Bon-Ton Stores closing 'at least' 40 stores next year
Bon-Ton Stores said last week it will shutter at least 40 underperforming stores, out of the 260 stores making up its footprint, through 2018.
CEO Bill Tracy, who arrived at the helm in August after a May executive shakeup, declined to identify which stores would close, saying only "we're looking at everything," according to a transcript from Seeking Alpha of executives' conference call with analysts. The final list will include stores the company normally would have closed at the end of this fiscal year, according to Chief Financial Officer Nancy Walsh. "They are generally the negative cash flow stores that we've talked about, as well as more of our smaller [stores]," she told analysts.
The announcement came as the department store retailer also reported third quarter same-store sales fell 6.6%, largely due to unseasonably warm weather that hurt sales of cold-weather apparel. Sales in the winter apparel category fell by more than one-third, or some 240 basis points, according to Walsh.
Bon-Ton, like many of its department store peers, has been under siege of late as specialty retailers continue to take market share in the categories that once defined their departments.
Department store results for the third quarter in general showed signs of relative progress despite continued operating income weakness relative to last year, according to a note from Moody's Investors Service emailed to Retail Dive. The analysts wrote that inventory management was key to stabilizing impact on merchandising margins.
"Lower clearance levels supported full-priced selling in the quarter," the analysts wrote, adding that Bon-Ton met the challenge, ending the third quarter with inventory down 10% from the prior year.
The struggling retailer is in good stead with its vendors and "well-positioned with merchandise" entering the important holiday season, though expecting heavy promotions at the holidays, executives said. The note on supplier relations is an important reassurance to the retailer's investors and other stakeholders, after reports broke earlier this year that some vendors had pulled back from Bon-Ton, that the retailer had hired an adviser to help with a turnaround and with the company's perceived bankruptcy risk after years of sales declines and profit losses.
Like other retailers and brands, including Kohl's, Nike and Calvin Klein, Bon-Ton has agreed to a tie-up with Amazon, in its case installing Amazon lockers for pickup of orders, which Tracy said have "performed very well" and have helped boost traffic.
While some observers see such partnerships as deals with the devil, Amazon is hardly the chain's only problem. Customers are turning to off-price stores and beauty retailers like Ulta instead of department stores. Nick Egelanian, president of retail development consultants SiteWorks International, says that is hurting the sector far more than e-commerce.
"The narrative that's out there that the internet has anything to do with department stores failing is wrong," Egelanian told Retail Dive earlier this year. "It's not stopping H&M from opening stores, it's not stopping [off-price retailers] TJX or Ross. ... This is the 30-year transfer of departments out of department stores. Department stores are under full scale assault, and this is just the beginning."
Like Macy's and other other department store retailers, Bon-Ton has already been closing stores, as well as cutting costs and scrambling for ways to drive traffic. In August executives had said the company would likely close between six and eight stores this year, well below the dramatic footprint shrinkage of Macy's, Sears and J.C. Penney this year. But the company has clearly decided to get tougher. "We're being very, and we have been very aggressive, candidly," Tracy told analysts.
- press release The Bon-Ton Stores, Inc. Reports Third Quarter Fiscal 2017 Results
- Seeking Alpha Earnings Call Transcript The Bon-Ton Stores' CEO Bill Tracy on Q3 2017 Results
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