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After a roller-coaster year confronting several headwinds, The Bon-Ton Stores Inc. faces another hurdle — finding a new chief executive officer.
This story first appeared in the March 12, 2014 issue of WWD. Subscribe Today.
Bon-Ton’s current president and ceo Brendan Hoffman has decided not to renew his contract when it expires in February 2015. He’s leaving the struggling regional chain in the middle of turnaround efforts he initiated. Hoffman joined the retailer in January 2012.
Hoffman told WWD that he resigned because he was away from his family too much, commuting every week from New York, where his family lives, to Milwaukee, where Bon-Ton is based. “I underestimated the toll it would take on my family with the commuting, especially with my kids being the age they are,” Hoffman said. “I am very focused on the business and what we need to accomplish. Because we are a public company, this needed to be disclosed when it did.” He has a 12-year-old son and a 10-year-old daughter. Sources said his wife did not want to relocate the family.
Hoffman has time to continue to implement changes to strengthen the business, which has been struggling for years under the weight of more than $800 million in debt and operating dated stores in economically challenged markets, but a turnaround under his watch seems remote now. Bon-Ton operates 270 department stores in the Northeast, Midwest and upper Great Plains under the Bon-Ton, Bergner’s, Boston Store, Carson’s, Elder-Beerman, Herberger’s and Younkers nameplates.
On Tuesday, right after Hoffman revealed his plans to depart, Bon-Ton reported disappointing results, citing the impact of bad weather since mid-December across the whole chain. Net income for the fourth quarter ended Feb. 1 declined 17.6 percent to $61.3 million from $74.4 million in the year-ago period. Comparable-store sales decreased 7.3 percent and total sales dropped 9.9 percent to $914.9 million, from $1.02 billion the year before.
For the year, the company lost $3.56 million, compared to a loss of $21.6 million a year ago. Net sales dropped to $2.77 billion from $2.92 billion. Comparable-store sales decreased 4.2 percent.
“Multiple snowstorms and the polar vortex during the December and January periods resulted in a sharp decline in traffic and, therefore, we were unable to achieve our comparable-store sales goals in the fourth quarter,” Hoffman said. “In spite of these top-line pressures, we were able to achieve a gross margin rate slightly better than the prior year and reduce expenses. In addition, we effectively managed our inventory such that we ended the year with inventory levels approximately 5 percent below that of the prior year, including a significant reduction in carryover merchandise, leaving us well positioned for the spring season.
“We’re not sitting back here and saying it was all weather,” which hurt the business, he said. “We are being very proactive.”
Hoffman cited several initiatives going forward, among them:
• Continuing to balance “depth versus breadth” so the company has less breadth of styles and focuses on bestsellers.
• Pumping up private label, plus sizes, activewear and active clothes worn casually.
• Furthering e-commerce, which outpaces the overall business; online accounts for 5 percent of sales.
• Furthering the fledgling clearance center strategy with a third unit opening soon.
• Localizing assortments and personalizing e-mails to customers based on their purchases.
In other advances, a fulfillment center in Columbus, Ohio, to expand shipping capacity for online orders is scheduled to open in spring 2015; RFID technology will be expanded, following a test in footwear last fall, and traffic counters were recently installed in many of the stores. Hoffman’s departure raises speculation about the difficult search for a successor and where he might find his next job. He’s considered a young star in the industry, with experience in department stores and the Internet. Before joining Bon-Ton, Hoffman ran Lord & Taylor and, earlier, Neiman Marcus Direct.
Currently, there are some high-profile retail vacancies, including Abercrombie & Fitch Co., which is seeking presidents for its A&F and Hollister divisions, while American Eagle Outfitters Inc., J.C. Penney Co. Inc. and BCBG Max Azria Group are all seeking ceo’s.
While Hoffman will be contacted by headhunters and retail search committees, if he hasn’t already, he said he will stay at Bon-Ton until his contract expires. A reluctance to commute again or relocate his family, and the non-compete clause in his Bon-Ton contract, also limits the possibility of landing a new job soon. Hoffman did live in Dallas, where Penney’s is based, when he worked at Neiman’s. His non-compete clause stipulates that for one year following the end of Bon-Ton employment, he is prohibited from engaging in or being financially interested in any competitor, other than the passive ownership of less than 2 percent of any class of securities.
Aside from the brutal weather, fluctuating gas prices and consumer sentiment also impacted business at times during last year.