NEW YORK – Shares of The Bon-Ton Stores lost nearly 10% of their value in Nasdaq trading Thursday after the York, Pennsylvania-based department store group reported a larger first quarter loss and estimated that 2007 results would be at the low end of estimates.
The company cited unfavorable April weather in its explanation of the weak performance. However, it noted that the inclusion of Carson’s operations for the full quarter of 2007, versus only five weeks in the 2006 quarter, also drained gross margins as the first quarter is notoriously clearance and discount oriented. Gross margin fell to 33.5% of sales from 37.4% a year ago.
The net loss for the three months ended May 5 nearly tripled, hitting $29.3 million, or $1.78 a diluted share, from a loss of $10.8 million, or $0.66, in the 2006 period. Bon-Ton had guided analysts to a loss for the quarter, but the consensus estimate was for a loss of $1.09.
Aided by the inclusion of Carson’s through the quarter, net sales rose 31.3% to $737.6 million from $561.8 million. Same-store sales fell 0.8%.
Reiterating that the integration of Bon-Ton and Carson’s is “a two-year process,” Bud Bergren, president and chief executive officer of the company, said of the first quarter, “This is historically a clearance-driven period with low margins. We were comfortable with our performance in the first two months of the quarter and then the coldest April in ten years hit, which had a substantial adverse impact on our sales results and put pressure on our margin dollars.”
He said that results for better sportswear, children’s, intimate apparel and shoes were encouraging during the period.
Keith Plowman, executive vice president and chief financial officer, said that results have improved along with the weather in May and told investors to expect full year EPS to “be in the lower end of the range of the guidance provided previously for fiscal 2007, with the earnings per share range of $3.40 to $3.50.” EBITDA – earnings before interest, taxes, depreciation and amortization – is expected to be $315 million to $320 million.
Bon-Ton shares ended Thursday’s Nasdaq session at $45.08, down $4.87 or 9.8%.
Bon-Ton operates 277 department stores in 23 states under names including Bon-Ton, Bergner’s, Boston Store, Carson’s and Elder-Beerman. Carson’s and several of its other nameplates were acquired from Saks Inc as that company disposed of its moderate department stores and elected to retain the more upscale Saks Fifth Avenue.