Dive Brief:

• Bon-Ton Chief Financial Officer Nancy Walsh is leaving the struggling department store retailer to take the CFO spot at Pier 1 Imports, according to press releases from both companies. Walsh is set to leave Bon-Ton on Jan. 22 and join Pier 1 on Jan. 25, taking over for interim CFO Darla Ramirez, who will continue as vice president and chief principal accounting officer.
• Pier 1 CEO Alasdair James, who joined last spring, said in a statement Walsh would help the furnishings retailer execute its strategic plan, as it faces heady competitive pressures. Replacing Walsh at Bon-Ton is Michael Culhane, who has served in executive roles at several retailers, including as CFO of Hudson's Bay Co. as well as positions at Lord & Taylor and May Department Store Group, according to Bon-Ton.
• The CFO switch comes weeks after Bon-Ton missed a $14 million interest payment on its second-lien notes due Dec. 15. Although Bon-Ton moved into a grace period on the payment, analysts with S&P wrote at the time that a default — either in the form of a bankruptcy or out-of-court restructuring — is "likely in the near future."

Dive Insight:

The next few weeks could determine the fate of Bon-Ton. But whether the retailer files for Chapter 11 or convinces its creditors to exchange debt for equity, or neither, it will likely look to close stores in an effort to bring its costs in line with shrunken sales. And that could be a boon to other retailers, as millions in apparel and home goods sales go up for grabs.

Morgan Stanley analysts led by Kimberly Greenberger wrote in a Dec. 21 note that the retailer's deteriorating cash flow combined with its high debt levels have "led investors to question Bon-Ton's long term viability."

According to Morgan Stanley's analysis of Bon-Ton locations, TJX Cos., Kohl's, J.C. Penney, Walmart and Sears (which has plenty of financial problems of its own and is rapidly shrinking its own store fleet) have the greatest geographic overlap with Bon-Ton stores.

Specifically, Greenberger's team wrote that 40% of Bon-Ton stores are located within a mile of a TJX concept (either T.J. Maxx, Marshalls or Home Goods). But it's Sears that has the greatest overlap, the analysts write. However, given Sears' own financial problems, that retailer is unlikely to benefit from Bon-Ton closures and could even suffer in the short-term as Sears stores compete against Bon-Ton liquidation sales.

Concerns and rumors about Bon-Ton's financial health have been hanging over the retailer for months. Many analysts saw the company as having the liquidity to chug along through the holiday season and into 2018. But circumstances can change rapidly, as the world saw with Toys R Us, which also seemed to have the financial wherewithal to make it through 2017 and 2018. That was, until a large number of suppliers began demanding better terms, creating a sudden need for $1 billion in liquidity that the company didn't think it would need.

Worryingly, earlier this year some Bon-Ton suppliers reportedly pressed for tighter terms on shipments. Such supplier troubles echo not just the lead-up to Toys R Us' filing, but that of many retail bankruptcies, including Gymboree, Charming Charlie and others.

Bon-Ton has $572 million in debt due next December and carries $850 million altogether, according to Moody's. The retailer's debt has been rated at distressed levels for some time now, and S&P has listed the company as one of the retailers most at risk of bankruptcy. In a Nov. 17 report, analysts with Fitch Ratings, after leaving Bon-Ton off an expanded "loans of concern" list in October, wrote, "While the company has enough liquidity to support 2017 holiday working capital needs, there is risk of a debt restructuring over the next 12 months."

In September, media reported that the retailer hired AlixPartners for help with its turnaround efforts and was also looking for a financial adviser to help with a possible debt restructuring. The month of May saw an executive shakeup at the retailer, in which Bon-Ton announced that COO William Tracy would replace previous CEO Kathryn Bufano.

Bon-Ton's top-line sales have been falling since 2007, and the retailer hasn't posted a positive profit since 2010, according to regulatory filings. Comparable sales for Bon-Ton have been negative for the past nine quarters, according to an August report from Moody's.