Some rather ominous dark clouds are gathering on the horizon for Bon-Ton Stores Inc., the parent company of Boston Store that operates dual headquarters in Milwaukee and York, Pa.
The company recently reported a fiscal first quarter net loss of $34.1 million, or $1.74 per share.
The firm has not turned an annual profit since 2010.
Like many mid-range department stores, Bon-Ton’s stores are facing stiff competition for bargain shoppers from discount stores such as Kohl’s and Target, for upscale shoppers from higher-end stores like Nordstrom and for tech-savvy shoppers from the growth of online retail at the expense of traditional brick-and-mortar stores.
In March, the company’s stock plummeted to a 52-week low of $4.32 per share.
Multiple analysts, including those at Imperial Capital, Benzinga and Zacks, have downgraded their outlooks for Bon-Ton’s stock.
“While Bon-Ton has not fared as poorly as Aeropostale in recent years, the company’s revenue and earnings performance has been terrible. On top of this, the company is loaded with debt and, with a large chunk of its current assets in inventory, its liquidity is anything but great. While there’s no guarantee, these issues, when combined, imply that the company’s future is bleak and that investors should be very cautious,” wrote Daniel Jones, manager of Avaring Capital Advisors LLC, a hedge fund advisor reporting on the Seeking Alpha investment advisory service.
Jones’ report was headlined, “Is the end nigh for Bon-Ton Stores?”
Jones said Bon-Ton’s balance sheet “is among the worst I’ve ever seen in the retail industry.”
Kathryn Bufano, who was named president and chief executive officer of Bon-Ton Stores last year and operates from the company’s office in downtown Milwaukee, remained undaunted in assessing the firm’s most recent quarterly report.
“While we saw top-line pressure in the first quarter, we delivered a comparable store sales increase of 0.8 percent, with growth in both brick-and-mortar and eCommerce channels, and effectively managed our expenses, leveraging expense decreases to an 80-basis-point reduction in our selling, general and administrative rate. In addition, we saw some wins in merchandising, including strength in moderate sportswear, active wear and men’s furnishings, while efforts in our localization strategies continue to generate good results. Gross margin dollars and rate decreased due to increased eCommerce distribution and delivery costs and an unfavorable comparison to prior year permanent markdowns,” Bufano said. “We are looking forward to the opening of our new eCommerce fulfillment center this fall as we believe there are opportunities for improved customer service and efficiencies that we expect will benefit our future performance. Overall, we believe that the strategies we have in place will yield improved results as we move through fiscal 2015.”
However, Jones remains skeptical.
“Moving forward, it will be interesting to see how things turn out with Bon-Ton. With sales and profits falling, the picture doesn’t look very good to say the least. Add to this the high debt the company has on its books compared to its book value, and the questionable liquidity, and I think it’s difficult (but not necessarily impossible) to say that the company will be around in its current incarnation five or 10 years from now,” Jones wrote.
