Bon-Ton plans to close at least 40 stores next year as bankruptcy threat grows
Bon-Ton is planning to close 15% of its store footprint next year as the troubled department store retailer attempts to right-size the business as part of a much-needed turnaround. The news accompanied disappointing Q3 results.
“We expect to implement a significant store rationalisation programme and plan to close at least 40 locations through 2018,” Bon-Ton CEO William Tracy said Thursday, “This will enable us… moving forward with a more productive store footprint and redirecting capital expenditures toward investments designed to drive sales growth.”
The closure timetable has yet to be revealed by the retailer which operates 260 stores in 24 states under various nameplates, including Bon-Ton, Bergner’s, Boston Store, Carson’s, Elder-Beerman, Herberger’s and Younkers.
Although New York-based private-equity firm Sycamore Partners is expressing interest in buying some of the ailing retailer’s assets, analysts still believe bankruptcy protection is on the cards.
CEO William Tracy said on an earnings call with analysts Thursday Bon-Ton and its advisers have completed a detailed analysis of the company’s stores and are now working with landlords to bring occupancy costs more in line with sales.
“We’re looking at everything – sales performance and profitability of the locations,” Tracy said. Stores with a negative cash flow will be among those targeted for closure, officials said on the call.
In addition, Tracy said the company will continue to look at opportunities to monetize its real estate. He pointed to an $18.9m sale-leaseback transaction for its Herberger’s store in Roseville, Minnesota.
On Thursday, Bon-Ton reported Q3 total sales declined 7.6% to $545.3m although it also reported double-digit growth in its omnichannel business despite comp sales dipped 6.6%.
But net loss grew to $44.9m/$2.19 a share from a net loss of $31.6m/ $1.58 a year ago. Through the first three quarters of the year, Bon-Ton has lost $135.4m, an increase from the $108.1m it lost during the first nine months last year.
Tracy said: “While results in the third quarter fell short of our expectations, we are taking more aggressive actions to fuel improved performance as well as strengthen our financial position.”
The retailer now expects fiscal 2017 loss per share to be in a range of $2.86-$3.35, inclusive of a $0.05 per share expense from the 53rd week, and adjusted ebitda to be in a range of $100m-$110m. It also expects a comp sales dip now ranging 4.5-5.5%.