The Bon-Ton's CEO Presents At Goldman Sachs Nineteenth Global Retailing Conference (Transcript)

The Bon-Ton Stores, Inc. (BONT)

Goldman Sachs Nineteenth Global Retailing Conference Transcript

September 5, 2012 9:35 AM ET

Executives

Brendan Hoffman - President and CEO

Keith Plowman - EVP and CFO

Mary Kerr - VP, Public and IR

Analysts

Adrianne Shapira - Goldman Sachs

Karen Eltrich - Goldman Sachs

Presentation

Adrianne Shapira - Goldman Sachs

All right, I think we are about ready to get started with our next presentation. Bon-Ton should be on everybody's radar screen as their regional department store being revitalized, with about 270 stores in 23 states, primarily in the Northeast and Midwest, it's got a tremendous agent of change, new management. While he doesn't look that old, Brendan has been around the block a few times, at Lord & Taylor and Neiman Marcus, back in Lord & Taylor and now President and CEO of Bon-Ton.

Brendan along with his CFO, Keith Plowman and --

Karen Eltrich - Goldman Sachs

Mary Kerr.

Adrianne Shapira - Goldman Sachs

Mary, sorry – are going to share their exciting plans for Bon-Ton.

Brendan Hoffman

Thank you, Adrianne. And we're really pleased to be here today and I already have had the chance to meet with some of you and look forward to meeting with more of you over the course of the day.

So I just thought I'd take a few minutes just to kind of update you, on what I've seen, I've been in the company now for exactly seven months and really spent that time trying to get around to see as many stores as possible, trying to understand the business, trying to learn the language because Bon-Ton, like all retailers, kind of have their own unique language.

And really I spent the last month or so trying to figure out what the strategy should be to map some goals and vision. So internally the team knew what we were marching towards and externally we could present that as well. And so I thought I'd just take a few minutes to share with you some of what was posted on our website I think earlier this morning.

First thing was what's our vision, what do we want to be? And for us, it's to be the dominant, omni-channel retailer in the small to mid-size communities we serve, offering fashion merchandise for the family and home at compelling prices.

Goals, how will we know when we get there? For us right now, it's a $3 billion plus in revenues and a 10% EBITDA margin. That would show great improvement from where we are today, particularly on the bottom line margin, but we think it's an achievable goal as we turn ourselves around.

And then kind of six categories in terms of how – where will the growth come from? I think the first thing is embrace our base. One thing I commented on during our most recent conference call was we tried to get too young too quickly and we paid the price for that. The previous team has set a goal to reach out to a younger customer, I think that's the right goal to have, I think that's a natural evolution, but it was done far too quickly.

We didn't try to get younger by a couple years, we tried to get younger by a couple of decades and we paid the price for that. So we need to evolve towards the younger customer but not at the expense of our mature traditional customer. And our inventories went from being about 70% traditional and 30% updated to last season they were a 50-50 split. And our existing customer was disappointed because we had eliminated or downsized many of her favorite brands and we couldn't get that younger customer in quickly enough.

We need to do a better job speaking to her in her language not ours. Again I mentioned the Bon-Ton language we used. We have events that we – that mean something to us but not to the outside world. Capacity days was one of our biggest events of the season, yet I still don't know what a capacity day is and neither does the customer, particularly as we try and reach out to new customers that might be [different] franchise from other retailers.

We need to communicate with all of our customers. We were only communicating to about 25% of our active database. I think this is tremendously low-hanging fruit for us. Most retailers are out there buying other list to market to. We have our own internal list that we're only touching the surface on.

We obviously need to gain market share in order to reach these goals and for me capitalizing on the under $10 million doors is a big opportunity for us. These are markets where there is no Macy's. It's us and Kohl's and Penney's. And they don't have access to many of the same brands that we have access to where we're often the only place within 50 miles you can buy Estee Lauder, buy Nine West and buy Ralph Lauren. And I think we need to do a better job using that as an advantage to get people on the doors.

We need to clean up our message. We are going to embrace coupons. I learned at Lord & Taylor that customer response to the coupon is better than any other promotional deal. It really frames the discount for them and I think it's something we kind of were half using before. We're very clear now about our use of the coupons and how that's going to drive our overarching store events and also allow us to have longer, stronger events. We were getting too choppy with our stopping and starting different events as we constantly changed the message.

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