The Bon-Ton Stores, Inc. (NASDAQ:BONT) today
reported operating results for its fiscal second quarter ended July
29, 2017, and reaffirmed its earnings guidance for the full year
fiscal 2017.
Results for the Second Quarter Ended July 29,
2017
- Comparable store sales decreased 6.1% as compared with the
prior year period.
- Selling, general and administrative (“SG&A”) expense
decreased $20.7 million as compared with the second quarter of
fiscal 2016.
- Net loss in the current year second quarter was $33.2 million,
or $1.64 per share, compared with net loss of $38.7 million, or
$1.95 per share, in the second quarter of fiscal 2016.
- Adjusted EBITDA totaled $9.1 million in the second quarter of
fiscal 2017. Adjusted EBITDA in the second quarter of 2016
was $2.5 million. (As used in this release, Adjusted EBITDA
is not a measure recognized under generally accepted accounting
principles (“GAAP”)—see the accompanying financial table which
reconciles this non-GAAP measure to net loss.)
William Tracy, Incoming President and Chief Executive Officer,
commented, “We made progress in several important areas of the
business during the second quarter. We saw strength in key
merchandise categories and brands and were pleased with the
continued double-digit growth in our omnichannel business.
Additionally, we continued to effectively execute our profit
improvement initiatives, substantially reducing our SG&A
expense for the quarter. While our results were consistent
with our expectations and showed an improvement over our
performance in the first quarter, we remain focused on working to
better position the business for the long-term. Looking
forward, we will focus on efforts to further enhance our
merchandise assortment with an emphasis on our targeted growth
categories, refine our marketing strategy to increase traffic and
customer engagement, and drive growth in our omnichannel
business. In addition, we expect to achieve further cost
reductions through the continued rollout of our profit improvement
initiative. We believe that these actions will drive improved
performance in the back half of the year.”
Second Quarter ReviewComparable store sales in
the second quarter of fiscal 2017 decreased 6.1%. Total sales
in the period decreased 7.0% to $504.4 million, compared with
$542.4 million in the second quarter of fiscal 2016.
The Company continued its 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 second quarter of fiscal 2017 was $21.0
million, an increase of $4.8 million over the comparable prior year
period. The increase was primarily due to income associated
with gift card breakage and, to a lesser degree, higher revenues
associated with the Company’s proprietary credit card
operations. Proprietary credit card sales, as a percentage of
total sales, increased approximately 40 basis points to 57.4% in
the second quarter of fiscal 2017.
The gross margin rate in the second quarter of fiscal 2017
decreased approximately 100 basis points as compared with the
second quarter of fiscal 2016 to 35.5% of net sales, primarily due
to an increase in the markdown rate. Gross profit decreased
$18.9 million to $179.2 million in the second quarter of fiscal
2017, primarily as a result of decreased sales volume.
SG&A expense in the second quarter of fiscal 2017 decreased
$20.7 million, or 9.8%, as compared with the second quarter of
fiscal 2016, to $191.2 million. This was largely due to savings
associated with prior year closed stores and reductions in
consulting fees, medical insurance, payroll, taxes and rent, as
well as gains associated with various real estate
transactions. The SG&A expense rate in the second quarter
of 2017 was 37.9% of net sales, a decrease of approximately 120
basis points from the prior year.
Adjusted EBITDA totaled $9.1 million in the second quarter of
fiscal 2017, inclusive of $4.6 million of income associated with
gift card breakage, $7.8 million of gains related to various real
estate transactions and $1.9 million of severance costs. In
the second quarter of fiscal 2016, Adjusted EBITDA was $2.5
million, inclusive of $2.4 million of consulting fees related to
cost reduction initiatives and $2.2 million of severance
costs. (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.)
The Company’s excess borrowing capacity under its revolving
credit facility was approximately $171 million at the end of the
second quarter of fiscal 2017 and $189 million as of August 14,
2017.
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 per share 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 3.5% to 4.5%,
which excludes sales from the 53rd week;
- A gross margin rate decrease now ranging from 40 to 60 basis
points below the fiscal 2016 rate of 35.5%;
- SG&A expense now ranging from $834 million to $839 million,
including approximately $10 million for the 53rd week, compared to
SG&A expense of $880.6 million in fiscal 2016;
- 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 $15
million to $20 million by the end of fiscal 2017.
Call DetailsThe Company’s quarterly conference
call to discuss second 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) 523-1232 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,
August 24, 2017. The number to call for the taped replay is
(844) 512-2921 and the replay PIN is 4541275. 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 260 stores, which includes nine
furniture galleries and four clearance centers, in 24 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 profits; 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 for working capital,
capital expenditures 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) |
|
July 29, |
|
July 30, |
(Unaudited) |
|
|
|
|
2017 |
|
2016 |
|
|
|
|
|
|
|
|
Assets |
|
|
|
|
|
|
|
Current
assets: |
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
6,335 |
|
|
$ |
7,047 |
|
Merchandise inventories |
|
|
|
658,218 |
|
|
|
693,810 |
|
Prepaid expenses and other current assets |
|
82,801 |
|
|
|
74,897 |
|
Total current assets |
|
|
747,354 |
|
|
|
775,754 |
|
Property,
fixtures and equipment at cost, net of accumulated depreciation
and |
|
|
amortization of $1,049,212 and $998,415 at July 29, 2017 and
July 30, 2016, respectively |
|
547,279 |
|
|
|
613,763 |
|
Intangible
assets, net of accumulated amortization of $68,371 and $65,090
at |
|
|
July 29, 2017 and July 30, 2016, respectively |
|
70,386 |
|
|
|
79,176 |
|
Other
long-term assets |
|
|
|
|
21,729 |
|
|
|
16,053 |
|
Total assets |
|
$ |
1,386,748 |
|
|
$ |
1,484,746 |
|
|
|
|
|
|
|
|
|
|
Liabilities
and Shareholders' Deficit |
|
|
|
|
|
Current
liabilities: |
|
|
|
|
|
|
Accounts payable |
|
|
$ |
177,689 |
|
|
$ |
214,957 |
|
Accrued payroll and benefits |
|
|
26,288 |
|
|
|
25,999 |
|
Accrued expenses |
|
|
|
136,610 |
|
|
|
143,738 |
|
Current maturities of long-term debt |
|
|
- |
|
|
|
57,183 |
|
Current maturities of obligations under capital leases |
|
6,986 |
|
|
|
5,666 |
|
Total current liabilities |
|
|
347,573 |
|
|
|
447,543 |
|
Long-term
debt, less current maturities |
|
|
|
849,332 |
|
|
|
762,326 |
|
Obligations
under capital leases, less current maturities |
|
130,471 |
|
|
|
123,796 |
|
Other
long-term liabilities |
|
|
|
|
170,307 |
|
|
|
189,589 |
|
Total liabilities |
|
|
1,497,683 |
|
|
|
1,523,254 |
|
|
|
|
|
|
|
|
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 18,908,120 and 18,944,025 at July 29, 2017 and July 30,
2016, respectively |
|
189 |
|
|
|
189 |
|
Class A Common Stock - authorized 20,000,000 shares at $0.01
par value; issued |
|
and outstanding shares of 2,951,490 at July 29, 2017 and July
30, 2016 |
|
30 |
|
|
|
30 |
|
Treasury stock, at cost - 337,800 shares at July 29, 2017 and
July 30, 2016 |
|
(1,387 |
) |
|
|
(1,387 |
) |
Additional paid-in-capital |
|
|
168,285 |
|
|
|
165,820 |
|
Deferred compensation |
|
|
|
|
|
Accumulated other comprehensive loss |
|
(71,391 |
) |
|
|
(74,388 |
) |
Accumulated deficit |
|
|
|
(206,661 |
) |
|
|
(128,772 |
) |
Total shareholders' deficit |
|
(110,935 |
) |
|
|
(38,508 |
) |
Total liabilities and shareholders'
deficit |
$ |
1,386,748 |
|
|
$ |
1,484,746 |
|
|
|
|
|
|
|
|
|
THE BON-TON STORES, INC. AND
SUBSIDIARIES |
CONSOLIDATED STATEMENTS OF
OPERATIONS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
THIRTEEN |
|
TWENTY-SIX |
|
|
|
WEEKS ENDED |
|
WEEKS ENDED |
(In
thousands, except per share data) |
July 29, |
|
July 30, |
|
July 29, |
|
July 30, |
(Unaudited) |
|
2017 |
|
2016 |
|
2017 |
|
2016 |
|
|
|
|
|
|
|
|
|
|
Net sales |
|
|
$ |
504,424 |
|
|
$ |
542,360 |
|
|
$ |
1,040,565 |
|
|
$ |
1,133,367 |
|
Other
income |
|
|
21,037 |
|
|
|
16,252 |
|
|
|
37,917 |
|
|
|
33,668 |
|
|
|
|
|
525,461 |
|
|
|
558,612 |
|
|
|
1,078,482 |
|
|
|
1,167,035 |
|
|
|
|
|
|
|
|
|
|
|
Costs and
expenses: |
|
|
|
|
|
|
|
|
Costs of merchandise sold |
|
325,195 |
|
|
|
344,273 |
|
|
|
688,756 |
|
|
|
735,186 |
|
Selling, general and administrative |
|
191,191 |
|
|
|
211,872 |
|
|
|
396,276 |
|
|
|
428,057 |
|
Depreciation and amortization |
|
23,135 |
|
|
|
24,999 |
|
|
|
45,342 |
|
|
|
48,193 |
|
Amortization of lease-related interests |
|
955 |
|
|
|
1,008 |
|
|
|
1,909 |
|
|
|
2,015 |
|
Impairment charges |
|
147 |
|
|
|
178 |
|
|
|
147 |
|
|
|
178 |
|
Loss from
operations |
|
|
(15,162 |
) |
|
|
(23,718 |
) |
|
|
(53,948 |
) |
|
|
(46,594 |
) |
Interest
expense, net |
|
|
18,029 |
|
|
|
15,162 |
|
|
|
36,047 |
|
|
|
30,248 |
|
Loss on
extinguishment of debt |
|
- |
|
|
|
- |
|
|
|
559 |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
Loss before
income taxes |
|
|
(33,191 |
) |
|
|
(38,880 |
) |
|
|
(90,554 |
) |
|
|
(76,842 |
) |
Income tax
provision (benefit) |
|
18 |
|
|
|
(144 |
) |
|
|
(30 |
) |
|
|
(288 |
) |
|
|
|
|
|
|
|
|
|
|
Net
loss |
|
|
$ |
(33,209 |
) |
|
$ |
(38,736 |
) |
|
$ |
(90,524 |
) |
|
$ |
(76,554 |
) |
|
|
|
|
|
|
|
|
|
|
Basic loss per share |
|
$ |
(1.64 |
) |
|
$ |
(1.95 |
) |
|
$ |
(4.49 |
) |
|
$ |
(3.86 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted loss per share |
|
$ |
(1.64 |
) |
|
$ |
(1.95 |
) |
|
$ |
(4.49 |
) |
|
$ |
(3.86 |
) |
|
|
|
|
|
|
|
|
|
|
THE BON-TON STORES, INC. AND
SUBSIDIARIES |
|
CONSOLIDATED STATEMENTS OF CASH
FLOWS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TWENTY-SIXWEEKS ENDED |
|
(In
thousands) |
|
|
|
|
July 29, |
|
July 30, |
|
(Unaudited) |
|
|
|
|
|
2017 |
|
2016 |
|
Cash flows from operating activities: |
|
|
|
|
|
|
Net loss |
|
|
|
|
|
$ |
(90,524 |
) |
|
$ |
(76,554 |
) |
|
Adjustments
to reconcile net loss to net cash provided by |
|
|
|
|
|
operating activities: |
|
|
|
|
|
Depreciation and amortization |
|
|
45,342 |
|
|
|
48,193 |
|
|
Amortization of lease-related interests |
|
|
1,909 |
|
|
|
2,015 |
|
|
Impairment charges |
|
|
|
147 |
|
|
|
178 |
|
|
Share-based compensation expense |
|
|
896 |
|
|
|
1,516 |
|
|
(Gain) loss on sale of property, fixtures and equipment |
|
(5,538 |
) |
|
|
22 |
|
|
Reclassifications of accumulated other comprehensive loss |
|
2,567 |
|
|
|
2,927 |
|
|
Loss on extinguishment of debt |
|
|
559 |
|
|
|
- |
|
|
Amortization of deferred financing costs and debt discount |
|
2,892 |
|
|
|
1,704 |
|
|
Deferred income tax benefit |
|
|
(30 |
) |
|
|
(288 |
) |
|
Changes in operating assets and liabilities: |
|
|
|
|
Decrease in merchandise inventories |
|
66,236 |
|
|
|
17,888 |
|
|
Decrease in prepaid expenses and other current assets |
|
15,757 |
|
|
|
22,358 |
|
|
Decrease in other long-term assets |
|
49 |
|
|
|
632 |
|
|
(Decrease) increase in accounts payable |
|
(6,698 |
) |
|
|
49,514 |
|
|
Decrease in accrued payroll and benefits and accrued
expenses |
|
(11,966 |
) |
|
|
(6,495 |
) |
|
Decrease in other long-term liabilities |
|
(10,254 |
) |
|
|
(41 |
) |
|
Net cash provided by operating activities |
|
11,344 |
|
|
|
63,569 |
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
Capital expenditures |
|
|
(21,184 |
) |
|
|
(25,749 |
) |
|
Proceeds from sale of property, fixtures and equipment |
|
21,422 |
|
|
|
7 |
|
|
Net cash provided by (used in) investing activities |
|
238 |
|
|
|
(25,742 |
) |
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
Payments on long-term debt and capital lease and financing
obligations |
|
(279,382 |
) |
|
|
(303,258 |
) |
|
Proceeds from issuance of long-term debt and financing
obligations |
|
275,866 |
|
|
|
263,669 |
|
|
Restricted shares forfeited in lieu of payroll taxes |
|
(44 |
) |
|
|
(120 |
) |
|
Deferred financing costs paid |
|
|
(6,842 |
) |
|
|
(495 |
) |
|
(Decrease) increase in book overdraft balances |
|
(1,581 |
) |
|
|
2,545 |
|
|
Net cash used in financing activities |
|
(11,983 |
) |
|
|
(37,659 |
) |
|
|
|
|
|
|
|
|
|
|
|
Net (decrease) increase in cash and cash equivalents |
|
(401 |
) |
|
|
168 |
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at beginning of
period |
|
|
6,736 |
|
|
|
6,879 |
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period |
|
|
$ |
6,335 |
|
|
$ |
7,047 |
|
|
|
|
|
|
|
|
|
|
|
|
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, impairment
charges 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 |
|
TWENTY-SIX |
|
|
|
WEEKS ENDED |
|
WEEKS ENDED |
(In
thousands) |
|
July 29, |
|
July 30, |
|
July 29, |
|
July 30, |
(Unaudited) |
|
2017 |
|
2016 |
|
2017 |
|
2016 |
|
|
|
|
|
|
|
|
|
|
Net loss |
|
|
$ |
(33,209 |
) |
|
$ |
(38,736 |
) |
|
$ |
(90,524 |
) |
|
$ |
(76,554 |
) |
Adjustments: |
|
|
|
|
|
|
|
|
Income tax provision (benefit) |
|
18 |
|
|
|
(144 |
) |
|
|
(30 |
) |
|
|
(288 |
) |
Loss on extinguishment of debt |
|
- |
|
|
|
- |
|
|
|
559 |
|
|
|
- |
|
Interest expense, net |
|
18,029 |
|
|
|
15,162 |
|
|
|
36,047 |
|
|
|
30,248 |
|
Depreciation and amortization |
|
23,135 |
|
|
|
24,999 |
|
|
|
45,342 |
|
|
|
48,193 |
|
Amortization of lease-related interests |
|
955 |
|
|
|
1,008 |
|
|
|
1,909 |
|
|
|
2,015 |
|
Impairment charges |
|
147 |
|
|
|
178 |
|
|
|
147 |
|
|
|
178 |
|
Adjusted
EBITDA |
|
$ |
9,075 |
|
|
$ |
2,467 |
|
|
$ |
(6,550 |
) |
|
$ |
3,792 |
|
|
|
|
|
|
|
|
|
|
|
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 |
|
|
|
|
|
|
|
|
|
CONTACT:
Investor Relations
Jean Fontana
ICR, Inc.
646.277.1214
Jean.Fontana@icrinc.com