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Bon-Ton Stores (BONT)

Q1 2011 Earnings Call

May 19, 2011 10:00 am ET


Byron Bergren - Chief Executive Officer, President and Director

Joseph Teklits - Senior Managing Director

Keith Plowman - Chief Financial Officer, Principal Accounting Officer and Executive Vice President of Finance

Anthony Buccina - Vice Chairman and President of Merchandising


William Reuter - BofA Merrill Lynch

Grant Jordan - Wells Fargo Securities, LLC

Michael Exstein - Crédit Suisse AG

Emily Shanks - Lehman Brothers

Leah Hartman - CRT Capital Group LLC

Carla Casella - JP Morgan Chase & Co

Edward Yruma - KeyBanc Capital Markets Inc.



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Good morning, ladies and gentlemen. Thank you for standing by. Welcome to today's Bon-Ton Stores Inc. First Quarter 2011 Earnings Conference Call. [Operator Instructions] As a reminder, today's conference is being recorded. And now, I would like to turn the conference over to Joe Teklits with ICR. Please go ahead, sir.

Joseph Teklits

Thanks. Good morning, everyone. Welcome to Bon-Ton's First Quarter 2011 Conference Call. Mr. Bud Bergren, President and CEO; Mr. Tony Buccina, Vice Chairman and President of Merchandising; and Mr. Keith Plowman, Executive Vice President and Chief Financial Officer, will host today's call.

You may access a copy of the earnings release on the company's website at You may also get a copy of the earnings release by calling us at (203) 682-8200.

The statements contained in this conference call, which are not historical facts, may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. 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 with that, I'll turn the call over to Bud.

Byron Bergren

Good morning, and thank you for joining us. I'll begin with some general comments on the first quarter of 2011 and then touch upon our perspective regarding the remainder of the year. Keith will provide details on the first quarter and update our guidance and assumptions for 2011. Tony will discuss the quarter's merchandise results and the merchandising initiatives for the remainder of the year. After that, I'll make some closing comments, and then we'll be available to address your questions.

All of our stores are located in northern states. Therefore, our sales can be positively or negatively impacted by sustained regional weather. In the first quarter of fiscal 2010, our markets had unreasonably warm weather, and our comparable store sales increased 3%. In the first quarter of fiscal 2011, our markets experienced unseasonably cold and wet weather, and our comparable store sales decreased 1.2%.

When we saw that the seasonal apparel was not selling at the projected rate, we responded by taking markdowns and making adjustments to our merchandise assortments to better align with customer preference. The weather has recently become more seasonable, and we are pleased with our recent sales performance in May.

Tony will go into more detail about our merchandise initiatives going into summer and for the remainder of the year. But first, some highlights for the first quarter. Comparable store sales decreased 1.2%, while operating income decreased $8.1 million to a loss of $2.5 million. We continued to monitor our selling, general and administrative expenses, resulting in a reduction, as compared with the prior year period.

Our best performing regions were Ohio, Western Pennsylvania, Michigan, Eastern Pennsylvania and Nebraska in west. Softest regions were Central Illinois, Indiana, Iowa and the south side of Chicago.

We generated outstanding growth in our eCommerce business. Sales were up 98% in the first quarter compared to the prior year.

During the quarter, we announced 2 real estate initiatives: a new location for our Kokomo, Indiana store, which should benefit with increased traffic and visibility and offer a very convenient location to our Kokomo customers. Also, our new Edina, Minnesota, Herberger's store in the Southdale Mall will bring the total number of Herberger's stores to 6 in the Minneapolis/St. Paul market, which continues to be an excellent market for us. We look forward to further expansion of the Herberger's brand in that area. Both locations are scheduled to open in November, in time for the holiday selling season.

On April 27, we introduced the collection from the partnership announced last fall with designer John Bartlett. The John Bartlett Consensus and John Bartlett Statements collections were extremely well received by the media, which attended the presentation in New York. We're very excited about the collection, which is exclusive to Bon-Ton and further differentiates us from our competitors. I think our customers will find it right on-trend and offer terrific value. The merchandise will be in our stores and online in August.

We also look forward to our latest exclusive offering, Mambo, assortment gear to young men, juniors and kids areas. The line will arrive in time for back-to-school and, we believe, will generate excitement and differentiate us. We are pleased with the addition of Casual Male at selected stores this spring, providing our customers with Big & Tall merchandise.

Next, I would like to review with you several initiatives we have in place to drive growth for the remainder of the year. A summary of the strategic initiatives we announced on our fourth quarter conference call are, first, we want to drive our franchise businesses. Then, we want to increase the penetration of differentiated and exclusive product, which includes further development of our private brands. We will continue to explore new exclusive lines like Bartlett and Mambo to distinguish us in our markets. We'll drive our key item programs, including our Incredible Value Program. We're also developing a younger attitude customer with new updated merchandise brands. We'll continue to grow our eCommerce by at least 1% of total company sales each year, and we're focusing on tailoring our merchandise assortments by store and expanding our merchandise optimization program to more store planners.

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