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Mario Gabelli Increases Stake in Pep Boys, Bon-Ton Stores

January 17, 2014 | About:
Holly LaFon

Holly LaFon

249 followers
GAMCO Investors (GBL), which manages $47 billion in assets, focuses on fundamental bottom-up research, and is led by Mario Gabelli (Trades, Portfolio). The firm’s All Cap Value fund also had a stellar year, returning 36.2%, besting the S&P 500’s 32.4% return. Since inception in 1977, the fund has realized a 16.2% average annual return, also outpacing 11.7% for the S&P.

Gabelli’s firm has added to two of its positions, according to GuruFocus Real Time Picks: Pep Boys (PBY) and Bon-Ton Stores Inc. (BONT).

GAMCO owns a 9.98% stake in Pep Boys after increasing the holding by 4.26%, or 216,775 shares. In total, it holds 5,304,812 shares after the transaction, which occurred on Jan. 15, 2014. GAMCO has been adding to the holding every consecutive quarter since the first of 2012.

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The company’s shares have advanced by about 14% from a year ago, and sunk by 7% in the past three months. Its stock trades around $11.96 a share on Friday.

In Pep Boys’ third quarter ended Nov. 2, sales declined by 0.5% to $2.6 million year over year, with comparable sales declining 2.8%. Net earnings were reported at $1.0 million, compared to a net loss of $6.8 million the prior year.

The company stated that its maintenance and repair service business grew sales for the sixth consecutive quarter, and tire sales began to improve as the weather turned colder, but competition continued to put pressure on lower-priced tire sales.

At quarter-end, Pep Boys had cash of $56 million, and total long-term liabilities and debt of around $365 million.

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The company also has a P/B of 1.1 and P/S of 0.3.

Gabelli’s GAMCO also increased its stake in Bon Ton Stores (BONT) by 1.57%, equal to 20,897 shares. The transaction boosts its holding size to 647,397 shares from the 626,500 shares it owned at the end of the third quarter. This represents 3.7% of shares outstanding.

GAMCO reversed the trend of reducing his position quarterly since the second quarter of 2012 when it bought 60,000 shares in the third quarter of 2013.

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Bon-Ton Stores is a regional department store, operating approximately 272 stores in 23 states, with a market cap of $235.6 million.

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Bon-Ton Stores shares dropped 29% year to date, due to a profit warning the company issued Jan. 10. The company announced that its comparable stores sales for December were “significantly impacted by unfavorable winter weather conditions in its markets.”

Brendan Hoffman, President and Chief Executive Officer, commented, "We are disappointed with the deceleration in sales during December, particularly given the strong start to the holiday season beginning with Black Friday and extending through the early part of the month. Adverse weather and treacherous travel conditions in the majority of our markets resulted in a sharp reduction in traffic and hampered promotional events on key weekend selling dates leading up to and continuing after Christmas."

As a consequence, the company revised its full-year 2013 outlook to a comparable store sales decrease of approximately 3.5%. The decline would also lead to a fiscal 2013 adjusted EBITDA guidance to a range of $160 million to $170 million and a loss per share of $0.30 to earnings per share of $0.15.

Bon-Ton’s 10-year revenue and earnings history:

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Bon-Ton ended the third quarter with $8 million in cash and $1.19 billion in debt. It trades with a P/E of 21.2, P/B of 5.0 and P/S of 0.08.

 

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