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Bon-Ton Stores Isn't a Retail Value Trap, It's a Train Wreck

Six months ago, in July 2013, it was trading at over $21 a share. It fell to around $10 a share in October, than rallied strongly. It closed at $18 a share on Nov. 27, 2013. An analyst report from Telsey Advisory Group raised the target price from $13.50 to $16 a share on Nov. 22, 2013. That, along with the bull market and strong performance by the retail sector for 2013, undoubtedly helped, too.

But, in terms of having to stand on its own merits, Bon-Ton Stores is collapsing.

Earnings-per-share growth is down by 73.1% this year. With the guidance from management that comparable store sales are expected to decline, it is difficult to be bullish about any improvement in the future. That is compounded by the declining sales growth. Even worse, Bon-Ton Stores has a debt-to-equity ratio of 20.3.

The book value of Bon-Ton Stores is $2.39 per share, according to Yahoo Finance. For J.C. Penney, it is $8.69 a share. Sears Holdings has a book value of $17.68.

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Bon-Ton Stores is selling at a price-to-book ratio of 4.82. The sector average is 3.82. For Wal-Mart, it is 3.36.  Even though the stock is down nearly 30% for 2013, it still appears to be overvalued based on declining sales, decreasing revenues, the high debt load, and its overpriced assets.

At the time of publication, the author held no positions in any of the stocks mentioned.

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

Jonathan Yates has written for numerous publications including Newsweek and The Washington Post. He is a former general counsel for a publicly traded corporation. Much of his career was spent working on Capitol Hill for Members of Congress in both the House and Senate. He has degrees from Harvard University, Georgetown University Law Center and The Johns Hopkins University.
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