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Bon-Ton Misses, Lowers Outlook

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Bon-Ton Stores Inc reported an adjusted loss of $1.48 in the first quarter of 2011, higher than the Zacks Consensus Estimate of a loss of $1.41. The lower-than-expected results were due to inclement weather conditions, which resulted in lower traffic. 

On a reported basis, including loan prepayment and refinancing of revolving credit charges of 53 cents per share, the company posted a loss of $2.01 versus loss of $1.33 in the year-ago quarter.

Total revenue of the departmental store chain inched down 1.7% year over year to $649.9 million in the reported quarter attributable to a 1.2% drop in the same-store sales. The company witnessed negative comps due to bad weather conditions in northern states, which resulted in soft sales of seasonal apparel.

Gross margin in the quarter contracted 190 basis points (bps) to 35.5%, attributed to higher delivery costs and increased net markdowns. EBITDA of the company also decreased $9.8 million to $23.2 million in the reported quarter.

Selling, general and administrative expenses, as a percentage of revenue, plunged 30 bps to 34.2% in the quarter, as the company continues to focus on cost control and lower employee incentives.

Financial Position

Bon-Ton ended the quarter with cash and cash equivalents of $13.6 million, shareholders’ equity of $145.4 million and long-term debt of $891.8 million.


Bon-Ton, headquartered in York, Pennsylvania and Milwaukee, Wisconsin lowered its outlook for 2011. The earnings are expected in the range of $1.00 to $1.25 (previous guidance $1.00 to $1.25) and EBITDA is expected between $235 million and $245 million, down from the previous guidance of $235 million–$ 255 million. Comparable store sales are estimated to be up 1.0% to 2.5% and gross margin to be down 50 bps to 70 bps year over year for 2011.

Our Take

The company reported disappointing results and also reduced its outlook. Hence, we expect a downward movement in estimates over the coming days. The Zacks Consensus Estimate is currently pegged at 77 cents for 2011 and 76 cents for 2012.

One of Bon-Ton’s primary competitors, Dillard's Inc. (DDS - Free Report) the leading fashion apparel, cosmetics and home furnishings retailer, posted first quarter 2011 earnings of $1.27 per share, outpacing the Zacks Consensus Estimate of 91 cents per share and the prior-year quarter earnings of 69 cents per share.

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