Why Shares of Bon-Ton Stores Jumped

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Bon-Ton Stores (NASDAQ: BONT  ) were looking stunning, finishing up 24% after a better-than-expected third-quarter earnings report.

So what: The parent of department stores such as its namesake Bergner's, Boston Store, posted a smaller-than-expected loss at $0.05 per share, up from a $0.55 loss a year ago. Analysts had expected a $0.29 shortfall. Nonetheless, same-store sales fell 2.8%, though CEO Brendan Hoffman said, "We saw meaningful improvement in comps toward the end of the quarter." Reduced expenses boosted the bottom line, and the company maintained its full-year EPS guidance. However, the provided range of $0.15-$0.75 was so wide as to be nearly meaningless. Analysts expect $0.46 a share.

Now what: While the solid earnings beat is encouraging, declining same-store sales are always a warning sign for retailers, and Bon-Ton also missed sales estimates by a considerable margin. The fourth quarter is where the company makes its money, and Hoffman said, "We are looking forward to the holiday selling season with a fresh and inspired merchandise assortment," and promised continued cost-cutting. Other retailers have warned about the holiday season, but if management follows through, shares could bounce again. Keep your eye on same-store sales, though, as another decline could be a signal to sell.

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