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Acquisition lifts Bon Ton numbers

Don Hogsett, Staff Staff -- Home Textiles Today, March 15, 2004

Layering on results of last year's acquisition of Elder-Beerman Stores, The Bon-Ton Stores Inc., a Northeast regional department store chain, drove fourth-quarter profits up by more than 60 percent, while almost doubling sales.

Despite weaker margins and higher costs, the buyout drove earnings up by 60.3 percent, to $24.4 million from $15.2 million last year.

Sales at the newly combined store groups jumped up by 87.1 percent, to $451.4 million from $241.3 million. Same-store sales for Bon-Ton on a stand-alone basis, excluding Elder-Beerman, decreased by 1.9 percent.

Acting as a cap on profits, margins thinned out while debt levels, costs and interest expense all climbed in the wake of the acquisition. Average gross margin narrowed by 220 basis points, or 2.2 percentage points, to 35.8 percent from 38 percent. Operating costs rose by 30 basis points, or three-tenths of a percentage point, to 25.2 percent of sales from 24.9 percent a year ago.

Acting as a further drag, interest expense climbed by 74.1 percent, to $3.4 million from $1.9 million. Long-term debt almost tripled, rising by 165.9 percent, to $170.7 million from $64.2 million.

James H. Baireuther, vice chairman and chief administrative officer, cautioned, "We emphasize these results are not representative of expected full-year results due to the timing of the Elder-Beerman acquisition, which allowed us to include Elder-Beerman's most profitable quarter in our full-year results without having to account for the first three quarters of the year, which traditionally reflect a net loss."

The Bon-Ton Stores Inc.

Qtr. 1/31 (x000) 2003 2002 % chg
Sales $451,416 $241,281 87.1
Oper. income (EBIT) 47,491 31,651 50.0
Net income 24,393 15,221 60.3
Per share (diluted) 1.52 1.00 52.0
Average gross margin 35.8% 38.0%
SG&A expenses 25.2% 24.9%
12 months 2003 2002 % chg
Sales 926,072 713,230 29.8
Oper. income (EBIT) 60,932 42,696 42.7
Net income 20,601 9,605 114.5
Per share (diluted) 1.33 0.62 114.5
Average gross margin 36.4% 36.8%
SG&A expenses 29.9% 30.8%


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