Same-store sales at Bon-Ton Stores Inc. (BONT) slipped 3.6% in the four-week period ended October 1, 2011. This compared unfavorably with a 5.9% growth in the year-ago period. On a year-to-date basis, same-store sales fell 2.1% in September 2011.
Total sales declined 4.1% to $286.9 million during the four-week period ended October 1, 2011 from $299.2 million in the same period ended October 2, 2010. Further, on a year-to-date basis, total sales dropped 2.7% to $1,709.4 million, compared with $1,756.3 million during the prior-year period ended October 2, 2010.
The company’s sales were mostly affected by lower consumer traffic and poor performance in categories like furniture, traditional ladies' sportswear and intimate apparel. Moreover, the company’s decision to effect price increases on some women and men's clothing due to higher costs further hurt revenues, as consumers are still not willing to pay higher prices.
However, the company experienced strong upside in categories like cosmetics, shoes, hard home and men's furnishings. Additionally, Bon-Ton received a strong response for its merchandise initiatives in missy, women’s and petite sportswear categories. Moreover, the company’s various efforts such as footwear expansions and increasing the market share of updated merchandise are expected to drive sales further.
However, same-store sales at Bon-Ton’s peer company, Kohl’s Corporation (KSS) grew 4.1% in the five-week period ended October 1, 2011 compared with an increase of 3.0% in the year-ago period. Sales increased mostly due to better consumer traffic and favorable impact of the new Jennifer Lopez and Marc Anthony clothing lines.
In the second quarter of 2011, total revenue of the departmental store chain plummeted 2.2% year over year to $595.5 million; mainly attributable to a 1.5% drop in same-store sales.
For fiscal 2011, the company expects same-store sales in the range of flat to up 1.0%.
Bon-Ton is expected to release its third quarter 2011 results on November 17, 2011. The Zacks Consensus Estimate for sales is pegged at $717 million for the third quarter. We believe the company will find it difficult to achieve the estimate in the third quarter, owing to dismal sales results in August and September.
The Zacks Consensus EPS estimates for the third quarter and fiscal 2011 are pegged at a loss of 28 cents and earnings of 85 cents, respectively. The estimates have not budged in the last 30 days, implying that analysts do not see any near-term catalyst.
We reiterate our long-term Neutral recommendation on Bon-Ton.
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