Why Bon-Ton Stores (BONT) Stock Is Surging Today

NEW YORK (TheStreet) -- Shares of The Bon-Ton Stores, Inc.  (BONT) are surging 6.24% to $9.88 today after announcing a new president and CEO.

Kathryn Bufano of Belk Inc. (BLKIA) replaces Brendan Hoffman, who had said in March that he would not renew his three-year employment agreement. 

As part of Bufano's contract, she'll get a grant of 175,000 shares of Bon-Ton stock, given to her over three years and will be eligible for another 175,000 shares based on the firm's performance in 2014, 2015 and 2016.

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The Bon-Ton Stores, headquartered in York, PA and Milwaukee, WI, operates 272 stores in 25 states.

Separately, TheStreet Ratings team rates BON-TON STORES INC as a Sell with a ratings score of D+. TheStreet Ratings Team has this to say about their recommendation:

"We rate BON-TON STORES INC (BONT) a SELL. This is driven by a few notable weaknesses, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, generally high debt management risk, disappointing return on equity, weak operating cash flow and generally disappointing historical performance in the stock itself."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The company, on the basis of change in net income from the same quarter one year ago, has underperformed when compared to that of the S&P 500 and the Multiline Retail industry average. The net income has decreased by 18.3% when compared to the same quarter one year ago, dropping from -$26.64 million to -$31.51 million.
  • The debt-to-equity ratio is very high at 9.40 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Along with this, the company manages to maintain a quick ratio of 0.10, which clearly demonstrates the inability to cover short-term cash needs.
  • The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Multiline Retail industry and the overall market, BON-TON STORES INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • Net operating cash flow has significantly decreased to -$15.80 million or 258.87% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • Looking at the price performance of BONT's shares over the past 12 months, there is not much good news to report: the stock is down 52.10%, and it has underformed the S&P 500 Index. In addition, the company's earnings per share are lower today than the year-earlier quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
  • You can view the full analysis from the report here: BONT Ratings Report

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