Bon-Ton’s Bankruptcy Risk Ascends in 2018 as Debt Crosses $1.0 Billion

Bon-Ton's Bankruptcy in 2018
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Bon-Ton Stores Inc (OTCMKTS:BONT), a department store, may enter bankruptcy in 2018. The company’s top-line sales have been falling since 2007. As per regulatory filings, the company hasn’t posted a positive profit since 2010. Bon-Ton missed its payments due because of its growing debt, increase in online competition, and decline in store foot traffic. The company has a debt of about $1.0 billion and, for the past six fiscal years, it has suffered a loss. To control its falling sales, in November 2017, Bon-Ton announced the closure of 40 stores in 2018. Also, it may file for Chapter 11 protection.

Bon-Ton missed a $14.0-million interest payment due on December 15; the grace period ended exactly one month later. On January 16, the company announced that it had entered into a forbearance agreement with the group of creditors as it has failed to make its interest payment due in December 2017. The agreement will expire on January 26, but can be extended automatically to February 4 if both the parties mutually agree.

According to Moody’s Corporation (NYSE:MCO), the company has $572.0 million in debt due next December. Altogether, it carries a debt of $850.0 million. Moreover, Standard & Poor’s has listed the company as one of the retailers most at risk of bankruptcy.

Bon-Ton’s Holiday Season Sales Declined by 2.9%

Bon-Ton recently addressed the decline in its holiday sales. A report suggests that company’s comparable store sales for the nine-week holiday period that ended on December 30, 2017 were down 2.9%. Total sales were $720.9 million, compared to $752.1 million in the year-ago holiday period, for a decline of four percent down, which has added to Bon-Ton’s continuous revenue decline.

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This holiday season, most customers purchased cosmetics, children’s clothing, outerwear, and jewelry. The store official said the decline in holiday sale wasn’t bad as it was a year ago.

“The Company’s holiday period comparable store sales decrease of 2.9 percent is an improvement from the comparable store sales decrease of 6.6 percent reported in the third quarter,” said Bill Tracy, Bon-Ton Stores Inc’s president and CEO. “We are actively engaged in discussions with our debt holders in an effort to strengthen our capital structure to support the business going forward.”

According to S&P Global Market Intelligence, about 15 retailers are at a higher risk to file for bankruptcy this year. Bon-Ton Stores Inc is one of them.

Retailer Announced Closure of 40 Stores in 2018 After Continuous Sales Decline

Bon-Ton Store closures in 2018 now include an additional 40 stores being shut down by the end of this year, announced in November 2017 after the company observed continuous sales decline from its quarterly results. The decline in sales due to the increase in online shopping was the main cause for store closings. In the first three quarters of 2017, the company was down $135.4 million, compared to the $108.1 million loss it observed during the first three quarters of 2016.

“While results in the third quarter fell short of our expectations, we are taking more aggressive actions to fuel improved performance as well as strengthen our financial position,” Tracy said. “We are also focused on cost reductions through the continued rollout of our profit improvement initiatives. In addition, we expect to implement a significant store rationalization program and plan to close at least 40 locations through 2018. This will enable us with moving forward with a more productive store footprint and redirecting capital expenditures toward investments designed to drive sales growth.”

Bon-Ton opted to sell its real estate to recover the losses, but the main issue is that many of its stores are on lease. A report suggests that the company owns only 25 stores that are less than 10% of its total locations. The company sold its Roseville, Minnesota location for $18.9 million.

Retail stores closings and their bankruptcies is an ongoing trend these days. Bon-Ton’s bankruptcy in 2018 is an addition to the list of stores which are already going through such phases.

 

Sources

Bon-Ton Creditors May Propose Bankruptcy Within Weeks,” Bloomberg, January 12, 2018.

Bon-Ton bankruptcy could reportedly be ‘imminent,” Retail Dive, January 12, 2018.

Bon-Ton might soon file for bankruptcy,” York Dispatch, January 16, 2018.

Bon-Ton Stores shares drop as bankruptcy speculation rises,” Milwaukee Journal Sentinel, January 16, 2018.

In another blow for Elder-Beerman, Bon-Ton posts holiday sales decline,” Dayton Daily News, January 8, 2018.

Bon-Ton Holiday Sales Decline,” HomeWorld Business, January 11, 2018.

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