Bon-Ton Stores: More Store Closures Coming Soon
Adam Levine-Weinberg, The Motley Fool,Motley Fool 16 hours ago
Struggling department store operator Bon-Ton Stores (NASDAQ: BONT) filed for bankruptcy last month, after a desperate attempt to organize a voluntary debt restructuring failed. Since then, management has continued to pursue a turnaround plan that could keep most of the company intact.
However, Bon-Ton is running out of options for keeping the lights on. Its best chance of survival now appears to be a bid by a group of vendors for a portion of the company's stores. This would entail a significant number of additional store closures. The alternative is an outright liquidation of the company.
Sharp sales declines forced Bon-Ton Stores to file for bankruptcy last month. Image source: Bon-Ton Stores.
Either way, it's good news for rivals like Macy's (NYSE: M), J.C. Penney (NYSE: JCP), and Kohl's (NYSE: KSS), which are poised to capture some of Bon-Ton's lost revenue.
Dreadful results force downsizing
During the first three quarters of fiscal 2017, Bon-Ton's revenue plunged by more than 7%, as mall traffic continued to decline.
Macy's, Kohl's, and (to a lesser extent) J.C. Penney have been able to offset some of the recent weakness in store traffic with strong e-commerce sales growth. By contrast, Bon-Ton is a laggard in e-commerce, largely because it has had a meager investment budget for years.
Not surprisingly, the big sales declines at Bon-Ton caused a sharp erosion in profitability, despite aggressive cost cuts. As a result, in conjunction with the Q3 earnings report, management announced plans to close at least 40 of the company's 260 stores during 2018.
In late January, Bon-Ton Stores published a list of 42 locations that will close in April. It has also closed six other stores since the beginning of the calendar year. This will leave Bon-Ton with 212 stores by the end of next month.
Bon-Ton is closing about a dozen stores under the Carson's banner. Image source: Bon-Ton Stores.
Additional store closures are inevitable
In recent months, Bon-Ton has been seeking a capital infusion -- potentially from a private equity firm -- to finance a comeback attempt. This effort appears to have failed.
However, a number of vendors are considering banding together to bid for roughly 150-175 of the company's stores. Their interest makes sense, as Bon-Ton serves a lot of smaller markets where it is the only high-quality department store. If it disappears, brands that don't want to sell to the likes of Kohl's and J.C. Penney will lose visibility in some parts of the country.
A successful vendor-led bid would salvage the majority of Bon-Ton's stores. Still, if the endgame is to keep 150-175 stores operational, roughly 50 additional locations would need to be closed, aside from the 48 already announced.
Yet even this rescue plan may be unrealistic. With Bon-Ton's sales and earnings in free fall, stores that are profitable today could be losing money within a year or two. Furthermore, for Bon-Ton to be a viable stand-alone business, the remaining stores would have to generate enough profit to cover corporate overhead costs and fund investments in e-commerce and omnichannel capabilities.
A windfall for rivals?
Despite its steep sales decline in 2017, Bon-Ton Stores still brought in roughly $2.5 billion of revenue last year. At least a third of that revenue will be up for grabs in 2018, assuming that vendors manage to save 150-175 stores. There's also a good chance that liquidators will end up winning the bankruptcy auction, in which case all of the stores would be closed.
Rivals like Macy's, J.C. Penney, and Kohl's are all likely to pick up a slice of Bon-Ton's revenue. Kohl's could get the biggest piece, because it has a broad store footprint and very few of these locations are in malls, where they might suffer from traffic declines as Bon-Ton shutters stores.
J.C. Penney has the most stores in malls where Bon-Ton Stores also operates. This should drive solid market-share gains, particularly where mall owners are able to find good substitute tenants for Bon-Ton. Meanwhile, Macy's doesn't have much physical overlap with Bon-Ton anymore, but the two companies carry many of the same brands. Thus, Macy's e-commerce business is likely to gain sales from some former Bon-Ton customers.
The bankruptcy auction is set for April 9, so we will learn soon enough whether Bon-Ton Stores will be radically downsizing in 2018 -- or if it will disappear entirely.
Above is from: https://www.yahoo.com/finance/news/bon-ton-stores-more-store-124500259.html
From Wikipedia, the free encyclopedia
This article is about a department store. For other uses, see Bon Ton.The Bon-Ton Stores, Inc.
Traded as
OTC Pink Current: BONTQ
Industry
Retail
Founded
1898 (120 years ago)
Headquarters
York, Pennsylvania, and Milwaukee, Wisconsin U.S.
Number of locations
267 (Q3 2016)[1]
Bon-Ton Branded locations = 59 (2018) [2]
Key people
William Tracy President & CEO
Nancy Walsh EVP & CFO
Products
Clothing, footwear, bedding, furniture, jewelry, beauty products, and housewares
Revenue
$2.834 billion (FY 2016)[3]
Number of employees
27,100[4]
Subsidiaries
Bergner's
Boston Store
Carson's
Elder-Beerman
Herberger's
Younkers
Website
www.bonton.com
The Bon-Ton is a department store chain headquartered in York, Pennsylvania, and Milwaukee, Wisconsin. There are 267 stores, which includes nine furniture galleries and four clearance centers, in 26 states.[5] Other brands operated by The Bon-Ton include Bergner's, Boston Store, Carson's, Elder-Beerman, Herberger's, and Younkers.
