Bon-Ton Stores Inc (BONT) reported a loss of $1.78 per share in the second quarter of 2011, much wider than the Zacks Consensus Estimate of a loss of $1.60, but better than the year-ago quarter loss of $1.91. The year-over-year improvement in the quarter reflects lower expense and a favorable tax benefit.
Total revenue of the departmental store chain plummeted 2.2% year over year to $595.5 million in the reported quarter attributable to a 1.5% drop in the same-store sales. To attract customers, the company is adding new apparel brands John Bartlett and Mambo in the men's and young men's divisions, respectively, and has also recently completed renovations of 17 stores.
Gross margin in the quarter contracted 80 basis points (bps) to 37.2%, attributed to higher delivery costs and increased net markdowns. EBITDA of the company also decreased $5.7 million to $15.6 million in the reported quarter.
Selling, general and administrative (SG&A) expenses decreased 2.0% to $219.8 million in the reported quarter as the company continues to focus on cost control and lower employee incentives. However, SG&A as a percentage of revenue inched up 10 bps to 36.9% in the quarter due to higher spending in the fields of marketing, private brands and e-commerce.
Financial Position
Bon-Ton ended the quarter with cash and cash equivalents of $13.4 million, shareholders’ equity of $111.6 million and long-term debt of $869.4 million. During the quarter, total debt reduced 6% year over year based on the company’s continuous efforts to reduce debt.
Outlook
Bon-Ton, headquartered in York, Pennsylvania and Milwaukee, Wisconsin lowered its outlook for 2011. The earnings are expected in the range of 70 cents to $1.00 (previous guidance $1.00 to $1.25) and EBITDA is expected between $225 million and $235 million, down from the previous guidance of $235 million–$245 million. Comparable store sales are estimated to be flat to up 1.0% while gross margin is expected to be down 70 bps to 80 bps year over year for 2011.
Our Take
The company reported disappointing results and also reduced its fiscal outlook. Hence, we expect a downward movement in estimates over the coming days. The Zacks Consensus Estimate is currently pegged at 85 cents per share for 2011 and $1.38 per share for 2012.
One of Bon-Ton’s primary competitors, Saks Incorporated (SKS) reported second-quarter 2011 adjusted loss per share of 5 cents, better than the Zacks Consensus Loss Estimate of 8 cents. Saks had reported a loss of 13 cents per share in the year-ago quarter. The year-over-year improvement in the quarter reflects strong same-store sales growth and gross margin expansion.
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