Consuming Beerman costing Bon-Ton

Don Hogsett, Staff Staff, May 24, 2004

Grafting onto its own operations the recently acquired Elder-Beerman stores, The Bon-Ton Stores Inc., an East Coast regional department store chain, recorded a mounting $5.6 million loss, up from $2.9 million.

Adding Elder-Beerman sales to its own, The Bon-Ton almost doubled in size, driving sales up 87.9 percent, to $265.1 million from $141.1 million a year ago. Same-store sales for Bon-Ton stores declined 2 percent, and Elder-Beerman comps were down 2.9 percent. Combined comps were off 2.4 percent.

As the retailer picked up the tab for the buyout and drove its debt level higher, interest expense more than doubled, rising 157.6 percent, to $3.2 million from $1.2 million the year before.

Squeezing the bottom line somewhat, average gross margin eroded, declining 60 basis points, or six-tenths of a percentage point, to 36.4 percent from 37 percent, reflecting the inclusion of Elder-Beerman sales at a comparably lower gross margin rate and an increase in the markdown rate. At the end of the first quarter, comparable store inventory at retail decreased 4.8 percent from the year before.

Operating costs were unchanged at 34.6 percent of sales, with integration expenses offset by synergistic cost cutting.

James Baireuther, vice chairman and chief administrative officer, said results were hurt "by a decrease in sales volume and a very promotional retail environment which negatively impacted the company's profit performance. We are addressing this issue with the finalization of our vendor matrix, product assortment and inventory levels, along with a strong marketing calendar."

The Bon-Ton Stores Inc.

Qtr. 5/1 (x000) 2004 2003 % chg
a-First-quarter results include miscellaneous income of $983,000, compared with $526,000 the prior year; and an income-tax benefit of $3.3 million vs. $1.7 million last year.
Sales $265,083 $141,111 87.9
Oper. income (EBIT) (87) 804
Net income (5,551)a (2,948)a
Per share (diluted) (0.35) (0.20)
Average gross margin 36.4% 37.0%
SG&A expenses 36.4% 36.4%

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