Bon-Ton (BONT) Slammed on Wide Guidance Range

Tickers in this article: BONT

NEW YORK (TheStreet) -- Bon-Ton  shares have tanked 15% to $13.18 early in Monday's trading session after the department store significantly reduced its outlook for full-year earnings.

The York, Penn.-based business warned of lower guidance, noting weather significantly hampered operations over key weekends in December.

"We are disappointed with the deceleration in sales during December, particularly given the strong start to the holiday season beginning with Black Friday and extending through the early part of the month. Adverse weather and treacherous travel conditions in the majority of our markets resulted in a sharp reduction in traffic and hampered promotional events on key weekend selling dates," said CEO Brendan Hoffman in a statement.

Management expects fiscal 2013 comparable store sales to decrease around 3.5% with adjusted EBITDA between $160 million and $170 million. Analysts polled by Thomson Reuters forecast EBITDA of $181.21 million.

The company said it anticipates earnings will fall as low as a net loss of 30 cents a share or climb as high as 15 cents a share. Earnings guidance is significantly lower than the 78 cents a share in net income forecast by analysts.

Fourth-quarter results for the period ending Feb. 1 will be released in early March.

Following the guidance update, Credit Suisse lowered its estimates.

"We have adjusted our 4Q13 adjusted EBITDA and EPS estimates to $101.9 million and $2.49, from $120.6 million and $3.22, respectively. We point out 4Q adjusted EBITDA has historically accounted for over 65% of the total year. This brings our FY13 estimates to $164.2 million and $(0.59), from $183.0 million and $0.15; for FY14, we estimate EBITDA of 178.6 million and EPS of $0.80," analysts wrote in a report.

The investment bank gave the stock a "neutral" rating with a price target of $15.

TheStreet Ratings team rates BON-TON STORES INC as a Hold with a ratings score of C. The team has this to say about their recommendation:

"We rate BON-TON STORES INC (BONT) a HOLD. The primary factors that have impacted our rating are mixed -- some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its compelling growth in net income, good cash flow from operations and expanding profit margins. However, as a counter to these strengths, we find that the company has favored debt over equity in the management of its balance sheet."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Multiline Retail industry. The net income increased by 90.8% when compared to the same quarter one year prior, rising from -$10.15 million to -$0.93 million.
  • Net operating cash flow has increased to -$68.34 million or 35.09% when compared to the same quarter last year. In addition, BON-TON STORES INC has also vastly surpassed the industry average cash flow growth rate of -21.63%.
  • The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Multiline Retail industry and the overall market on the basis of return on equity, BON-TON STORES INC has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
  • Powered by its strong earnings growth of 90.90% and other important driving factors, this stock has surged by 39.78% over the past year, outperforming the rise in the S&P 500 Index during the same period. Looking ahead, however, we cannot assume that the stock's past performance is going to drive future results. Quite to the contrary, its sharp appreciation over the last year is one of the factors that should prompt investors to seek better opportunities elsewhere.
  • The debt-to-equity ratio is very high at 20.31 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Along with this, the company manages to maintain a quick ratio of 0.09, which clearly demonstrates the inability to cover short-term cash needs.