Bon-Ton’s strong Q3 web sales growth fails to offset its declining store sales
December 1, 2014 11:03 AM
It was a strong quarter for the online side of Bon-Ton Stores Inc., as the department store chain’s e-commerce sales rose 27%, largely thanks to a jump in its conversion rate. The merchant did not disclose sales figures.
“We saw a meaningful increase in conversion in the quarter due to more product offerings and additional promotions such as online flash sales and targeted sales call-out emails,” Keith Plowman, executive vice president and chief financial officer, during a conference call with analysts.
The growth was not enough to offset the merchant’s declining store sales, however, and Bon-Ton says its gross margins fell by $5 million during the period due to increased distribution and delivery costs associated with its web business and its Let Us Find It program, which enables in-store customer service agents to search for out-of-stock items in the retailers’ other stores or e-commerce fulfillment centers and ship them to consumers.
Bon-Ton, No. 191 in the Internet Retailer 2014 Top 500 Guide, expects its margins to improve once it opens a new e-commerce fulfillment center in West Jefferson, Ohio, next year.
“When completed we will employ state-of-the-art technology and material handling equipment enabling us to service the fastest growing area of our business and achieve levels of efficiency unavailable to us today in our existing facilities,” Plowman said. “The consolidation of our existing facilities into one new e-commerce fulfillment center will facilitate expansion of our shipping capacity and significantly reduce cost.”
Also during the quarter, Bon-Ton signed with e-commerce delivery service ShopRunner, a program which it says is bringing in new customers. ShopRunner is a two-day delivery service that competes with Amazon.com Inc.’s Prime program. Other Top 500 merchants participating in ShopRunner include Toys ‘R’ Us Inc. (No. 34), Blue Nile Inc. (No. 78) and eBags Inc. (No. 163).
Around 78% of the customers that use ShopRunner have never purchased from Bon-Ton before, and the merchant says the partnership represents a good opportunity to drive incremental sales in the future.
For the three months ended Nov. 1, 2014, Bon-Ton reported:
Net sales decreased 1.3% to $642.7 million from $651.2 million in the third fiscal quarter of 2013.
- Comparable store sales decreased 0.8%.
- Net loss was $11.0 million versus $0.9 million in Q3 2013.
For the first three quarters of the year, Bon-Ton also reported:
- Net sales of $1.81 billion, a 2.2% decline from $1.85 billion in the first nine months of 2013.
- Net loss of $78.7 million versus a loss of $64.9 million.