Ailing department store chain The Bon-Ton Stores Inc. appears to be headed for a restructuring — sooner rather than later.
In a filing Monday with the U.S. Securities and Exchange Commission, Bon-Ton said it is engaged in discussions with debtholders regarding potential restructuring alternatives.
While the company, co-headquartered in York and Milwaukee, noted there are no assurances it will reach an agreement, Bon-Ton disclosed in the filing a plan to turn around its business and boost its total revenue by about 5 percent to almost $2.7 billion by 2020.
The filing comes about two weeks after Bon-Ton announced it entered into forbearance agreements with its lenders after missing a $14 million interest payment in December. Those agreements, however, expired Friday and bankruptcy speculation has been swirling.
The company’s turnaround plan, which covers 2018 through 2020, says a “clear opportunity exists to enhance Bon-Ton’s performance and regain ground lost due to recent challenges.”
The plan’s initiatives were developed from four major business areas: a review of the existing store portfolio; key retailing strategies in merchandising, planning and allocation; necessary changes in marketing; and capital investment strategies within stores.
In terms of store count, the company said that its store portfolio contains a sizeable portion of poorly performing stores that contribute minimal value to the organization – these stores require an investment of working capital and management attention away from more profitable stores in the chain.
The retailer maintained that approximately 100 of the worst performing stores were selected for detailed analysis of financial and economic factors. As a result, 42 stores may potentially close with an additional 3 potential stores may be put up for sale including 1 owned clearance center.
Closing stores account for approximately $200 million of total sales across Bon-Ton, but contribute minimal EBITDA. Additional opportunities have also been identified that may result in an approximately $4 million reduction in rent across the remaining portfolio of stores.
And, to go along with store reduction, the company said that there is an opportunity to reduce the number of distribution centers from 3 to 2 with the removal of the facility in Fairborn, Ohio.
“Bon-Ton continues to work with our advisers and debtholders to evaluate potential options for the restructuring of the company’s balance sheet and other strategic alternatives,” the company said in a statement.
“At the same time, we are also focused on executing the merchandising, marketing, cost reduction and store rationalization initiatives that are part of the comprehensive turnaround plan for the business we outlined in November. We are committed to pursuing the path that we believe is in the best interests of the company and its stakeholders.”