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Analyst Blog

On Nov 26, Zacks Investment Research upgraded Bon-Ton Stores, Inc. to a Zacks Rank #1 (Strong Buy). Shares of this department store retailer of apparel, accessories, cosmetics, home furnishings and footwear have amassed an impressive year-to-date return of roughly 50%.

Why the Upgrade?

Bon-Ton has been witnessing rising earnings estimates on the back of better-than-expected third-quarter fiscal 2013 bottom-line results. The impressive results were attributable to higher operating income and lower expenses. Moreover, favorable product mix and robust e-Commerce growth were the additional tailwinds.

The company reported third-quarter loss of 5 cents per share on Nov 21 that not only fared better than the Zacks Consensus Estimate of a loss of 50 cents but were also significantly better than a loss of 55 cents in the year-ago quarter.

Adjusted EBITDA came in at $38.4 million, up 12.6% year over year. Operating income increased 46.6% year over year to $15.9 million whereas gross margin remained flat year over year at 36.6%. Further, selling, general and administrative (SG&A) expenses declined 4.3% year over year to $215.2 million.

Despite healthy results, management reaffirmed its fiscal 2013 earnings guidance of 15 cents–75 cents per share. Following the results, the Zacks Consensus Estimate for fiscal 2013 improved substantially to 75 cents from 35 cents over the last 30 days and for fiscal 2014, the Zacks Consensus Estimate went up 23.8% to $1.08 over the same time frame.  

Other Stocks to Consider

Some better-ranked stocks in the retail sector, which look attractive at the current level include Hanesbrands Inc. and Kirkland's Inc. both carrying a Zacks Rank #1 (Strong Buy), whereas Five Below, Inc. ,  sports a Zacks Rank #2 (Buy).

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