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Bon-Ton shares fall on worries about future growth

NEW YORK (AP) — Shares of Bon-Ton Stores Inc. tumbled Wednesday on investor skepticism about the department store operator's ability to increase its profit.

THE SPARK: Credit Suisse analyst Michael Exstein cut his rating for Bon-Ton to "Underperform" from "Neutral," saying that while the company has accomplished a lot in the months since hiring its new CEO, it still has a tough road ahead.

THE BIG PICTURE: Bon-Ton, which has corporate offices in York, Pa., and Milwaukee, runs about 270 department stores in the Northeast, Midwest and Great Plains states.

The company hired Brendan Hoffman as its CEO in February and in the months since has focused on improving its promotions and marketing strategy, boosting online sales and changing the direction of its merchandising.

Earlier this month, 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. Total revenue gained 2.1 percent to $180.8 million.

THE ANALYSIS: Exstein noted that Bon-Ton has done a lot of good things since Hoffman's appointment, including extending most of its debt set to come due in 2014 by three years and emphasizing footwear, accessories and beauty products.

The result has been significant investor interest, but Exstein said that the company's stock has doubled since early August and as a result has become too expensive.

"Despite making great strides in just a few months, the road ahead remains difficult, and we still are cautious in regards to Bon-Ton's ability to grow earnings before interest, taxes, depreciation and amortization," Exstein, who also raised his price target for the company by $2 to $7, wrote in a note to investors.

THE SHARES: Down $1.28, or 9.9 percent, to $11.68 in morning trading, after falling as low as $11.62 earlier in the day. Over the past 52 weeks, the company's shares have traded between $2.23 and $14.99.

Since the beginning of this year, Bon-Ton shares have nearly quadrupled.

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