Edgar Filing: CATO CORP

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )

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14a-6(e)(2))
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THE CATO CORPORATION
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(Name of Registrant as Specified In Its Charter)

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[LOGO]
THE CATO CORPORATION

May 2, 2005

Dear Shareholder:

You are cordially invited to attend the Annual Meeting of Shareholders to be
held at the Corporate Office of the Company, 8100 Denmark Road, Charlotte, North
Carolina 28273 on Thursday, May 26, 2005 at 11:00 A.M., Eastern Time.

The Notice of the Annual Meeting of Shareholders and Proxy Statement are
attached. The matters to be acted upon by our shareholders are set forth in the
Notice of Annual Meeting of Shareholders and discussed in the Proxy Statement.

We would appreciate your signing, dating, and returning to the Company the
enclosed proxy card in the enclosed envelope at your earliest convenience.

We look forward to seeing you at our Annual Meeting.

Sincerely yours,

JOHN P. DERHAM CATO
CHAIRMAN, PRESIDENT AND
CHIEF EXECUTIVE OFFICER

8100 DENMARK ROAD
P. O. BOX 34216
CHARLOTTE, NC 28234
(704) 554-8510

THE CATO CORPORATION

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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 26, 2005

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TO THE SHAREHOLDERS OF
THE CATO CORPORATION

Notice is hereby given that the Annual Meeting of Shareholders of The
Cato Corporation (the "Company") will be held on Thursday, May 26, 2005 at 11:00
A.M., Eastern Time, at the Corporate Office of the Company, 8100 Denmark Road,
Charlotte, North Carolina 28273, for the following purposes:

1. To elect three Directors to serve until their successors are
elected and qualified;

2. To ratify the selection of PricewaterhouseCoopers LLP as the
Company's independent registered public accounting firm for the
fiscal year ending January 28, 2006; and

3. To transact such other business as may properly come before the
meeting or any adjournments thereof.

The Board of Directors has fixed the close of business on March 29, 2005
as the record date for determination of shareholders entitled to notice of and
to vote at the meeting or any adjournments thereof.

By Order of the Board of Directors

MICHAEL O. MOORE
Dated: May 2, 2005 SECRETARY

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SHAREHOLDERS ARE URGED TO SIGN AND MAIL THE ENCLOSED PROXY IN THE ENCLOSED
ENVELOPE TO ENSURE A QUORUM AT THE MEETING. THIS IS IMPORTANT WHETHER YOU OWN
FEW OR MANY SHARES. DELAY IN RETURNING YOUR PROXY MAY SUBJECT THE COMPANY TO
ADDITIONAL EXPENSE.

THE CATO CORPORATION
8100 Denmark Road
Charlotte, North Carolina 28273

---------------
PROXY STATEMENT
---------------

This proxy statement is furnished in connection with the solicitation of
proxies by the Board of Directors of The Cato Corporation (the "Company") for
use at the Annual Meeting of Shareholders of the Company to be held on May 26,
2005, and at any adjournment or adjournments thereof. This proxy statement and
the accompanying proxy card are first being mailed to shareholders on or about
May 2, 2005.

Only shareholders of record at the close of business on March 29, 2005
are entitled to notice of and to vote at the meeting. As of March 29, 2005, the
Company had outstanding and entitled to vote 20,367,720 shares of Class A Common
Stock ("Class A Stock") held by approximately 1,279 holders of record and
460,350 shares of Class B Common Stock ("Class B Stock") held by 3 holders of
record. The Company's transfer agent estimates that there are approximately
5,028 beneficial owners in total. Holders of Class A Stock are entitled to one
vote per share and holders of Class B Stock are entitled to ten votes per share.
Holders of Class A Stock vote with holders of Class B Stock as a single class.

All proxies which are properly executed and received prior to the
meeting will be voted at the meeting. If a shareholder specifies how the proxy
is to be voted on any of the business to come before the meeting, the proxy will
be voted in accordance with such specification. If no specification is made, the
proxy will be voted FOR the election as Directors of the three persons named as
nominees in this Proxy Statement, and FOR the ratification of
PricewaterhouseCoopers LLP as the Company's independent registered public
accounting firm. A proxy may be revoked, to the extent it has not been
exercised, at any time prior to its exercise by written notice to the Secretary
of the Company, by executing and delivering a proxy with a later date, or by
voting in person at the meeting.

If you plan to attend and vote at the meeting and your shares are held
in the name of a broker or other nominee, please bring with you a proxy or
letter from the broker or nominee to confirm your ownership of shares.

In accordance with applicable Delaware law and the Company's Bylaws, the
holders of a majority of the combined voting power of Class A Stock and Class B
Stock present in person or represented by proxy at the meeting will constitute a
quorum. Abstentions are counted for purposes of determining the presence or
absence of a quorum. With regard to the election of directors, votes may either
be cast in favor of or withheld, and, assuming the presence of a quorum,
directors will be elected by a plurality of the votes cast. Votes that are
withheld will be excluded entirely from the vote and will have no effect on the
outcome of the election. Ratification of PricewaterhouseCoopers LLP as the
Company's independent registered public accounting firm requires the affirmative
vote of a majority of the combined voting power of the Class A Stock and Class B
Stock present in person or represented by proxy at the meeting and entitled to
vote. On any proposal other than the election of directors, an abstention will
have the same effect as a negative vote but, because shares held by brokers will
not be considered entitled to vote on matters which the brokers withhold
authority, a broker non-vote will have no effect on the vote on any such
proposal.

The Company will bear the expense of preparing, printing, and mailing
the proxy statement to shareholders. The Company will reimburse brokers,
dealers, banks, and other custodians, nominees, and fiduciaries for their
reasonable expenses in forwarding proxy solicitation materials to beneficial
owners of the Company's Class A Stock and Class B Stock and securing their
voting instructions. Georgeson Shareholder Communications, Inc. has assisted the
Company in conducting the search for beneficial owners at a cost of
approximately $975.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT

The following table sets forth, as of March 29, 2005, certain
information regarding the ownership of the outstanding shares of Class A Stock
and Class B Stock by (i) each director and nominee, (ii) each person who is
known by the Company to own more than 5% of such stock, (iii) each executive
officer listed in the Summary Compensation Table, and (iv) all directors and
executive officers as a group. Unless otherwise indicated in the footnotes
below, each shareholder named has sole voting and investment power with respect
to such shareholder's shares.

SHARES BENEFICIALLY OWNED (1) (2)
--------------------------------- PERCENT
CLASS A STOCK CLASS B STOCK OF TOTAL
------------- ------------- VOTING
NUMBER PERCENT NUMBER PERCENT POWER
------ ------- ------ ------- -----

John P. Derham Cato (3) 157,960 * 1,159,350 99.7 36.6
Michael O. Moore (4) 39,027 * -- * *
B. Allen Weinstein 10,903 * -- * *
Howard A. Severson (5) 34,846 * -- * *
Sally J. Almason 976 * -- * *
Robert W. Bradshaw, Jr. 500 * -- * *
George S. Currin 11,287 * -- * *
William H. Grigg 0 * -- * *
Grant L. Hamrick 3,000 * -- * *
James H. Shaw 5,046 * -- * *
A. F. (Pete) Sloan 7,200 * -- * *
D. Harding Stowe 0 * -- * *
All directors and executive officers as a 272,950 1.3 1,159,350 99.7 37.0
group (14 persons) (6)

Royce & Associates, LLC (7) 2,330,300 11.4 -- * 7.3
FMR Corporation, et al (8) 2,081,054 10.2 -- * 6.5
NFJ Investment Group (9) 1,507,600 7.4 -- * 4.7

-----------------
* Less than 1%

(1) Includes the vested interest of executive officers in the Company's
Employee Stock Ownership Plan and Employee Stock Purchase Plan. The
aggregate vested amount credited to their accounts as of March 29, 2005
was 33,656 shares of Class A Stock.

(2) Share amounts shown as subject to stock options in the footnotes below
cover shares under options that are presently exercisable or will become
exercisable within 60 days after March 29, 2005.

(3) The amount shown for Class A Stock includes 3,000 shares held by Mr.
Cato's wife, 4,500 shares subject to stock options held by Mr. Cato's
wife, and 47,500 shares subject to stock options held by Mr. Cato. The
amount for Class B Stock includes 700,000 shares subject to stock
options held by Mr. Cato and 2,000 shares subject to stock options held
by Mr. Cato's wife. Mr. Cato disclaims beneficial ownership of shares
held directly or indirectly by his wife.

(4) Includes 30,000 shares of Class A Stock subject to stock options.

(5) Includes 28,000 shares of Class A Stock subject to stock options.

(6) The amounts shown for Class A Stock include 111,000 shares subject to
stock options.

(7) Based on an amended Schedule 13G filed by this shareholder with the
Securities and Exchange Commission on or about January 21, 2005. The
address of this shareholder is 1414 Avenue of the Americas, New York,
New York 10019.

(8) Based on an amended Schedule 13G filed by FMR Corporation and certain of
its affiliates with the Securities and Exchange Commission on or about
February 14, 2005. The address of this shareholder is 82 Devonshire
Street, Boston, Massachusetts 02109. This shareholder reports sole
voting power over 127,970 of such shares.

(9) Based on an amended Schedule 13G filed with the Securities and Exchange
Commission on or about February 14, 2005 by NFJ Investment Group L.P.
and certain of its affiliates. The address of this shareholder is 2121
San Jancinto Street, Suite 1840, Dallas, Texas 75201. This shareholder
reports sole voting power over 1,034,600 of such shares.

ELECTION OF DIRECTORS

The Board of Directors, currently consisting of nine members, is divided
into three classes with terms expiring alternately over a three-year period. The
terms of three incumbent directors expire at the annual meeting. The directors
whose terms expire at this year's annual meeting, Mr. Robert W. Bradshaw, Jr.,
Mr. Grant L. Hamrick, and Mr. Michael O. Moore, have been nominated by the
Corporate Governance and Nominating Committee to succeed themselves and to serve
until the 2008 annual meeting and until their successors are elected and
qualified. The Corporate Governance and Nominating Committee nominates director
candidates in accordance with the Company's Bylaws and the policies described
below under "Corporate Governance Matters - Director Nomination Criteria and
Process."

It is the intention of the persons named in the proxy to vote for the
nominees above to serve for the terms described above, except to the extent
authority to so vote is withheld with respect to one or more nominees. Should
any nominee be unable to serve, which is not anticipated, the proxy will be
voted for the election of a substitute nominee selected by the Board of
Directors. The three nominees shall be elected by a plurality of the votes of
Class A Stock and Class B Stock voting as a single class.

NOMINEES

Information with respect to each nominee, including biographical data
for at least the last five years, is set forth below.

ROBERT W. BRADSHAW, JR., 71, has been a director of the Company since
1994. Since 1961, he has been engaged in the private practice of law with
Robinson, Bradshaw & Hinson, P.A. and currently serves of counsel to the firm.

GRANT L. HAMRICK, 66, has been a director of the Company since 1994. Mr.
Hamrick was Senior Vice President and Chief Financial Officer for American City
Business Journals, Inc. from 1989 until his retirement in 1996. From 1961 to
1985, Mr. Hamrick was employed by the public accounting firm Price Waterhouse
and served as Managing Partner of the Charlotte, North Carolina office.

MICHAEL O. MOORE, 54, has been employed by the Company as Executive Vice
President, Chief Financial Officer and Secretary since July 1998 and has been a
director of the Company since 2002. Mr. Moore served as Vice President, Chief
Financial Officer for Party Experience from 1997 to 1998, Executive Vice
President, Chief Financial Officer of David's Bridal from 1994 to 1997, and was
employed by Bloomingdales from 1984 to 1994, serving as Senior Vice President,
Chief Financial Officer from 1990 to 1994.

CONTINUING DIRECTORS

Information with respect to the six continuing members of the Board of
Directors, including biographical data for the last five years, is set forth
below.

JOHN P. DERHAM CATO, 54, has been employed as an officer of the Company
since 1981 and has been a director of the Company since 1986. Since January
2004, he has served as Chairman, President and Chief Executive Officer. From May
1999 to January 2004, he served as President, Vice Chairman of the Board and
Chief Executive Officer. From June 1997 to May 1999, he served as President,
Vice Chairman of the Board and Chief Operating Officer. From August 1996 to June
1997, he served as Vice Chairman of the Board and Chief Operating Officer. From
1989 to 1996, he managed the Company's off-price division, serving as Executive
Vice President and as President and General Manager of the It's Fashion!
Division from 1993 to August 1996. Mr. Cato is currently a director of Ruddick
Corporation.

GEORGE S. CURRIN, 68, has been a director of the Company since 1973.
Since 1989, he has served as Chairman and Managing Director of Fourth Stockton
Company LLC and Chairman of Currin-Patterson Properties LLC, both privately held
real estate investment companies.

WILLIAM H. GRIGG, 72, has been a director of the Company since February
2005. Mr. Grigg is Chairman Emeritus (Retired) of Duke Energy Corporation, where
he held positions including Chairman, President and Chief Executive Officer,
Vice Chairman, Chief Financial Officer and General Counsel over a 35 year
career. Mr. Grigg retired from Duke Energy Corporation in 1997. He currently
serves on the Board of Directors of Associated Electric and Gas Insurers, Ltd.
and has served on the Boards of Directors of Nations Fund Group, Shaw Group,
Inc. and Coltec Industries, Inc.

JAMES H. SHAW, 76, has been a director of the Company since 1989. Mr.
Shaw was Chairman of Consolidated Ivey's, a regional department store chain,
from 1988 until his retirement in 1989, Chairman and Chief Executive Officer of
J. B. Ivey & Company from 1986 to 1988 and Chairman and Chief Executive Officer
of Ivey's Carolinas from 1983 to 1986.

A. F. (PETE) SLOAN, 75, has been a director of the Company since 1994.
Mr. Sloan is retired Chairman and Chief Executive Officer of Lance, Inc. where
he was employed from 1955 until his retirement in 1990.

D. HARDING STOWE, 49, has been a director of the Company since February
2005. Mr. Stowe has been the President and Chief Executive Officer of R.L. Stowe
Mills, Inc. since 1994. Mr. Stowe currently serves on the board of the National
Council of Textile Organizations, the National Cotton Council, The Foundation of
the University of North Carolina at Charlotte, Inc. and the Board of Advisors of
Belmont Abbey College. Mr. Stowe also serves by appointment of the Bush
Administration on the United States Manufacturing Council.

The six continuing members of the Board of Directors are divided into
two classes with current terms expiring in 2006 and 2007. On the expiration of
each director's term, his successor in office will be elected for a three-year
term. The terms of Messrs. John P. Derham Cato, William H. Grigg, and James H.
Shaw expire in 2006. The terms of Messrs. George S. Currin, A.F. (Pete) Sloan,
and D. Harding Stowe expire in 2007.

DIRECTORS' COMPENSATION

Directors who are not employees of the Company receive a fee for their
services of $27,000 per year. Each non-employee director is paid $1,000 for
attending each Board of Directors meeting and each committee meeting scheduled
other than in conjunction with a regularly scheduled Board of Directors meeting.
The Committee Chairs of the Corporate Governance and Nominating Committee and
the Compensation Committee receive an additional $3,000 per year. The Committee
Chair of the Audit Committee receives an additional $5,000 per year. Directors
are reimbursed for reasonable expenses incurred in attending director meetings
and committee meetings.

MEETINGS AND COMMITTEES

During the fiscal year ended January 29, 2005, the Company's Board of
Directors held seven meetings. The Board typically schedules a meeting in
conjunction with the Company's annual meeting of shareholders and expects that
all directors will attend the annual meeting absent a schedule conflict or other
valid reason. All directors attended the Company's 2004 Annual Meeting.

The Board of Directors, pursuant to authority granted in the Company's
Bylaws, has established an Audit Committee, Compensation Committee, and
Corporate Governance and Nominating Committee.

AUDIT COMMITTEE

The Company's Audit Committee discusses with management the quality and
adequacy of the Company's system of internal controls, discusses with the
independent registered public accounting firm any significant matters regarding
internal control over financial reporting that have come to their attention
during their audit, and confers with the Company's independent registered public
accounting firm concerning the scope and results of their audits and any
recommendations they may have and considers such other matters relating to
auditing and accounting as the Committee may deem appropriate. During the fiscal
year ended January 29, 2005, the Audit Committee held five meetings. The Board
of Directors has determined that each member of the Audit Committee is an
independent director, in accordance with the independence requirements of the
New York Stock Exchange. In addition, the Board has determined that each member
of the Audit Committee meets the heightened standards of independence for audit
committee members under the Securities Exchange Act of 1934. Messrs. Grant L.
Hamrick, Chairman, Robert W. Bradshaw, Jr. and A. F. (Pete) Sloan are members of
the Audit Committee. Additional information concerning the Audit Committee is
set forth below under "Selection of Independent Registered Public Accounting
Firm."

COMPENSATION COMMITTEE

The Compensation Committee assesses the Company's overall compensation
programs and philosophies. The Committee reviews and approves, on an annual
basis, the Corporation's goals and objectives for compensation of the Chief
Executive Officer and evaluates the Chief Executive Officer's performance in
light of those goals and objectives at least annually. Based on this evaluation,
the Compensation Committee determines and reports to the Board the Chief
Executive Officer's compensation, including salary, bonus, incentive, and equity
compensation.

The Compensation Committee also reviews and approves, on an annual
basis, the evaluation process and compensation structure of the Corporation's
other executive officers and evaluates those other officers' performance at
least annually. Based on this evaluation, the Compensation Committee determines
and reports to the Board the other executive officers' compensation, including
salary, bonus, incentive, and equity compensation.

In addition, the Compensation Committee grants stock options and other
awards to employees of the Company and its subsidiaries pursuant to the
Company's benefit and incentive compensation plans and reports such actions to
the Board of Directors. The Board of Directors has determined that each member
of the Compensation Committee is an independent director, in accordance with the
independence requirements of the New York Stock Exchange. The Compensation
Committee held eight meetings during the fiscal year ended January 29, 2005.
Messrs. A. F. (Pete) Sloan, Chairman, George S. Currin and James H. Shaw are
members of the Compensation Committee.

CORPORATE GOVERNANCE AND NOMINATING COMMITTEE

The Corporate Governance and Nominating Committee reviews, evaluates and
recommends nominees for the Board of Directors. In addition, the Corporate
Governance and Nominating Committee monitors and evaluates the performance of
the directors on a periodic basis, individually and collectively. The Committee
also periodically reviews the Company's corporate governance principles and
recommends

changes to the Board of Directors. The Board of Directors has determined that
each member of the Corporate Governance and Nominating Committee is an
independent director, in accordance with the independence requirements of the
New York Stock Exchange. The Corporate Governance and Nominating Committee held
four meetings during the fiscal year ended January 29, 2005. Messrs. George S.
Currin, Chairman, Robert W. Bradshaw, Jr. and James H. Shaw are members of the
Corporate Governance and Nominating Committee.

CORPORATE GOVERNANCE MATTERS

CORPORATE GOVERNANCE GUIDELINES AND COMMITTEE CHARTERS

In furtherance of its longstanding goal of providing effective
governance of the Company's business and affairs for the benefit of
shareholders, the Board of Directors of the Company approved Corporate
Governance Guidelines. The Guidelines are available on the Company's website at
www.catocorp.com, as are the committee charters for the Company's Audit
Committee, Compensation Committee and Corporate Governance and Nominating
Committee. Print copies of these documents are available to any shareholder that
requests a copy by writing to Corporate Governance and Nominating Committee, c/o
General Counsel, 8100 Denmark Road, Charlotte, North Carolina 28273.

DIRECTOR INDEPENDENCE

The Board of Directors made a determination as to the independence of
each of its members. The Board of Directors determined, that each of the
following Board members is independent: Mr. Robert W. Bradshaw, Jr., Mr. George
S. Currin, Mr. William H. Grigg, Mr. Grant L. Hamrick, Mr. James H. Shaw and Mr.
A.F. (Pete) Sloan, Mr. D. Harding Stowe. The Board determined that Mr. John P.
Derham Cato and Mr. Michael O. Moore, employees of the Company, are not
independent. The Board made these determinations based upon, among other things,
the definition of an "independent director" set forth in the NYSE listing
standards supplemented by the Company's Corporate Governance Guidelines. A
director will be independent only if the Board affirmatively determines that the
director has no material relationship with the Company. This determination is in
addition to the analysis under the NYSE Independence tests and SEC Rule 10A-3
and must be based on the overall facts and circumstances specific to that
director.

In order to assist the Board in making determinations of independence,
any relationship described below will be presumed material:

(i) The director is, or has been within the last three years, an
employee of the Company, or an immediate family member is, or
has been within the last three years, an executive officer, of
the Company.
(ii) The director has received, or has an immediate family member has
received, during any twelve-month period within the last three
years, more than $100,000 in direct compensation from the
Company, other than director and committee fees and pension or
other forms of deferred compensation for prior service (provided
such compensation is not contingent in any way on continued
service).
(iii) The director or an immediate family member is a current partner
of a firm that is the Company's internal or external auditor;
the director is a current employee of such a firm; the director
has an immediate family member who is a current employee of such
a firm and who participates in the firm's audit, assurance or
tax compliance (but not tax planning) practice; or the director
or an immediate family member was within the last three years
(but is no longer) a partner or employee of such a firm and
personally worked on the listed company's audit within that
time.
(iv) The director or an immediate family member is, or has been
within the last three years, employed as an executive officer of
another company where any of the Company's present executive
officers at the same time serves or served on that company's
compensation committee.
(v) The director is a current employee, or an immediate family
member is a current executive officer, of a company that has
made payments to, or received payments from, the

Company for property or services in an amount which, in any of
the last three fiscal years, exceeds the greater of $1 million,
or 2% of such other company's consolidated gross revenues.

AUDIT COMMITTEE FINANCIAL EXPERTS

The Board of Directors has determined that at least one member of the
Audit Committee, Mr. Grant L. Hamrick, is a financial expert.

EXECUTIVE SESSIONS OF NON-MANAGEMENT DIRECTORS

Non-management Board members meet without management at regularly
scheduled executive sessions. In addition, to the extent that the group of
non-management directors includes directors that are not independent, at least
once a year there will be scheduled an executive session including only
independent directors. The Chairman of the Corporate Governance and Nominating
Committee will preside over meetings of the non-management or independent
directors.

CODE OF ETHICS AND CODE OF BUSINESS CONDUCT AND ETHICS

The Company has adopted a written Code of Ethics (the "Code of Ethics")
that applies to the Company's Chairman, President and Chief Executive Officer
(principal executive officer), Executive Vice President, Chief Financial Officer
and Secretary (principal financial officer), and Senior Vice President,
Controller (principal accounting officer). The Company has adopted a Code of
Business Conduct and Ethics (the "Code of Conduct") that applies to all
employees, officers, and directors of the Company. The Code of Ethics and Code
of Conduct are available on the Company's website at www.catocorp.com, under the
"Corporate Governance" caption and print copies are available to any shareholder
that requests a copy by writing to Corporate Governance and Nominating
Committee, c/o General Counsel, 8100 Denmark Road, Charlotte, North Carolina
28273. Any amendments to the Code of Ethics or Code of Conduct, or any waivers
of the Code of Ethics, or any waiver of the Code of Conduct for directors or
executive officers, will be disclosed on the Company's website promptly
following the date of such amendment or waiver. Information on the Company's
website, however, does not form a part of this Proxy Statement.

COMMUNICATIONS WITH DIRECTORS

You may communicate directly with any member or committee of the Board
of Directors by writing to: Chairman of the Corporate Governance and Nominating
Committee, c/o General Counsel, The Cato Corporation, 8100 Denmark Road,
Charlotte, North Carolina 28273. Depending on the subject matter, the Chairman
of the Corporate Governance and Nominating Committee, with the assistance of the
Company's General Counsel or Senior Vice President, Human Resources, will
determine whether to forward it to the director or directors to whom it is
addressed, attempt to handle the inquiry directly (for example, where it is a
request for information about the Company or it is a stock-related matter), or
not forward the communication if it is primarily commercial in nature or if it
relates to an improper or irrelevant topic.

If the subject matter involves a matter relating to accounting, internal
accounting controls, or auditing matters, the General Counsel will report the
matter to the Chairman of the Audit Committee and also advise the Chief
Executive Officer and Chief Financial Officer. The Chairman of the Audit
Committee and the Chief Executive Officer will determine what action, if any,
should be taken. The General Counsel and Chairman of the Audit Committee will
investigate the matter, if necessary, and file a report with the Audit
Committee. The Audit Committee, at its discretion, may discuss the matter with
the Board of Directors.

The General Counsel will maintain a log of all complaints, tracking
their receipt, investigation and resolution and will prepare a periodic summary
thereof for the Board of Directors, and the Audit Committee, as appropriate.

DIRECTOR NOMINATION CRITERIA AND PROCESS

Directors may be nominated by the Board of Directors in accordance with
the Company's Bylaws or by shareholders in accordance with the procedures for
shareholder proposals described under the caption "Shareholder Proposals" in
this Proxy Statement. The Company's Corporate Governance and Nominating
Committee will consider all nominees, including any submitted by shareholders,
for the Board of Directors. The assessment of a nominee's qualifications will
include a review of Board of Director qualifications as described in the
Company's Corporate Governance Guidelines.

The Corporate Governance and Nominating Committee will select qualified
nominees and review its recommendations with the full Board of Directors. The
Board of Directors will decide whether to invite the nominee to join the Board.
Nominees for director will be selected on the basis of outstanding achievement
in their personal careers, broad experience, wisdom, integrity, ability to make
independent, analytical inquiries, understanding of the business environment,
diversity, and willingness to devote adequate time to Board duties. The Board
believes that each director should have a basic understanding of (i) the
principal operational and financial objectives and plans and strategies of the
Company, (ii) the results of operations and financial condition of the Company
and of any significant subsidiaries or business segments, and (iii) the relative
standing of the Company and its business segments in relation to its
competitors.

The Board will have a majority of directors who meet the criteria for
independence required by the New York Stock Exchange. The Corporate Governance
and Nominating Committee is responsible for reviewing with the Board, on an
annual basis, the requisite skills and characteristics that the Board seeks in
Board members as well as the composition of the Board as a whole. On an annual
basis the Board will evaluate whether members qualify as independent under
applicable standards. During the course of a year, directors are expected to
inform the Board of any material changes in their circumstances or relationships
that may impact their designation by the Board as independent.

SUMMARY COMPENSATION TABLE

The table below sets forth the compensation for the persons who were at
January 29, 2005 the Chief Executive Officer and the four other most highly
compensated executive officers.

LONG TERM
COMPENSATION
ANNUAL COMPENSATION (1) AWARDS
------------------------------------- ----------------
FISCAL RESTRICTED ALL
YEAR SALARY BONUS STOCK OTHER
AWARDS COMPENSATION
NAME AND PRINCIPAL POSITION ($) ($) ($) ($)(2)

John P. Derham Cato 2004 818,750 1,237,500 (3) 9,135
Chairman, President and 2003 787,500 -- -- 9,101
Chief Executive Officer 2002 737,500 669,922 -- 10,549

B. Allen Weinstein 2004 449,750 339,750 -- 10,370
Executive Vice President 2003 435,000 -- -- 10,336
Chief Merchandising Officer 2002 415,000 187,578 -- 11,489
of the Cato Division

Michael O. Moore 2004 337,500 255,000 -- 9,210
Executive Vice President 2003 326,250 -- -- 9,176
Chief Financial Officer 2002 311,250 140,684 -- 10,199
and Secretary

Howard A. Severson 2004 274,250 207,000 -- 10,075
Executive Vice President 2003 267,000 -- -- 9,341
Chief Real Estate and 2002 258,250 110,738 -- 12,039
Store Development Officer

Sally J. Almason (4) 2004 226,500 120,000 -- 8,691
Senior Vice President 2003 198,250 -- -- 8,407
General Merchandise Manager 2002 191,250 54,415 -- 7,958
of the Cato Division

--------------
(1) No named executive officer received perquisites or other personal
benefits, securities or property which, in the aggregate, exceeded the
lesser of $50,000 or 10% of the total annual salary and bonus reported
for the named executive officer.

(2) Matching contributions by the Company to 401(k) Plan accounts and
imputed income amounts for group term life and income tax preparation.

(3) As of January 29, 2005, Mr. Cato held a total of 100,000 restricted
shares of Class B Stock at a value of 2,995,000 based on the closing of
trading price of the Class A Stock of $29.95 on January 28, 2005, the
last trading day before fiscal year end. Dividends are payable on the
restricted shares.

(4) Ms. Almason was promoted to Senior Vice President, General Merchandise
Manager of the Cato Division on September 1, 2004.

EMPLOYMENT AND SEVERANCE AGREEMENTS

The Company has severance agreements with Mr. Allen Weinstein and Mr.
Michael Moore currently providing for the continuation of each of their base
salaries for 12 months upon the termination of their employment without cause.
(See "Compensation Committee Report on Executive Compensation" for a discussion
of Mr. John Cato's employment relationship.)

OPTION GRANTS IN LAST FISCAL YEAR

The following table sets forth information concerning certain options
granted by the Company to the named executive officers during the fiscal year
ended January 29, 2005.

INDIVIDUAL GRANTS
------------------------------------------------------------------------------------ POTENTIAL REALIZABLE VALUE
NUMBER OF AT ASSUMED ANNUAL RATES OF
SECURITIES % OF TOTAL EXERCISE STOCK PRICE APPRECIATION
UNDERLYING OPTIONS GRANTED OF BASE FOR OPTION TERM
OPTIONS TO EMPLOYEES PRICE EXPIRATION ------------------------------
NAME GRANTED (#) IN FISCAL YEAR ($/SH) DATE 5%($) 10%($)
-------------------------------------------------------------------------------------------------------------------

John P. Derham Cato -- -- -- -- -- --

B. Allen Weinstein -- -- -- -- -- --

Michael O. Moore -- -- -- -- -- --

Howard A. Severson -- -- -- -- -- --

Sally J. Almason 10,000 (1) 13.2 21.25 9/1/14 133,640 338,670

----------------

(1) Options granted under the Company's 2004 Incentive Compensation Plan to
purchase Class A Stock at the fair market value of the Class A Stock on
the date of grant. The option vest in equal amounts over five years from
the date of grant and expires ten years from the date of grant.

AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES

The following table presents certain information concerning the exercise
of stock options during the fiscal year ended January 29, 2005 and the value of
unexercised options held at January 29, 2005 by the named executives.

NUMBER OF VALUE OF
SECURITIES UNDERLYING UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY
SHARES AT FISCAL OPTIONS AT
ACQUIRED YEAR-END (#)(1) FISCAL YEAR-END ($)(2)
ON VALUE ------------------------- ---------------------------
EXERCISE REALIZED EXERCISABLE (E)/ EXERCISABLE (E)/
NAME (#) ($) UNEXERCISABLE (U) UNEXERCISABLE (U)
------------------------------------------------------------------------------- ---------------------------

John P. Derham Cato -- -- 747,500 (3) 14,338,350
0 0

B. Allen Weinstein 23,100 257,094 0 0
0 0

Michael O. Moore 20,000 212,313 30,000 495,300
0 0

Howard A. Severson 16,000 275,504 28,000 527,000
0 0

Sally J. Almason 4,000 44,880 0 0
10,000 87,000

--------------------------------------------------------------------------------------------------------------

(1) Except as otherwise indicated in the footnotes below, all options are
for shares of Class A Stock.

(2) Value is based on difference between exercise price and market price of
the underlying securities as of January 28, 2005, the last trading day
before the fiscal year-end.

(3) Includes options to acquire 47,500 shares of Class A Stock and 700,000
shares of Class B Stock.

EQUITY COMPENSATION PLAN INFORMATION

The following table sets forth information regarding the shares of the
Company's Class A Stock and Class B Stock issuable under all of the Company's
equity compensation plans as of January 29, 2005:

(C)
NUMBER OF SECURITIES
(A) (B) REMAINING AVAILABLE
FOR FUTURE ISSUANCE
UNDER EQUITY
NUMBER OF SECURITIES TO WEIGHTED-AVERAGE EXERCISE COMPENSATION PLANS
BE ISSUED UPON EXERCISE PRICE OF OUTSTANDING (EXCLUDING SECURITIES
OF OUTSTANDING OPTIONS, OPTIONS, WARRANTS AND REFLECTED IN COLUMN
PLAN CATEGORY WARRANTS AND RIGHTS (1) RIGHTS (A))
------------------------------- --------------------------- ------------------------------- --------------------------

Equity compensation plans 1,003,550 12.08 (2) 1,102,086 (3)
approved by
security holders

Equity compensation plans not
approved by security holders
-- None -- -- --
--------------------------- ------------------------------- --------------------------
TOTAL 1,003,550 12.08 1,102,086
=============================== =========================== =============================== ==========================

(1) This category includes the 1987 Non-Qualified Stock Option Plan, the
1999 Incentive Compensation Plan, and the 2004 Incentive Compensation
Plan. The Company has no outstanding warrants or rights.

(2) This amount does not include the exercise price of options outstanding
under the Employee Stock Purchase Plan because the exercise price is not
determinable as of the date of this Proxy Statement. The exercise price
to purchase a share of Class A Stock under such an option equals 85% of
the lesser of the fair market value per share of Class A Stock at the
beginning of the applicable offering period or the fair market value per
share of Class A Stock at the end of the applicable offering period.

(3) This category includes 13,318 shares available for future issuance under
the Company's 1987 Non-Qualified Stock Option Plan, 221,768 shares
available for issuance under the Company's 2003 Employee Stock Purchase
Plan and 867,000 shares available for issuance under the Company's 2004
Incentive Compensation Plan.

COMPENSATION COMMITTEE
REPORT ON EXECUTIVE COMPENSATION

The following report submitted by the Compensation Committee of the
Board of Directors addresses the Company's executive compensation policies for
fiscal 2004.

The Compensation Committee is composed of three members. The members are
Messrs. A. F. (Pete) Sloan, Chairman, George S. Currin, and James H. Shaw. The
Compensation Committee provides guidance for the Company's executive
compensation programs to insure a direct relationship between executive
compensation and corporate performance.

EXECUTIVE COMPENSATION PROGRAM

The Company's executive compensation program has been designed (i) to
provide compensation equivalent to compensation offered by peer group companies
in order to attract and retain the most qualified executives, (ii) to motivate
executive officers by rewarding them for attaining pre-established Company
financial goals and (iii) to align the interest of executive officers with the
long-term interest of shareholders.

In designing the compensation packages for executive officers, the
Compensation Committee compares the Company's executive officer compensation
packages with peer group executive officer compensation packages, some of which
are included in the Dow Jones Specialty Apparel Market Index used in the
performance graph. Peer group companies, which are similar in size and operate
in the specialty apparel retail market, are given particular consideration.

The executive compensation program is focused on attainment of
profitability and enhancement of shareholder equity. Currently, the Company's
executive compensation program consists of three principal types of
compensation: annual base salary, incentive bonuses and long-term stock option
awards. Executive officers are rewarded when the Company achieves financial
goals, particularly related to net income, and when the executive officer
achieves individual performance levels related to the executive officer's
specific area of responsibility.

ANNUAL BASE SALARY - The annual base salary of each executive officer is
based on the scope of his or her responsibility and accountability. Each year
the Compensation Committee determines the base salary for each executive officer
taking into consideration whether the Company achieved net income results and
whether the executive officer achieved individual performance levels established
for the prior fiscal year.

INCENTIVE BONUS - A significant component of an executive officer's
total cash compensation consists of an incentive bonus. Each executive officer
is eligible to earn a bonus based on achievement of the targeted net income
performance criteria. A bonus accrual is made based on the achievement of the
net income performance criteria. If net income performance criteria are not
achieved, the accrual may be reduced or eliminated.

No weighting is applied to the criteria established for each executive
officer. If an executive officer achieves all of his or her performance goals
and if the Company's profit plan is achieved, the executive officer is eligible
to receive an incentive bonus. In the event an executive officer achieves some,
but not all, of the performance goals, he or she is eligible to receive a
portion of the executive officer's potential maximum bonus.

LONG-TERM STOCK OPTION AWARDS - Stock options are awarded by the
Compensation Committee under the Company's 2004 Incentive Compensation Plan to
executive officers to provide incentive for the executive officer to focus on
the Company's future financial performance and as a means to encourage an
executive officer to remain with the Company. The stock option exercise price is
100% of the fair market value of the shares on the date of grant and,
historically, the stock options have vested in 20% increments over five years.
Stock option grants are made when executive officers join the Company and
thereafter at the discretion of the Compensation Committee. The Compensation
Committee recognizes that, to varying degrees, the determination of an executive
officer's compensation package involves subjective considerations.

CHIEF EXECUTIVE OFFICER

The Compensation Committee discusses and determines the compensation
package for the Chief Executive Officer. Mr. John P. Derham Cato was appointed
Chief Executive Officer on May 20, 1999. The employment arrangement provides for
the compensation discussed herein. Mr. Cato's compensation package consists of
base salary, incentive bonus, long-term stock option awards and restricted stock
grants. Mr. Cato received no long-term stock option awards during fiscal 2004.

In determining Mr. Cato's compensation package, the Compensation
Committee compared Mr. Cato's package with the compensation packages of other
retailers, including the Chief Executive Officer compensation package of the
companies listed in the Dow Jones Specialty Apparel Market Index and the Peer
Group used in the Stock Performance Graph. The Compensation Committee took into
consideration Mr. Cato's years of service and experience with the Company and in
the specialty retail apparel industry. The Compensation Committee believes that
the compensation package offered Mr. Cato is consistent with Chief Executive
Officer packages of companies used in the review, considering Mr. Cato's
experience and longevity with the Company.

CHIEF EXECUTIVE OFFICER COMPENSATION PACKAGE

Base Salary - Mr. Cato's salary was increased to $825,000 from $800,000
for fiscal 2004 in response to the Company's performance in fiscal 2003.

Incentive Bonus - Mr. Cato is eligible to receive an annual bonus of up
to 150% of his base salary depending on the achievement of performance goals
established by the Compensation Committee. The main performance goal is based on
achievement of targeted net income. Based on the Company's performance for
fiscal 2004 as measured by the performance criteria established by the
Compensation Committee, Mr. Cato received 100% of his bonus payout potential.

This report has been provided by the Compensation Committee:

A. F. (Pete) Sloan, Chairman
George S. Currin
James H. Shaw

CERTAIN TRANSACTIONS

During fiscal 2004, the Company had 23 lease agreements with entities in
which Mr. George S. Currin, a director of the Company, had an ownership
interest. One lease agreement was signed in fiscal 1993, three were signed in
fiscal 1994, one was signed in fiscal 1995, one was signed in fiscal 1997, one
was signed in fiscal 1999, four were signed in fiscal 2000, seven were signed in
fiscal 2002, two were signed in fiscal 2003, and three were signed in fiscal
2004. The lease term of each agreement is for a period ranging from five years
to ten years with renewal terms at the option of the Company. The Company
believes that the terms and conditions of the lease agreements are comparable to
those which could have been obtained from unaffiliated leasing companies. The
Company paid to entities controlled by Mr. Currin or his family the amount of
$286,860 for rent and related charges during fiscal 2004. The Company paid to
entities in which Mr. Currin or his family has an interest of 50% or less the
amount of $800,929 for rent and related charges during fiscal 2004.

The firm of Robinson, Bradshaw & Hinson, P. A. was retained to perform
certain legal services for the Company during the last fiscal year. Mr. Robert
W. Bradshaw, Jr., a director of the Company, was a shareholder of Robinson,
Bradshaw & Hinson, P. A. until December 31, 2000 and currently serves of counsel
to the firm. It is anticipated that the firm will continue to provide legal
services to the Company

during the current fiscal year. Fees paid by the Company to Robinson, Bradshaw &
Hinson, P.A. in fiscal 2004 were 189,911.

STOCK PERFORMANCE GRAPH

The following graph compares the yearly change in the Company's
cumulative total shareholder return on the Company's Common Stock (which
includes Class A Stock and Class B Stock) for each of the Company's last five
fiscal years with (i) the Dow Jones Total Market Index, (ii) the Dow Jones
Retailers, Apparel Index and (iii) an index of four (4) peer companies. The peer
group includes Charming Shoppes, Inc., Deb Shops, Inc., The Dress Barn, Inc.,
and United Retail Group, Inc. The Company has chosen to use this peer group
index in its performance graph because management believes the peer group index
is a better reflection of the Company's competitors in the market place.

-----------------------
THE CATO CORPORATION
STOCK PERFORMANCE GRAPH
-----------------------

[PERFORMANCE GRAPH]

THE CATO CORPORATION
STOCK PERFORMANCE TABLE
(BASE 100 - IN DOLLARS)

LAST TRADING DAY THE CATO D. J. TOTAL D. J. RETAILERS PEER
OF THE FISCAL YEAR CORPORATION MKT INDEX APPL INDEX GROUP
------------------ ----------- --------- ---------- -----
1/28/00 100 100 100 100
2/02/01 155 99 116 115
2/01/02 179 83 101 133
1/31/03 157 65 87 100
1/30/04 185 89 117 113
1/28/05 264 94 141 149

The graph assumes an initial investment of $100 on January 28, 2000, the
last trading day prior to the commencement of the Company's 2000 fiscal year,
and that all dividends were reinvested.

CHANGE OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Effective September 16, 2003, the Audit Committee approved the dismissal
of its independent registered public accountant, Deloitte & Touche LLP, and
engaged PricewaterhouseCoopers LLP as its new independent registered public
accountant. PricewaterhouseCoopers LLP has audited the Company's financial
statements for fiscal year ended January 31, 2004.

During the Company's fiscal years ended February 2, 2002 and February 1,
2003, and the subsequent interim periods through September 16, 2003, there were
no disagreements between the Company and Deloitte & Touche LLP on any matter of
accounting principles or practices, financial statement disclosure, or auditing
scope or procedure, which disagreements, if not resolved to Deloitte & Touche
LLP's satisfaction, would have caused Deloitte & Touche LLP to make reference to
the subject matter of the disagreements in connection with its reports on the
Company's financial statements for such periods. None of the reportable events
described under Item 304 (a) (1) (v) of Regulation S-K occurred during the
Company's fiscal years ended February 2, 2002 and February 1, 2003, or during
any subsequent interim period through September 16, 2003.

The audit reports issued by Deloitte & Touche LLP on the Company's
consolidated financial statements as of and for the fiscal years ended February
2, 2002 and February 1, 2003 did not contain any adverse opinion or disclaimer
of opinion, nor were they qualified or modified as to uncertainty, audit scope
or accounting principles. The Company provided Deloitte & Touche LLP with a copy
of the foregoing disclosures, and a letter from Deloitte & Touche LLP confirming
its agreement with these disclosures was filed as an exhibit to the Company's
Form 8-K, filed with the Securities and Exchange Commission on September 23,
2003, amended October 6, 2003.

During the Company's fiscal years ended February 2, 2002 and February 1,
2003, and through subsequent interim periods through September 16, 2003, the
Company did not consult with PricewaterhouseCoopers LLP with respect to the
application of accounting principles to a specified transaction, either
completed or proposed, or the type of audit opinion that might be rendered on
the Company's consolidated financial statements, or any of the other matters or
events set forth in Item 304 (a) (2) (i) and (ii) of Regulation S-K.

SELECTION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Audit Committee has selected PricewaterhouseCoopers LLP as
independent registered public accounting firm to examine the Company's financial
statements for fiscal year ending January 28, 2006. This selection is being
presented to the shareholders for their ratification at the annual meeting.
Deloitte & Touche LLP examined the Company's financial statements for the fiscal
year ended February 1, 2003. PricewaterhouseCoopers LLP audited the Company's
financial statements for each of the fiscal years ended January 31, 2004 and
January 29, 2005. A representative of PricewaterhouseCoopers LLP is expected to
attend the meeting, respond to appropriate questions from shareholders present
at the meeting and, if such representative desires, to make a statement. The
affirmative vote of a majority of the votes present or represented at the annual
meeting and entitled to vote by the holders of Class A Stock and Class B Stock,
voting as a single class, is required to approve the proposal. The directors
recommend that shareholders vote FOR the proposal to ratify the selection of
PricewaterhouseCoopers LLP as the Company's independent registered public
accounting firm. If the Shareholders do not ratify the appointment of
PricewaterhouseCoopers LLP, the Audit Committee will reconsider its appointment
of an independent registered public accounting firm.

AUDIT COMMITTEE REPORT

The Audit Committee of the Board of Directors is composed of three
independent directors and operates under a written charter, a copy of which is
available on the Company's website at www.catocorp.com. The Board of Directors
has determined that all members of the Audit Committee

possess the required level of financial literacy and are "independent" in
accordance with the independence requirements of the New York Stock Exchange.

Management is responsible for the Company's internal controls and the
financial reporting process. PricewaterhouseCoopers LLP, the Company's
independent registered public accounting firm, is responsible for performing an
independent audit of the Company's consolidated financial statements in
accordance with standards of the Public Company Accounting Oversight Board and
issuing a report thereon. The Audit Committee, among other things, is
responsible for monitoring and overseeing these processes and is directly
responsible for the appointment, compensation, retention and oversight of the
Company's independent registered public accounting firm.

The primary purpose of the Audit Committee is to assist the Board of
Directors in fulfilling its oversight responsibility for safeguarding the
Company's assets and for the integrity of the accounting and reporting practices
of the Company and such other duties as directed by the Board. As set forth in
the Audit Committee Charter, the Audit Committee is not responsible for
conducting audits or preparing or determining whether the Company's financial
statements are accurate or complete or conform with accounting principles
generally accepted in the United States of America. The Company's independent
registered public accounting firm is responsible for expressing an opinion on
the conformity of audited financial statements to accounting principles
generally accepted in the United States of America.

In the performance of its oversight function and in accordance with its
responsibilities under its charter, the Audit Committee has reviewed and
discussed the audited financial statements for the year ended January 29, 2005
with management and the independent registered public accounting firm. The Audit
Committee also discussed with management and the independent registered public
accounting firm, the adequacy of the Company's internal controls, and discussed
with management the effectiveness of the Company's internal controls and
procedures used for periodic public reporting. The Audit Committee reviewed with
the independent registered public accounting firm their audit plans, audit scope
and identification of audit risks. The Audit Committee has discussed with the
independent registered public accounting firm the communications required by
generally accepted auditing standards and the Public Company Accounting
Oversight Board (United States), including those described in Statement on
Auditing Standards No. 61, as amended or supplemented. In addition, the Audit
Committee has received from the independent registered public accounting firm
the written disclosures and letter required by the Independence Standards Board,
Standard No. 1 titled "Independence Discussions with Audit Committees" and
discussed with the independent registered public accounting firm their
independence from the Company and its management. The Audit Committee also has
considered whether the independent registered public accounting firm's provision
of non-audit services to the Company is compatible with the auditor's
independence.

Based on the reviews and discussions mentioned above, the Audit
Committee recommended to the Board of Directors that the audited financial
statements for the year ended January 29, 2005 be included in the Company's
Annual Report to shareholders and to the Securities and Exchange Commission on
Form 10-K.

AUDIT COMMITTEE MEMBERS

Grant L. Hamrick, Chairman
Robert W. Bradshaw, Jr.
A. F. (Pete) Sloan

AUDIT FEES

PricewaterhouseCoopers LLP audited the Company's consolidated financial
statements for the fiscal years ended January 29, 2005 and January 31, 2004. The
aggregate PricewaterhouseCoopers LLP fees for all professional services rendered
for fiscal years ended January 29, 2005 and January 31, 2004 were:

PricewaterhouseCoopers LLP Audit Fees

FISCAL YEAR ENDED FISCAL YEAR ENDED
JANUARY 29, 2005 JANUARY 31, 2004
Audit Fees 654,250 (1) $165,000
Audit Related Fees 66,450 (2) 65,000(2)
Tax Fees 26,300 (3) 32,330(3)
All Other Fees -- 25,000(4)

(1) Includes $380,000 for audit services under Section 404 of the
Sarbanes-Oxley Act of 2002 and expenses of $75,000 related to a
restatement for lease accounting practices.

(2) Consists of audits of employee benefit plans, subsidiaries, and
expenses related thereto.

(3) Consists of tax compliance and related tax matters.

(4) Consists of expenses related to review of related party
transaction review for the fiscal year ended January 31, 2004.

POLICY ON AUDIT COMMITTEE PRE-APPROVAL OF AUDIT AND PERMISSIBLE NON-AUDIT
SERVICES BY THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Audit Committee is responsible for the appointment, compensation and
oversight of the work of the independent registered public accounting firm. As
part of this responsibility, the Audit Committee is required to pre-approve the
audit and non-audit services performed by the independent registered public
accounting firm in order to assure that they do not impair the auditor's
independence from the Company. Accordingly, the Audit Committee has adopted
procedures and conditions under which services proposed to be performed by the
independent registered public accounting firm must be pre-approved.

Pursuant to this policy, the Audit Committee will consider annually and
approve the terms of the audit engagement. Any proposed engagement relating to
permissible non-audit services must be presented to the Audit Committee and
pre-approved on a case-by-case basis. In addition, particular categories of
permissible non-audit services that are recurring may be pre-approved by the
Audit Committee subject to pre-set fee limits. If a category of services is so
approved, the Audit Committee will be regularly updated regarding the status of
those services and the fees incurred. The Audit Committee reviews requests for
the provision of audit and non-audit services by the Company's independent
registered public accounting firm and determines if they should be approved.
Such requests could be approved either at a meeting of the Audit Committee or
upon approval of the Chair of the Audit Committee, or another member of the
Audit Committee designated by the Chair. If a permissible non-audit service is
approved by the Chair or his designee, that decision is required to be presented
at the next meeting of the Audit Committee. Prior to approving any services, the
Audit Committee considers whether the provision of such services are consistent
with the SEC's rules on auditor independence and are compatible with maintaining
the auditor's independence.

SHAREHOLDER PROPOSALS

Shareholders who intend to present proposals for consideration at next
year's annual meeting are advised that, pursuant to rules of the Securities and
Exchange Commission, any such proposal must be received by the Secretary of the
Company at the Company's principal executive offices, 8100 Denmark Road,
Charlotte, North Carolina 28273-5975 no later than the close of business on
January 2, 2006 if such proposal is to be considered for inclusion in the proxy
statement and proxy appointment form relating to that meeting. Only persons who
have held beneficially or of record at least $2,000 in market value, or 1% of
the combined class of Class A and Class B Common Stock, for at least one year on
the date the proposal is submitted and who continue in such capacity through the
meeting date are eligible to submit proposals to

be considered for inclusion in the Company's proxy statement. In addition,
pursuant to rules of the Securities and Exchange Commission, the Company may
direct the persons named in the Company's proxy with respect to next year's
annual meeting to exercise discretionary voting authority to vote against any
matter, without any disclosure of such matter in the Company's proxy statement,
if notice of such matter is received by the Secretary of the Company later than
the close of business on March 16, 2006.

OTHER MATTERS

The Board of Directors of the Company knows of no matters which will be
presented for consideration at the meeting other than those set forth in this
proxy statement. However, if any other matters are properly presented for
action, it is the intention of the persons named in the proxy to vote on them in
accordance with their best judgment.

For the Board of Directors

THE CATO CORPORATION

MICHAEL O. MOORE
May 2, 2005 SECRETARY

FOLD AND DETACH HERE
--------------------------------------------------------------------------------

CLASS A COMMON STOCK

THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS

PROXY THE CATO CORPORATION

The undersigned hereby appoints John P. Derham Cato, Michael O. Moore, and J.
Gregory Fagan, and each of them, with full power of substitution, attorneys and
proxies to appear and vote, as indicated below, all of the shares of Class A
Common Stock of The Cato Corporation that the undersigned would be entitled to
vote at the Annual Meeting of Shareholders of The Cato Corporation to be held on
May 26, 2005, and at any and all adjournments thereof. The Board recommends a
vote FOR the following items:

1. ELECTION OF DIRECTORS

[ ] FOR all nominees [ ] WITHHOLD AUTHORITY
except as indicated to the contrary to vote for all nominees

Nominees: Robert W. Bradshaw, Jr., Grant L. Hamrick, Michael O. Moore
(INSTRUCTION: To withhold authority to vote for any individual nominee strike a
line through that nominee's name in the list provided above.)

2. Proposal to ratify the selection of PricewaterhouseCoopers LLP as the
Company's independent registered public accounting firm for fiscal year
ending January 28, 2006; and

[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting or any adjournments thereof.

[ ] FOR [ ] AGAINST [ ] ABSTAIN

FOLD AND DETACH HERE
--------------------------------------------------------------------------------

THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED "FOR" ALL PROPOSALS AND "FOR" ELECTION OF ALL NOMINEES FOR DIRECTOR.

THE UNDERSIGNED HEREBY ACKNOWLEDGES RECEIPT OF THE ACCOMPANYING NOTICE
OF ANNUAL MEETING AND PROXY STATEMENT AND REVOKES ALL PROXIES HERETOFORE GIVEN
BY THE UNDERSIGNED.

PLEASE MARK, DATE AND SIGN THIS PROXY AND RETURN IT PROMPTLY SO AS TO
INSURE A QUORUM AT THE MEETING. THIS IS IMPORTANT WHETHER YOU OWN FEW OR MANY
SHARES. DELAY IN RETURNING YOUR PROXY MAY SUBJECT THE COMPANY TO ADDITIONAL
EXPENSE.

Dated:____________________________________, 2005

________________________________________________

________________________________________________
(Signature)

Please sign exactly as your name appears hereon.
If the holder named hereon is a corporation,
partnership or other association, please sign
its name and add your name and title. When
signing as attorney, executor, administrator,
trustee or guardian, please also give your full
title. If shares are held jointly, EACH holder
should sign.

FOLD AND DETACH HERE
--------------------------------------------------------------------------------

CLASS B COMMON STOCK

THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS

PROXY THE CATO CORPORATION

The undersigned hereby appoints John P. Derham Cato, Michael O. Moore, and J.
Gregory Fagan, and each of them, with full power of substitution, attorneys and
proxies to appear and vote, as indicated below, all of the shares of Class B
Common Stock of The Cato Corporation that the undersigned would be entitled to
vote at the Annual Meeting of Shareholders of The Cato Corporation to be held on
May 26, 2005, and at any and all adjournments thereof. The Board recommends a
vote FOR the following items:

1. ELECTION OF DIRECTORS

[ ] FOR all nominees [ ] WITHHOLD AUTHORITY
except as indicated to the contrary to vote for all nominees

2. Proposal to ratify the selection of PricewaterhouseCoopers LLP as the
Company's independent registered public accounting firm for fiscal year
ending January 28, 2006; and

[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting or any adjournments thereof.

[ ] FOR [ ] AGAINST [ ] ABSTAIN

FOLD AND DETACH HERE
--------------------------------------------------------------------------------

THE UNDERSIGNED HEREBY ACKNOWLEDGES RECEIPT OF THE ACCOMPANYING NOTICE
OF ANNUAL MEETING AND PROXY STATEMENT AND REVOKES ALL PROXIES HERETOFORE GIVEN
BY THE UNDERSIGNED.

Dated:____________________________________, 2005

________________________________________________

________________________________________________
(Signature)