Bon-Ton shares jump on analyst upgrade
NEW YORK (AP) — Shares of Bon-Ton Stores Inc. surged Wednesday, after a KeyBanc analyst raised his rating for the department store operator to "Buy" from "Hold," saying that recent changes at the company have it poised for growth.
THE SPARK: Edward Yruma, who also set a $15 price target for the stock, said that since the appointment of its new CEO in February, Bon-Ton has improved its promotions and marketing strategy and changed the direction of its merchandising.
The result has been two-straight months of increases in revenue at stores open at least a year, he said. The metric is a key indicator of a retailer's health because it excludes results from stores recently opened or closed.
THE BIG PICTURE: Bon-Ton, which has corporate offices in York, Pa., and Milwaukee, runs 272 department stores in the Northeast, Midwest and Great Plains states.
Last week, the company said its August revenue at stores open at least a year rose 2.2 percent as it tightly controlled how much merchandise it kept in stores.
Bon-Ton said its strongest categories included ladies sportswear and children's merchandise, shoes, home goods and fine jewelry. Online sales rose by a double-digit percentage. Total revenue gained 2.1 percent to $180.8 million.
For the year-to-date, revenue at stores open at least a year dipped 0.3 percent. Total revenue slipped less than 1 percent to $1.42 billion.
THE ANALYSIS: "While the risk profile remains high given high balance sheet leverage, we believe Bon-Ton Stores Inc. presents one of the most compelling upside opportunities in our space," Yruma wrote in a note to investors.
THE SHARES: Up $1.79, or 18.5 percent, to $11.49 in midday trading after peaking at $11.59 earlier in the session, its highest price since May 2011.