May 19, 2016

Bon-Ton Stores, Inc. Reports First Quarter Fiscal 2016 Results

Revises Fiscal 2016 Guidance

YORK, Pa., May 19, 2016 (GLOBE NEWSWIRE) -- The Bon-Ton Stores, Inc. (NASDAQ:BONT) today reported operating results for its fiscal first quarter ended April 30, 2016, and revised its earnings guidance for the full year fiscal 2016.  For the first quarter, comparable store sales decreased 2.9% as compared with the prior year period.  Adjusted EBITDA was $1.3 million in the first quarter of fiscal 2016, compared with $4.1 million in the first quarter of fiscal 2015.  (Adjusted EBITDA is not a measure recognized under generally accepted accounting principles—see the financial tables accompanying this release.)  Net loss in the first quarter of fiscal 2016 was $37.8 million, or $1.91 per diluted share, compared with net loss of $34.1 million, or $1.74 per diluted share, in the first quarter of fiscal 2015.  

Comments

Kathryn Bufano, President and Chief Executive Officer, commented, "Ongoing headwinds in the retail environment, unfavorable weather, and a soft Easter all pressured our top line performance during the quarter. We saw only a slight decrease in merchandise margin and reduced inventory levels by 4.0% on a comparable store basis despite the sales pressure, as we maintained disciplined inventory management.  In addition, we moved forward with our cost savings initiatives while continuing to carefully manage expenses. That said, based on our first quarter performance as well as current trends in the second quarter to-date and our expectation that the retail environment will remain difficult, we believe that it is prudent to reduce our full year guidance. We remain focused on the controllables which we believe will drive incremental sales in the back half of the year including further enhancing both our brand and our merchandise assortments, elevating the communication of our value proposition to both new and existing customers, and once again driving double-digit growth in our omnichannel sales. Longer term, we continue to believe that as we make progress against our seven pillars of execution, we will be poised to drive improved and consistent sales and profitability."

First Quarter Summary

Comparable store sales in the first quarter of fiscal 2016 decreased 2.9%.  Total sales in the period decreased 3.3% to $591.0 million, compared with $610.9 million in the first quarter of fiscal 2015.  Sales increases were achieved in Home, Young Men's, Big and Tall and Young Contemporary, while Woman's Accessories was the poorest performing category. Sales were also impacted by general weakness in apparel and shoes. 

The Company once again achieved double-digit sales growth in omnichannel, which reflects sales via the Company's website and Let Us Find It initiative, as the Company successfully leveraged its new West Jefferson facility and expanded store-fulfillment network.

Other income in the first quarter of fiscal 2016 was $17.4 million, an increase of $1.1 million over the comparable prior year period.  The increase was largely the result of higher revenues associated with the Company's proprietary credit card operations.  Proprietary credit card sales, as a percentage of total sales, increased 400 basis points to 54.9% in the first quarter of fiscal 2016.

The gross margin rate in the first quarter of fiscal 2016 increased six basis points as compared with the first quarter of fiscal 2015 to 33.9% of net sales, as reductions in delivery expense were partially offset by higher distribution center costs for omni-channel operations.  Gross profit decreased $6.4 million to $200.1 million in the first quarter of fiscal 2016, primarily as a result of decreased sales volume.    

Selling, general and administrative ("SG&A") expense in the first quarter of fiscal 2016 decreased $2.5 million compared to the first quarter of fiscal 2015, largely due to decreased store expenses, partially offset by increased advertising and higher-than-expected medical claims.  The SG&A expense rate in the first quarter of 2016 was 36.6% of net sales, an increase of 78 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 $244 million at the end of the first quarter of fiscal 2016.

Guidance

For fiscal 2016, the Company now expects Adjusted EBITDA in a range of $130 million to $140 million.  Loss per diluted share is expected to be in a range of $0.95 to $1.45 and cash flow in a range of $28 million to $38 million. (As used in this release, Adjusted EBITDA and cash flow are not measures recognized under GAAP - see the accompanying financial tables which reconcile these non-GAAP measures to net loss.) 

Assumptions reflected in our full-year guidance include the following:

  • A comparable sales performance ranging from flat to a decrease of 1%;  
  • A gross margin rate ranging from a 30- to 50-basis-point increase over the fiscal 2015 rate of 34.7%;
  • An SG&A expense rate ranging from a 40- to 60-basis-point decrease from the fiscal 2015 rate of 33.3%;
  • Capital expenditures not to exceed $40 million, net of external contributions; and
  • An estimated 20 million weighted average shares outstanding.

Call Details

The Company's quarterly conference call to discuss first quarter fiscal 2016 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) 215-6853 at 9:55 a.m. Eastern time and reference conference ID 9034310.  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 26, 2016.  The number to call for the taped replay is (877) 870-5176 and the replay PIN is 2301341.  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 267 stores, which includes nine furniture galleries and four clearance centers, in 26 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.  For further information, please visit the investor relations section of the Company's website at http://investors.bonton.com.   

Cautionary Note Regarding Forward-Looking Statements

Certain 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," "estimate," "project," "intend" or other similar expressions and include the Company's fiscal 2016 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 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) April 30, May 2,
(Unaudited)  2016    2015 
         
Assets     
Current assets:    
 Cash and cash equivalents $7,807  $8,711 
 Merchandise inventories  712,113   738,231 
 Prepaid expenses and other current assets  72,246   77,834 
  Total current assets  792,166   824,776 
Property, fixtures and equipment at cost, net of accumulated depreciation and    
 amortization of $974,272 and $931,661 at April 30, 2016 and May 2, 2015, respectively  623,086   642,268 
Intangible assets, net of accumulated amortization of $63,647 and $64,625 at    
 April 30, 2016 and May 2, 2015, respectively  80,619   88,538 
Other long-term assets  16,713   14,609 
  Total assets $1,512,584  $1,570,191 
     
Liabilities and Shareholders' (Deficit) Equity    
Current liabilities:    
 Accounts payable $159,818  $197,789 
 Accrued payroll and benefits  22,309   21,116 
 Accrued expenses  146,585   152,598 
 Current maturities of long-term debt   -   209,358 
 Current maturities of obligations under capital leases  5,529   4,061 
  Total current liabilities  334,241   584,922 
         
Long-term debt, less current maturities  864,856   690,648 
Obligations under capital leases, less current maturities  125,269   43,629 
Other long-term liabilities  189,477   196,549 
  Total liabilities  1,513,843   1,515,748 
     
Shareholders' (deficit) equity:    
 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 18,954,675 and 18,331,899 at April 30, 2016 and May 2, 2015, respectively  190   183 
 Class A Common Stock - authorized 20,000,000 shares at $0.01 par value; issued    
  and outstanding shares of 2,951,490 at April 30, 2016 and May 2, 2015  30   30 
 Treasury stock, at cost - 337,800 shares at April 30, 2016 and May 2, 2015  (1,387)  (1,387)
 Additional paid-in-capital  165,199   162,253 
 Accumulated other comprehensive loss  (75,255)  (79,423)
 Accumulated deficit  (90,036)  (27,213)
  Total shareholders' (deficit) equity  (1,259)  54,443 
  Total liabilities and shareholders' (deficit) equity $1,512,584  $1,570,191 
        

 

THE BON-TON STORES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
      
     
   THIRTEEN
   WEEKS ENDED
(In thousands, except per share data)April 30, May 2,
(Unaudited)  2016   2015 
      
Net sales $591,007  $610,938 
Other income 17,416   16,304 
    608,423   627,242 
       
Costs and expenses:   
 Costs of merchandise sold 390,913   404,465 
 Selling, general and administrative 216,185   218,686 
 Depreciation and amortization 23,194   22,033 
 Amortization of lease-related interests 1,007   1,101 
Loss from operations (22,876)  (19,043)
Interest expense, net 15,086   15,190 
       
Loss before income taxes (37,962)  (34,233)
Income tax benefit (144)  (159)
      
Net loss $(37,818) $(34,074)
      
Basic loss per share$(1.91) $(1.74)
      
      
Diluted loss per share$(1.91) $(1.74)
      

Non-GAAP Financial Measures

We report our financial results in accordance with generally accepted accounting principles ("GAAP").  However, we believe that certain non-GAAP financial measures provide users of the Company's financial information with additional useful information in evaluating our historical performance or our forecasted earnings guidance.  The tables below provide supplemental financial data and a corresponding reconciliation to the most directly comparable GAAP financial measure.  These non-GAAP financial measures are not calculated in the same manner by all companies and, accordingly, are not necessarily comparable to similarly entitled measures of other companies and may not be appropriate measures for performance relative to other companies.  These non-GAAP financial measures 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.  These non-GAAP financial measures are not intended to represent, and should not be considered to be more meaningful measures than, or alternatives to, measures of operating performance as determined in accordance with GAAP. 

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.  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.

The following is a reconciliation of net loss to Adjusted EBITDA for the historical periods indicated:

      
   THIRTEEN
   WEEKS ENDED
(In thousands)April 30, May 2,
(Unaudited) 2016   2015 
      
Net loss $(37,818) $(34,074)
Adjustments:   
 Income tax benefit (144)  (159)
 Interest expense, net 15,086   15,190 
 Depreciation and amortization  23,194   22,033 
 Amortization of lease-related interests 1,007    1,101 
Adjusted EBITDA$1,325  $4,091 
    

The following is a reconciliation of forecasted net loss to forecasted Adjusted EBITDA for fiscal 2016 based on the Company's guidance metrics: 

      
   FORECASTED FISCAL 2016
(In thousands)Minimum Maximum
(Unaudited) Guidance Guidance
      
Net loss $(29,000) $(19,000)
Adjustments:   
 Income tax provision 900   900 
 Interest expense, net 62,000   62,000 
 Depreciation and amortization and amortization of   
 lease-related interests 96,100    96,100 
Adjusted EBITDA$130,000  $140,000 
    

Cash Flow (Non-GAAP Financial Measure)

As used in this release, cash flow reflects forecasted net loss, plus depreciation and amortization, amortization of lease-related interests and income taxes, less capital expenditures.  We present cash flow (as defined) as we consider it to be a useful financial measure in evaluating our operating performance as well as our ability to generate cash flow from operations after giving effect to cash used by investing activities.  We believe our forecasted cash flow is a relevant indicator of our ability to repay maturing debt, pay dividends or fund other uses of capital that we believe will enhance shareholder value.  Cash flow is one of our key liquidity measures and, when used in conjunction with GAAP measures, provides investors with a meaningful analysis of our ability to generate cash from our business.      

The following is a reconciliation of forecasted net loss to forecasted cash flow for fiscal 2016 based on the Company's guidance metrics:

      
   FORECASTED FISCAL 2016
(In thousands)Minimum Maximum
(Unaudited) Guidance Guidance
      
Net loss $(29,000) $(19,000)
Adjustments:   
 Income tax provision 900   900 
 Depreciation and amortization and amortization of   
  lease-related interests 96,100   96,100 
 Capital expenditures, net (40,000)  (40,000)
Cash flow $28,000  $38,000 
    


CONTACT:

Investor Relations

Jean Fontana

ICR, Inc.

646.277.1214

jean.fontana@icrinc.com

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Source: The Bon-Ton Stores, Inc.

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