The Bon-Ton Posts Q2 Profit as Comps Inch Up

The Bon-Ton Stores, Inc. reported income of $858,000, or $0.06 per share, for the second quarter of fiscal 2003, compared to a net loss of $1.6 million, or $0.10 per share, for the second quarter of fiscal 2002.

For the six months ended August 2, 2003, the Company reported a net loss of $2.1 million, or $0.14 per share, versus a net loss of $5.9 million, or $0.39 per share, reported for the comparable period last year.

As previously announced, second quarter total sales decreased 0.5% to $153.1 million from $153.9 million reported in the prior year. Comparable store sales increased 0.2%. Year-to-date total sales for fiscal 2003 decreased 3.3% to $294.2 million from $304.4 million for the same period last year. Comparable store sales decreased 2.7%.

The gross margin rate in the second quarter of fiscal 2003 decreased 0.5 percentage point to 37.1% versus 37.6% reported for the same period last year. Year-to-date gross margin increased by 1.5 percentage points to 37.0% versus 35.5% in the prior year. The increase in the year-to-date gross margin rate and dollars was principally due to the accelerated recognition of markdowns implemented in the first quarter of 2002 and a reduction in the inventory shrinkage accrual rate in 2003. Year-to-date gross margin dollars increased $950,000 as compared to prior year period. At the end of the second quarter, ending inventory at retail decreased 1.3% compared to last year.

The selling, general and administrative (SG&A) expense rate in the second quarter declined 2.5 percentage points to 32.4% of sales, compared to 34.9% of sales for the same period last year. SG&A expenses decreased $4.1 million from the prior year period. A gain on the sale of our Harrisburg distribution center of $930,000 pre-tax, or $0.04 per share, is included in the reduction of SG&A expense. The year-to-date SG&A expense rate was even with the prior year period, with a favorable variance of $3.4 million to last year.

James H. Baireuther, Vice Chairman and Chief Administrative Officer, commented, “We are pleased with our earnings for the second quarter of 2003. Although second quarter sales were virtually flat with last year, we were able to control operating expenses, keep inventory levels in line with plan and offer our customer value with broad assortments of fresh, new merchandise. The earnings improvement also reflects a gain on the sale of our Harrisburg distribution center and lower interest expense. Our balance sheet remains strong as debt decreased $4.5 million compared to the same period last year.”

As previously announced, The Bon-Ton submitted a proposal to acquire The Elder-Beerman Stores Corp. that provides for a combination of the two companies in which all Elder-Beerman shareholders would receive $7.00 per share in cash for their common stock. Elder-Beerman and The Bon-Ton have entered into a confidentiality agreement under which Bon-Ton and its representatives are in the process of conducting due diligence.

               THE BON-TON STORES, INC. AND SUBSIDIARIES

                 CONSOLIDATED STATEMENTS OF OPERATIONS

                              THIRTEEN               TWENTY-SIX

                             WEEKS ENDED             WEEKS ENDED

                       ----------------------- -----------------------

(In thousands except

 share and per share

 data)                   August 2,   August 3,   August 2,   August 3,

(Unaudited)                2003        2002        2003        2002

---------------------------------------------- -----------------------
Net sales                $153,128    $153,890    $294,239    $304,407

Other income, net             564         553       1,090       1,087

                       ----------------------- ----------- -----------

                          153,692     154,443     295,329     305,494

                       ----------------------- ----------- -----------

Costs and expenses:

   Costs of merchandise

    sold                   96,311      95,959     185,238     196,356

   Selling, general and

    administrative         49,594      53,733     100,974     104,369

   Depreciation and

    amortization            5,123       4,847       9,887       9,904

                       ----------------------- ----------- -----------

Income (loss) from

 operations                 2,664         (96)       (770)     (5,135)

Interest expense, net       1,302       2,399       2,546       4,376

                       ----------------------- ----------- -----------

Income (loss) before

 income taxes               1,362      (2,495)     (3,316)     (9,511)

Income tax provision

 (benefit)                    504        (936)     (1,226)     (3,567)

                       ----------------------- ----------- -----------

Net income (loss)            $858     $(1,559)    $(2,090)    $(5,944)

                       ----------------------- ----------- -----------
Per share amounts --

Basic:

   Net income (loss)        $0.06      $(0.10)     $(0.14)     $(0.39)

                       ----------------------- ----------- -----------
Diluted:

   Net Income (loss)        $0.06      $(0.10)     $(0.14)     $(0.39)