Bon-Ton first-quarter EBITDA drops by $4.7 million; cash flow guidance revised downward

By Jennifer Lanning Drey

Portland, Ore., May 22 - Bon-Ton Stores, Inc. reported first-quarter EBITDA of $4.7 million, down from $9.4 million in the comparable period of 2007, due to continued challenges presented by the slowing economy, Bon-Ton's chief financial officer Keith Plowman said Thursday during the company's quarterly earnings conference call.

Based on the first-quarter operating environment, the company revised its guidance for fiscal 2008 to reflect a comparable-store sales decrease in the range of 2.5% to 3.5%. EBITDA for the year is now expected to be in the $224 million to $232 million range, compared to previous guidance of EBITDA in the $230 million to $237 million range.

Additionally Bon-Ton now expects to generate free cash flow of $40 million to $50 million in fiscal 2008, down from its previous target of generating more than $50 million in cash.

The free cash flow is targeted for long-term debt reduction.

"We are committed to pay down debt with free cash flow generated by the business and moving closer to achieving our long-term goal of a 2.5 to 3.0 debt-to-EBITDA ratio," Plowman said.

When asked whether upcoming debt repayments might include bond buybacks, Plowman said: "We look at all options and determine what we feel is best for the business. At this point we do recognize that [the bonds] are trading substantially below their par and we just consider all opportunities."

$1.22 billion debt balance

At the May 3 end of the first quarter, Bon-Ton had borrowing capacity of $273.8 million available under its revolving credit facility and total debt including capital leases of $1.22 billion. The debt figure was down from $1.32 billion at the end of the first quarter of 2007.

Bon-Ton had cash and cash equivalents of $18.8 million at May 3, down from $21.2 million at Feb. 2, 2008.

"Despite the weakness in sales, we maintained a strong balance sheet that reflects lower inventory, and going forward we have the flexibility to invest in short-and long-term initiatives and opportunities to benefit and grow of business," Plowman said.

Bon-Ton will continue to focus on merchandising and inventory management combined with tight expense and capital spending controls as softness in consumer spending continues, Bud Bergren, chief executive officer of Bon-Ton, said during Thursday's call.

"We will manage our business under the assumption that the difficult macroeconomic environment will continue. We will continue to adjust our operating plan based on what we see in the marketplace," he said.

Bon-Ton is a York, Pa.-based operator of 280 U.S. department stores.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.