Bon Ton Stores headed on the downswing

Predicting the demise of Sears & Kmart since 2017!
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Re: Bon Ton Stores headed on the downswing

Post by storewanderer »

buckguy wrote: April 26th, 2018, 11:22 am Dillards has been absolute failure in the Midwest--Cleveland and Cincinnati have seen a lot of store closings and the remaining stores were neglected for many years. Dillard also has its own problems, generally---a declining sales trend for many years. They operate as a piggy bank for the Dillard family---the company has been continually buying back stock which means it's increasingly easier to pay a decent dividend to the Dillard family. Their onetime main attraction to Wall Street was their centralized buying which meant that the stores weren't very interesting other than a few upscale "flagship" locations. Their stores have always been bereft of service--that seemed to be the first thing to go when they bought other chains and the merchandising isn't very inventive (all that centralized buying)--a lot of boring store brand merchandise. i doubt that they have the spare capital to buy many or even any Bon Ton stores and they'd probably end up closing half of them if they did.

If anyone would be close to the Bon Ton model and I'm thinking the eastern Bon Ton & Elder Beerman stores, it would be Belk, but they have shown no inclination to go into northern markets and have sold stores in those locations when they've come with acquisitions.
I have had nothing but positive service experiences with Dillards in Reno, but I have noticed out of town when I have made purchases the service has been rather indifferent.

Their dividend is only 40 cents per share (less than 1% yield) so they definitely need to have a lot of shares held by the family to get much out of the dividends. What I think may be happening with the ongoing stock buybacks is a very slow move to take the company private.

I think missteps of Macy's over the past few years have greatly benefited Dillards.

We will see if any of Bon Ton's stuff goes to Dillards. I believe Dillards owns most of its real estate, among other things, like a construction operation to build stores. Dillards store count has also remained pretty consistent the past few years, I think they are down something like 5 stores from 5 years ago. That is a lot better "hold up" of store count than the competitors...
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Re: Bon Ton Stores headed on the downswing

Post by buckguy »

The Dillard family controls the chain through Class B stock. perhaps they are gradually taking the company truly private through buybacks of their publicly traded stock, but whether it's keeping the dividend checks coming or greater control it's about enriching the family and not the stores. the family has been divided on what to do with the chain, so perhaps taking it fully private might give them more options--but a tired mature business isn't going garner a big premium, regardless.

My own experience is that the stores are bereft of service and often cluttered, as well as neglected. I doubt that they are really profiting from Macy's mistakes given that their own same-store sales have been declining for years.
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Re: Bon Ton Stores headed on the downswing

Post by architect »

buckguy wrote: April 27th, 2018, 7:40 am The Dillard family controls the chain through Class B stock. perhaps they are gradually taking the company truly private through buybacks of their publicly traded stock, but whether it's keeping the dividend checks coming or greater control it's about enriching the family and not the stores. the family has been divided on what to do with the chain, so perhaps taking it fully private might give them more options--but a tired mature business isn't going garner a big premium, regardless.

My own experience is that the stores are bereft of service and often cluttered, as well as neglected. I doubt that they are really profiting from Macy's mistakes given that their own same-store sales have been declining for years.
Part of the challenge for Dillard's is the discrepancy between their flagships and small-town locations. Their flagships are typically well-maintained and straddle the line between Macy's and Nordstrom; upscale while still carrying everyday merchandise. On the other hand, many of their small town locations are in desperate need of investment and are limited in their sales per square foot with limited growth potential. I do agree that in recent years, they have benefitted greatly from competitor missteps (particularly Macy's).

Another retailer to potentially keep in mind for some of the western Bon-Ton owned stores: Von Maur.
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Re: Bon Ton Stores headed on the downswing

Post by buckguy »

Given that the pre-Mercantile Stores acquisitions were mostly upper middle brow stores like Stix & Higbee's, they should have upper middle brow merchandise in their flagships. Yet, they still seem to have very lackluster regular mall stores with no customers.
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Re: Bon Ton Stores headed on the downswing

Post by pseudo3d »

I think the Dillard's has the right idea on how to do department stores. Maintain reasonably nice stores (at least with the horror shows with JCPenney, Sears, and often Macy's) with respectable-looking employees, a knowledge of your customers, and a cycle of new stores that even if net store count isn't much, at least build new stores for every store that does close. The "knowledge of customers" is where Macy's and JCPenney really screwed up. When Macy's added all of those stores in 2005-2006, they diluted their largely more upscale urban store base with more rural, conservative-leaning stores, and was never really able to adapt to their rapidly different customer base. JCPenney had a similar problem, and I think the pressures of Wall Street drove them to the disastrous "jcp" rebranding, and despite rebranding to their older, more familiar logo, they're still closing stores. Most of Sears' problems have been Lampert's awful handling of the company.

As for Bon-Ton, I'm just too unfamiliar with them but they really seem to have started down the wrong path when they acquired a bunch of stores from Saks (Carson Pirie Scott, Herberger's, Younkers, etc.) in 2005.
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Re: Bon Ton Stores headed on the downswing

Post by architect »

pseudo3d wrote: April 27th, 2018, 7:33 pm As for Bon-Ton, I'm just too unfamiliar with them but they really seem to have started down the wrong path when they acquired a bunch of stores from Saks (Carson Pirie Scott, Herberger's, Younkers, etc.) in 2005.
Actually, in a way, the troubles faced by Bon-Ton are somewhat similar to those faced by Macy's after the May acquisition. Prior to acquiring the Saks-owned nameplates, Bon-Ton was primarily located in smaller, more rural markets and was marketed accordingly (and with some success). On the flip side, the Saks nameplates were concentrated much more heavily in urban markets with larger stores (particularly Carson's, Boston Store and Herberger's), which necessitated completely different marketing and a different merchandise mix. Clearly, Bon-Ton was unable to reconcile the two, as complaints about slipping quality and selection at the Bon-Ton nameplates have plagued the company for several years and have sent shoppers away in droves. Excessibe promotions (similar to Macy's) were also a significant factor in the chain's financial situation and ultimately their downfall.
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Re: Bon Ton Stores headed on the downswing

Post by storewanderer »

buckguy wrote: April 27th, 2018, 7:40 am The Dillard family controls the chain through Class B stock. perhaps they are gradually taking the company truly private through buybacks of their publicly traded stock, but whether it's keeping the dividend checks coming or greater control it's about enriching the family and not the stores. the family has been divided on what to do with the chain, so perhaps taking it fully private might give them more options--but a tired mature business isn't going garner a big premium, regardless.

My own experience is that the stores are bereft of service and often cluttered, as well as neglected. I doubt that they are really profiting from Macy's mistakes given that their own same-store sales have been declining for years.
I believe in some micro-markets they are absolutely profiting from Macy's mistakes. Maybe not as a whole, but they absolutely are in some micro-markets.

The only cluttered Dillard's Stores I've ever seen have been their "clearance centers." But I have seem some pretty dated main-line Dillards Stores. Given their prices, I am a little surprised these dated stores survive. I have to assume they run on low volumes and count on a few high margin sales. Seeing as how they own much of their real estate unlike Macy's and JC Penney who highly lease their real estate, I suspect their costs are low and this is how they can justify keeping these locations. I was just in one like that in Las Cruces, NM. But in that mall the other stores were a JC Penney that looked more like a Ross than a department store and with merchandise that looked lower quality than Wal Mart, and a Sears that was so poorly stocked and empty of product that I can't see how anyone could even find anything to buy there (or find a clerk to sell the items to them; the only clerk I saw on the entire softlines side was sitting at a computer in the shoe department doing some kind of training module).

So thinking of those factors combined with some observations of others here, I am not so sure Dillard's will be interested in any of these stores Bon Ton has... most are probably leased stores; strike 1. It appears these stores are in markets where Dillards has not done all that well; strike 2. The business model seems to be dying so it is questionable how much sense it makes to even open new stores; strike 3.
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