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Bon-Ton Reports Weak November Comps

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Bon-Ton Stores Inc. reported a 4.9% decline in same-store sales for the four-week period ended November 26, 2011. This compared unfavorably with a 2.9% growth in the year-ago period. On a year-to-date basis, same-store sales fell 3.3% in November 2011.

Total sales slipped 4.9% to $303.6 million during the four-week period ended November 26, 2011 from $319.1 million in the comparable period ended November, 2010. Further, on a year-to-date basis, total sales dropped 3.7% to $2,205.1 million, compared with $2,289.6 million for the prior-year period.

November comps remained sluggish primarily due to unexpected warm weather conditions, which significantly hurt cold weather merchandise sales. The record sales on Black Friday day also failed to drive the comps.

Apart from the cold weather category, which accounts for 24% of total sales, other categories including ladies’ and men's apparel and accessories also lagged considerably.

However, the company witnessed strong upside in categories like shoes, hard and soft home, and juniors. Additionally, Bon-Ton is recording significant sales gains in eCommerce and considers it to be a significant growth driver. Moreover, the company’s various efforts such as footwear expansions, market share expansion of updated merchandise, and pilot store renovations are expected to drive sales further.

Same-store sales at Bon-Ton’s peer company, Kohl’s Corporation (KSS - Free Report) also fell 6.2% in the four-week period ended, November 26 2011. Total sales also decreased 4.5% for the period.

In the third quarter of 2011, total revenue of the departmental store chain plummeted 6.3% year over year to $656.1 million; attributable to poor sales of traditional merchandise apparel or moderate apparel. Moreover, the company’s decision to implement price rise on some women and men's clothing due to higher costs further hurt revenues, as tough economic environment prevented consumers from spending higher.  Same-store sales results also fell 5.9% during the quarter.

Bon-Ton expects comps to improve in the month of December on the back of favorable seasonal weather conditions. However, based on challenging economic conditions resulting in lower traffic, the company estimates comparable store sales in the range of negative 3.3% to negative 1.6% in 2011. Thus, the company has a long way to go and possibility of positive comps in the near term seems bleak, in our view.

Bon-Ton, headquartered in York, Pennsylvania and Milwaukee, Wisconsin expects earnings in the range of a loss of 65 cents to a gain of 25 cents per share for 2011 versus the previous guidance of earnings of 70 cents to $1.00 per share. EBITDA is expected between $190 million and $210 million, down from the previous guidance of $225 million–$235 million.

We reiterate our long-term Neutral recommendation on Bon-Ton.

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