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Bon-Ton Points to Good Cash Flow

James Mammarella -- Home Textiles Today, December 8, 2008

Executives at Bon-Ton Stores spoke with a unified note of determined enthusiasm during the 281-unit retailer's third quarter earnings call in late November.

Bud Bergren, president and ceo, said Bon-Ton has a "prudent capital structure."

Keith Plowman, evp and cfo, emphasized the company is "maintaining cash flow and strong liquidity," and noted that Bon-Ton's long term debt requires minimal annual payments through 2010. He pointed to projected full-year cash flow of $5-$20 million, along with a trimmed capital expenditure plan.

Tony Buccina, vice chairman and president-merchandising, said while overall transactions were down in the quarter ending Nov. 1, the average dollar per transaction was up. He also pointed to broad consumer acceptance of the key-item driven "IVP" or Incredible Value Program, which exceeded plan in the period.

Buccina added that private brands have reached 19.1% penetration of sales, noting the gross margin rate for these goods is ahead of both plan and company average.

Bon-Ton reported a quarterly net loss narrowed to $14.3 million or 85 cents per share, from $19.4 million or $1.17 in the year-ago period. But this measure of performance was underpinned by a favorable tax benefit adjustment of $7.0 million or 42 cents per share in Q3 '08.

Bon-Ton's year-to-date net loss of $82.2 million or $4.90 per share included both that tax benefit and a second-quarter non-cash goodwill impairment charge of 71 cents per share. The year-ago loss was $63.6 million or $3.86 per share.

Quarterly sales of $724.9 million were down 7.2%, with a comp drop of 8.3%. Year-to-date sales of $2.1 billion were down 5.8%, with a comp fall of 6.3%.

The number of items offered via e-commerce has tripled at Bon-Ton, which has only lately made a serious push in this area. Buccina said the best-performing product categories online in the quarter were hard and soft home, footwear and children's apparel.

Buccina also pointed to better overall performance in the company's Northern Lodge stores – which promote the casual lodge lifestyle across categories – in markets such as Minneapolis, Detroit and Buffalo, than in the Bon-Ton units in Ohio, Indiana and Pennsylvania that he said have seen severe impacts from the slowdown in the automotive industry and its support industries.

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