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Bon-Ton: Caught in the Rain of US Retail Bankruptcies
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Reference: IVEY-9B19B005-E
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Year: 2018
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Number of pages: 18
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Geographic Setting: United States
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Publication Date: May 3, 2019
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Fecha de edición: May 3, 2019
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Source: Ivey Business School (Canada)
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Type of Document: Case
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Industry Setting: Retail Trade;
Description
In June 2018, an intern at an investment firm was given the task of assessing the financial condition of Bon-Ton Holdings, Inc. (Bon-Ton), a leading US department store chain. In January 2018, it had entered into forbearance agreements with some of its lenders and announced store closures at 42 locations as part of its rationalization program. On February 4, 2018, it filed a voluntary petition for protection against bankruptcy and for reorganization. With the US retail industry already having witnessed more than 15 bankruptcies in 2017—the most in the last six years—would Bon-Ton survive? What measures could the company take to fight bankruptcy? What actions might put the company back on track?
Learning Objective
The case can be used in an undergraduate- or graduate-level course on accounting or finance. Students will have the opportunity to analyze financial statements, conduct fundamental analyses, and draw interpretations. The case requires learners to have basic knowledge of financial accounting and corporate finance concepts. The case presents the issues and challenges of gauging the financial performance of a firm, assessing overall economic and retail industry prospects in the United States, and performing a bankruptcy analysis. The case helps learners to understand and conduct a financial performance assessment using financial details including the income statement, balance sheet, and cash flow statement. Students evaluate the US retail industry and financials for Bon-Ton and its competitors to determine whether the bankruptcy could have been predicted. After completion of this case, students will be able to ·describe the current state of the U.S. retail industry and explain its effects on a company; ·calculate and analyze financial ratios; ·use financial analysis tools such as financial ratio analysis and trend analysis to analyze and evaluate the financial performance of a company, and draw interpretations from this analysis; ·predict the likelihood that a company will declare bankruptcy; and ·recommend an appropriate action for a firm that has invested in the company under analysis.