For Bon-Ton, founded in 19th century, an uncertain future
NEW YORK » The future of Bon-Ton Stores looks tenuous after the department store chain that survived economic downturns including the Great Depression filed for bankruptcy protection and said it may seek a buyer for all or pieces of itself.
Even as it closes stores, plans to jazz up its store label products and reduce its debt load, the chain must make itself stand out in a competitive market where shoppers are buying more online overall and less of the clothing that department stores depend on.
The filing late Sunday makes Bon-Ton the largest retailer to file for bankruptcy so far this year. It joins several dozen others that filed for Chapter 11 last year, including Toys R Us, Payless ShoeSource and Gymboree Corp. More are expected to follow as many retailers face similar challenges, including big debt loads.
About two dozen distressed retailers, including Nine West Holdings Inc. and Claire’s Stores Inc., are on the watch list of Moody’s Investors Service. That surpasses the 19 from last year on the list of stores with poor credit ratings or liquidity, weak credit and what the agency calls challenged competitive positions.
“In the current environment of pricing transparency, cutthroat pricing and more-demanding consumers, retailers must have strong balance sheets if they’re to remain competitive,” Moody’s Christina Boni notes.
But the Bon-Ton brand — and all of its banners that include Elder-Beerman and Carson’s — are far from healthy, says analyst Neil Saunders, managing director of GlobalData Retail.
“Even with breathing space, the future of BonTon is uncertain. In our view, there are many stores and locations, which are in terminal decline and where closure is the only sensible option,” Saunders wrote. “They are undifferentiated, unclear and have become increasingly irrelevant to consumers. Even if the debt load was cut and unprofitable divisions culled, BonTon would still be running up a down escalator to survive.”
Though Bon-Ton has survived a score of severe economic downturns, it’s in uncharted territory today. Amazon has revolutionized the way people shop, but the behavior of Americans had already been changing radically in terms of what they buy and where they buy it.
Many stores, particularly department stores, are fighting for customers. However, some of BonTon’s peers like Macy’s and J.C. Penney and plenty of other retailers saw sales rebound this past holiday shopping season, helped by a solid economy.
There had been signs for some time that Bon-Ton was in trouble, and that did not ease heading into the most recent holiday season. Sales at established stores, a critical gauge of a retailer’s health, slid 2.9 percent in the nine-week period before the New Year. Those sales had tumbled 6.6 percent in the prior quarter.
Amazon, in contrast, for the first time booked more than $1 billion in profits during its most recent quarter.
Bon-Ton, which runs 260 stores in 24 states, largely in the Northeast and Midwest, is in talks with debt holders about restructuring $1 billion in debt. Bon-Ton received a commitment of $725 million in debtor-in-possession financing to operate during its restructuring process.