CATO

These disclosures reflect the Company’s beliefs and opinions as to factors that could materially and adversely affect the Company and its securities in the future.
References to particular events or contingencies are provided as examples only and should not be interpreted as a complete listing or as any representation about whether or not such events or contingencies have occurred in the past or may occur in the future.
Risks Relating to Our Business: Because we source a significant portion of our merchandise directly and indirectly from overseas, we are subject to risks associated with increased costs, changes, disruptions or other problems affecting the Company’s merchandise supply chain, risks associated with trade policies, including costs and uncertainties as the result of actual or threatened tariffs, the risks of conducting international operations and risks that affect the prevailing economic, social, geopolitical, public health and other conditions in the areas from which we source merchandise.
A significant amount of our merchandise is manufactured overseas, principally in Southeast Asia and Egypt.
Geopolitical tensions, conflicts, sanctions, prohibitions, additional actual or threatened tariffs, compliance and reporting requirements have resulted in increased costs associated with merchandise produced in certain regions.
We are subject to supply chain disruptions affecting transit times and costs, including disruptions from issues related to vessels transiting the Suez Canal and Red Sea, which are being forced to travel a much longer distance around the Cape of Good Hope due to the hostilities in the Middle East.
These issues have and may continue to drive up our ocean freight costs, delay merchandise deliveries, and impact our ability to access the already limited supply of ocean container shipping capacity that we require.
Additionally, we may be subject to additional costs related to our supply chain such as increased facility fees, fuel costs, peak surcharges and other additional charges to transport our goods, which may increase our costs.
Our ability to raise retail prices in response to these cost increases is limited, in part due to our customers’ unwillingness to pay higher prices for discretionary items in light of actual or perceived effects of pricing pressure on consumer confidence, limited customer disposable income to purchase our products, sentiment or financial outlook.
Moreover, the persistence or worsening of these conditions could also lead our customers to reduce their amount of current discretionary spending on our products even in the absence of price increases, which could erode our sales volume and adversely affect our results of operations and financial condition.
Consumer spending habits, including spending for our apparel and accessories, are affected by, among other things, prevailing social, economic, political and public health conditions and uncertainties (such as matters under debate in the U.S. from time to time regarding budgetary, spending and tax policies), levels of employment, fuel costs, inflation, interest rates, energy and food costs, salaries and wage rates and other sources of income, tax rates, home values, consumer net worth, the availability of consumer credit, consumer confidence and consumer perceptions of adverse changes in or trends affecting any of these conditions.
The price and availability of raw materials may be impacted by demand and supply fluctuations, regulation, tariffs, weather and crop yields, currency value fluctuations, inflation, as well as other factors.
Further, the activities conducted by our sourcing offices outside the United States subject us to foreign operational risks, as well as U.S. and international regulations and compliance risks, as discussed elsewhere in this “Risk Factors” section, in particular below under “Risk Factors – Risks Relating to Accounting and Legal Matters – Our business operations subject us to legal compliance and litigation risks, as well as regulations and regulatory enforcement priorities, which could result in increased costs or liabilities, divert our management’s attention or otherwise adversely affect our business, results of operations and financial condition.” Extreme weather, natural disasters, impacts of climate change, public health threats or similar events have and may continue to adversely affect our sales or operations from time to time.
The occurrence or threat of extreme weather, natural disasters, power outages, terrorist acts, outbreaks of flu or other communicable diseases (such as COVID-19) or other catastrophic events could reduce customer traffic in our stores and likewise disrupt our ability to conduct operations, which would materially and adversely affect us and could adversely affect our reputation and results of operations.
Activities conducted by us or on our behalf outside the United States further subject us to numerous U.S. and international regulations and compliance risks, as discussed below under “Risk Factors – Risks Relating to Accounting and Legal Matters – Our business operations subject us to legal compliance and litigation risks, as well as regulations and regulatory enforcement priorities, which could result in increased costs or liabilities, divert our management’s attention or otherwise adversely affect our business, results of operations and financial condition.” Existing and increased competition in the women’s retail apparel industry may negatively impact our business, results of operations, financial condition and market share.
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.
Although the Company's e-commerce platform provides another channel to drive incremental sales, expose existing customers with the online shopping experience and introduce a new customer base to the Company, it also exposes us to numerous risks.
We are subject to potential failures in the efficient and uninterrupted operation of our websites, customer contact center or our distribution center, including system failures caused by telecommunication or software system providers, order volumes that exceed our present system capabilities, electrical outages, mechanical problems and human error.
We accept payments using a variety of methods, including third-party credit cards, “buy now, pay later” services, our own branded credit card, debit cards, gift cards and physical and electronic bank checks.
We are exposed to risks related to the use of AI by us and our competitors.
We are exploring incorporating artificial intelligence (AI) capabilities into the development of technologies, our business operations and our merchandise.
AI technology is complex and rapidly evolving and may subject us to significant competitive, legal, regulatory, operational and other risks.
There is no guarantee that our use of AI will enhance our technologies, benefit our business operations, or produce apparel and accessories that are preferred by our customers.
Our competitors may be more successful in their AI strategy and develop superior products with the aid of AI technology.
Additionally, AI algorithms or training methodologies may be flawed, and datasets may contain irrelevant, insufficient or biased information, which can cause errors in outputs.
This may give rise to legal liability, damage our reputation, and materially harm our business.
The use of AI in the development of our products could also cause loss of intellectual property, as well as subject us to risks related to intellectual property infringement or misappropriation, data privacy and cybersecurity.
The United States and other countries may adopt laws and regulations related to AI.
These laws and regulations could cause us to incur greater compliance costs and limit the use of AI in the development of our products.
Any failure or perceived failure by us to comply with these regulatory requirements could subject us to legal liabilities, damage our reputation, or otherwise have a material and adverse impact on our business.
Risks Relating to Accounting and Legal Matters: Our business operations subject us to legal compliance and litigation risks, as well as regulations and regulatory enforcement priorities, which could result in increased costs or liabilities, divert our management’s attention or otherwise adversely affect our business, results of operations and financial condition.
New legislation or regulation and interpretation of existing laws and regulations, including those related to data privacy, AI or sustainability matters, could increase our costs of compliance, technology and business operations.
The Company’s periodic assessment of litigation-related matters may change in light of the discovery of facts not presently known to us or determinations by judges, juries or other finders of fact.
If we fail to protect our trademarks and other intellectual property rights or infringe the intellectual property rights of others, our business, brand image, growth strategy, results of operations and financial condition could be adversely affected.
Generally Accepted Accounting Principles and SEC accounting, disclosure and reporting rules and regulations are common and have become more frequent and significant in the past several years.
Significant judgment is required to determine and estimate tax liabilities, and there are many transactions and calculations where the ultimate tax determination is uncertain.
In the U.S., there have been numerous initiatives at the federal and state level to impose new or enhanced disclosure requirements regarding climate emissions, sustainability, workforce composition and related metrics, among other topics.
In addition, the covenants under our ABL Facility include restrictions that, among other things, limit our ability to incur additional indebtedness, create liens on assets, make investments, loans or advances, engage in mergers, consolidations, sell assets, make acquisitions, pay dividends and make other restricted payments, and enter into transactions with affiliates.
Risks Relating to the Market Value of Our Common Stock: The interests of our principal shareholder may limit the ability of other shareholders to influence the direction of the Company and otherwise affect our corporate governance and the market price of our common stock.
Cato owns a significant economic interest in the Company and the majority of the total voting power of our outstanding common stock at 53.3% as of March 23, 2026.

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Gone since FY2025

Risks Relating to Our Business: Because we source a significant portion of our merchandise directly and indirectly from overseas, we are subject to risks associated with changes, disruptions, increased costs or other problems affecting the Company’s merchandise supply chain, risks associated with trade policies, including costs and uncertainties as the result of actual or threatened tariffs, the risks of conducting international operations and risks that affect the prevailing social, economic, political, public health and other conditions in the areas from which we source merchandise.
A significant amount of our merchandise is manufactured overseas, principally in Southeast Asia.
We are subject to supply chain disruptions affecting transit times and costs, including issues related to a sustained drought in Panama that is causing longer transit times through the Panama Canal and limiting the number of containers on a vessel due to vessel draft restrictions.
We also face disruptions from issues related to vessels transiting the Suez Canal and Red Sea, which are being forced to travel a much longer distance around the Cape of Good Hope due to the hostilities in the Middle East.
These continued issues have and may continue to drive up our ocean freight costs, delay merchandise deliveries, and impact our ability to access the already limited supply of ocean container shipping capacity that we require.
Additionally, we may be subject to additional costs related to our supply chain such as increased facility fees, fuel, peak surcharg es and other additional charges to transport our goods, which may increase our costs.
In addition, geopolitical tensions, sanctions, prohibitions, additional actual or threatened tariffs, compliance and reporting requirements have resulted in increased costs associated with merchandise produced in certain regions.
Consumer spending habits, including spending for our apparel and accessories, are affected by, among other things, prevailing social, economic, political and public health conditions and uncertainties (such as matters under debate in the U.S. from time to time regarding budgetary, spending and tax policies), levels of employment, fuel, inflation, interest rates, energy and food costs, salaries and wage rates and other sources of income, tax rates, home values, consumer net worth, the availability of consumer credit, consumer confidence and consumer perceptions of adverse changes in or trends affecting any of these conditions.
Tight labor markets have caused wages to increase at the store, distribution center and home office levels, as well as making it more difficult to hire new associates and retain existing associates.
The tight labor market and continued inflation also are driving up our operating costs.
In addition, inflationary pressures on labor and raw materials used to make our products may continue to increase the cost we pay for our products.
If we are unable to offset the effects of these increased costs to our business by increasing the retail prices of our products, reducing other expenses or otherwise, our business, margins, results of operations and financial condition may be adversely affected.
Our ability to raise retail prices in response to these cost increases is limited, in part due to our customers’ unwillingness to pay higher prices for discretionary items in light of actual or perceived effects of inflation in increasing our customers’ cost of essential items and diminishing customers’ disposable income, sentiment or financial outlook.
Moreover, the persistence or worsening of inflationary conditions and high interest rates could also lead our customers to reduce their amount of current discretionary spending on our products even in the absence of price increases, which could erode our sales volume and adversely affect our results of operations and financial condition.
Further, the activities conducted by our sourcing offices outside the United States subject us to foreign operational risks, as well as U.S. and international regulations and compliance risks, as discussed elsewhere in this “Risk Factors” section, in particular below under “Risk Factors – Risks Relating to Accounting and Legal Matters – Our business operations subject us to legal compliance and litigation risks, as well as regulations and regulatory enforcement priorities, which could result in increased costs or liabilities, divert our management’s attention or otherwise adversely affect our business, results of operations and financial condition.
Extreme weather, natural disasters, impacts of climate change, public health threats or similar events have and may continue to adversely affect our sales or operations from time to time.
The occurrence or threat of extreme weather, natural disasters, power outages, terrorist acts, outbreaks of flu or other communicable diseases (such as COVID-19) or other catastrophic events could reduce customer traffic in our stores and likewise disrupt our ability to conduct operations, which would materially and adversely affect us.
The long-term impacts of global climate change are expected to be unpredictable and widespread.
The potential impacts of climate change present a variety of potential risks.
The physical effects of climate change such as extreme weather and drought could adversely affect our results of operations, including disrupting our supply chain, the costs of our products and negatively impacting our workforce.
In addition, the potential impacts of climate change present transition risks including regulatory and reputational risks.
The potential cost of compliance with any future regulations may substantially increase our costs.
For example, the use of certain commodities in the manufacture of our products and energy we use in our operations may face increased regulation due to climate change or other environmental concerns, which could increase our costs.
Furthermore, any failure of or perceived failure by us to comply with any potential future climate change regulatory requirements, including stakeholder expectations regarding the environment, could adversely affect our reputation and results of operations.
Activities conducted by us or on our behalf outside the United States further subject us to numerous U.S. and international regulations and compliance risks, as discussed below under “Risk Factors – Risks Relating to Accounting and Legal Matters – Our business operations subject us to legal compliance and litigation risks, as well as regulations and regulatory enforcement priorities, which could result in increased costs or liabilities, divert our management’s attention or otherwise adversely affect our business, results of operations and financial condition.” 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.
The price and availability of raw materials may be impacted by demand, regulation, tariffs, weather and crop yields, currency value fluctuations, inflation, as well as other factors.
If the Company is unable to successfully integrate new businesses into its existing business, the Company’s financial condition and results of operations will be adversely affected.
The Company’s long-term business strategy includes opportunistic growth through the development of new store concepts.
This growth may require significant capital expenditures and management attention.
The Company may not realize any of the anticipated benefits of a new business and integration costs may exceed anticipated amounts.
We have incurred substantial financial commitments and fixed costs related to our retail stores that we will not be able to recover if our stores are not successful and that have resulted in and could result in future impairment charges.
If we cannot successfully execute our growth strategies, our financial condition and results of operations may be adversely impacted.
Although the Company's e-commerce platform provides another channel to drive incremental sales, provides existing customers the online shopping experience and introduces the Company to a new customer base, it also exposes us to numerous risks.
We are subject to potential failures in the efficient and uninterrupted operation of our websites, customer contact center or our distribution center, including system failures caused by telecommunication system providers, order volumes that exceed our present system capabilities, electrical outages, mechanical problems and human error.
We accept payments using a variety of methods, including third-party credit cards, our own branded credit card, debit cards, gift cards and physical and electronic bank checks.
Risks Relating to Accounting and Legal Matters: If we fail to protect our trademarks and other intellectual property rights or infringe the intellectual property rights of others, our business, brand image, growth strategy, results of operations and financial condition could be adversely affected.
Our business operations subject us to legal compliance and litigation risks, as well as regulations and regulatory enforcement priorities, which could result in increased costs or liabilities, divert our management’s attention or otherwise adversely affect our business, results of operations and financial condition.
New legislation or regulation and interpretation of existing laws and regulations, including those related to data privacy or sustainability matters, could increase our costs of compliance, technology and business operations.
The Company’s periodic evaluation of litigation-related matters may change our assessment in light of the discovery of facts with respect to legal actions pending against us, not presently known to us or by determination of judges, juries or other finders of fact.

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Sentence-level comparison of Item 1A in the two most recent 10-Ks (FY2025 ↗, FY2026 ↗). A reworded sentence counts as one dropped and one added, so heavy edits read as low “kept”. Headings and page furniture are stripped; nothing is summarised by a model.

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