The Bon-Ton Stores, Inc. (BONT)
Q2 2010 Earnings Call Transcript
August 19, 2010 10:00 am ET
Joseph Teklit – ICR
Bud Bergren – President and CEO
Keith Plowman – EVP, CFO and Principal Accounting Officer
Tony Buccina – Vice Chairman and President, Merchandising
Bill Reuter – Bank of America Merrill Lynch
Leah Hartman – CRT Capital Group
Emily Shanks – Barclays Capital
Grant Jordan – Wells Fargo
Kathleen Brady – Citadel Securities
Chris Beth [ph] – JP Morgan
Chris Spring [ph] – Valley Assets [ph]
Previous Statements by BONT
» Bon-Ton Stores Q1 2010 Earnings Call Transcript
» The Bon-Ton Stores, Inc. Q4 2009 Earnings Call Transcript
» The Bon-Ton Stores, Inc. Q3 2009 Earnings Call Transcript
Good day ladies and gentlemen. Thank you for standing by. Welcome to today's Bon-Ton Stores second quarter 2010 earnings conference call. (Operator instructions) And now I would like to turn the conference over to Mr. Joseph Teklit with ICR. Please go ahead, sir.
Thanks. Good morning, everyone. Welcome to Bon-Ton's second quarter 2010 conference call. Today Mr. Bud Bergren, President and CEO; Tony Buccina, Vice Chairman and President of Merchandising; and Keith Plowman, Executive Vice President, Chief Financial Officer and Principal Accounting Officer will host the call. You can access a copy of the company's earnings release on its website at www.bonton.com. You may also obtain a copy of the earnings release by calling 203-682-8200.
As a reminder, the statements contained in this conference call which are not historical facts may constitute forward-looking statements within the meanings of the Private Securities Litigation Reform Act of 1995 [ph]. Actual results might differ materially from those projected in such statements due to a number of risks and uncertainties, all of which are described in the company’s filings with the SEC. And now I will turn the call over to the CEO, Bud Bergren.
Thank you Joe.
Good morning and thank you for joining us. I'll begin with some general comments on the second quarter of 2010. Keith will then provide details of the financial results and update you on our financial guidance and assumptions for 2010. Tony will discuss merchandize results and trends and offer our thoughts on what we see happening in retail in the upcoming fall season. After that, we will be available to answer your questions.
Let me give some highlights from the second quarter. First, the results for the second quarter met our expectations. We had a 90 basis-point increase in our gross margin rate, and a $4.3 million improvement in operating loss. Our cost strategies were successful as SG&A expenses were well controlled, and EBITDA for the quarter increased by 12%, and excess borrowing capacity under our revolving credit facility was approximately $391 million, up from $174 million a year ago.
For the quarter, our best regional markets were Detroit; Lancaster in York, Pennsylvania; Minneapolis and Buffalo, New York. Our softest regions were Harrisburg in the Lehigh Valley, Central Pennsylvania. Many merchandise initiatives were successful in the second quarter, and we continue to manage our inventory, keep book [ph] clearance low, and deliver fresh goods into our stores, and Tony will discuss this in a little more detail [ph].
Overall, we’re very pleased with our performance in the first-half of fiscal 2010. Customers responded favorably to our merchandise assortments, and e-commerce continues its significant growth. Our value message resonated with our customers through our key item program, including the Incredible Value items. The continued reduction in clearance merchandise combined with disciplined inventory management led to the 180 basis point improvement in our gross margin rate for the spring season.
Our inventory and expense control efforts resulted in our EBITDA dollars more than doubling from the prior year. Although our sales trends slowed during quarter two versus quarter one, we continue to trend positively for the year. Looking ahead, we believe we have positioned ourselves for continued improvement. We will continue to drive towards improved EBITDA, leveraging the same disciplines and tools that we have implemented over the past two years.
We will continue inventory management and fresh flow of goods to our stores based on sales trend, and tight controls on expenses. We will have merchandise assortments that deliver quality and cater to the needs of our customer today with outstanding values by also providing margin opportunities for the company, for use of our merchandise optimization process, private brands and other merchandise initiatives.
In marketing, we plan to target our loyal customers and attract new ones. We will have enhanced our marketing efforts and will present value to ensure we keep our customers excited about shopping at Bon-Ton Stores. In addition, we are emphasizing our commitment to deliver great service through our customer first initiative. Over 24,000 managers and associates are going through training during the month of August. The training was developed based upon feedback from our customers, managers and associates, and emphasizes the customer comes first, and our associates are empowered to satisfy the customer.
We are looking forward to the fall and holiday seasons and we are confident that we have the right strategy and tactics in place to drive sales and to help withstand some renewed softness in overall consumer spending, as evidenced by spending patterns that slowed in the past few months. We continue to enhance our merchandise assortments by accelerating the penetration of exclusive and distinctive merchandise, scaling [ph] our offerings by region and customer preference, and instituting innovative marketing programs. We believe we are on the right track to achieve the fiscal 2010 goals.
At this time, I would like to turn the call over to Keith to review the financials in more detail.