Brendan Hoffman, president and CFO of Bon-Ton Stores believes experimentation is the key to the success of the US department store's turnaround strategy.

Hoffman outlined what he called the "hit list" of the retailer's latest growth plans to investors on Wednesday (5 September) at the Goldman Sachs 19th Global Retailing Conference in the US.

Last month, Bon-Ton saw its second-quarter net loss widen because of one-off costs and a severance charge. Net loss widened to US$45m for the quarter ended 28 July, compared to a $32.3m loss last year.

Aiming to become "the dominant, omni-channel retailer" in small to mid-size communities, Hoffman believes the company can turn around its 15-20 unprofitable stores. 

Hoffman, who has been in the role for seven months, said the ultimate mistake Bon-Ton made previously was trying to "get younger by a couple of decades and we paid the price for that".

"The previous team has set a goal to reach out to a younger customer. I think that's the right goal to have, I think that's a natural evolution but it was done far too quickly."

"We need to communicate with all of our customers," he told investors.

Hoffman said one of the main objectives of the transformation plan is to bring certain products to the forefront of customers' minds. "We need to pick some categories that we truly believe in, some hero categories. To me, ladies shoes is the single best destination a department store has right now," he said.

Bon-Ton believes working towards generating revenues of more than US$3bn and a 10% EBIDTA margin is an achievable goal to help the retailer return to profit again.

"We need to be more competitive," Hoffman said. "So in the markets where there is heavier competition, we need to make sure we are fighting a fair fight."

"We need to clean up our message," Hoffman stressed to investors. "We're very clear now about our use of the coupons and how that's going to drive our overarching store events and also allow us to have longer, stronger events."

Hoffman said the retailer is also experimenting with clearance stores to drive bottom line profit. Bon-Ton is expected to have fewer promotions but they will be last seven or eight days now, he said. 

"We need to improve inventory management," he added. "We need to localise our assortments."

Hoffman said the group needs to understand where it is placing its inventory and how it is allocating it to stores. "And that means making tough choices as we grow category - shrinking or eliminating other categories in the by door basis," he added.

Increasing raw material costs including cotton and changes to its merchandise assortment crippled the retailer previously, causing it to increase costs. However, he said he will "take prices back down" to drive sales. 

The CEO remains confident that the department store chain can effectively deal with the challenging trading environment. "I think we're watching the inventories closely enough that if there is some macro effects that cause a downturn, we can react quickly as well," he said.

E-commerce growth

"We need to grow e-commerce," Hoffman told investors, adding that it aims for the division to account for 10% of its business.

"Right now, it's only about 3% of our business. This needs to increase. We need to increase our digital spend to reinforce this channel."

Efficiency is also key to the turnaround strategy, Hoffman believes. Bon-Ton cut about $40m out of its SG&A budget in the last few months.

"This is important not only to weather the storm as we turn this business around but also to provide us more flexibility once we do have this turned around to invest back in parts of the business that could help drive us to our goals."

"The path we were on before we knew wasn't one that was getting us to where we needed to go and we think now we're headed on the right direction," Hoffman added.