We’re Watching Carson Pirie Scott

YORK, Pa.-We watch carefully the fate of Bon-Ton Stores, Inc. (NASDAQ: BONT), which owns some great old legacy department store names that include:

  • Carson Pirie Scott,
  • Bon-Ton
  • Bergner’s
  • Boston Store
  • Elder-Beerman
  • Herberger’s
  • Younkers
  • Parisian

It’s not a “bon” scene at Bon Ton, as their stock is less than $2 a share, though that they are still alive through the recent months gives them some credit.

We worry about Carson Pirie Scott. They closed their Louis Sullivan store in Chicago, which was in every architectural history book, and now are a severely diminished company. That being said, these brand names are well known in their particular communities, and need to be nurtured. In addition, legal departments need to put a protective wall around the brand names in the event that the company needs to be sold off, or worse things happen.

Unfortunately, all of the store brands are being marketed the same way, with the same font and same approach, with minor differences. This gives Bon Ton economies of scale. But what is missing is that these were all different companies with different stories, and while there are economies of scale, they need to be run differently. This is easier said than done, of course, but it has to be done if the company is to grow again.

The store brands have value separate from the company, and need to be walled off in a separate LLC as Wendy’s has done with its Oldemark LLC, which is a separate entity that owns the Wendy’s intellectual property. We can easily imagine manufacturers and retailers in China, for instance, who would love a foothold in the U.S., and who might think purchasing a five store “chain” in mid-America would be an opportunity to gain a foothold in the U.S. market. Sadly, investors in the U.S. see no value in these companies. Pity, because they have generations of goodwill, much of it untapped.

Comparable store sales for the five weeks ended April 4, 2009 were down 11.2 percent compared with the prior year period. Total sales for the five weeks decreased 10.6 percent to $245.0 million compared with $274.0 million for the prior year period. Year-to-date comparable store sales decreased 10.1%. Year-to-date total sales decreased 9.3% to $445.1 million compared to $491.0 million for the same period last year.

Tony Buccina, vice Chairman and president, merchandising, said in a press release:

“We were pleased with the results of our Goodwill Sale in March as strong customer response to this promotion and to our assortments led to above-plan sales during the two-week event. Our eCommerce business also continued to perform above plan and is gaining traction with online customers. While overall March sales results were disappointing as the retail environment remains challenging and traffic inconsistent, our disciplined inventory management, with less clearance, allowed us to take fewer markdowns compared with the prior year as well as reduce comparable inventories by 9% year-over-year. Our best performing businesses were ladies’ moderate and petite sportswear, children’s, accessories and shoes. Our weakest performing businesses were ladies’ and men’s better sportswear, juniors and furniture.”

Keith Plowman, Executive Vice President and Chief Financial Officer:

“We ended March with excess borrowing capacity under our revolving credit facility of $171 million, well above the required minimum availability of $75 million. Additionally, as part of our strategic initiative to reduce expenses, on April 8, 2009, we elected to reduce our commitment under our Senior Secured Credit Facility to $800 million from the previous $1 billion. The impact of this initiative is an annualized decrease in interest expense, reflecting unused commitment fees of approximately $0.5 million. The commitment reduction does not impact our excess borrowing capacity.”

The Bon-Ton Stores, Inc. operates 280 stores, including twelve furniture galleries, in 23 states in the Northeast, Midwest and upper Great Plains. The stores offer a broad assortment of brand-name fashion apparel and accessories for women, men and children, as well as cosmetics and home furnishings. For further information, please visit the investor relations section of the Company’s website at http://investors.bonton.com.

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