On Aug 31, Zacks Investment Research downgraded retailer
The Bon-Ton Stores Inc.
) to a Zacks Rank #5 (Strong Sell) on lower-than-expected
second-quarter 2013 results as well as trimmed guidance.
BON-TON STORES (BONT): Get Free Report
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Why the Downgrade?
The Bon-Ton Stores, which reported its second-quarter 2013
earnings on Aug 22, failed to exceed the Zacks Consensus Estimate
on both the top and bottom lines. The company's loss per share
was 4 cents, wider than the Zacks Consensus Estimate.
On the sales front, the performance was more disappointing. Net
sales, which declined 6.3% year over year, fell shy of the Zacks
Consensus Estimate by 8.1%. Underperformance in comps was held
responsible for this lackluster result. Notably, the departmental
store chain missed sales estimate in the preceding quarter as
The company has been witnessing a slowdown in comps since the
last two quarters due to sluggish traffic trend. After
registering just 1% and 1.2% growth in comps in the last two
quarters, comps plunged 6.4% in the second quarter. Management
now expects its comps to remain negative 2.5% to flat for the
As per management, most of its operating markets are lagging
national traffic trends, which is why Bon-Ton now plans to fine
tune its core promotional events with an aim to attract traffic.
While the company has been able to post expansion in gross margin
in the recent time due to lower costs of merchandise sold, we
believe, it might become difficult for it to weather out the
effects of soft sales through cost savings, going forward.
On the guidance front as well, the company does not inspire
optimism as it reduced its expectation almost on every account.
Management now expects its adjusted earnings before interests,
taxes, depreciation and amortization (EBITDA) to remain in the
range of $170 million to $190 million (down from $180 million to
$200 million), earnings per share to come within the range of 15
cents-75 cents (down from 40 cents-$1.00) and cash flow in the
range of $10 million-$30 million (down from $20 million-$40
Other Stocks to Consider
Other players in the retail industry, which look attractive at
current levels, include
Haverty Furniture Cos. Inc.
Green Mountain Coffee Roasters Inc.
). While Haverty and hhgregg carry a Zacks Rank #1 (Strong Buy),
Green Mountain has a Zacks Rank #2 (Buy).