The Bon-Ton Stores, Inc. (NASDAQ:BONT) today
reported operating results for its fiscal first quarter ended April
29, 2017.
Results for the First Quarter Ended April 29,
2017
- Comparable store sales decreased 8.8% as compared with the
prior year period.
- SG&A decreased by $11.1 million as compared to the same
period last year.
- Net loss in the first quarter of fiscal 2017 was $57.3 million,
or $2.86 per share, compared with net loss of $37.8 million, or
$1.91 per share, in the first quarter of fiscal
2016.
- Adjusted EBITDA was negative $15.6 million in the first quarter
of fiscal 2017, compared with positive $1.3 million in the first
quarter of fiscal 2016. (As used in this release, Adjusted
EBITDA is not a measure recognized under GAAP – see the
accompanying financial table which reconciles this non-GAAP measure
to net loss.)
- During the quarter, the Company closed on an extension of its
$730 million ABL Tranche A credit facility, in advance of the
December 2018 maturity date. The Tranche A revolving facility
is now due to mature in April 2022.
Kathryn Bufano, President and Chief Executive Officer,
commented, “Our first quarter results did not meet our expectations
due primarily to weak mall traffic trends, unfavorable weather and
marketing challenges associated with the Easter calendar shift.
That said, our omnichannel business once again generated double
digit growth and we continued to expand our merchandise offering
with highly recognized brands as well as exclusive and private
brands that resonate with our customer. Looking ahead, we
will continue to make enhancements to our omnichannel strategy,
expand our merchandise assortment with brands and categories that
appeal to our customer, and elevate our marketing programs to drive
traffic and conversion. In addition, we expect to achieve
additional cost reductions in fiscal 2017 through the rollout of
our internal profit improvement initiative.”
First Quarter Review
Comparable store sales in the first quarter of fiscal 2017
decreased 8.8%. Total sales in the period decreased 9.3% to
$536.1 million, compared with $591.0 million in the first quarter
of fiscal 2016.
The Company once again achieved double-digit sales growth in
omnichannel, which reflects sales via the Company’s website, mobile
site and its Let Us Find It customer service program, as the
Company leveraged its West Jefferson facility and store-fulfillment
network.
Other income in the first quarter of fiscal 2017 was $16.9
million, a decrease of $0.5 million compared to the prior year
period. The decrease was largely due to lower revenues
associated with the Company’s proprietary credit card
operations. Proprietary credit card sales, as a percentage of
total sales, increased 90 basis points to 55.8% in the first
quarter of fiscal 2017.
The gross margin rate in the first quarter of fiscal 2017
decreased 170 basis points as compared with the first quarter of
fiscal 2016 to 32.2% of net sales, due to an increase in the
markdown rate and increased delivery expenses. Gross profit
decreased $27.5 million to $172.6 million in the first quarter of
fiscal 2017, primarily as a result of decreased sales
volume.
Selling, general and administrative (“SG&A”) expense in the
first quarter of fiscal 2017 decreased $11.1 million compared to
the first quarter of fiscal 2016, largely due to decreased rent,
advertising, payroll, taxes, and medical expenses. The
SG&A expense rate in the first quarter of 2017 was 38.3% of net
sales, an increase of 170 basis points over the prior year,
primarily as a result of the decreased sales volume in the
period.
The Company’s excess borrowing capacity under its revolving
credit facility was approximately $226.5 million at the end of the
first quarter of fiscal 2017, after payment of $6.6 million in fees
associated with the Company’s recently closed ABL Tranche A
extension.
Guidance
For fiscal 2017, the Company continues to expect loss per share
to be in a range of $2.08 to $2.59, inclusive of a $0.05 expense
from the 53rd week, and adjusted EBITDA to be in a range of $115
million to $125 million. (As used in this release, Adjusted EBITDA
is not a measure recognized under GAAP – see the accompanying
financial table which reconciles this non-GAAP measure to net
loss.) Updated assumptions reflected in the Company’s
full-year guidance include the following:
- A comparable sales decrease now ranging from 3.0% to 4.0%,
which excludes sales from the 53rd week;
- A gross margin rate of flat to up 10 basis points over the
fiscal 2016 rate of 35.5%;
- SG&A dollars now ranging from $855 million to $857 million,
including approximately $10 million for the 53rd week, compared to
SG&A of $880.6 in fiscal 2016; the improvement compared to the
Company’s prior guidance is primarily due to lower expenses related
to advertising, payroll, and occupancy.
- Capital expenditures not to exceed $30 million, net of external
contributions; and
- An estimated 20.3 million weighted average shares
outstanding.
The Company expects to decrease debt by approximately $20
million to $30 million by the end of fiscal 2017.
Call DetailsThe Company’s quarterly conference
call to discuss first quarter fiscal 2017 results will be broadcast
live today at 10:00 a.m. Eastern time. Investors and analysts
interested in participating in the call are invited to dial (888)
428-9498 at 9:55 a.m. Eastern time. A taped replay of the
conference call will be available within two hours of the
conclusion of the call and will remain available through Thursday,
May 25, 2017. The number to call for the taped replay is
(844) 512-2921 and the replay PIN is 5341864. The conference
call will also be broadcast on the Company’s website at
http://investors.bonton.com. An online archive of the webcast
will be available within two hours of the conclusion of the
call.
About The Bon-Ton Stores, Inc.The Bon-Ton
Stores, Inc., with corporate headquarters in York, Pennsylvania and
Milwaukee, Wisconsin, operates 261 stores, which includes nine
furniture galleries and four clearance centers, in 25 states in the
Northeast, Midwest and upper Great Plains under the Bon-Ton,
Bergner's, Boston Store, Carson's, Elder-Beerman, Herberger's and
Younkers nameplates. The stores offer a broad assortment of
national and private brand fashion apparel and accessories for
women, men and children, as well as cosmetics and home furnishings.
The Bon-Ton Stores, Inc. is an active and positive participant in
the communities it serves. For further information, please visit
http://investors.bonton.com.
Cautionary Note Regarding Forward-Looking
StatementsCertain information included in this press
release contains statements that are forward-looking within the
meaning of the Private Securities Litigation Reform Act of 1995.
Such forward-looking statements, which may be identified by words
such as "may," "could," "will," "plan," "expect," "anticipate,"
"believe," "estimate," "project," "intend" or other similar
expressions and include the Company's fiscal 2017 guidance, involve
important risks and uncertainties that could significantly affect
results in the future and, accordingly, such results may differ
from those expressed in any forward-looking statements made by or
on behalf of the Company. Factors that could cause such
differences include, but are not limited to: risks related to
retail businesses generally; a significant and prolonged
deterioration of general economic conditions which could negatively
impact the Company in a number of ways, including the potential
write-down of the current valuation of intangible assets and
deferred taxes; risks related to the Company's proprietary credit
card program; potential increases in pension obligations; consumer
spending patterns, debt levels, and the availability and cost of
consumer credit; additional competition from existing and new
competitors or changes in the competitive environment; inflation;
deflation; changes in the costs of fuel and other energy and
transportation costs; weather conditions that could negatively
impact sales; uncertainties associated with expanding or remodeling
existing stores; the ability to attract and retain qualified
management; the dependence upon relationships with vendors and
their factors; a data security breach or system failure; the
ability to reduce or control SG&A expenses, including
initiatives to reduce expenses and improve efficiency; operational
disruptions; unsuccessful marketing initiatives; the ability to
expand our capacity and improve efficiency through our new
eCommerce fulfillment center; changes in, or the failure to
successfully implement, our key strategies, including initiatives
to improve our merchandising, marketing and operations; adverse
outcomes in litigation; the incurrence of unplanned capital
expenditures; the ability to obtain financing to fund working
capital, capital expenditures, losses and general corporate
purposes; the impact of regulatory requirements including the
Health Care Reform Act and the Dodd-Frank Wall Street Reform and
Consumer Protection Act; the inability or limitations on the
Company's ability to favorably adjust the valuation allowance on
deferred tax assets; and the financial condition of mall
operators. Additional factors that could cause the Company's
actual results to differ from those contained in these
forward-looking statements are discussed in greater detail under
Item 1A of the Company's Form 10-K filed with the Securities and
Exchange Commission.
- tables follow –
THE BON-TON STORES, INC. AND
SUBSIDIARIES |
CONSOLIDATED BALANCE SHEETS |
|
|
|
|
|
|
|
|
(In
thousands, except share and per share data) |
|
April 29, |
|
April 30, |
(Unaudited) |
|
|
2017 |
|
|
|
2016 |
|
|
|
|
|
|
|
|
|
Assets |
|
|
|
|
|
Current
assets: |
|
|
|
|
|
Cash and
cash equivalents |
|
$ |
7,012 |
|
|
$ |
7,807 |
|
|
Merchandise
inventories |
|
|
713,731 |
|
|
|
712,113 |
|
|
Prepaid
expenses and other current assets |
|
|
73,350 |
|
|
|
72,246 |
|
|
|
Total
current assets |
|
|
794,093 |
|
|
|
792,166 |
|
Property,
fixtures and equipment at cost, net of accumulated depreciation
and |
|
|
|
|
|
amortization of $1,045,580 and $974,272 at April 29, 2017 and April
30, 2016, respectively |
|
|
570,709 |
|
|
|
623,086 |
|
Intangible
assets, net of accumulated amortization of $67,009 and $63,647
at |
|
|
|
|
|
April 29,
2017 and April 30, 2016, respectively |
|
|
71,748 |
|
|
|
80,619 |
|
Other
long-term assets |
|
|
22,384 |
|
|
|
16,713 |
|
|
|
Total assets |
|
$ |
1,458,934 |
|
|
$ |
1,512,584 |
|
|
|
|
|
|
Liabilities
and Shareholders' Deficit |
|
|
|
|
Current
liabilities: |
|
|
|
|
|
Accounts
payable |
|
$ |
160,643 |
|
|
$ |
159,818 |
|
|
Accrued
payroll and benefits |
|
|
22,751 |
|
|
|
22,309 |
|
|
Accrued
expenses |
|
|
146,396 |
|
|
|
146,585 |
|
|
Current
maturities of capital lease and financing obligations |
|
|
6,823 |
|
|
|
5,529 |
|
|
|
Total
current liabilities |
|
|
336,613 |
|
|
|
334,241 |
|
|
|
|
|
|
|
|
|
|
Long-term
debt, less current maturities |
|
|
894,895 |
|
|
|
864,856 |
|
Obligations
under capital lease and financing obligations, less current
maturities |
|
|
132,179 |
|
|
|
125,269 |
|
Other
long-term liabilities |
|
|
174,030 |
|
|
|
189,477 |
|
|
|
Total liabilities |
|
|
1,537,717 |
|
|
|
1,513,843 |
|
|
|
|
|
|
Shareholders' deficit: |
|
|
|
|
|
Preferred
Stock - authorized 5,000,000 shares at $0.01 par value; no shares
issued |
|
|
- |
|
|
|
- |
|
|
Common
Stock - authorized 40,000,000 shares at $0.01 par value; issued
shares |
|
|
|
|
|
|
of
18,806,967 and 18,954,675 at April 29, 2017 and April 30, 2016,
respectively |
|
|
188 |
|
|
|
190 |
|
|
Class A
Common Stock - authorized 20,000,000 shares at $0.01 par value;
issued |
|
|
|
|
|
|
and
outstanding shares of 2,951,490 at April 29, 2017 and April 30,
2016 |
|
|
30 |
|
|
|
30 |
|
|
Treasury
stock, at cost - 337,800 shares at April 29, 2017 and April 30,
2016 |
|
|
(1,387 |
) |
|
|
(1,387 |
) |
|
Additional
paid-in-capital |
|
|
167,984 |
|
|
|
165,199 |
|
|
Accumulated
other comprehensive loss |
|
|
(72,146 |
) |
|
|
(75,255 |
) |
|
Accumulated
deficit |
|
|
(173,452 |
) |
|
|
(90,036 |
) |
|
|
Total shareholders' deficit |
|
|
(78,783 |
) |
|
|
(1,259 |
) |
|
|
Total liabilities and shareholders' deficit |
|
$ |
1,458,934 |
|
|
$ |
1,512,584 |
|
|
|
|
|
|
|
|
|
THE BON-TON STORES, INC. AND
SUBSIDIARIES |
CONSOLIDATED STATEMENTS OF
OPERATIONS |
|
|
|
|
|
|
|
|
|
|
|
|
|
THIRTEEN |
|
|
|
|
|
WEEKS ENDED |
|
|
|
|
(In
thousands, except per share data) |
April 29, |
|
April 30, |
|
|
|
|
(Unaudited) |
|
|
2017 |
|
|
|
2016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
sales |
|
$ |
536,141 |
|
|
$ |
591,007 |
|
|
|
|
|
Other
income |
|
16,880 |
|
|
|
17,416 |
|
|
|
|
|
|
|
|
|
553,021 |
|
|
|
608,423 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and
expenses: |
|
|
|
|
|
|
|
|
Costs of
merchandise sold |
|
363,561 |
|
|
|
390,913 |
|
|
|
|
|
|
Selling,
general and administrative |
|
205,085 |
|
|
|
216,185 |
|
|
|
|
|
|
Depreciation and amortization |
|
22,207 |
|
|
|
23,194 |
|
|
|
|
|
|
Amortization of lease-related interests |
|
954 |
|
|
|
1,007 |
|
|
|
|
|
Loss from
operations |
|
(38,786 |
) |
|
|
(22,876 |
) |
|
|
|
|
Interest
expense, net |
|
18,018 |
|
|
|
15,086 |
|
|
|
|
|
Loss on
extinguishment of debt |
|
559 |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before
income taxes |
|
(57,363 |
) |
|
|
(37,962 |
) |
|
|
|
|
Income tax
benefit |
|
(48 |
) |
|
|
(144 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss |
|
$ |
(57,315 |
) |
|
$ |
(37,818 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic loss per share |
$ |
(2.86 |
) |
|
$ |
(1.91 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted loss per share |
$ |
(2.86 |
) |
|
$ |
(1.91 |
) |
|
|
|
|
THE BON-TON STORES, INC. AND
SUBSIDIARIES |
|
CONSOLIDATED STATEMENTS OF CASH
FLOWS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
THIRTEEN WEEKS ENDED |
|
(In
thousands) |
|
April 29, |
|
April 30, |
|
(Unaudited) |
|
|
|
2017 |
|
|
|
2016 |
|
|
Cash flows from operating activities: |
|
|
|
|
|
Net
loss |
|
|
|
$ |
(57,315 |
) |
|
$ |
(37,818 |
) |
|
Adjustments
to reconcile net loss to net cash (used in) provided by |
|
|
|
|
|
|
operating
activities: |
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
22,207 |
|
|
|
23,194 |
|
|
|
|
Amortization of lease-related interests |
|
|
954 |
|
|
|
1,007 |
|
|
|
|
Share-based
compensation expense |
|
|
590 |
|
|
|
896 |
|
|
|
|
Loss on
sale of property, fixtures and equipment |
|
|
43 |
|
|
|
21 |
|
|
|
|
Reclassifications of accumulated other comprehensive loss |
|
|
1,284 |
|
|
|
1,464 |
|
|
|
|
Loss on
extinguishment of debt |
|
|
559 |
|
|
|
- |
|
|
|
|
Amortization of deferred financing costs and debt discount |
|
|
1,644 |
|
|
|
849 |
|
|
|
|
Deferred
income tax benefit |
|
|
(48 |
) |
|
|
(144 |
) |
|
|
|
Changes in
operating assets and liabilities: |
|
|
|
|
|
|
|
|
Decrease
(increase) in merchandise inventories |
|
|
10,723 |
|
|
|
(414 |
) |
|
|
|
|
Decrease in
prepaid expenses and other current assets |
|
|
25,208 |
|
|
|
25,008 |
|
|
|
|
|
(Increase)
decrease in other long-term assets |
|
|
(14 |
) |
|
|
577 |
|
|
|
|
|
(Decrease)
increase in accounts payable |
|
|
(28,868 |
) |
|
|
2,533 |
|
|
|
|
|
Decrease in
accrued payroll and benefits and accrued expenses |
|
|
(5,250 |
) |
|
|
(5,102 |
) |
|
|
|
|
(Decrease)
increase in other long-term liabilities |
|
|
(2,712 |
) |
|
|
207 |
|
|
|
|
|
|
Net cash (used in)
provided by operating activities |
|
|
(30,995 |
) |
|
|
12,278 |
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
Capital
expenditures |
|
|
(9,781 |
) |
|
|
(12,626 |
) |
|
|
|
Proceeds
from sale of property, fixtures and equipment |
|
|
24 |
|
|
|
7 |
|
|
|
|
|
|
Net cash used in
investing activities |
|
|
(9,757 |
) |
|
|
(12,619 |
) |
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
Payments on
long-term debt and capital lease and financing obligations |
|
|
(122,471 |
) |
|
|
(144,117 |
) |
|
|
|
Proceeds
from issuance of long-term debt and financing obligations |
|
|
166,465 |
|
|
|
151,461 |
|
|
|
|
Restricted
shares forfeited in lieu of payroll taxes |
|
|
(40 |
) |
|
|
(120 |
) |
|
|
|
Deferred
financing costs paid |
|
|
(6,589 |
) |
|
|
(495 |
) |
|
|
|
Increase
(decrease) in book overdraft balances |
|
|
3,663 |
|
|
|
(5,460 |
) |
|
|
|
|
|
Net cash provided by
financing activities |
|
|
41,028 |
|
|
|
1,269 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase in cash
and cash equivalents |
|
|
276 |
|
|
|
928 |
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at beginning of
period |
|
|
6,736 |
|
|
|
6,879 |
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period |
|
$ |
7,012 |
|
|
$ |
7,807 |
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA (Non-GAAP Financial
Measure)
As used in this release, Adjusted EBITDA is defined as net loss
before interest, income taxes, depreciation and amortization,
including amortization of lease-related interests and loss on
extinguishment of debt. Adjusted EBITDA is not a measure of
financial performance under generally accepted accounting
principles (“GAAP”). We present Adjusted EBITDA in this
release because we consider it to be a useful financial measure in
evaluating our operating performance. When analyzed in conjunction
with our net income and cash flows from operations, Adjusted EBITDA
provides investors with a supplemental tool to evaluate our ongoing
operations as it excludes the effects of financing and investing
activities. Adjusted EBITDA is frequently used by securities
analysts, investors and other interested parties to evaluate the
performance of companies in our industry and by some investors to
determine a company’s ability to service or incur debt. In
addition, our management uses Adjusted EBITDA (i) to compare the
profitability of our stores, (ii) to evaluate the effectiveness of
our business strategies, and (iii) as a factor in evaluating
management’s performance when determining incentive
compensation.
Adjusted EBITDA is not calculated in the same manner by all
companies and, accordingly, is not necessarily comparable to
similarly entitled measures of other companies and may not be an
appropriate measure for performance relative to other
companies. Adjusted EBITDA should not be assessed in
isolation from or construed as a substitute for net income or cash
flows from operations, which are determined in accordance with
GAAP. Adjusted EBITDA is not intended to represent, and
should not be considered to be a more meaningful measure than, or
an alternative to, measures of operating performance as determined
in accordance with GAAP.
The following is a reconciliation of net loss to Adjusted EBITDA
for the historical periods indicated:
|
|
|
THIRTEEN |
|
|
|
WEEKS ENDED |
(In
thousands) |
April 29, |
|
April 30, |
(Unaudited) |
|
2017 |
|
|
|
2016 |
|
|
|
|
|
|
|
Net
loss |
|
$ |
(57,315 |
) |
|
$ |
(37,818 |
) |
Adjustments: |
|
|
|
|
Income tax
benefit |
|
(48 |
) |
|
|
(144 |
) |
|
Loss on
extinguishment of debt |
|
559 |
|
|
|
- |
|
|
Interest
expense, net |
|
18,018 |
|
|
|
15,086 |
|
|
Depreciation and amortization |
|
22,207 |
|
|
|
23,194 |
|
|
Amortization of lease-related interests |
|
954 |
|
|
|
1,007 |
|
Adjusted
EBITDA |
$ |
(15,625 |
) |
|
$ |
1,325 |
|
The following is a reconciliation of forecasted net loss to
forecasted Adjusted EBITDA for fiscal 2017 based on the Company’s
guidance metrics:
|
|
|
FORECASTED FISCAL 2017 |
(In
thousands) |
Minimum |
|
Maximum |
(Unaudited) |
|
Guidance |
|
Guidance |
|
|
|
|
|
|
Net
loss |
|
$ |
(52,600 |
) |
|
$ |
(42,200 |
) |
Adjustments: |
|
|
|
|
Income tax
benefit |
|
(300 |
) |
|
|
(300 |
) |
|
Interest
expense, net, and loss on extinguishment of debt |
|
75,500 |
|
|
|
75,100 |
|
|
Depreciation and amortization and amortization of |
|
|
|
|
lease-related interests |
|
92,400 |
|
|
|
92,400 |
|
Adjusted
EBITDA |
$ |
115,000 |
|
|
$ |
125,000 |
|
|
|
|
|
|
|
|
|
Investor Relations
Jean Fontana
ICR, Inc.
646.277.1214
jean.fontana@icrinc.com