Whatever firewall brick-and-mortar retailers hoped to build against e-commerce over the holiday has failed quickly for many. The latest to succumb to the rapid-paced shift to online spending is Bon-Ton Stores, which has filed for Chapter 11.
The niche clothing store chain announced:
The Company is currently engaged in constructive discussions with potential investors and its debtholders regarding the terms of a financial restructuring plan. Bon-Ton intends to use this court-supervised process to explore potential strategic alternatives to maximize value for the benefit of its stakeholders, which may include a sale of the Company or certain of its assets as part of the plan of reorganization.
The Company’s stores, e-commerce and mobile platforms under the Bon-Ton, Bergner’s, Boston Store, Carson’s, Elder-Beerman, Herberger’s and Younkers nameplates are open and operating as usual. As previously announced, the Company is closing 47 stores in 2018, four of which closed in January and one store that is near completion and 42 additional at which store closing sales began on February 1, 2018 and will run for approximately 10 to 12 weeks.
The filing was made in the U.S. Bankruptcy Court for the District of Delaware. Bon-Ton said it has received $725 million in debtor-in-possession funding.
Bon-Ton plans to close 47 stores this year. The company currently has 256 locations.
Bon-Ton suffers from several disadvantages. One is its size. Aside from its store count, it only operates in 23 states. It also sells items that are available at a number of larger retailers with more stores, more revenue and better balance sheets. It sells a combination of men’s and women’s clothing, home furnishings, jewelry and beauty items. Like most other retailers, it has sales to clear holiday inventory. Currently, some clearance items are available for discounts up to 70%. It has to be an uphill battle to make money on such heavily discounted merchandise.
Bon-Ton’s odds of survival well into the future are also in doubt. It is, like other niche retailers that have gone bankrupt, still faced with falling sales and earnings. As with Toys “R” Us, the Chapter 11 filing makes its debt burden less onerous. However, cleaning the balance sheet only buys a little time.