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For Bon-Ton, founded in 19th century, an uncertain future

For Bon-Ton, founded in 19th century, an uncertain future
Posted at 10:41 AM, Feb 05, 2018
and last updated 2018-02-05 11:41:53-05

MILWAUKEE (AP) -- Bon-Ton Stores, saddled with debt and faltering sales, enters the week beside a throng of other retailers under bankruptcy protection, seeking a buyer for pieces or all of a department store that was founded at the tail end of the 19th century.

The company has survived a score of severe economic downturns, including the Great Depression, but finds itself in uncharted territory today.

While has revolutionized the way people shop, the behavior of Americans had had already been diverging radically both in terms of what they buy, and where they buy it. The changes have been so sweeping they've left the aisles of many department stores barren of customers even during the crucial days leading up to Christmas.

There have been signs for some time that Bon-Ton was in trouble and that did not ease heading into the most recent holiday season.

Sales at established Bon-Ton stores, a critical gauge of a retailer's health, slid 2.9 percent in nine-week period before the New Year. Those sales had tumbled 6.6 percent in the prior quarter.

On Sunday, Bon-Ton filed for Chapter 11 protection in the U.S. Bankruptcy Court for Delaware. There, it joined several dozen other retailers who entered a bankruptcy court over the past year, among them Toys R Us, Payless ShoeSource and Gymboree Corp.

"The harsh reality is that while Bon-Ton's management put in great effort to make the business sustainable, they were always running up a down escalator," said Neil Saunders, the managing director of GlobalData Retail.

Bon-Ton runs 260 stores in 24 states, largely in the Northeast and Midwest.

While the retail and department stores that have sold Americans goods for generations march into bankruptcy court, Amazon for the first time booked more than $1 billion in profits during its most recent quarter.

Bon-Ton, which has dual headquarters in York, Pennsylvania, and in Milwaukee, is now in talks with debt holders about restructuring $1 billion in debt.

It is closing dozens of stores this year in Wisconsin, Pennsylvania, Illinois, Indiana and elsewhere.

"We are currently engaged in discussions with potential investors and our debt holders on a financial restructuring plan, and the actions we are taking are intended to give us additional time and financial flexibility," CEO Bill Tracy said in prepared comments Sunday.

Bon-Ton received a commitment of $725 million in debtor-in-possession financing to operate during its restructuring process.

All department stores are attempting to overhaul their appearance, along with what they are offering customers and how they get it to them.

In a recent regulatory filing, Bon-Ton said it would accelerate that campaign as it tries to catch up with Kohl's, Macy's and J.C. Penney, who are devoting major resources to better compete online.

"Many of Bon- Ton's stores were in areas where the availability of branded fashions and homewares was traditionally poor," said Saunders at GlobalData. "However, while this once made them a focal point and a destination for local shoppers, the internet has done much to change this dynamic and has made the stores less relevant, and arguably less necessary, than they once were."

Attempts by Bon-Ton to generate excitement in stores have fizzled.

The company in October opened FAO Schwarz toy shops in almost 200 stores (FAO Schwarz shut down as an independent retailer two years ago), but it has done little to revive sales.