KSS Kohls Corporation

Bon-Ton Stores Inc. (BONT), a department store chain, reported sluggish same-store sales results for the crucial holiday season and induced the company to trim its outlook for the fourth quarter of 2011. Comps went down 0.7% in the five-week period ended December 31, 2011 compared with a dip of 0.1% in the year-ago period. However, on a year-to-date basis, same-store sales declined 2.8% in December last year.

Total sales slipped 1.1% to $505.2 million during the five-week period ended December 31, 2011 from $510.8 million in the comparable period ended December, 2010. Further, on a year-to-date basis, total sales dropped 3.2% to $2,710.3 million, compared with $2,800.4 million in the prior-year period.

Comparable sales were primarily hurt by weak sales in cold-weather categories arising from the mild weather conditions in December.

Apart from the cold weather category, which accounted for 25% of total December sales, other categories including ladies’ and men's apparel, handbags and shoes also lagged considerably.

However, the company witnessed strong upside in categories like hard home, cosmetics, fine jewelry, children’s and better apparel. Additionally, Bon-Ton is recording significant sales gains in eCommerce and considers it to be a significant growth driver. Moreover, the company’s various efforts such as market share expansion of updated merchandise, and pilot store renovations are expected to drive sales further. The company also slashed prices to clear the old stock and ensure fresh inventory for the customers. 

Same-store sales at Bon-Ton’s peer company, Kohl’s Corporation (KSS) also fell 0.1% for the month of December, but on the other hand, same-store sales of another competitor Saks Inc. (SKS) went up 5.8% for the month of December.

For the upcoming fourth quarter of 2011, the company slashed its EBITDA forecast to $170 million - $175 million from the previous range of $190 million - $210 million and earnings per share guidance to a loss of $1.30 per share to $1.00 per share from the earlier projection of a loss of 65 cents to a gain of 25 cents. It also expects cash in the range of $5 million to $10 million, down from its previous estimate of $25 million to $40 million.

Bon-Ton continues to make efforts to drive traffic and improve margins by controlling cost and closing underperforming stores. The company plans to close 5 stores, out of which 4 will shut down in 2012 and one in 2014. The company also foresees growth opportunities driven by renovation of 17 stores completed in the previous quarter and 2 new stores opened in the reported quarter. However, Bon-Ton continues to face cost inflation due to higher cotton prices and wages of Chinese labor and expects commodity pressure to persist till mid 2012. Moreover, with lower consumer spending due to tough economic environment, we believe the possibility of positive comps in the near term seems bleak.

We reiterate our long-term Neutral recommendation on Bon-Ton.

 
BON-TON STORES (BONT): Free Stock Analysis Report
 
KOHLS CORP (KSS): Free Stock Analysis Report
 
SAKS INC (SKS): Free Stock Analysis Report
 
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