Sadie Keljikian, Express Trade Capital
Retail chain Bon-Ton has filed for Chapter 11 bankruptcy relief.
The apparel retailer has been struggling with sales losses, mounting debt and management upheaval for some time. Late last year, the business invoked a 30-day grace period to pay $14 million in interest in hopes that holiday sales would supplement dwindling funds. Unfortunately, Bon-Ton reported a 2.9% fall in comparable-store sales during the crucial winter holiday period. When news of Bon-Ton’s increasing debt reached vendors, many of them began requiring letters of credit or cash on delivery for goods, which compounded the chain’s financial issues. In mid-January, conditions were so dire that stock fell to a meager $0.29.
As part of the restructuring plan, Bon-Ton executives decided to downsize the chain’s brick and mortar presence (particularly those in malls) in favor of expanding its ecommerce options. Like many store-based retailers, Bon-Ton is hoping to rise to competition from the likes of Amazon and other ecommerce-based retailers. According to the Securities and Exchange Commission filing, Bon-Ton plans to scrutinize 100 of its 260 US locations and close at least 40 and as many as 60 of them in 2019. Closures will likely include locations of all the chain’s stores including Carson’s, Elder-Beerman, Herberger’s and Younkers. The chain also plans to improve its more successful facilities by remodeling flagship stores and potentially opening new stores in more advantageous locations.
Taking a cue from Macy’s, Bon-Ton also plans to expand its private label products so that they make up 25% of total merchandise. For perspective, discount retailers Kohl’s and J.C. Penney (both of which have done remarkably well despite the difficulty facing brick and mortar retailers) occupy 46% and 52% of their products respectively with their own private labels. The chain also plans to renegotiate its leases and potential rent reductions to rein in operational costs. Unfortunately, Bon-Ton stocks have only continued to plummet, falling and lingering below $0.10 this week.
CEO Bill Tracy released a statement addressing plans for the chain’s uncertain future. He stressed that the company would continue operations as usual during the restructuring and that the company is currently discussing options with its debtholders and potential investors. Whether or not it will be enough to combat the significant financial and managerial difficulties facing the business, only time will tell.
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