thousands, except per share data and selected
    operating data)STATEMENT OF OPERATIONS DATA:Retail sales

$
834,341


$
862,813


$
821,639


$
773,809


$
731,770Other income


12,096



13,072



14,742



15,795



15,497Total revenues


846,437



875,885



836,381



789,604



747,267Cost of goods sold (exclusive of depreciation shown below)


572,309



572,712



546,955



528,916



508,991Gross margin


262,032



290,101



274,684



244,893



222,779Gross margin percent


31.4
%


33.6
%


33.4
%


31.6
%


30.4
%Selling, general and administrative


210,892



212,157



203,156



187,618



174,202Selling, general and administrative percent of retail sales


25.3
%


24.6
%


24.7
%


24.2
%


23.8
%Depreciation


22,212



20,941



20,275



20,397



18,695Interest expense


9



41



183



717



306Interest and other income


(8,218
)


(9,597
)


(4,563
)


(2,739
)


(3,614
)Income before income taxes


49,233



79,631



70,375



54,695



48,687Income tax expense


16,914



28,181



25,546



19,854



17,673Net income

$
32,319


$
51,450


$
44,829


$
34,841


$
31,014Basic earnings per share

$
1.03


$
1.64


$
1.44


$
1.13


$
.89Diluted earnings per share

$
1.03


$
1.62


$
1.41


$
1.11


$
.88Cash dividends paid per share

$
.645


$
.58


$
.507


$
.457


$
.42SELECTED OPERATING DATA:Stores open at end of year


1,318



1,276



1,244



1,177



1,102Average sales per store(1)

$
640,000


$
685,000


$
684,000


$
682,000


$
692,000Average sales per square foot of selling space

$
165


$
175


$
173


$
170


$
171Comparable store sales increase (decrease)


(4
)%


(2
)%


1
%


0
%


(7
)%BALANCE SHEET DATA (at period end):Cash, cash equivalents and short-term investments

$
114,578


$
123,542


$
107,819


$
107,228


$
71,402Working capital


144,114



176,464



139,114



136,980



117,403Total assets


420,792



432,322



406,636



397,323



356,284Total stockholders equity


247,370



276,793



239,948



211,175



186,075     (1)
    
    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.(2)
    
    The fiscal year 2006 contained 53 weeks versus
    52 weeks for all other years shown. 14




---



##### 



Item 7.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations:  Results
    of Operations
    February 2,


February 3,


January 28,Fiscal Year Ended

2008


2007


2006Retail sales


100.0
%


100.0
%


100.0
%Other income


1.4



1.5



1.8Total revenues


101.4



101.5



101.8Cost of goods sold


68.6



66.4



66.6Selling, general and administrative


25.3



24.6



24.7Depreciation


2.7



2.4



2.5Interest and other income


(1.0
)


(1.1
)


(0.6
)Income before income taxes


5.9



9.2



8.6Net income


3.9
%


6.0
%


5.5
%   Fiscal
    2007 Compared to Fiscal 2006
           15




---



##### 



Fiscal
    2006 Compared to Fiscal 2005
           16




---



##### 



Off
    Balance Sheet Arrangements
    Critical
    Accounting Policies
      Allowance
    for Doubtful Accounts
   17




---



##### 



Merchandise
    Inventories
  (first-in,
  Lease
    Accounting
  Accounting for Leases
  Impairment
    of Long-Lived Assets
    Insurance
    Liabilities
   18




---



##### 



Uncertain
    Tax Positions
    Revenue
    Recognition
        Liquidity,
    Capital Resources and Market Risk
       19




---



##### 



20




---



##### 



Payments Due During One Year Fiscal Period EndingContractual Obligations

Total


2008


2009


2010


2011


2012


ThereafterUncertain tax positions(1)

$
9,180


$



$



$



$



$



$
9,180Merchandise letters of credit


4,274



4,274



















Operating leases


153,046



54,095



40,312



29,501



19,356



9,614



168Total Contractual Obligations

$
166,500


$
58,369


$
40,312


$
29,501


$
19,356



9,614


$
9,348     (1)
    
    Due to the nature of this obligation, the Company is unable to
    estimate the timing of the cash outflows.  Recent
    Accounting Pronouncements
  Share-Based Payment Accounting for Stock Issued to
    Employees
  Accounting for Uncertainty in Income Taxes  an
    Interpretation of FASB Statement No. 109. Accounting for Uncertainty in Income
    Taxes  an Interpretation of FASB Statement
    No. 109
  Fair Value
    Measurements
  The Fair
    Value Option for Financial Assets and Financial Liabilities
  No. 06-11, Accounting for Income Tax Benefits of Dividends on
    Share-Based Payment No. 06-11
 21




---



##### 



No. 06-11
  Item 7A.
    Quantitative
    and Qualitative Disclosures About Market Risk:   22




---



##### 



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


24Consolidated Statements of Income and Comprehensive Income for
    the fiscal years ended
    February 2, 2008, February 3, 2007 and
    January 28, 2006


25Consolidated Balance Sheets at February 2, 2008 and
    February 3, 2007


26Consolidated Statements of Cash Flows for the fiscal years ended
    February 2, 2008,
    February 3, 2007 and January 28, 2006


27Consolidated Statements of Stockholders Equity for the
    fiscal years ended February 2, 2008
    February 3, 2007 and January 28, 2006


28Notes to Consolidated Financial Statements


29Schedule II  Valuation and Qualifying Accounts
    for the fiscal years ended
    February 2, 2008, February 3, 2007 and
    January 28, 2006


S-2  23




---



##### 



Report of
    Independent Registered Public Accounting Firm  To the Board
    of Directors and Stockholders of
   Internal Control -
    Integrated Framework
      /s/
    PricewaterhouseCoopers LLP
   24




---



##### 



THE CATO
    CORPORATION
 CONSOLIDATED
    STATEMENTS OF INCOME AND
    COMPREHENSIVE INCOME  Fiscal Year EndedFebruary 2,


February 3,


January 28,2008


2007


2006(Dollars in thousands, except per share data)REVENUESRetail sales

$
834,341


$
862,813


$
821,639Other income (principally finance charges, late fees and layaway
    charges)


12,096



13,072



14,742Total revenues


846,437



875,885



836,381COSTS AND EXPENSES, NETCost of goods sold (exclusive of depreciation shown below)


572,309



572,712



546,955Selling, general and administrative


210,892



212,157



203,156Depreciation


22,212



20,941



20,275Interest expense


9



41



183Interest and other income


(8,218
)


(9,597
)


(4,563
)797,204



796,254



766,006Income before income taxes


49,233



79,631



70,375Income tax expense


16,914



28,181



25,546Net income

$
32,319


$
51,450


$
44,829Basic earnings per share

$
1.03


$
1.64


$
1.44Basic weighted average shares


31,279,918



31,281,163



31,117,214Diluted earnings per share

$
1.03


$
1.62


$
1.41Diluted weighted average shares


31,513,202



31,815,332



31,789,887Dividends per share

$
.645


$
.580


$
.507Comprehensive income:Net income

$
32,319


$
51,450


$
44,829Unrealized gains on available-for-sale securities, net of
    deferred income tax liability or benefit


484



147



7Net comprehensive income

$
32,803


$
51,597


$
44,836    25




---



##### 



THE CATO
    CORPORATION
 CONSOLIDATED
    BALANCE SHEETS  February 2,


February 3,2008


2007(Dollars in thousands)ASSETSCurrent Assets:Cash and cash equivalents

$
21,583


$
24,833Short-term investments


92,995



98,709Accounts receivable, net of allowance for doubtful accounts of
    $3,263 at February 2, 2008 and $3,554 at February 3,
    2007


45,282



45,958Merchandise inventories


118,679



115,918Deferred income taxes


6,756



7,508Prepaid expenses


7,755



6,587Total Current Assets


293,050



299,513Property and equipment  net


123,190



128,461Other assets


4,552



4,348Total Assets

$
420,792


$
432,322LIABILITIES AND STOCKHOLDERS EQUITYCurrent Liabilities:Accounts payable

$
110,848


$
77,046Accrued expenses


27,617



29,526Accrued bonus and benefits


2,543



10,756Accrued income taxes


7,928



5,721Total Current Liabilities


148,936



123,049Deferred income taxes


1,707



8,817Other noncurrent liabilities (primarily deferred rent)


22,779



23,663Commitments 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; 36,109,263 and
    35,955,815 shares issued at February 2, 2008 and
    February 3, 2007, respectively


1,204



1,199Convertible Class B common stock, $.033 par value per
    share, 15,000,000 shares authorized; issued 1,743,525 and
    690,525 shares at February 2, 2008 and
    February 3, 2007, respectively


58



23Additional paid-in capital


58,685



42,475Retained earnings


340,088



327,684Accumulated other comprehensive income


709



225400,744



371,606Less Class A common stock in treasury, at cost
    (8,461,615 shares at 
    February 2, 2008 and 5,093,609 shares at
    February 3, 2007, respectively)


(153,374
)


(94,813
)Total Stockholders Equity


247,370



276,793Total Liabilities and Stockholders Equity

$
420,792


$
432,322    26




---



##### 



THE CATO
    CORPORATION
 CONSOLIDATED
    STATEMENTS OF CASH FLOWS  Fiscal Year EndedFebruary 2,


February 3,


January 28,2008


2007


2006(Dollars in thousands)OPERATING ACTIVITIESNet income

$
32,319


$
51,450


$
44,829Adjustments to reconcile net income to net cash provided by
    operating activities:Depreciation


22,212



20,941



20,275Provision for doubtful accounts


2,844



2,633



4,650Share  based compensation


1,694



1,326



682Excess tax benefits from share-based compensation


(5,964
)


(768
)


Deferred income taxes


(6,358
)


574



(3,656
)Loss on disposal of property and equipment


1,163



2,079



1,757Changes in operating assets and liabilities which provided
    (used) cash:Accounts receivable


(2,168
)


1,053



(3,405
)Merchandise inventories


(2,761
)


(12,548
)


(2,832
)Prepaid and other assets


(1,372
)


2,238



(1,065
)Accrued income taxes


8,533



1,499



525Accounts payable, accrued expenses and other liabilities


24,022



(11,776
)


9,183Net cash provided by operating activities


74,164



58,701



70,943INVESTING ACTIVITIESExpenditures for property and equipment


(18,330
)


(27,547
)


(28,512
)Purchases of short-term investments


(313,761
)


(180,463
)


(94,845
)Sales of short-term investments


319,960



167,985



97,355Net cash used in investing activities


(12,131
)


(40,025
)


(26,002
)FINANCING ACTIVITIESChange in cash overdrafts included in accounts payable


(1,000
)


500



(3,100
)Dividends paid


(20,277
)


(18,228
)


(15,867
)Purchases of treasury stock


(58,561
)






(3,536
)Payments to settle long term debt










(22,000
)Proceeds from employee stock purchase plan


481



413



430Excess tax benefits from share-based compensation


5,964



768



Proceeds from stock options exercised


8,110



970



2,226Net cash used in financing activities


(65,283
)


(15,577
)


(41,847
)Net increase (decrease) in cash and cash equivalents


(3,250
)


3,099



3,094Cash and cash equivalents at beginning of year


24,833



21,734



18,640Cash and cash equivalents at end of year

$
21,583


$
24,833


$
21,734    27




---



##### 



THE CATO
    CORPORATION
 CONSOLIDATED
    STATEMENTS OF STOCKHOLDERS EQUITY  Convertible








Accumulated


UnearnedClass A


Class B


Additional





Other


Compensation





TotalCommon


Common


Paid-in


Retained


Comprehensive


Restricted


Treasury


StockholdersStock


Stock


Capital


Earnings


Income


Stock Awards


Stock


Equity(Dollars in thousands)Balance  January 29, 2005


875



187



103,366



265,499



71



(911
)


(157,912
)


211,175Comprehensive income:Net income














44,829















44,829Unrealized gains on available-for-sale securities, net of
    deferred income tax liability of $3


















7











7Dividends paid ($.507 per share)














(15,866
)














(15,866
)Class A common stock sold through employee stock purchase
    plan  28,684 shares


1







429



















430Class A common stock sold through stock option
    plans  172,025 shares


5







1,310



















1,315Income tax benefit from stock options exercised










912



















912Purchase of treasury shares  186,531


























(3,536
)


(3,536
)Cancellation of treasury shares  6,136,354


143







(66,773
)














66,630



Shares reclassified from Class B to
    Class A  4,907,309 shares


164



(164
)






















Unearned compensation  restricted stock awards






















682







682Balance  January 28, 2006


1,188



23



39,244



294,462



78



(229
)


(94,818
)


239,948Comprehensive income:Net income














51,450















51,450Unrealized gains on available-for-sale securities, net of
    deferred income tax liability of $78


















147











147Dividends paid ($.58 per share)














(18,228
)














(18,228
)Class A common stock sold through employee stock purchase
    plan  22,873 shares


1







484



















485Class A common stock sold through stock option
    plans  95,775 shares


3







1,127



















1,130Class A common stock issued through restricted stock grant
    plans 214,882 shares


7







857



















864Income tax benefit from stock options exercised










768



















768Cancellation of treasury shares  231 shares










(5
)














5



Unearned compensation  restricted stock awards






















229







229Balance  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



















1,493Income tax benefit from stock options exercised










5,964



















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


























(58,561
)


(58,561
)Adoption of FIN 48














362















362Balance  February 2, 2008


1,204



58



58,685



340,088



709







(153,374
)


247,370    28




---



##### 



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,
 29




---



##### 



THE CATO
    CORPORATION
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Property and Equipment: 98-1, Accounting for the Costs of Computer Software Developed or
    Obtained for Internal Use.
  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
  Accounting for Leases
     30




---



##### 



THE CATO
    CORPORATION
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Revenue
    Recognition
        Cost of Goods Sold:
  Credit Sales:
  Advertising:
  Stock Repurchase Program:
  Earnings Per Share: Earnings Per Share
 31




---



##### 



THE CATO
    CORPORATION
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Three Months Ended


Twelve Months EndedFebruary 2,


February 3,


February 2,


February 3,2008


2007


2008


2007Weighted-average shares outstanding


29,978,405



31,326,640



31,279,918



31,281,163Dilutive effect of :Stock options






545,350



187,593



512,814Restricted stock






37,464



45,691



21,355Employee stock purchase plan














Weighted-average shares and common stock equivalents outstanding


29,978,405



31,909,454



31,513,202



31,815,332   Vendor Allowances: EITF 02-16, Accounting by a Customer (Including a Reseller) for
    Certain Consideration Received from a Vendor
  Income Taxes:
  Accounting for Uncertainty in Income Taxes
    (FIN 48) an interpretation of FASB Statement
    No. 109
  Store Opening and Closing Costs:
  Closed Store Lease Obligations:
  Insurance:
 32




---



##### 



THE CATO
    CORPORATION
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Fair Value of Financial Instruments: and/or
  Recent
    Accounting Pronouncements
  Share-Based Payment Accounting for Stock Issued to
    Employees
  Accounting for Uncertainty in Income Taxes  an
    Interpretation of FASB Statement No. 109 Accounting for Uncertainty in Income
    Taxes  an interpretation of FASB Statement
    No. 109,
  Fair Value
    Measurements
  The Fair
    Value Option for Financial Assets and Financial Liabilities
 33




---



##### 



THE CATO
    CORPORATION
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  No. 06-11, Accounting for Income Tax Benefits of Dividends on
    Share-Based Payment No. 06-11 No. 06-11
  2.
    Interest
    and Other Income:    February 2,


February 3,


January 28,2008


2007


2006Dividend income

$
(17
)

$
(23
)

$
(17
)Interest income


(5,729
)


(4,221
)


(2,593
)Hurricane claims settlement






(2,384
)


Visa/Mastercard claims settlement






(470
)


Miscellaneous income


(2,207
)


(2,100
)


(1,836
)(Gain)/loss investment sales


(265
)


(399
)


(117Interest and other income

$
(8,218
)

$
(9,597
)

$
(4,563
)   3.
    Short-Term
    Investments:  available-for-sale
     34




---



##### 



THE CATO
    CORPORATION
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    February 2, 2008


February 3, 2007Unrealized


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 (loss)

$
92,373


$
622


$
92,995


$
98,761


$
(52
)

$
98,709Total

$
92,373


$
622


$
92,995


$
98,761


$
(52
)

$
98,709         4.
    Accounts
    Receivable:    February 2,


February 3,2008


2007Customer accounts  principally deferred payment
    accounts

$
42,007


$
43,939Miscellaneous trade receivables


6,538



5,573Total


48,545



49,512Less allowance for doubtful accounts


3,263



3,554Accounts receivable  net

$
45,282


$
45,958    35




---



##### 



THE CATO
    CORPORATION
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  5.
    Property
    and Equipment:    February 2,


February 3,2008


2007Land and improvements

$
3,681


$
3,266Buildings


18,518



17,990Leasehold improvements


53,938



51,308Fixtures and equipment


160,688



158,614Information Technology equipment and software


48,649



45,594Construction in progress


1,741



2,833Total


287,215



279,605Less accumulated depreciation


164,025



151,144Property and equipment  net

$
123,190


$
128,461     6.
    Accrued
    Expenses:    February 2,


February 3,2008


2007Accrued payroll and related items

$
4,476


$
5,524Accrued advertising


299



504Property and other taxes


11,159



11,446Accrued insurance


5,225



5,227Other


6,458



6,825Total

$
27,617


$
29,526   7.
    Financing
    Arrangements:       36




---



##### 



THE CATO
    CORPORATION
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  8.
    Stockholders
    Equity:            5-year
     37




---



##### 



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


AverageOptions


Option Prices


PriceOutstanding options,January 29, 2005


1,505,325


$
5.13  $17.84


$
8.05Granted


22,250



18.96  21.75



20.05Exercised


(172,025
)


5.13  17.84



7.63Cancelled


(12,150
)


11.50  20.50



14.62Outstanding options,January 28, 2006


1,343,400



5.50  21.75



8.23Granted










Exercised


(95,775
)


5.50  21.37



10.12Cancelled


(10,950
)


13.47  21.37



17.24Outstanding options,February 3, 2007


1,236,675



5.50  21.75



8.01Granted










Exercised


(1,092,200
)


5.50  17.84



7.41Cancelled


(5,400
)


13.52  19.53



17.45Outstanding options,February 2, 2008


139,075


$
6.39  $21.75


$
12.41     Options Outstanding


Options ExercisableWeighted Average


Weighted





WeightedRange of





Remaining


Average





AverageExercise Prices


Options


Contractual Life


Exercise Price


Options


Exercise Price$
6.39  $ 8.96



42,650



1.49 years


$
8.28



42,650


$
8.2811.10   14.79



74,025



5.67 years



13.30



45,375



12.9815.08   19.99



20,900



6.91 years



17.00



12,500



17.2021.75   21.75



1,500



7.08 years



21.75



600



21.75$
6.39  $21.75



139,075



4.59 years


$
12.41



101,125


$
11.58       9.
    Employee
    Benefit Plans:   38




---



##### 



THE CATO
    CORPORATION
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
        10.
    Leases:      Fiscal Year2008

$
54,0952009


40,3122010


29,5012011


19,3562012


9,614Thereafter


168Total minimum lease payments

$
153,046     February 2,


February 3,


January 28,Fiscal Year Ended

2008


2007


2006Minimum rentals

$
51,142


$
49,169


$
47,278Contingent rent


54



106



74Total rental expense

$
51,196


$
49,275


$
47,352   11.
    Related
    Party Transactions:   39




---



##### 



THE CATO
    CORPORATION
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      12.
    Income
    Taxes:  Accounting for Uncertainty in Income Taxes
    (FIN 48) an interpretation of FASB Statement
    No. 109
    In thousandsBalance, February 4, 2007

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


1,686Additions for tax positions prior years


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


Settlements during the period


Lapses of applicable statue of limitations


Balance, February 2, 2008

$
9,180  40




---



##### 



THE CATO
    CORPORATION
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    February 2,


February 3,


January 28,Fiscal Year Ended

2008


2007


2006Current income taxes:Federal

$
23,800


$
26,480


$
27,895State


(280
)


1,205



1,311Total


23,520



27,685



29,206Deferred income taxes:Federal


(5,902
)


443



(3,271
)State


(704
)


53



(389
)Total


(6,606
)


496



(3,660
)Total income tax expense

$
16,914


$
28,181


$
25,546     February 2,


February 3,2008


2007Deferred tax assets:Bad debt reserve

$
1,227


$
1,364Inventory valuation


2,164



1,830Unrealized losses on short-term investments






Restricted stock options






184Write-down of short term investments






Capital loss carryover


274



393Other






Deferred lease liability


9,148



5,277Reserves


3,817



2,245Other taxes


1,203



1,932Federal Benefit of FIN 48


3,906



Equity Compensation Expense


1,297



651Total deferred tax assets


23,036



13,876Deferred tax liabilities:Fixed assets


16,010



13,489Unrealized gains (losses) on short-term investments


371



123Other


1,606



1,573Total deferred tax liabilities


17,987



15,185Net deferred tax liabilities (assets)

$
(5,049
)

$
1,309    41




---



##### 



THE CATO
    CORPORATION
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
     February 2,


February 3,


January 28,Fiscal Year Ended

2008


2007


2006Federal income tax rate


35.0
%


35.0
%


35.0
%State income taxes


7.7



2.4



3.2Tax Credits


(3.1
)


(1.3
)


(0.4
)Federal benefit of FIN 48


(9.0
)






Other


3.8



(0.7
)


(1.5
)Effective income tax rate


34.4
%


35.4
%


36.3
%   13.
    Quarterly
    Financial Data (Unaudited):    Fiscal 2007

First


Second


Third


FourthRetail sales

$
224,134


$
218,973


$
181,870


$
209,364Total revenues


227,228



221,934



184,838



212,436Cost of goods sold (exclusive of depreciation)


143,422



147,514



126,080



155,294Income before income taxes


29,172



18,650



3,947



(2,538
)Net income


18,670



12,510



2,936



(1,798
)Basic earnings per share

$
0.60


$
0.39


$
0.09


$
(0.06
)Diluted earnings per share

$
0.59


$
0.39


$
0.09


$
(0.06
)   Fiscal 2006

First


Second


Third


FourthRetail sales

$
229,741


$
214,633


$
187,727


$
230,712Total revenues


233,060



217,845



190,882



234,097Cost of goods sold (exclusive of depreciation)


142,113



143,746



127,229



159,625Income before income taxes


32,754



19,044



9,133



18,698Net income


20,799



12,093



5,861



12,696Basic earnings per share

$
0.67


$
0.39


$
0.19


$
0.41Diluted earnings per share

$
0.65


$
0.38


$
0.18


$
0.40  42




---



##### 



THE CATO
    CORPORATION
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  14.
    Reportable
    Segment Information:      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   Fiscal 2006

Retail


Credit


TotalRevenues

$
864,987


$
10,898


$
875,885Depreciation


20,849



92



20,941Interest and other income


(9,597
)


0



(9,597
)Income before taxes


74,772



4,859



79,631Total assets


368,786



63,536



432,322Capital expenditures


27,483



64



27,547   Fiscal 2005

Retail


Credit


TotalRevenues

$
823,685


$
12,696


$
836,381Depreciation


20,173



102



20,275Interest and other income


(4,563
)


0



(4,563
)Income before taxes


65,682



4,693



70,375Total assets


339,788



66,848



406,636Capital expenditures


28,477



35



28,512       February 2,


February 3,


January 28,2008


2007


2006Bad debt expense

$
2,844


$
2,633


$
4,650Payroll


983



1,008



1,043Postage


985



1,034



1,061Other expenses


1,252



1,272



1,147Total expenses

$
6,064


$
5,947


$
7,901  43




---



##### 



THE CATO
    CORPORATION
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  15.
    Stock
    Based Compensation:  Share-Based Payment Accounting for Stock Issued to
    Employees
      1987


1999


2004Plan


Plan


Plan


TotalOptions and/or restricted stock initially authorized


5,850,000



1,000,000



1,350,000



8,200,000Options and/or restricted stock available for grant:February 3, 2007


9,277







1,091,618



1,100,895February 2, 2008


12,277







1,006,033



1,018,310       Weighted Average


AggregateWeighted Average


Remaining Contractual


IntrinsicShares


Exercise Price


Term


Value(a)Options outstanding at February 3, 2007


1,236,675


$
8.01



1.86 years


$
18,363,084GrantedForfeited or expired


5,400



17.45Exercised


1,092,200



7.41Outstanding at February 2, 2008


139,075


$
12.41



4.64 years


$
494,087Vested and exercisable at February 2, 2008


101,125


$
11.58



3.94 years


$
443,411     (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. 44




---



##### 



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



21.41Vested






Forfeited


15,314



19.90Restricted stock awards at February 2, 2008


301,967


$
22.56   16.
    Commitments
    and Contingencies:   45




---



##### 



THE CATO
    CORPORATION
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
         46




---



##### 



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:   47




---



##### 



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


139,075


$
12.41



1,272,220Equity compensation plans not approved by security holders










Total


139,075


$
12.41



1,272,220     (1)
    
    This column contains information regarding employee stock
    options only; there are no outstanding warrants or stock
    appreciation rights.(2)
    
    Includes the following:1,006,033 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. Additionally,
    12,277 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; and253,910 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 2008 Proxy
    Statement is incorporated by reference in response to this Item.  Item 13.
    Certain
    Relationships and Related Transactions and Director
    Independence:    Item 14.
    Principal
    Accountant Fees and Services:   48




---



##### 



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


24Consolidated Statements of Income and Comprehensive Income for
    the fiscal years ended February 2, 2008, February 3,
    2007 and January 28, 2006


25Consolidated Balance Sheets at February 2, 2008 and
    February 3, 2007


26Consolidated Statements of Cash Flows for the fiscal years ended
    February 2, 2008, February 3, 2007, and
    January 28, 2006


27Consolidated Statements of Stockholders Equity for the
    fiscal years ended February 2, 2008, February 3, 2007,
    and January 28, 2006


28Notes to Consolidated Financial Statements


29(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*


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
.4*


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
.5*


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. 49




---



##### 



ExhibitNumber

Description of Exhibit10
.6*


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
.7*


Resignation Agreement between Registrant and Reynolds C
. Faulkner dated as of October 30, 2006, incorporated by
    reference to Exhibit 99.1 to
    Form 8-K
    of the Registrant filed November 1, 2006.10
.8*


Letter Agreement between Registrant and Thomas W
. Stoltz dated as of December 4, 2006, incorporated by
    reference to Exhibit 99.1 to
    Form 8-K
    of the Registrant filed December 5, 2006.10
.9*


Summary of Named Executive Officer Compensation Determinations,
    incorporated by reference to Item 5
.02 of
    Form 8-K
    filed April 4, 2007.21



Subsidiaries of Registrant
.23
.1


Consent of Independent Registered Public Accounting Firm
.31
.1


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


Rule 13a-14(a)/15d-14(a)
    Certification of Chief 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. 50




---



##### 



EXHIBIT INDEX
  Designationof Exhibit



Page21


Subsidiaries of the Registrant


5323
.1

Consent of Independent Registered Public Accounting Firm


5431
.1

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


5531
.2

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


5632
.1

Section 1350 Certification of Chief Executive Officer


5732
.2

Section 1350 Certification of Chief Financial Officer


58  51




---



##### 



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

By /s/  THOMAS
    W. STOLTZThomas
    W. Stoltz
    Executive Vice President
    Chief Financial OfficerBy /s/  JOHN
    R. HOWEJohn
    R. Howe
    Senior Vice President 
    Controller       /s/  JOHN
    P. D. CATOJohn
    P. D. Cato
    (President and Chief Executive Officer
    (Principal Executive Officer) and Director)

/s/  WILLIAM
    H. GRIGGWilliam
    H. Grigg
    (Director)/s/  THOMAS
    W. STOLTZThomas
    W. Stoltz
    (Executive Vice President
    Chief Financial Officer (Principal Financial Officer))

/s/  GRANT
    L. HAMRICKGrant
    L. Hamrick
    (Director)/s/  JOHN
    R. HOWEJohn
    R. Howe
    (Senior Vice President
    Controller (Principal Accounting Officer))

/s/  JAMES
    H. SHAWJames
    H. Shaw
    (Director)/s/  ROBERT
    W. BRADSHAW, JR.Robert
    W. Bradshaw, Jr.
    (Director)

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

/s/  D.
    HARDING STOWED.
    Harding Stowe
    (Director)  52




---



##### 



SCHEDULE II  VALUATION
    AND QUALIFYING ACCOUNTS
  AllowanceforDoubtful


Self InsuranceAccounts(a)


Reserves(b)Balance at January 29, 2005

$
6,122


$
4,155Additions charged to costs and expenses


4,650



3,518Additions (reductions) charged to other accounts


1,117
(c)


(46
)Deductions


(8,195
)(d)


(2,977
)Balance at January 28, 2006


3,694



4,650Additions charged to costs and expenses


2,633



3,971Additions (reductions) charged to other accounts


1,600
(c)


(690
)Deductions


(4,373
)(d)


(3,329
)Balance at February 3, 2007


3,554



4,602Additions charged to costs and expenses


2,844



4,739Additions (reductions) charged to other accounts


1,038
(c)


(1,134
)Deductions


(4,173
)(d)


(4,080
)Balance at February 2, 2008

$
3,263


$
4,127     (a)
    
    Deducted from trade accounts receivable.(b)
    
    Reserve for Workers Compensation and General Liability.(c)
    
    Recoveries of amounts previously written off.(d)
    
    Uncollectible accounts written off. S-2