Report: Bon-Ton hires turnaround advisers
- Struggling department store retailer Bon-Ton has hired AlixPartners for help with its turnaround efforts and is also looking for a financial adviser that could help with strategic options, including debt restructuring, unnamed sources told Reuters. A spokesperson for AlixPartners declined to comment to Retail Dive. Bon-Ton did not reply to requests for comment.
- Investors are apparently concerned about Bon-Ton’s ability to repay its $850 million in debt, which according to Reuters is trading "well below its face value." Bond rating firm Moody’s Investors Services lists the department store chain among current distressed retailers and S&P has listed the company as one of the retailers most at risk of bankruptcy.
- Bon-Ton’s topline sales have been falling since 2007, and the retailer hasn’t posted a positive profit since 2010, according to regulatory filings. Comparable sales for Bon-Ton have been negative for the past nine quarters, according to an August report from Moody’s. In Q1 of this year, comparable sales fell by 8.8% — the worst among its department store peers with the exception of Sears, according to Moody’s.
Like other department store retailers, Bon-Ton has been closing stores, cutting costs and scrambling for ways to drive traffic in a largely dismal climate for department stores.
Executives said in an Aug. 17 conference call that they expect to close between six and eight stores this year, according to a Seeking Alpha transcript. That’s well below what Macy’s, Sears and J.C. Penney have closed this year, but Bon-Ton’s sales are still suffering: total sales fell 7% in Q2, to $504.4 million, compared to the prior-year period, and comparable sales fell by just over 6%, according to the company. That's not to mention the company's executive shakeup in May, in which Bon-Ton announced that COO William Tracy would replace previous CEO Kathryn Bufano.
"Bon-Ton management remains optimistic that its initiatives to increase revenue and drive growth will be successful," Debtwire analyst Philip Emma wrote in an August note emailed to Retail Dive. "Time will tell if these growth plans reverse the negative revenue trends or just become attempts that really don’t slow the rate of erosion that is occurring at brick-and-mortar retail due to secular trends."
But, Emma added, Bon-Ton has the ability to generate cash through its borrowing capacity, which gives it some flexibility. "[I]f the company can sell assets, given its level of liquidity, it has the room to allow strategic objectives to take hold and get through a difficult year, which may get better once it’s past the industrywide store closings that have exacerbated operating challenges," he wrote.
Meanwhile, turnarounds at Bon-Ton’s fellow department store operators are beginning to bear fruit, according to Moody’s. Analysts wrote in August that much of the group had begun to stem sales declines and were making headway in their e-commerce efforts.
Kohl’s and Nordstrom have been leading the pack with higher operating profit performance, which Moody’s analysts attributed to strong loyalty programs that helped the retailers build relationships with their core customers. Macy’s, the analysts noted, is trying to follow suit with a new loyalty program set to roll out in October, as 50% of that retailer’s business comes from just 10% of its customers.
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