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BONT: Don’t Add Bon-Ton After Q3 Earnings

By Neena Mishra , Zacks Investment Research


Even though gas prices have declined more than 40% in the past few months, it is not yet clear whether consumers are ready to spend the money saved from cheaper gas on other items. The landscape continues to be challenging for many retail companies despite improving economy and healing labor markets.

BonTon185Bon-Ton Stores Inc (BONT) is one of the largest regional department store operators in the country, offering a broad assortment of fashion apparel and accessories, as well as cosmetics, fine jewelry and home furnishings.

Founded in 1898, Bon-Ton currently operates 270 stores, including furniture galleries.

Disappointing Results and Guidance

On Nov. 20, Bon-Ton reported operating results for Q3 of fiscal 2014.  Total sales for the quarter declined 1.3% to $642.7 million, while adjusted Ebitda was down to $28.4 million from $38.4 million in Q3 2013.  Slower traffic and warmer weather in October impacted sales.

Gross margin decreased 29 basis points to 36.3% of net sales, thanks mainly to higher distribution and delivery costs. Net loss for the quarter was $11 million or 57 cents per share, compared with a net loss of $0.9 million or 5 cents per share year over year, which was much worse than the Zacks Consensus Estimate of 8 cents per share.

The bright spot in the Bon-Ton earnings report was 27% growth over the prior year quarter in e-commerce sales as the partnership with ShopRunner continues to drive incremental sales.

Based on Q3 results, Bon-Ton management also downgraded guidance for fiscal 2014. Bon-Ton now expects adjusted Ebitda in a range of $150 million to $160 million and earnings in a range of a loss of 20 cents per share to income of 10 cents per share.

Downward Revisions

Analysts have been cutting their estimates for Bon-Ton after quarterly results and lowered guidance. Zacks Consensus Estimates for the current and next year are currently 1 cent per share and 66 cents per share respectively, down from 35 cents per share and 72 cents per share, 30 days ago. Declining estimates sent BONT stock back to “Zacks Rank # 5” last week.

Bottom Line

Declining store traffic and highly promotional environment continue to present challenges for retailers. The Zacks industry rank for “Retail-Regional Department Stores” is currently 247 out of 265 (which is in the bottom 7%), and Bon-Ton is definitely included in that bottom rung.

Investors seeking exposure to the broader retail industry could look at Columbia Sportswear Company (COLM), which currently enjoys a “Zacks Rank # 1 (Strong Buy).”

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Article printed from InvestorPlace Media, https://investorplace.com/2014/12/bont-dont-add-bon-ton-q3-earnings/.

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