Bon-Ton: Zacks’ Bear of the Day Play

Bon-Ton Stores (BONT) is one of the largest regional department store operators in the country, offering a broad assortment of fashion apparel and accessories, as well as cosmetics, fine jewelry and home furnishings.
 
Founded in 1898, the company currently operates 270 stores, including furniture galleries.
 
Disappointing Results and Guidance
 
On August 21, the company reported operating results for Q2 of fiscal 2014. Adjusted EBITDA for the quarter was $5.1 million, compared with $8.7 million in the same quarter last year. Net loss was $36.2 million, or $1.86 per diluted share, worse than the Zacks Consensus Estimate for a loss of $1.43 per share. This was the second consecutive quarterly earning miss for the company.
 
Gross margin contacted to 36.6% of net sales from 37.0% of net sales in the prior year period, mainly due to increased net markdowns and increased delivery costs. The positive part of the report was the 1.6% increase in comparable store sales, for the first time in five quarters.
 
The management also revised down their fiscal 2014 guidance. They now expect adjusted EBITDA to be in a range of $165 million to $175 million and earnings to be in the range of $0.25 to $0.55 per share.  
 
Downward Revisions
 
Analysts have been cutting their estimates for the company after quarterly results and lowered guidance. Zacks Consensus Estimates for the current and next year are currently $0.35 per share and $0.72 per share respectively, down from $0.58 per share and $0.93 per share, 30 days ago. Declining estimates sent the stock back to Zacks Rank # 5.
 
The Bottom Line
 
Declining store traffic and highly promotional environment continue to present challenges for retailers. Fierce competition in the industry and stagnant consumer wages will continue to pose headwinds in the third quarter as well. The Zacks industry rank for Retail-Regional Department Stores” is currently 224 out of 265 (Bottom 15%).
 
Better Play?
Investors seeking exposure to “Retail” industry could consider Citi Trends (CTRN), which currently enjoys a Zacks Rank # 1 (Strong Buy).
 
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