Why Shares of the Bon-Ton Stores Inc. Dropped

Is this meaningful? Or just another movement?

Mar 11, 2014 at 3:33PM

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 The Bon-Ton Stores (NASDAQ:BONT) were moving in the wrong direction today, falling as much as 11% after the company turned in a disappointing earnings report and said its CEO would step down next year. 

So what: The department store chain actually came out ahead on bottom-line estimates, posting earnings of $3.04 per share against expectations of $2.74, but sales were well short of the consensus as revenue fell 9.9% on a 7.3% drop in comps to $914.9 million. Analysts had expected sales of $981 million. As many retailers have, CEO Brendan Hoffman cited severe weather as having impacted results during January and February, but said that effective inventory management left the company "well positioned for the spring season." 

Now what: Bon-Ton's outlook for the coming year was also disappointing, as management sees an EPS of $0.40-$0.70, below analyst estimates at $0.99. Still, it expects same-store sales to recover from a 4.2% decline last year to a 1% to 3% increase with a slight uptick in gross margin. Finally, Hoffman said he would not renew his contract when it expires on Feb. 7, 2015. While that leaves plenty of time for the company to find a replacement, the uncertainty about its next leader may also be weighing on the stock today, as Hoffman has led the stock back to profitability. 

Two retailers doing it right
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Jeremy Bowman has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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