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Bon-Ton Falls on Dismal Comps, Guides Low

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Shares of Bon-Ton Stores Inc. witnessed a drastic fall of roughly 26% during the after-market trading session on Jan 10, 2014, following soft December sales results and a trimmed earnings outlook.

The departmental retailer stated that comparable-store sales for the month of December were strongly affected by adverse weather conditions. The company, which kick started the holiday season on a strong note with Black Friday and exhibited a favorable trend into early December, lost momentum owing to a bad winter coupled with faulty commuting conditions.

Though unfavorable weather resulted in lower traffic count and rendered its promotional offers ineffective in the main selling season, its inventories for the month were significantly lower than the previous-year level, positioning the company well for the spring season.

Following the dismal results, Bon-Ton revised its guidance for full-year fiscal 2013. It now envisions comps to dip 3.5% for fiscal 2013, leading to a lowered guidance for earnings before interest, income taxes, depreciation and amortization (EBITDA) lying between $160–$170 million.

Given the trend so far, management is anticipating loss of 30 cents to earnings of 15 cents a share for fiscal 2013. Earlier, the company projected earnings in the band of 15-75 cents a share.

Bon-Ton is not the only company to have cut its forecast due to lower-than-expected sales and margin pressure following intense price competition that resulted in huge discounts. Retailers that lowered guidance battered by the holiday results include American Eagle Outfitters Inc. (AEO - Free Report) , Pacific Sunwear of California Inc. and L Brands Inc. (LB - Free Report) .

Apparel and accessories retailer, American Eagle, now expects its fourth-quarter fiscal 2013 earnings to dovetail with the lower-end of previously provided guidance range of 26 cents to 30 cents a share.

Apparel retailer, Pacific Sunwear is anticipating the loss to aggravate in the fourth quarter and projected loss of 18 cents to 21 cents a share. Earlier, it had forecasted loss between 12 cents and 17 cents per share.

L Brands, the specialty retailer of women’s intimate and other apparel, now anticipates fourth-quarter fiscal 2013 earnings to be approximately $1.60 per share compared to its earlier forecast of $1.67 to $1.82.

Currently, Bon-Ton holds a Zacks Rank #1 (Strong Buy). However, we could witness a downward revision in the Zacks Rank in the coming days given disappointing sales results and trimmed outlook.

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