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Acquisition drags Bon-Ton 3Q results

Rising expenses from the integration of Elder-Beerman produced a poor third quarter for Bon-Ton Stores Inc. The department store retailer reported a net loss of $1.7 million for the quarter just ended, as opposed to a modest $328,000 net profit from the third quarter of 2002.

The loss occurred in spite of a nearly 8 percent pickup in sales, which finished the quarter at $180.4 million. But selling, general and administrative expenses ballooned by 11.6 percent on a dollar basis, largely due to the added SG&A that Elder-Beerman brought to the table. As a result, SG&A as a percentage of sales rose by 120 basis points in the quarter, to 34.1 percent. Further down the income statement, operating income dropped 23.5 percent, to $6 million.

The healthy increase in sales came about mostly from the Elder-Beerman stores that have joined the Bon-Ton fold. On a same-store basis, third-quarter sales fell 0.8 percent for the company as a whole.

Bon-Ton completed the Elder-Beerman acquisition on Oct. 24. The deal brought 69 Elder-Beerman stores into the Bon-Ton corporate family, located in the Northeast, the Midwest and the South.

"We continue to work on the integration of Bon-Ton and Elder-Beerman divisions but remain focused on achieving our fourth quarter planned results," said James H. Balreuther, Bon-Ton's vice chairman and chief administrative officer. "Although comparable-store sales in the third quarter declined slightly, we were able to manage gross margin and expenses so the reduction in earnings…was minimized."

For the year to date, Bon-Ton actually narrowed its net loss from $5.6 million for the first three quarters of 2002 to $3.8 million this year. Operating income increased by nearly 20 percent, to $15.2 million, even though sales rose by a modest 0.6 percent, to $474.7 million.

Bon-Ton Stores Inc.

Qtr. 11/1 (x000) 2003 2002 % chg
Sales $180,417 $167,542 7.7
Operating income 6,033 7,883 -23.5
Net income -1,702 328
Earnings per share -0.11 0.02
Average gross margin 37.4% 37.6%
SG&A percentage 34.1% 32.9%
Nine months 2003 2002 % chg
Sales 474,656 471,949 0.6
Operating income 15,150 12,652 19.7
Net income -3,792 -5,616
Earnings per share -0.25 -0.37
Average gross margin 37.3% 36.4%
SG&A percentage 34.1% 33.7%

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