BonTon Stores Inc. Reports Operating Results (10-Q)
Bonton Stores Inc. has a market cap of $139.4 million; its shares were traded at around $7.2 with a P/E ratio of 8.9. Bonton Stores Inc. had an annual average earning growth of 20.6% over the past 10 years. GuruFocus rated Bonton Stores Inc. the business predictability rank of 4-star.BONT is in the portfolios of Steven Cohen of SAC Capital Advisors.
Highlight of Business Operations:Costs and expenses: Gross margin in the second quarter of 2010 increased $5.3 million to $231.4 million as compared with $226.1 million in the comparable prior year period. The increase is attributable to an improved gross margin rate. Gross margin as a percentage of net sales increased 90 basis points to 38.0% in the second quarter of 2010 from 37.1% in the same period last year. We improved our merchandise margins primarily through strong inventory management and increased sales penetration of private brand and value-priced offerings, both of which typically generate higher net markup and gross margins.
Depreciation and amortization expense and amortization of lease-related interests decreased $2.3 million, to $27.7 million in the second quarter of 2010 from $29.9 million in the second quarter of 2009, primarily due to the reduced asset base resulting from significant reductions in capital expenditures in fiscal 2009 (whereby depreciation expense greatly exceeded asset additions) and, to a lesser extent, asset impairments recorded in fiscal 2009.
Costs and expenses: Gross margin in 2010 was $478.5 million as compared with $450.3 million in 2009, reflecting an increase of $28.2 million. The increase in gross margin dollars was due to the increased sales volume and an increased margin rate in the period. Gross margin as a percentage of net sales increased 180 basis points to 37.7% in the current year from 35.9% last year, primarily due to increased sales penetration of private brand and value-priced offerings, both of which typically generate higher net markup and gross margins, and decreased net markdowns.
Income tax benefit: The effective tax rate in 2010 and 2009 largely reflects the Companys valuation allowance position against all net deferred tax assets. The $0.2 million income tax benefit in 2010 includes a $1.5 million tax benefit resulting from recognition of uncertain tax positions due to a statute of limitations expiration, partially offset by certain state income tax expense and recognition of deferred tax liabilities associated with indefinite-lived assets. The $0.1 million income tax benefit in 2009 includes a $1.6 million tax benefit resulting from recognition of uncertain tax positions due to a statute of limitations expiration, partially offset by certain state income tax expense and recognition of deferred tax liabilities associated with indefinite-lived assets.
At July 31, 2010, we had $15.3 million in cash and cash equivalents and $390.5 million available under our asset-based revolving credit facility (before taking into account the minimum borrowing availability covenant under such facility of $75.0 million). In anticipation of continued economic uncertainty in fiscal 2010, we heightened our focus on maximizing cash flow by reducing operating expenses and continuing to control inventory levels in order to benefit our working capital needs. We anticipate that these actions will positively impact our fiscal 2010 cash flow.
Net cash used in investing activities primarily reflects capital expenditures for store remodels and information technology. Capital expenditures totaled $20.1 million and $13.0 million in 2010 and 2009, respectively; these expenditures do not reflect reductions for external contributions of $2.6 million and $2.0 million in 2010 and 2009, respectively. We anticipate our fiscal 2010 capital expenditures will not exceed $50.0 million (net of external contributions of $7.0 million), an increase over our fiscal 2009 capital investments of $32.3 million (which do not reflect reductions for external contributions of $7.6 million).
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