The Bon-Ton Stores Inc., the parent company of Boston Store which maintains dual headquarters in Milwaukee and York, Pennsylvania, today provided updated guidance on its business performance, one day after S&P Global Ratings said the company could default within a year.
The struggling retailer, which widened its loss in the first quarter, last week announced its planned million sale-leaseback deal on three of its stores had fallen through. The move would have saved Bon-Ton $44.9 million. Bon-Ton stock fell from $1.49 on June 21 to $1.38 on June 27.
On Monday, S&P Global Ratings downgraded Bon-Ton from CCC+ to CCC and said it has weak liquidity and increasing refinancing risk for a debt that matures in mid-2017. A default could be in the near future for the retailer, S&P credit analyst Mathew Christy predicted in the downgrade report.
“…A default is likely within 12 months absent a meaningful turnaround in operating results,” Christy said. “Our view considers the June 20, 2016, announcement that a previously agreed upon sales-leaseback of three company-owned stores was terminated, which we believe suggests sustained industry weakness and operating performance for Bon-Ton.”
Bon-Ton doesn’t produce enough cash flow to support its operations, interest burden and refinancing needs, the report says. Its capital structure is “unsustainable.”
Comparable store sales, an important measure of retail performance, were still on track with Bon-Ton’s forecast through June 25, the company said. It also reaffirmed its fiscal 2016 guidance, with an expected loss per diluted share of between 95 cents and $1.45.
“In light of recent developments, including the announcement regarding our sale-leaseback agreement, and the ongoing uncertainties in the marketplace, we believe it is prudent to provide an update on our quarter-to-date business trends,” said Kathryn Bufano, president and chief executive officer of Bon-Ton. “Overall, our sales trends are in line with our plan, and we continue to believe that we are on track to meet our expectations for fiscal 2016. In addition, we continue to focus on maintaining adequate and sustainable liquidity levels for the business. As part of our ongoing refinancing efforts, we are working to diligently explore all appropriate options to pay down our senior notes due in 2017, and remain confident that we will be in a position to pay down this debt prior to maturity in July of 2017. We look forward to providing you with further details and additional information when we report our second quarter results in August.”
Bon-Ton Stores operates 267 department stores in 26 states under the Bon-Ton, Bergner’s, Boston Store, Carson’s, Elder-Beerman, Herberger’s and Younkers brands.