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Gross margin improves at Bon-Ton Stores

22
Nov '10
The Bon-Ton Stores Inc reported results for the third quarter of fiscal 2010 and the year-to-date period ended October 30, 2010.

Third Quarter Highlights:

• Comparable store sales decreased 0.3%.
• The gross margin rate was 38.2% of net sales, an increase of 60 basis points, compared with the prior year period, to yield a net increase in gross margin dollars of $2.7 million.
• Operating income totaled $22.7 million, compared with $19.6 million in the third quarter of fiscal 2009.
• EBITDA was $48.7 million, compared with $48.8 million in the same period of fiscal 2009. EBITDA is defined as earnings before interest, income taxes and depreciation and amortization, including amortization of lease-related interests. EBITDA is not a measure recognized under generally accepted accounting principles.
• Net loss totaled $6.3 million, or $0.36 per diluted share, compared with a net loss of $4.2 million, or $0.24 per diluted share, for the third quarter of fiscal 2009.

Year-To-Date Highlights:

• Comparable store sales increased 0.9%.
• The gross margin rate improved approximately 130 basis points to 37.9%, compared with 36.5% in the prior year period.
• Operating income was $22.0 million, compared with an operating loss of $14.7 million in the prior year period.
• EBITDA increased $29.1 million to $102.9 million, compared with $73.8 million in the prior year period.
• Net loss totaled $63.5 million, or $3.60 per diluted share, compared with a net loss of $84.4 million, or $4.96 per diluted share, in the prior year period.

Comments
Bud Bergren, President and Chief Executive Officer, commented, "We are reiterating our fiscal 2010 guidance as we were able to deliver quality sales in the third quarter by offering strong assortments and carefully managing our inventory levels, resulting in a 60 basis-point increase in our gross margin rate in the quarter and a 9% reduction in clearance inventory at period end. We believe we are well-positioned for the holiday season and expect to benefit in the fourth quarter from the arrival of more seasonable weather. We are confident we have the right merchandise assortment and a strong marketing program that will effectively convey our quality and value message."

Guidance
Keith Plowman, Executive Vice President and Chief Financial Officer, stated, "As noted in the Company's November 4, 2010 press release, our excess borrowing capacity under our revolving credit facility was approximately $462 million at the end of the third quarter of fiscal 2010, well above the required minimum availability."

Mr. Plowman added, "We are reiterating our full year 2010 guidance for EBITDA of a range of $235 million to $245 million and for income per diluted share of a range of $0.80 to $1.35. Our estimate for cash flow remains in a range of $80 million to $90 million, which, we believe, will permit us to manage and reduce our debt levels. Assumptions reflected in our full-year guidance include the following:

• Comparable store sales in a range of 1.0% to 1.5% increase;
• Gross margin rate of 37.7%;
• Reduction of $15 million to $20 million in SG&A expense;
• Effective tax rate of 0%;
• Capital expenditures not to exceed $50 million, net of external contributions; and
• Estimated 18.5 million to 19.0 million average shares outstanding."

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Bon-Ton Stores Inc


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