In Downturn, Bon-Ton Banks on Furniture
Cecile Corral -- Home Textiles Today, December 3, 2007
The Bon-Ton Stores is banking on its furniture business, which has been a bright spot for the regional department store operator since last year through its third quarter, the company said during its quarterly earnings call.
Furniture was singled out as one of the 280-unit retailer's best performing businesses for the quarter, along with other hard home goods, missy sportswear, cosmetics and children's products.
Overall results, however, were gloomy.
Bon-Ton reported a net quarterly loss of $19.4 million, half again as bad as its $10.9 million loss for the same period last year. Year-to-date, the net loss has widened to $63.6 million from $41.5 million in the first 39 weeks of fiscal 2006.
Third-quarter sales fell 2.9% to $780.0 million, while same store sales fell 3.0%.
Gross margins were punished in the quarter, down 180 basis points to 34.8% of sales. For the first three quarters the rate is 35.4%, down 80 basis points from 36.2% in the year-ago period.
"Furniture has been a focused business, and it's actually been a real good business for us in the past," said Bud Bergren, president and ceo. "We see a good opportunity in furniture."
He noted Bon-Ton's furniture business is "significantly higher in sales and gross margin per square foot than the rest of the company in total." The company's existing 10 furniture galleries, which the chain plans to expand by about two new units per year going forward, generate more than $300 per square foot in average sales per store, Bergren said.
"We think there is an opportunity right now to get some really attractive real estate deals in some of our key markets," he added.
"We've actually made furniture a focus business, particularly as a gallery business — not an in-store business," he continued. "The gallery business is really where we see the movement of the business forward."
In the mainline stores too, with furniture under the category umbrella of home, Bon-Ton sees overall gains ahead, with the department among those poised for a higher average retail ticket, said Anthony Buccina, vice chairman, president of merchandising.
"I'm thrilled with our progress in growing the average price in the Bon-Ton stores in coats, large size sportswear, intimate apparel, accessories, shoes, men's and home," Buccina said.
The Bon-Ton Stores Inc. and Subsidiaries
|Qtr. 11/3 ($millions)||2007||2006||% change|
|a. Sales does not include "other income," which is primarily from revenue received under the credit card program agreement with HSBC Bank Nevada.
b. Gross margin and SG&A expense comparisons are skewed by the fact that results for Carson's operations are included in year-to-year comparisons with the exception of a five-week period for 1Q fiscal 2007 that did not have corresponding input from 1Q fiscal 2006.
|Oper. Income (EBIT)||0.0||14.0||(99.9)|
|Per share (diluted)||(1.17)||(0.66)||—|
|Average gross margin||34.8%b||36.6%b||—|
|Oper. Income (EBIT)||(14.3)||14.6||(197.9)|
|Per share (diluted)||(3.86)||(2.53)||—|
|Average gross margin||35.4%b||36.2%b||—|
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