Bon-Ton Stores files for Chapter 11 bankruptcy protection

The Associated Press

NEW YORK – Bon-Ton Stores, saddled with debt and struggling with weak sales as shoppers abandon traditional department stores, said it filed Sunday for Chapter 11 bankruptcy protection and was exploring a sale of all or part of the company.

Jan. 16, 2017--The Bon-Ton at York Galleria Mall. Bill Kalina photo

The chain, with dual headquarters in Wisconsin and York County, operates 260 stores in 24 states, largely in the Northeast and Midwest. The company made the filing in the U.S. Bankruptcy Court for Delaware. It had said earlier this year that its holiday sales fell, despite a solid economy in which many retailers did well.

Several dozen retailers, including Toys R Us, Payless ShoeSource and Gymboree Corp., have filed for reorganization over the past year. Amazon, meanwhile, saw its latest quarterly profit soar past $1 billion for the first time as it sold more voice-activated gadgets, enlisted new Prime members and benefited from its recent purchase of Whole Foods.

Bon-Ton, which operates stores under its own name as well as the Boston Store, Carson’s, Younkers, Herberger’s, and Elder-Beerman, had said in a recent regulatory filing that it was in talks with debt holders about restructuring its $1 billion in debt. It had said in November that it would shut dozens of stores in 2018, and this week specified 42 locations across the country, most of them in Wisconsin, Pennsylvania, Illinois and Indiana.

The company said Sunday that it intends to use the Chapter 11 process to “explore potential strategic alternatives” that may include selling all of the company or some of its assets.

More: Chain store closings a mixed blessing for small businesses

“We are currently engaged in discussions with potential investors and our debt holders on a financial restructuring plan, and the actions we are taking are intended to give us additional time and financial flexibility to evaluate options for our business,” Bill Tracy, president and CEO, said in a statement.

Bon-Ton said it has received a commitment of $725 million in debtor-in-possession financing to operate during the restructuring process.

According to its business plan filed with the Securities and Exchange Commission earlier this week, Bon-Ton said one of its main priorities was to overhaul its private-label products, as it plays catch-up with Kohl’s, Macy’s and J.C. Penney, all of which have been improving their offerings. Clothes and other items under a store’s own labels offer better profit margins.

Last October, Bon-Ton had launched FAO Schwarz shops in about 190 of its stores, two years after the iconic toy chain shut down. But those efforts haven’t been enough to turn around its business. Like many department stores, Bon-Ton, with headquarters in York, Pennsylvania, and in Milwaukee, has been hit hard by shoppers’ increasing preference for buying online and their shift from buying clothing toward having experiences.

Bon-Ton also has struggled to pay down its debt, which has given it less financial flexibility to invest in its stores and online. The company said in its filing that it also wants to improve its online business, which accounts for about 12 percent of total sales.

It had also said that sales at established locations fell 2.9 percent for the nine-week holiday period that ended Dec. 30, 2017. That was an improvement from a 6.6 percent decline in the third quarter, but the holiday drop made it an outlier in the industry, which was overall helped by a solid economy.

As Bon-Ton shutters stores, Kohl’s Inc. could benefit the most among its rivals, according to Jefferies analyst Randal Konik. Based on his assessment of department store real estate, he says many of Bon-Ton’s designated store closures are in the same areas where Kohl’s operates stores. “Bon-Ton’s closures could be a cherry on top,” he wrote.