The Bon-Ton Stores, Inc. (NASDAQ: BONT) today reported operating results for the second quarter of fiscal 2015, the 13-week period ended August 1, 2015.
Second Quarter Overview
• Comparable store sales decreased 1.3% in the second quarter as compared with the prior year period.
• Gross margin rate increased 24 basis points to 36.8% of net sales in the current year period.
• Selling, general and administrative expense (“SG&A”) decreased $0.6 million in the second quarter compared with the prior year period.
• Adjusted EBITDA was $5.7 million in the second quarter of fiscal 2015. (Adjusted EBITDA is not a measure recognized under generally accepted accounting principles – see Note 1.) The current year second quarter includes a $0.7 million gain associated with an insurance settlement. Excluding this gain, Adjusted EBITDA was $5.0 million in the second quarter of fiscal 2015. Adjusted EBITDA was $5.1 million in the second quarter of fiscal 2014.
• Net loss in the second quarter of fiscal 2015 was $39.6 million, or $2.01 per diluted share, compared with net loss of $36.2 million, or $1.86 per diluted share, in the second quarter of fiscal 2014. Second quarter of fiscal 2015 results include a loss of $4.9 million, or $0.25 per diluted share, as a result of the early termination of one of the Company’s mortgage facilities and a gain of $0.7 million, or $0.04 per diluted share, for the aforementioned insurance settlement. Excluding these factors, net loss in the second quarter of fiscal 2015 was $35.4 million, or $1.80 per diluted share.
Kathryn Bufano, President and Chief Executive Officer, commented, “While our second quarter sales results were challenged, we saw meaningful improvement in our gross margin rate and effectively managed expenses, enabling us to achieve Adjusted EBITDA in line with that of last year. Sales were pressured by unseasonably cool weather, which impacted our seasonal classifications, and by weakness in overall traffic trends. That said, we were encouraged by the sales improvement in certain core categories and our private label business. We drove higher merchandise margins while we managed our inventory well, ending the quarter with on-hand inventories flat to last year on a comparable store basis and moving in the right direction to achieve our inventory reduction goal by the end of the year. Additionally, as previously announced, we closed on a sale/leaseback transaction that enabled us to retire one of our mortgage facilities.”
Ms. Bufano continued, “Looking ahead, we believe that some of the macro pressures that impacted our sales during the second quarter will continue into the second half and, therefore, we are reducing our fiscal 2015 Adjusted EBITDA guidance to a range of $145 million to $155 million. We will continue to prudently manage our business while we remain focused on the continued execution of our strategic initiatives to drive improved sales productivity and EBITDA growth over the long term.”
Comparable store sales in the second quarter of fiscal 2015 decreased 1.3%. Total sales in the period decreased 1.4% to $555.4 million, compared with $563.5 million in the second quarter of fiscal 2014. We continued our trend of double-digit sales growth in eCommerce in the period, primarily due to a higher conversion rate and increased transaction size. The sales performance in our small and mid-tier stores continued to outpace that of our larger locations. Year-to-date fiscal 2015 comparable store sales decreased 0.2%.
Other income in the second quarter of fiscal 2015 was $15.6 million, compared with $14.7 million in the second quarter of fiscal 2014. The increase was largely the result of increased revenues associated with our proprietary credit card operations. Proprietary credit card sales, as a percentage of total sales, increased 223 basis points to 53.2% in the second quarter of fiscal 2015.
The gross margin rate in the second quarter of fiscal 2015 increased 24 basis points as compared with the second quarter of fiscal 2014 to 36.8% of net sales, largely the result of reduced net markdowns. A 52-basis-point increase in merchandise margin rate was partially offset by increased distribution and delivery costs associated with omnichannel selling efforts in the current quarter. Gross margin decreased $1.6 million to $204.6 million in the second quarter of fiscal 2015 as a result of the decreased sales volume in the period.