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Bon-Ton details store closures as it nears bankruptcy
Struggling retailer Bon-Ton Stores Inc. has put together a turnaround plan focused on closing underperforming stores, providing more sought-after merchandise, improving its marketing and increasing online-related sales by 50 percent in the next two years.
Details of the turnaround plan were disclosed Monday, Jan. 29, in connection with a debt restructuring that Bon-Ton is working on with its debt-holders.
On Wednesday, Jan. 31, The Bon-Ton released a list of 42 stores that will be closing within the next few months.
Locations of Bon-Ton stores in Pennsylvania slated to be closed are:
- The Point at Carlisle Plaza, Carlisle
- The Commons, Dubois
- Millcreek Mall, Erie
- The Johnstown Galleria, Johnstown
- Susquehanna Valley Mall, Selinsgrove
- Nittany Mall, State College
- Stroud Mall, Stroudsburg
- Trexler Mall, Trexlertown
The company also will close Bon-Ton, Carson's, Elder-Beerman, Herberger's, Boston Stores and Younkers stores in Idaho, Illinois, Indiana, Iowa, Kentucky, Michigan, Minnesota, New Hampshire, New Jersey, New York, Ohio, Utah and Wisconsin.
Bankruptcy? Bon-Ton, which has dual headquarters in Wisconsin and York, has been unprofitable for the past six years and recently missed a $14 million debt payment, fueling speculation the company would file for bankruptcy.
The company has debt of about $1.1 billion.
Documents made public Monday indicate the restructuring could take place out of court or in bankruptcy court with a Chapter 11 filing as soon as Sunday, Feb. 4.
Under the restructuring plan, $45 million in cash would need to be raised, possibly from venture capital funds, industry investors or others, giving the new investor a controlling interest in the company. The documents suggest that existing shares of Bon-Ton Stores Inc. stock would be wiped out in the restructuring plan.
"While it is often optimal for companies to try to do restructuring out of court — and the reasons would be to avoid the cost and the disruption of a Chapter 11 proceeding — it appears that Bon-Ton has a restructuring proposal that leaves open the possibility of doing it out of court or through a prearranged Chapter 11 plan of reorganization," said bankruptcy expert Peter Blain, of the Milwaukee firm Reinhart Boerner Van Deuren, who examined the documents Monday.
Blain said the consultant Bon-Ton hired for the turnaround effort, AlixPartners, is highly regarded in the business community.
The turnaround plan states there is "a clear opportunity to enhance Bon-Ton's performance" over the next two years.
Retail analysts repeatedly told The (Allentown) Morning Call the most likely outcome for Bon-Ton is bankruptcy.
"To me, those are just Band-Aids," retail expert Jeff Green, owner of Jeff Green Partners in Phoenix, said after hearing of Bon-Ton's turnaround plans.
Issues: One issue for the company is, according to its plan, its store portfolio includes a "sizable portion of poorly performing stores that contribute minimal value to the organization." So about 100 of the worst-performing stores were selected for a financial assessment.
Bon-Ton already has said it expects to close at least 40 stores in 2018. The turnaround plan puts the number at 42, and potentially three more, including a clearance center. The stores marked to close typically have had weak financial performances and are located in dying malls, the plan says.
"There are an additional 20-plus stores that should be considered for inclusion on a 'Watch List' to actively monitor for signs of further deterioration," the plan states.
Bon-Ton has 260 stores in the United States, including furniture galleries and clearance centers, in addition to department stores.
Plan: The plan calls for more focus on reinvesting in top-selling merchandise, private brands and new business and building "powerful assortments" of inventory.
Bon-Ton's business is "significantly under-penetrated in e-commerce, representing an immediate opportunity to grow revenue," the plan states.
The plan anticipates online sales or online-related sales, such as those in which customers order items online and pick them up in a store, growing to $431 million in 2019 from $283 million in 2017.
The turnaround plan also said Bon-Ton can find savings in its advertising and marketing. The retailer could cut $13 million in unprofitable marketing spending in the category of direct mail alone, the plan states.
The plan says store staffing has been reduced in correlation with declining sales, but a targeted investment of $12 million of additional labor would support improved store operations.
The plan also calls for capital investments to upgrade some stores and make other changes.
Through the first three quarters of 2017, Bon-Ton lost $135.4 million. It hasn't yet reported sales for the full year.