Milwaukee Journal Sentinel

Emerging from bankruptcy could be a tough task for Bon-Ton

- Paul Gores

Department store owner Bon-Ton Stores Inc. has plans aimed at turning around its fortunes and emerging from bankruptcy, but restoring financial health to the company will be a tough task — maybe even an impossible one — industry analysts say.

Bon-Ton, which is the parent company of Boston Store, Younkers and other retail chains, filed for Chapter 11 bankruptcy in Delaware on Sunday. The company said it plans to restructur­e but will consider selling the company.

Bon-Ton has not been profitable since 2010 and recently missed a $14 million interest payment on its debt. The company has debt of about $1.1 billion. It already has said it is closing 47 stores this year.

Stores operated by Bon-Ton, many of them located in shopping malls, will remain open while the turn-around plan and discussion­s on restructur­ing are underway. Bon-Ton said it is talking with potential investors and debt holders about a financial restructur­ing plan.

But no matter what happens, trends are working against department stores such as Bon-Ton, analysts say.

Although growing online competitio­n is the most-often cited trend, a longer-term pattern going back 40 years has been the rise of “category killer” big box competitor­s that specialize in merchandis­e that once was found primarily in department stores, retail consultant Nick Egelanian, founder of SiteWorks Retail Real Estate Services in Annapolis, Md., said Monday.

For example, retailers such as T.J. Maxx, HomeGoods and Ulta keep opening stores that compete against the three most important department­s left in department stores: apparel, housewares and cosmetics.

“Discounter­s are going to grow until they put them out of business,” Egelanian said.

In a note issued after Bon-Ton filed for bankruptcy, industry analyst Neil Saunders of GlobalData Retail said the internet and online retailers have reduced an advantage Bon-Ton once had — locating its stores in smaller metro areas where the availabili­ty of branded fashions and housewares was traditiona­lly poor.

While Bon-Ton has tried to improve its assortment of merchandis­e and built up its e-commerce sales, “the meager sales they delivered were wholly insufficie­nt to turn around Bon-Ton,” Saunders said.

“The harsh reality is that while BonTon’s management put in great effort to make the business sustainabl­e, they were always running up a down escalator,” Saunders said.

With consultant AlixPartne­rs, BonTon recently put together a plan to try turn the company around. The plan focuses on closing underperfo­rming stores, providing more sought-after merchandis­e, improving its marketing and increasing online-related sales by 50% in the next two years.

Egelanian noted that one of the things Bon-Ton wants to pursue is adding more private label merchandis­e.

“Well, it’s a little late for that when you’re structural­ly and strategica­lly in a weakened position like they are. I wouldn’t expect that’s going to have much impact,” he said.

Retail consultant Anne Brouwer, senior partner at McMillanDo­olittle in Chicago, said shortly before the bankruptcy filing that Bon-Ton faces a difficult road.

“They have a pretty long, deep and sustained hole that they’ve managed to dig through really years and years of not making the tough decisions and bigenough changes,” she said.

Bon-Ton is looking for an investor, or sponsor, to invest $45 million in the company as part of its restructur­ing plan, in which debt would be converted to equity for debt holders. If that doesn’t happen, Bon-Ton is asking in bankruptcy court to allow it to take bids to sell all of the company’s assets before the end of this spring.

“Basically, they are on a dual track,” said corporate bankruptcy expert Peter Blain, who looked at the Bon-Ton bankruptcy documents Monday.

Blain, who leads the reorganiza­tion practice of the Milwaukee firm Reinhart Boerner Van Deuren, said the schedule sought by Bon-Ton to sell its assets would be “pretty aggressive,” with the company asking for bids to be taken by early April.

Bon-Ton said it has received a commitment from a group of lenders for up to $725 million in special financing, known as debtor-in-possession financing, which would be expected to support the company’s operations during the financial restructur­ing process.

In addition to Boston Store and Younkers, Bon-Ton, which has dual headquarte­rs in Milwaukee and York, Pa., operates department stores under the brand names Bergner’s, Bon-Ton, Carson’s, Elder-Beerman and Herberger’s. In all, it has 256 stores in 24 states.

Bon-Ton’s Milwaukee headquarte­rs, which has about 600 employees, operates from space in the Grand Avenue Boston Store building.

Bon-Ton has an agreement with the City of Milwaukee tied to ongoing renovation­s at the headquarte­rs. The redevelopm­ent of the building will create 100,000 square feet of offices for additional businesses, along with a smaller Boston Store and a renovated Bon-Ton headquarte­rs.

Asked how Bon-Ton’s bankruptcy might affect Milwaukee’s redevelopm­ent agreement, city spokesman Jeff Fleming said meetings were taking place on the matter Monday.

“We are focused on keeping jobs here, protecting city taxpayers and supporting a valued local business,” Fleming said.

The stock price of Bon-Ton shares closed at 9 cents Monday, down from 15 cents on Friday.

 ?? JOURNAL SENTINEL FILES ?? Boston Store parent company Bon-Ton Stores Inc. has filed for Chapter 11 bankruptcy protection.
JOURNAL SENTINEL FILES Boston Store parent company Bon-Ton Stores Inc. has filed for Chapter 11 bankruptcy protection.

Newspapers in English

Newspapers from United States