UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K

Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934

THE BON¨TON STORES, INC.
2801 East Market Street
York, Pennsylvania 17402
(717) 757-7660
www.bonton.com

         Securities registered pursuant to Section 12(b) of the Act:

         Securities registered pursuant to Section 12(g) of the Act: None

         Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o    No ý

         Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o    No ý

         Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý    No o

         Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ý    No o

         Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405) is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ý

         Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):

         Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o    No ý

         The aggregate market value of the voting stock held by non-affiliates of the registrant was approximately $86.9 million as of the last business day of the registrant's most recently completed second fiscal quarter. For purposes of this calculation only, the registrant has excluded all shares held in the treasury or that may be deemed to be beneficially owned by executive officers and directors of the registrant. By doing so, the registrant does not concede that such persons are affiliates for purposes of the federal securities laws.

         As of March 29, 2013, there were 16,826,215 shares of Common Stock, $.01 par value, and 2,951,490 shares of Class A Common Stock, $.01 par value, outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

         Portions of the definitive proxy statement for the 2013 Annual Meeting of Shareholders (the "Proxy Statement") are incorporated by reference in Part III to the extent described in Part III.

        The Bon-Ton Stores, Inc. operates on a fiscal year, consisting of the 52- or 53-week period ending on the Saturday nearer January 31 of the following calendar year. References to "2012," "2011" and "2010" represent the 2012 fiscal year ended February 2, 2013, the 2011 fiscal year ended January 28, 2012 and the 2010 fiscal year ended January 29, 2011, respectively. References to "2013" represent the 2013 fiscal year ending February 1, 2014.

        References to "the Company," "we," "us," and "our" refer to The Bon-Ton Stores, Inc. and its subsidiaries.

PART I

Item 1.    Business

Overview

        The Company, a Pennsylvania corporation, was founded in 1898 and is one of the largest regional department store operators in the United States, offering a broad assortment of brand-name fashion apparel and accessories for women, men and children. Our merchandise offerings also include cosmetics, home furnishings and other goods. We currently operate 272 stores in 24 states in the Northeast, Midwest and upper Great Plains under the Bon-Ton, Bergner's, Boston Store, Carson's, Elder-Beerman, Herberger's and Younkers nameplates, encompassing a total of approximately 25 million square feet.

Industry Overview

        We compete in the department store segment of the U.S. retail industry, a highly competitive environment. The department store industry continues to evolve in response to the evolution of competitive retail formats—mass merchandisers, national chain retailers, specialty retailers and online retailers—and the advent of mobile technology and social media.

        Our operating results and performance, and that of our competitors, depend significantly on economic conditions and their impact on consumer spending. Presently, there are numerous business and economic factors affecting the retail industry, including the department store sector. These factors include high levels of unemployment and a protracted economic recovery in the U.S. and around the globe.

Merchandise

Merchandise Assortment

        Our stores offer a broad assortment of quality fashion apparel and accessories for women, men and children, as well as cosmetics, home furnishings and other goods at moderate and better price points. Our comprehensive merchandise assortment includes nationally distributed brands at competitive prices and unique products at compelling values through our private brands. We further

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differentiate our merchandise assortment with exclusive products from nationally distributed brands. The following table illustrates our net sales by product category for the last three years:

Nationally Distributed Brands

        Our nationally distributed brand assortment includes many of the most well-known and popular labels in the apparel, accessories, footwear, cosmetics and home furnishings industries such as Anne Klein, Calvin Klein, Carters, Clarks, Clinique, Coach, Estée Lauder, Fossil, Frye, Jessica Simpson, Jones New York, Kenneth Cole, Lancôme, Lauren, Michael Kors, Nine West, Polo, Steve Madden and Vince Camuto. We believe these brands enable us to position our stores as headquarters for fashion, offering both newness and wardrobe staples at competitive prices. We believe we maintain excellent relationships with our merchandise vendors, working collaboratively to select the most compelling assortments for our customers.

Private Brands

        Our exclusive private brands complement our offerings of nationally distributed brands and are a key component of our overall merchandising strategy. Our private brand portfolio includes popular brands such as Laura Ashley, Ruff Hewn, Relativity, Studio Works, Breckenridge, Living Quarters, Paradise Collections, Kenneth Roberts, Cuddle Bear, John Bartlett and Mambo.

        By providing exclusive fashion products at price points that are more attractive than nationally distributed brand alternatives, our private brand program creates value for our customers and increases our brand exclusiveness, competitive differentiation and customer loyalty. Our private brand program also presents the opportunity to increase our overall gross margin by virtue of the more efficient cost structure inherent in the design and sourcing of in-house brands.

Vendor Relationships and Sourcing

        Our highly experienced team of buyers has developed long-standing and strong relationships with many of the leading vendors in the marketplace. Our scale, geographic footprint and market position make us an important distribution channel for leading merchandise vendors to reach their target consumers. We believe our status as a key account to many of our vendors serves to strengthen our ability to negotiate for merchandise exclusive to our stores as well as better pricing terms. We monitor and evaluate the sales and profitability performance of each vendor and adjust our purchasing decisions based upon the results of this analysis.

        Consistent with industry practice, we receive allowances from certain of our vendors in support of the merchandise sold to us that was marked down or that did not allow us to achieve certain margins

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upon sale to our customers. Additionally, we receive advertising allowances and reimbursement of certain payroll expenses from some of our vendors, which primarily represent reimbursements of specific, incremental and identifiable costs incurred to promote and sell the vendors' merchandise.

Marketing and Customer Service

        We are committed to providing our customers with a satisfying shopping experience by offering trend-right fashions, differentiated product, value and convenience. Critical elements of our customer service approach are:

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multi-channel marketing programs designed to promote customer awareness of our fashion, quality and value;



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customer targeting strategies that foster and strengthen long-term relationships;



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frequent shopper promotions for our proprietary credit card holders; and



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knowledgeable, friendly and well-trained sales associates.

Marketing

        Our strategic marketing initiatives develop and enhance our brand equity and support our position as a leading shopping destination among our target customers. Our multi-faceted marketing program is designed to engage with our customers through multiple media channels and allows us to attract new customers and to maintain loyalty with our existing customer base. We are focused on implementing a media mix strategy that optimizes media channels and maximizes our return on investment. We anticipate a continued shift from traditional print media to broadcast and digital, with significant opportunities to reach new customers via enhanced multi-channel marketing programs, including email, banner, search, mobile, social and affiliate marketing.

        We use a combination of (1) advertising and sales promotion activities to build brand image and increase customer traffic and (2) customer-specific communications and purchase incentives to drive customer spending and loyalty. Both types of marketing efforts focus primarily on our target customer of women between the ages of 25 and 60 with average annual household income of $55,000 to $125,000, with the intention of increasing visit frequency and purchases per visit. Our marketing activities also seek to attract a broader audience. We seek to attract new customers and to maintain our customer loyalty by actively communicating with our customers through the execution of targeted marketing facilitated by sophisticated customer relationship management capabilities.

        We are focused on important charitable causes and events to enhance our connection with the communities in which we operate and with the customers we serve. These strategic initiatives garner favorable publicity, increase customer traffic and generate incremental sales. Additionally, these efforts serve to differentiate us from our competitors.

        We maintain an active calendar of in-store events to promote our merchandise and sales efforts. These events include designer appearances, fashion shows and national makeup artist events.

Proprietary Credit Card

        Evidencing our customer satisfaction and loyalty is the high penetration rate of our proprietary credit card program. We have over 3.7 million active proprietary credit card holders. In December 2011, we entered into a new, seven-year private label credit card program agreement with Comenity Bank, a bank subsidiary of Alliance Data Systems Corporation ("ADS"). We completed the transition of our credit card program agreement to ADS in July 2012.

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        Our proprietary credit card loyalty program is designed to cultivate long-term relationships with our customers by offering rewards and privileges to all members, including advanced sales notices, savings and events. The program is designed to promote increased visits to our stores and shopping across multiple departments within our stores.

Customer Service

        We maintain a sales force of knowledgeable and well-trained sales associates to deliver excellent service to our customers. Sales associates are trained in the areas of customer service, selling skills and product knowledge. Our new associates receive computer-based training for an effective, efficient and uniform training experience. We view customer service as a key element of our growth strategy and have identified opportunities to enhance service and deliver meaningful results. In 2013, we will continue to conduct enhanced "Customer First" training for all managers and associates, a program designed to increase engagement with our customers on the selling floor, and use point-of-sale modules and MP3s as training tools for selling skills, product knowledge and trend updates for our sales associates.

        We employ a two-tiered strategy to achieve effective customer service. First, in selected areas, we offer one-on-one selling with dedicated associates to assist customers with merchandise selections. Second, we offer the convenience of self-service formats in many departments and efficient service centers to expedite customer purchases. We actively monitor and analyze, through our scheduling program, the service levels in our stores in order to maximize sales associate productivity and store profitability.

        We believe that customers are responding favorably to retailers that make it convenient for them to shop on their terms. State-of-the-art in-store kiosks, introduced in certain pilot stores in 2011, allow our customers access to our expanded online merchandise assortment, creating a virtual "endless aisle." Based on favorable customer response, we expanded the program to additional stores in 2012. In addition, we will implement a major upgrade to our customer order management system in fall 2013. The system will bring greater visibility to customer orders, improve call center capabilities and enhance overall efficiency. New functionality will be added to our point-of-sale ("POS") system to provide customer friendly access to 100% of the Company's available inventory. Our sales associates will be able to facilitate customer requests by placing an order for merchandise at any POS device, in any store, faster and easier than today. We build on our service strategy by providing engaging functionality through the use of technology to foster customer interaction, affording us an opportunity to enhance our brand and broaden our appeal to younger customers. We will continue exploring ways to use new tools and capabilities to make our sales floor more responsive to our customer.

Competition

        The retail industry is highly competitive. We face competition for customers from traditional department store operators such as Boscov's Department Store LLC, Dillard's, Inc., Macy's, Inc. and Von Maur Inc.; national chain retailers such as J. C. Penney Company, Inc., Kohl's Corporation and Sears Holdings Corporation; mass merchandisers such as Target Corporation and Wal-Mart Stores, Inc.; specialty stores; and catalogue and online retailers. In a number of our markets, we compete for customers with national department store chains which offer a similar mix of branded merchandise as we do. In other markets, we face potential competition from national chains that, to date, have not entered such markets and from national chains that have stores in our markets but currently do not carry similar branded goods. In all markets, we generally compete for customers with stores offering moderately-priced goods. In addition, we face competition for suitable store locations from other department stores, national chain retailers, mass merchandisers and other large-format retailers. Many of our competitors have substantially greater financial and other resources than we do, and many of

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those competitors have significantly less debt than we do and may thus have greater flexibility to respond to changes in our industry.

        Success in these competitive marketplaces is based on factors such as price, product assortment and quality, service and convenience. We believe that we compare favorably with our competitors with respect to quality of product, depth and breadth of merchandise, prices for comparable quality merchandise, customer service and store environment. We also believe our knowledge of and focus on small to mid-size markets, developed over our many years of operation, give us an advantage in these markets that cannot be readily duplicated. In markets in which we face traditional department store competition, we believe that we compete effectively.

Trademarks and Trade Names

        We own or license various trademarks and trade names, including our store nameplates and private brands. We believe our trademarks and trade names are important and that the loss of certain of our trademarks or trade names, particularly our store nameplates, could have a material adverse effect on us. We are not aware of any claims of infringement or other challenges to our right to use our trademarks in the United States that would have a material adverse effect on our consolidated financial position, results of operations or liquidity.

Information Technology and Systems

        Our information technology initiatives are focused on (1) accelerating the growth of our eCommerce business, (2) updating systems and business processes with emphasis on enhancing our customers' shopping experience throughout all channels, (3) improving associate productivity, (4) updating our merchandise and planning systems, and (5) reducing operating costs. During 2012, we continued to invest in our technology infrastructure equipment and software to facilitate the achievement of our goals. We updated our eCommerce sites and launched a new mobile site supporting delivery of promotions, online purchasing, and providing customers another convenient access point to our expanded online merchandise assortment. Warehouse management and customer order fulfillment systems were upgraded to support this rapidly growing business. We expanded our self-service kiosk program to an additional 61 store locations, offering our customers products from our eCommerce assortment and leveraging common fulfillment systems. We began preparations to implement a new customer order management system to support eCommerce growth, provide customers greater visibility to their orders, improve our call center capabilities and improve overall operating efficiency, with implementation expected in 2013. We enhanced our payment systems to convert customers' personal checks tendered at point-of-sale to electronic ACH transactions, improving cash flow and reducing processing costs. In addition, we continued our investments in security systems.

Inventory Management

        Our merchandising function is centralized, with a staff of buyers and a planning and allocation team who have responsibility for determining the merchandise assortment, quantities to be purchased and allocation of merchandise to each store.

        We primarily operate on a pre-distribution model through which we allocate merchandise on our initial purchase orders to each store. This merchandise is shipped from our vendors to our distribution facilities for delivery to designated stores. We have the ability to direct replenishment merchandise to the stores that demonstrate the highest customer demand. This reactive distribution technique helps minimize excess inventory and affords us timely and accurate replenishment.

        We utilize electronic data interchange (EDI) technology with most vendors, which is designed to move merchandise onto the selling floor quickly and cost-effectively by allowing vendors to deliver merchandise pre-labeled for individual store locations. In addition, we utilize high-speed automated

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conveyor systems in our distribution facilities to scan bar coded labels on incoming cartons of merchandise and direct cartons to the proper processing areas. Most of our merchandise is unloaded in the receiving area and immediately "cross-docked" to the shipping dock for delivery to the stores. Certain processing areas are staffed with personnel equipped with hand-held radio frequency devices that can scan a vendor's bar code and transmit the necessary information to a computer to record merchandise on hand. We utilize third-party carriers to distribute our merchandise to our stores.

        The majority of our merchandise is held in our stores. We closely monitor inventory levels and assortments in our stores to facilitate reorder and replenishment decisions, satisfy customer demand and maximize sales. Our business follows a seasonal pattern; merchandise inventories fluctuate with seasonal variations, reaching their highest level in October or November in advance of the holiday season.

        In addition to inventories to support our store operations, we maintain inventories to support our growing online business. These inventories are administered through similar procurement methods and are staged in our customer order fulfillment centers to complete customer orders received from our eCommerce sites and customer orders taken at point-of-sale in our store locations. Fulfillment centers are located within our distribution center network.

        We have a customer return policy allowing customers to return merchandise, for which a reserve is provided in our consolidated statements of operations for estimated returns. The reserve is based on historical returns experience, and is reflected as an adjustment to sales and costs of merchandise sold.

Seasonality

        Our business, like that of most retailers, is subject to seasonal fluctuations, with the major portion of sales and income realized during the second half of each year, which includes the holiday season. Due to the fixed nature of certain costs, our selling, general and administrative ("SG&A") expenses are typically higher as a percentage of net sales during the first half of each year. Because of the seasonality of our business, results for any quarter are not necessarily indicative of the results that may be achieved for a full year. In addition, quarterly results of operations depend upon the timing and amount of revenues and costs associated with the opening, closing and remodeling of existing stores.

Capital Investments

        We make capital investments to support our long-term business goals and objectives. We invest capital in new and existing stores, distribution and support facilities, and information technology.

        We anticipate our 2013 capital expenditures will not exceed $89.0 million (excluding external contributions, primarily leasehold improvement and fixture allowances received from landlords or vendors, of $19.0 million, reducing budgeted net capital investments to $70.0 million). Projects include two new stores and ongoing store remodels, as we focus on expanding our store base and improving the quality of our stores and our brand equity.

        We believe capital investments for information technology are necessary to support our business strategies. We are continually upgrading our information systems to improve efficiency and productivity. Included in the 2013 capital budget are expenditures for numerous information technology projects, most notably efforts to enhance our online presence and selling tools.

Associates

        As of March 29, 2013, we had approximately 26,900 full-time and part-time associates. We employ additional part-time associates during peak selling periods. We believe that our relationship with our associates is good.

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Available Information

        Our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports are available without charge on our website, www.bonton.com, as soon as reasonably practicable after they are filed electronically with the Securities and Exchange Commission ("SEC").

        We also make available on our website, free of charge, the following documents:

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Audit Committee Charter



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Human Resources and Compensation Committee Charter



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Governance and Nominating Committee Charter



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Code of Ethical Standards and Business Practices

Executive Officers

        The following table sets forth certain information regarding our executive officers as of March 29, 2013:

        Mr. Grumbacher served as Executive Chairman of the Board of Directors from February 2005 to February 2012, when he resigned that position and was appointed Chairman Emeritus and Strategic Initiatives Officer. He served as Chairman of the Board of Directors from August 1991 to February 2005. He was Chief Executive Officer from 1985 to 1995 and in positions of senior management since 1977.

        Mr. Hoffman became President and Chief Executive Officer and Director of the Company on February 7, 2012. Mr. Hoffman served as President and Chief Executive Officer of Lord & Taylor, a division of Hudson's Bay Trading Company, from October 2008 to January 2012. Prior to that, he served six years as President and Chief Executive Officer of Neiman Marcus Direct, where he oversaw the growth of neimanmarcus.com and the launch and growth of bergdorfgoodman.com.

        Mr. Byers has served as Executive Vice President—Stores, Visual and Loss Prevention since May 2011, having served as Vice Chairman—Stores, Distribution, Real Estate and Construction from February 2008 to May 2011. He served as Vice Chairman—Stores, Operations, Private Brand, Planning and Allocation from October 2006 to February 2008, and as Executive Vice President—Stores and Visual Merchandising from April 2006 to October 2006.

        Mr. Clouser has been Executive Vice President—Human Resources since April 2006, and assumed additional responsibilities for Corporate Procurement, Corporate Operations and Information Services in February 2008, Logistics in May 2011, and Store Planning and Construction in September 2012.

        Mr. Fernandez was appointed to the newly created position of Executive Vice President—Chief Marketing Officer and eCommerce in May 2012. He joined the Company from Neiman Marcus Group

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where he most recently served as Vice President, Last Call Marketing and Customer Insight. From 2007 to 2010, he served as Vice President, Marketing, Online and Catalog, and from 2002 to 2006, Vice President, Marketing and Systems Strategy at Neiman Marcus Group.

        Mr. Plowman has been Executive Vice President—Finance since April 2006, Chief Financial Officer since May 2005 and Principal Accounting Officer since June 2003.

Item 1A.    Risk Factors

Cautionary Statements Relating to Forward-Looking Information

        We have made, in this Annual Report on Form 10-K, forward-looking statements relating to developments, results, conditions or other events we expect or anticipate will occur. These statements may relate to revenues, earnings, store openings, business strategy, general economic conditions, market conditions and the competitive environment. The words or phrases "believe," "may," "might," "will," "estimate," "intend," "expect," "anticipate," "plan," "look forward to" and similar expressions as they relate to the Company, or future or conditional verbs, such as "will," "should," "would," "may" and "could," are intended to identify forward-looking statements under the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based on management's then-current views and assumptions and we undertake no obligation to update them. Forward-looking statements are subject to risks and uncertainties, and actual results may differ materially from those projected. The reader is cautioned not to place undue reliance on any such forward-looking statements.

        An investment in our securities carries certain risks. Investors should carefully consider the risks described below, and other risks which may be disclosed in our filings with the SEC, before investing in our securities.

There can be no assurance that our liquidity will not be adversely affected by changes in the Company's performance, financial markets or global economy.

        Historically, we have generated cash flow from operating activities and used supplemental borrowings under our credit facility to provide the liquidity we need to operate our business. The continued downturn in the global economy and distress in the financial markets have resulted in volatility in the capital markets. Adverse changes in the Company's performance or the potential tightening of credit markets could make it more difficult for us to access funds, to refinance our existing indebtedness, to enter into agreements for new indebtedness or to obtain funding through the issuance of securities and could potentially increase our borrowing costs. If such conditions were to persist, we would seek alternative sources of liquidity, but there can be no assurance that we would be successful in obtaining such additional liquidity. As a result, we may not be able to meet our obligations as they become due.

General economic conditions could have a material adverse effect on our financial condition and results of operations.

        Consumer spending habits, including spending for the merchandise that we sell, are affected by, among other things, prevailing economic conditions, levels of employment, salaries and wage rates, prevailing interest rates and credit terms, housing costs, energy costs, income tax rates and policies, inflation, consumer confidence and consumer perception of economic conditions. In addition, consumer purchasing patterns may be influenced by consumers' disposable income, credit availability and debt levels. A continued or incremental slowdown in the United States' economy or an uncertain economic outlook could adversely affect consumer spending habits, resulting in lower net sales and gross margin, which would cause reduced annual net profits or increased net losses, including the potential write-down of the current valuation of long-lived assets, intangible assets and deferred tax assets.

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        Our vendors, landlords, lenders and other business partners could also be adversely affected by difficult economic conditions. This, in turn, could impact us through increasing the risk of bankruptcy of our vendors, landlords, lenders and business partners, increasing the cost of goods, creating a void in product, reducing access to liquid funds or credit, increasing the cost of credit or other impacts which we are unable to fully anticipate.

Increases in the price of merchandise, raw materials, fuel and labor or their reduced availability could increase our cost of goods and negatively impact our financial results.

        We have experienced and may continue to experience increases in our merchandise, raw materials, fuel and labor costs. Fluctuations in the price and availability of merchandise, raw materials, fuel and labor have not materially affected our cost of goods in recent years, but an inability to mitigate these cost increases, unless sufficiently offset with retail pricing adjustments, might cause a decrease in our profitability. Related retail pricing adjustments, however, might cause a decline in our sales volume. Additionally, any decrease in the availability of raw materials could impair our ability to meet our purchasing requirements in a timely manner. Both the increased cost and lower availability of merchandise, raw materials, fuel and labor may also have an adverse impact on our cash and working capital needs as well as those of our suppliers.

We conduct our operations in a highly competitive retail environment which could have an adverse effect on our business, financial condition and results of operations.

        We compete with other department stores and many other retailers, including store-based, mail-order and internet retailers. Many of our competitors have financial and marketing resources that greatly exceed ours. The principal competitive factors in our business are price, quality and selection of merchandise, reputation, store location, advertising and customer service. We cannot ensure that we will be able to compete successfully against existing or future competitors, or that prolonged periods of deep discount pricing by our competitors during periods of weak consumer confidence or economic instability will not have a material adverse effect on our business. Our expansion into new markets served by our competitors and the entry of new competitors into, or expansion of existing competitors in, our markets could have a material adverse effect on our business, financial condition and results of operations.

Failure to maintain key vendor and factor relationships may adversely affect our business, financial condition and results of operations.

        Our business is dependent to a significant degree upon close relationships with our vendors and their factors and our ability to purchase brand name merchandise at competitive prices and terms. The loss of key vendor and factor support could have a material adverse effect on our business. There can be no assurance that we will be able to acquire brand name merchandise at competitive prices or on competitive terms in the future. For example, certain merchandise that is high profile and in high demand may be allocated by vendors based upon the vendors' internal criteria, which are beyond our control.

        In addition, vendors and their factors may potentially seek assurances to protect against non-payment of amounts due to them. If we experience declining operating performance, and if we experience severe liquidity challenges, vendors and their factors may demand that we accelerate our payment for their products. These demands could have a significant adverse impact on our operating cash flow and result in a severe diminishment of our liquidity. Under such circumstances, borrowings under our senior secured credit facility could reach maximum levels, in which case we would take actions to obtain additional liquidity. However, there can be no assurance that we would be successful in obtaining such additional liquidity. As a result, we may not be able to meet our obligations as they become due. In addition, if our vendors are unable to access liquidity or become insolvent, they could

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be unable to supply us with product or continue with their support of our advertising and promotional programs. Any such disruptions could negatively impact our ability to acquire merchandise or obtain vendor allowances in support of our advertising and promotional programs, which in turn could have a material adverse impact on our business, financial condition or results of operations.

Our debt could adversely affect our financial condition.

        As of February 2, 2013, we had total debt, including capital leases, of $901.2 million, which is subject to restrictions and financial covenants. This could have important consequences to our investors. For example, it could:

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increase our vulnerability to general adverse economic and industry conditions;



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limit our ability to borrow money or sell equity to fund future working capital requirements, capital expenditures, debt service requirements and other general corporate requirements;



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require us to dedicate a substantial portion of our cash flow from operations to payments on our debt, thereby reducing our ability to use our cash flow for other purposes, including capital expenditures;



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limit our flexibility in planning for, or reacting to, changes in our business and the retail industry;



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make it more difficult for us to meet our debt service obligations in the event there is a substantial increase in interest rates because the debt under our senior secured credit facility bears interest at fluctuating rates;



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restrict our ability to make certain types of investments, pay dividends, or sell all of our assets or merge or consolidate with another company; and



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place us at a competitive disadvantage compared with our competitors that have less debt.

        Our ability to service our debt depends upon, among other things, our ability to replenish inventory at competitive prices and terms, generate sales and maintain our stores. If we do not generate sufficient cash from our operations to service our debt obligations, we may need to take one or more actions, including refinancing our debt, obtaining additional financing, selling assets, obtaining additional equity capital, or reducing or delaying capital expenditures. We cannot be certain that our cash flow will be sufficient to allow us to pay the principal and interest on our debt and meet our other obligations. Debt under our senior secured credit facility bears interest at a floating rate. Accordingly, changes in prevailing interest rates may affect our ability to meet our debt service obligations. A higher interest rate on our debt would adversely affect our operating results. If we are unable to meet our debt service obligations or if we default under our credit facilities, our lenders could elect to declare all borrowings outstanding, together with accumulated and unpaid interest and other fees, immediately due and payable, which would have a material adverse effect on our business, financial condition and results of operations.

Our discretion in some matters is limited by the restrictions contained in our senior secured credit facility and mortgage loan facility agreements and in the indentures that govern our senior unsecured notes and our second lien senior secured notes (together, the "Senior Notes"), and any default on our senior secured credit facility, mortgage loan facility or the indentures that govern the Senior Notes could harm our business, profitability and growth prospects.

        The agreements that govern our senior secured credit facility and mortgage loan facility, and the indentures that govern our Senior Notes, contain a number of covenants that limit the discretion of our management with respect to certain business matters and may impair our ability to respond to changing

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business and economic conditions. The senior secured credit facility, the mortgage loan facility and the indentures, among other things, restrict our ability to:

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incur additional debt or issue guarantees of debt;



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sell preferred stock;



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create liens;



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make restricted payments (including the payment of dividends or the repurchase of our common stock);



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make certain types of investments;



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sell stock in our restricted subsidiaries;



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pay dividends or make payments from subsidiaries;



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enter into transactions with affiliates; and



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sell all or substantially all of our assets or merge or consolidate with another company.

        Our senior secured credit facility contains a financial covenant that at all times requires the minimum excess availability under the facility be at least the greater of (1) 10% of the lesser of (a) the aggregate commitments under the facility and (b) the aggregate borrowing base and (2) $50.0 million. Our ability to borrow funds for any purpose depends on our satisfying this requirement.

        If we fail to comply with the financial covenant or the other restrictions contained in our senior secured credit facility, mortgage loan facility or the indentures that govern our Senior Notes, an event of default would occur. An event of default could result in the acceleration of our debt due to the cross-default provisions within our debt agreements. If the debt is accelerated, we would not have, and may not be able to obtain, sufficient funds to repay our debt, which could have a material adverse effect on our business, financial condition and results of operations.

Changes in the terms of our proprietary credit card program could have an adverse effect on our operations.

        Our current proprietary credit card program is operated, under agreement, by ADS. ADS issues our proprietary credit cards to our customers and we receive a percentage of the net credit sales and outstanding credit balances thereunder. The inability or unwillingness of ADS to provide support for our proprietary credit card program under similar terms or conditions as exist today may result in a decrease in proprietary credit card sales to our customers and a loss of revenues attributable to payments from ADS. In addition, if our agreement with ADS is terminated under circumstances in which we are unable to quickly and adequately contract with a comparable replacement vendor, our customers who have accounts under our proprietary credit card program will be unable to use their cards. This would likely result in a decrease in sales to such customers, a loss of the revenues attributable to the payments from ADS and an adverse effect on customer goodwill, any or all of which could have a material adverse effect on our business and results of operations.

We might not be able to successfully implement our business strategies.

        We have identified strategies to achieve sales growth and improve our financial performance in the years ahead, as noted in "Management's Discussion and Analysis—2013 Strategies and Guidance." If we are unable to successfully execute those strategies, our operating results may suffer. Even if we are able to successfully execute our strategies, there can be no assurance that these strategies will necessarily result in our improved financial performance. In addition, the employment of any new approach involves risks and potential increased costs that may prove to be detrimental to our operating results.

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Our pension costs could increase at a higher than anticipated rate.

        Significant decreases in the fair value of plan assets, investment losses on plan assets and changes in interest rates have affected and could further affect the funded status of our plans and could increase future funding requirements of the pension plans. A significant increase in future funding requirements could have a negative impact on our cash flow, financial condition and results of operations.

We may not be able to accurately predict customer-based trends and effectively manage our inventory levels, which could reduce our revenues and adversely affect our business, financial condition and results of operations.

        It is difficult to predict what and how much merchandise consumers will want. A substantial part of our business is dependent upon our ability to make correct trend decisions. Failure to accurately predict constantly changing consumer tastes, spending patterns and other lifestyle decisions, particularly given the long lead times for ordering much of our merchandise, could adversely affect our long-term relationships with our customers. Our managers focus on inventory levels and balance these levels with inventory plans and reviews of trends; however, if our inventories become too large, we may have to "mark down" or decrease our sales prices, and we may be required to sell a significant amount of unsold inventory at discounted prices or even below cost.

An inability to find qualified domestic and international vendors and fluctuations in the exchange rate with countries in which our international vendors are located could adversely affect our business.

        The products we sell are sourced from a wide variety of domestic and international vendors. Our ability to find qualified vendors and source products in a timely and cost-effective manner, including obtaining vendor allowances in support of our advertising and promotional programs, represents a significant challenge. The availability of products and the ultimate costs of buying and selling these products, including advertising and promotional costs, are not completely within our control and could increase our merchandise and operating costs. Additionally, costs and other factors specific to imported merchandise, such as trade restrictions, tariffs, currency exchange rates and transport capacity and costs, are beyond our control and could restrict the availability of imported merchandise or significantly increase the costs of our merchandise and adversely affect our business, financial condition and results of operations.

Conditions in, and the United States' relationship with, the countries where we source our merchandise could adversely affect our business.

        A majority of our merchandise is manufactured outside of the United States. Political instability or other events resulting in the disruption of trade from the countries where our merchandise is manufactured or the imposition of additional regulations relating to, or duties upon, the merchandise we import could cause significant delays or interruptions in the supply of our merchandise or increase our costs. If we are forced to source merchandise from other countries, those goods may be more expensive than, or of inferior quality to, the merchandise we now sell. If we are unable to adequately replace the merchandise we currently source with merchandise produced elsewhere, our business, financial condition and results of operations could be adversely affected.

Our business is seasonal.

        Our business is subject to seasonal influences, with a major portion of sales and income historically realized during the second half of the fiscal year, which includes the holiday season. This seasonality causes our operating results to vary considerably from quarter to quarter and could have a material adverse impact on the market price of our common stock. We must carry a significant amount of

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inventory, especially before the peak selling periods. If we are not successful in selling our inventory, especially during our peak selling periods, we may be forced to rely on markdowns, vendor support or promotional sales to dispose of the inventory or we may not be able to sell the inventory at all, which could have a material adverse effect on our business, financial condition and results of operations.

Weather conditions could adversely affect our results of operations.

        Because a significant portion of our business is apparel sales and subject to weather conditions in our markets, our operating results may be unexpectedly and adversely affected by inclement weather. Frequent or unusually heavy snow, ice or rain storms might make it difficult for our customers to travel to our stores or, in particularly adverse conditions, our stores might be subject to temporary closings, thereby reducing our sales and profitability. Extended periods of unseasonable temperatures in our markets, potentially during our peak seasons, could render a portion of our inventory incompatible with those unseasonable conditions, reduce sales and adversely affect our business.

Our business could be significantly disrupted if we cannot retain or replace members of our management team.

        Our success depends to a significant degree upon the continued contributions of our executive officers and other key personnel, both individually and as a group. Our future performance will be substantially dependent on our ability to retain or replace our executive officers and key personnel and our inability to retain or replace our executive officers and key personnel could prevent us from executing our business strategy.

The ownership and leasing of significant amounts of real estate expose us to possible liabilities.

        We currently own or lease 272 stores, which subjects us to the risks associated with owning and leasing real estate. In particular, because of changes in the investment climate for real estate, the value of a property could decrease or operating costs could increase. Our store leases generally require us to pay a fixed minimum rent and a variable amount based on a percentage of sales at that location. These leases generally do not allow for termination prior to the end of the lease term without economic consequences. If a store is not profitable and we make the decision to close it, we may remain committed to perform certain obligations under the lease, including the payment of rent, for the balance of the lease term. In addition, as each of the leases expires, we may be unable to negotiate renewals, either on commercially acceptable terms or at all, which could cause us to close stores in desirable locations. If an existing owned store is not profitable, we may be required to record an impairment charge and/or exit costs if we make a decision to close that store. In addition, lease or other obligations may restrict our right to cease operations of an unprofitable owned or leased store, which may cause us to continue to operate the location at a loss. A decline in real estate values could also have an adverse effect on our borrowing availability under our senior secured credit facility.

Current store locations may become less desirable, and desirable new locations may not be available for a reasonable price, if at all.

        The success of any store depends substantially upon its location. There can be no assurance that current locations will continue to be desirable as demographic patterns change. Neighborhood or economic conditions where stores are located could decline in the future, resulting in potentially reduced sales in those locations. In addition, if we cannot obtain desirable new locations our sales will suffer, and if we cannot obtain desirable locations at reasonable prices our cost structure will increase.

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The declining financial condition of some shopping mall operators could adversely impact our stores.

        Many shopping mall operators were severely impacted by the recent global economic downturn. As the great majority of our stores are located in malls, we are dependent upon the continued popularity of malls as a shopping destination for our customers. The continuation of the economic slowdown in the United States could impact shopping mall operators' financial ability to develop new shopping malls and properly maintain existing shopping malls, which could adversely affect our sales. In addition, the consolidation of ownership of shopping malls through the merger or acquisition of large shopping mall operators may give landlords increased leverage in lease negotiations and adversely affect our ability to control our lease costs.

Risks associated with our private brands could adversely affect our business.

        We offer our customers quality products at competitive prices marketed under our private brands. We expect to continue to grow our private label offerings and have invested in our development and procurement resources and marketing efforts related to these exclusive brand offerings. The expansion of our private brand offerings subjects us to certain additional risks. These include, among others, risks related to: our failure to comply with government and industry safety standards; mandatory or voluntary product recalls related to our private brand offerings; our ability to successfully protect our proprietary rights in our exclusive offerings; and risks associated with overseas sourcing and manufacturing. In addition, damage to the reputation of our private brand trade names may generate negative customer sentiment. Our failure to adequately address some or all of these risks could have a material adverse effect on our business, results of operations and financial condition.

Our business could be significantly disrupted and burdened with additional costs if our associates unionize.

        While we believe our relationship with our associates is good, we cannot be assured that we will not become the subject of a unionization campaign. If some or all of our workforce were to become unionized and collective bargaining agreement terms were significantly different from our current compensation arrangements or work practices, it could have a material adverse effect on our business, financial condition and results of operations.

New legal requirements could make our business operations more costly.

        Our results of operations could be adversely affected by new legal requirements, including the newly enacted U.S. health care law, the Dodd-Frank Wall Street Reform and Consumer Protection Act, and potential global and domestic greenhouse gas emission requirements and other environmental legislation and regulations. The financial impact of these new legal requirements cannot be determined with certainty. New laws or regulations may result in increased direct costs to us for compliance or may cause our vendors to raise prices to us because of increased compliance costs or reduced availability of raw materials.

An unfavorable outcome to a potential litigation claim could have a material adverse effect on our business, financial condition and results of operations.

        In the ordinary course of business, we may be involved in lawsuits and regulatory actions. We are impacted by trends in litigation, including, but not limited to, class-action allegations brought under various consumer protection and employment laws. Due to the inherent uncertainties of litigation and regulatory proceedings, we cannot accurately predict the ultimate outcome of any such proceeding. An unfavorable outcome could have a material adverse impact on our business, financial condition and results of operations. In addition, regardless of the outcome of any litigation or regulatory proceeding, claims brought against us could result in substantial costs and may require that we devote substantial resources to our defense.

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Failure to successfully maintain and update information technology systems and enhance existing systems may adversely affect our business.

        To keep pace with changing technology, we must continuously provide for the design and implementation of new information technology systems and enhancements of our existing systems. Any failure to adequately maintain and update the information technology systems supporting our sales operations or inventory control could prevent us from processing and delivering merchandise, which could adversely affect our business, financial condition and results of operations.

Operational disruptions in our information systems may adversely affect our business.

        The efficient operation of our business is dependent on our information systems. We rely on our information systems to manage sales, distribution, merchandise planning and allocation functions. We also generate sales through the operations of our website. If our systems are damaged or cease to function properly, we may have to make a significant investment to fix or replace them and we may suffer interruptions in our operations in the interim. Any material interruption in our computer operations may have a material adverse effect on our business or results of operations.

A security breach that results in the unauthorized disclosure of Company, employee or customer information could adversely affect our business, reputation and financial condition.

        The protection of customer, employee, and Company data is critical to us. The regulatory environment surrounding information security and privacy is increasingly demanding, with the frequent imposition of new and changing requirements. In addition, customers have an expectation that we will adequately protect their personal information. Although we have appropriate security measures in place, our facilities and systems, and those of our third-party service providers, could be vulnerable to security breaches, acts of vandalism, computer viruses, misplaced or lost data, programming and/or human errors or other similar events. A significant breach of customer, employee or Company data could damage our reputation and result in lost sales, fines or lawsuits.

If our marketing programs are not successful, our sales and profitability could be adversely affected.

        Our business depends on attracting an adequate volume of customers who are likely to purchase our merchandise. We design our marketing programs to increase awareness of our stores and our brands, which we expect will create and maintain customer loyalty, increase the number of customers that shop our stores and increase our sales. We have a significant number of marketing initiatives which we regularly review and revise as necessary. There can be no assurance as to our continued ability to effectively execute our advertising and marketing programs, and any failure to do so could adversely affect our business and results of operations.

Tim Grumbacher has voting control over matters submitted to a vote of the shareholders, and he may take actions that conflict with the interests of our other shareholders and holders of our debt securities.

        Collectively, Tim Grumbacher, trusts for the benefit of Mr. Grumbacher's grandchildren and The Grumbacher Family Foundation beneficially own shares of our outstanding common stock (which is entitled to one vote per share) and shares of our Class A common stock (which is entitled to ten votes per share) representing, in the aggregate, more than 50% of the votes eligible to be cast by shareholders in the election of directors and generally. Accordingly, Mr. Grumbacher has the power to control all matters requiring the approval of our shareholders, including the election of directors and the approval of mergers and other significant corporate transactions. The interests of Mr. Grumbacher and certain other shareholders may conflict with the interests of our other shareholders and holders of our debt securities.

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In addition to Mr. Grumbacher's voting control, certain provisions of our charter documents and Pennsylvania law could discourage potential acquisition proposals and could deter, delay or prevent a change in control of the Company that our other shareholders consider favorable and could depress the market value of our common stock.

        Certain provisions of our articles of incorporation and by-laws, as well as provisions of the Pennsylvania Business Corporation Law, could have the effect of deterring takeovers or delaying or preventing changes in control or management of the Company that our shareholders consider favorable and could depress the market value of our common stock.

        Subchapter F of Chapter 25 of the Pennsylvania Business Corporation Law of 1988, which is applicable to us, may have an anti-takeover effect and may delay, defer or prevent a tender offer or takeover attempt that a shareholder might consider in his or her best interest. In general, Subchapter F could delay for five years and impose conditions upon "business combinations" between an "interested shareholder" and us, unless prior approval by our Board of Directors is given. The term "business combination" is defined broadly to include various merger, consolidation, division, exchange or sale transactions, including transactions using our assets for refinancing purposes. An "interested shareholder," in general, would be a beneficial owner of shares entitling that person to cast at least 20% of the votes that all shareholders would be entitled to cast in an election of directors.

Our stock price has been and may continue to be volatile.

        The market price of our common stock has been and may continue to be volatile and may be significantly affected by:

•

actual or anticipated fluctuations in our operating results;



•

announcements of new services by us or our competitors;



•

our level of indebtedness and our ability to refinance and service our debt;



•

developments with respect to conditions and trends in our industry;



•

governmental regulation;



•

general market conditions, particularly periods of decline; and



•

other factors, many of which are beyond our control.

Item 1B.    Unresolved Staff Comments

        None.

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Item 2.    Properties

        We currently operate 272 stores in 24 states, encompassing approximately 25 million square feet. We own 30 stores, have ground leases on eight stores, and lease 234 stores.

        We operate under seven nameplates, as follows:

        Our corporate headquarters are located in York, Pennsylvania, where the majority of our administrative and sales support functions reside, and in Milwaukee, Wisconsin, where our merchandising and marketing functions are located. We operate two distribution centers, one owned and one leased, located in Rockford, Illinois, and we lease two distribution centers located in Allentown, Pennsylvania and Fairborn, Ohio. We have a furniture warehouse attached to each of our Naperville, Illinois and Dayton, Ohio stores.

Item 3.    Legal Proceedings

        We are party to legal proceedings and claims that arise during the ordinary course of business. In the opinion of management, the ultimate outcome of any such litigation and claims will not have a material adverse effect on the Company's financial condition, results of operations or liquidity.

Item 4.    Mine Safety Disclosures

        Not applicable.

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PART II

Item 5.    Market for the Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

        Our common stock is traded on The NASDAQ Global Select Stock Market (symbol: BONT). There is no established public trading market for our Class A common stock. The Class A common stock is convertible on a share-for-share basis into common stock at the option of the holder. The following table sets forth the high and low sales price of our common stock for the periods indicated as furnished by NASDAQ:

        On March 29, 2013, we had 220 shareholders of record of common stock and one shareholder of record of Class A common stock.

        Pursuant to our senior secured credit facility agreement, as amended and restated on October 25, 2012, any dividends paid may not exceed $10.0 million in any year or $30.0 million during the term of the agreement, which expires on the earlier of (a) March 21, 2016 and (b) the date that is 60 days prior to the earlier of the maturity date of the senior unsecured notes and the mortgage loan facility; however, additional dividends may be paid subject to meeting other requirements. In addition, pursuant to the indentures that govern our senior unsecured notes and our second lien senior secured notes, any dividends declared and paid may not exceed $0.24 per share in any year or $40.0 million during the terms of the indentures, which expire on March 15, 2014 and July 15, 2017, respectively. We paid $0.05 per share on Class A common stock and common stock in three quarters of 2011. The dividend of $0.05 per share declared in the fourth quarter of 2011 was paid in the first quarter of 2012. In addition to paying the dividend declared in the fourth quarter of 2011, in 2012 we paid $0.05 per share on Class A common stock and common stock in four quarters, having accelerated the payment of the fourth quarter dividend in advance of likely increases in taxes in 2013 (payment would typically have occurred in the first quarter of 2013). On March 19, 2013, we declared a quarterly cash dividend of $0.05 per share, payable May 6, 2013 to shareholders of record as of April 19, 2013. Our Board of Directors may consider dividends in subsequent periods as it deems appropriate.

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STOCK PERFORMANCE GRAPH

        The following graph compares the yearly percentage change in the cumulative total shareholder return on the Company's common stock from February 2, 2008 through February 2, 2013, and the cumulative total return on the Center for Research in Security Prices Total Return Index for The NASDAQ Stock Market (U.S. Companies) and the NASDAQ Retail Trade Stocks Index during such period. The comparison assumes $100 was invested on February 2, 2008 in the Company's common stock and in each of the foregoing indices and assumes the reinvestment of any dividends.

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Item 6.    Selected Financial Data

(In thousands except per share, comparable stores data and number of stores)

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Item 7.    Management's Discussion and Analysis of Financial Condition and Results of Operations

Overview

General

        We compete in the department store segment of the U.S. retail industry. Founded in 1898, the Company is one of the largest regional department store operators, currently operating 272 stores in 24 states in the Northeast, Midwest and upper Great Plains under the Bon-Ton, Bergner's, Boston Store, Carson's, Elder-Beerman, Herberger's and Younkers nameplates. Our stores are predominately located in fashion-oriented shopping malls and lifestyle centers, encompassing a total of approximately 25 million square feet and offering a broad assortment of national brand and exclusive private brand fashion apparel and accessories for women, men and children as well as cosmetics, home furnishings and other goods. The Company had net sales of $2.9 billion in 2012.

2012 Performance and Accomplishments

        Throughout 2012, we took actions to stabilize and then reinvigorate our business while facing continued macroeconomic challenges, including weakness in consumer spending, that have impacted the retail industry. Our financial results, a net loss of $21.6 million, do not reflect the full extent of our achievements. Income from operations increased as we grew our comparable store sales by 0.5%, increased gross margin dollars and leveraged our SG&A expense rate to a 38 basis point improvement.

        Although we did not meet our financial goals in 2012, successful execution of key initiatives resulted in successive quarterly improvements in our business such that we believe our trend bodes well for improved performance in 2013. Our accomplishments included the following:

•

We achieved a better balance of traditional and updated merchandise in Women's Apparel through thoughtfully calibrated inventory adjustments. As a result, growth in Women's Apparel sales outpaced that of the Company in the fall season.



•

We funded and grew important franchise businesses, such as Women's Footwear and Cosmetics, that warranted an expanded presence both in-store and in our marketing vehicles.



•

We overhauled our promotional calendar to increase traffic in-store, online and via mobile devices. We focused on the strategic use of customer-friendly savings coupons and added or strengthened signature promotional events, as well as increased our investment in advanced customer relationship management systems, using enhanced consumer analytics and insights to drive marketing effectiveness through targeted and personalized initiatives.



•

We executed a more disciplined approach to inventory management, particularly with regard to markdown cadence. We adjusted our markdown process to allow greater flexibility within the product lifecycle, better allocating markdown dollars to those categories requiring price reductions for timely sell-through. Additionally, we have taken an aggressive posture on our new 'clearance store' strategy that allows us to liquidate the prior year's merchandise in the proper season and achieve a higher margin than in years past. Our gross margin rate increased 64 basis points in the fall season as compared with the fall season of 2011, with opportunity for continued improvement.



•

We invested in our online properties, meaningfully growing eCommerce sales through significant expansion of merchandise assortment and improvement in website performance, greatly expanding the use of digital marketing and enriching our mobile experience. We also use our online operations as synergetic selling and marketing tools to increase the visibility and exposure of our brand and generate customer traffic within our retail stores.

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•

We reduced ongoing SG&A expenses to better reflect the current size and scope of our business, affording us the flexibility to fund those areas we believe will give us the greatest return on our investment, including the aforementioned expansion of digital marketing and our eCommerce operations.



•

We transitioned our proprietary credit card program to our new service provider, ADS. We are continuing to benefit from higher approval rates and credit limits, a streamlined new account opening process and improved marketing and store solicitation support. Proprietary credit card sales as a percentage of total sales increased to 45.0% in 2012 from 43.5% in the prior year as a result of this strategic partnership.



•

We completed several financing transactions that further strengthened our financial position and created additional financial flexibility to support our growth plans. See "Exchange and Redemption of Senior Notes and Amendment to Credit Facility" and "Liquidity and Capital Resources," below.

Exchange and Redemption of Senior Notes and Amendment to Credit Facility

        On June 4, 2012, we commenced an offer to certain eligible note holders to exchange outstanding 10¹/4% Senior Notes due 2014 (the "Old Notes") for newly issued 10⁵/8% Second Lien Senior Secured Notes due 2017 (the "New Notes"). We received tenders with consents from holders of $330.0 million principal amount of Old Notes, representing approximately 71% of the outstanding Old Notes. Upon the July 9, 2012 settlement, $330.0 million principal amount of New Notes was issued. Fees associated with the exchange of debt totaled $7.1 million and were recognized in loss on exchange/extinguishment of debt.

        On October 25, 2012, we entered into a First Amendment (the "First Amendment") to our senior secured Second Amended and Restated Loan and Security Agreement (the "Second Amended Revolving Credit Facility"), increasing our revolving borrowing commitments to $675.0 million from $625.0 million. Unamortized deferred financing fees of $0.2 million associated with the Second Amended Revolving Credit Facility were accelerated upon entry into the First Amendment and were recognized in loss on exchange/extinguishment of debt.

        On January 23, 2013, we issued a notice of partial redemption for $65.0 million aggregate principal amount of our Old Notes at a cash redemption price equal to the principal amount plus accrued and unpaid interest. The redemption was completed on February 22, 2013, after which approximately $69 million aggregate principal amount of the Old Notes remains outstanding.

        We believe the extension of the maturity date of the exchanged notes from 2014 to 2017 and the increase in our borrowing availability have enhanced our financial position. Furthermore, the only significant debt maturity prior to 2016 is the remaining Old Notes, which we anticipate will be satisfied with cash flow and capacity on our Second Amended Revolving Credit Facility during 2013.

2013 Strategies and Guidance

        The financial results of the fall season of 2012, particularly the fourth quarter, underscore our continued progress in implementing key initiatives to drive growth and improve our performance. We are focused on building upon the successes of the fall season with strategies we believe offer the best opportunities to improve returns, including:

•

Optimizing our merchandise assortment to reenergize our core customer while gradually diversifying the mix and marketing to appeal to a younger, more contemporary customer;

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•

Increasing our gross margin rate by improving the average unit retail price of our sales transactions through more strategic pricing and improved turnover, particularly in our smaller stores;



•

Increasing the growth of eCommerce sales by an additional 50% through continued merchandise, systems and marketing investments;



•

Revamping and reintroducing our "Your Rewards" customer loyalty program, expanding the benefits and reducing the spending threshold for participation in the program;



•

Building upon the expense reductions achieved in 2012 through continued process and workload analyses to maximize efficiencies;



•

Reallocating marketing expenditures to increase effectiveness through the expanded employment of multichannel technologies and investment in customer relationship management systems;



•

Capitalizing on our competitive strengths and opportunities in smaller markets with a renewed focus on these stores; and



•

Defining ways to localize our merchandise assortments, marketing programs and shopping experiences to better reflect the unique diversity of our store base.

        In 2013, we expect to achieve earnings per diluted share ranging from $0.40 to $1.00. On March 12, 2013, we provided the following assumptions with respect to our 2013 guidance:

•

a comparable store sales increase ranging from 2.0% to 3.5%;



•

a gross margin rate 20 to 60 basis points higher than the 2012 rate of 35.8%; and



•

an SG&A rate, inclusive of increased performance incentives approximating $15 million, flat to a 20 basis point reduction from the 2012 rate of 32.1%.

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Results of Operations

        The following table summarizes changes in our selected operating indicators, illustrating the relationship of various income and expense items to net sales for each year presented (components may not add or subtract to totals because of rounding):

2012 Compared with 2011

        Results for 2012 were impacted by the inclusion of an additional week in accordance with the National Retail Federation fiscal reporting calendar, resulting in a 53-week reporting period. This compares with a reporting period of 52 weeks in 2011.

        Net sales:    Net sales in 2012 were $2.919 billion, an increase of 1.2% over sales of $2.885 billion in 2011. Comparable store sales, which are reflective of a 52-week reporting period for both years, increased 0.5% in 2012 as the continued refinement of our merchandise assortment of both national and private brands, particularly as it relates to the mix of traditional and updated product, and enhanced marketing efforts yielded positive results. Additionally, investments in our eCommerce business continued to result in higher sales.

        The best performing merchandise categories in the period were Footwear, Coats and Better Sportswear (both included in Women's Apparel) and Cosmetics. Sales in Footwear benefited from the continued strategic capital investment for expansion and remodels in certain stores and expansion of key updated vendors to an increased number of stores. Sales growth in Coats was achieved in the fall season through timely merchandise receipts that more accurately reflected customer shopping patterns and marketing initiatives to sustain traffic. Growth in private brands and the expansion of updated nationally-branded vendors to additional stores contributed to the success in Better Sportswear. Cosmetics sales increases were driven by strength in treatment lines and men's and women's fragrances, with both core and new launch fragrances contributing to the sales growth. Additionally, fourth quarter marketing efforts were instrumental in driving the holiday business.

        The poorest performing categories in the period were Furniture (included in Home) and Juniors' Apparel. Sales in Furniture were adversely impacted by ongoing economic concerns and resultant customer reluctance to purchase higher-priced items. Despite the ongoing challenge of inducing the

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younger junior customer to frequent a department store, we have achieved some success in sales of cross-over merchandise that appeals to an older customer and are continuing our broader efforts to reengineer our Juniors' Apparel business through transformative changes, including merchandise adjustments and floor location conversions to effect more strategic adjacencies.

        Other income:    Other income was $59.4 million, or 2.0% of net sales, in 2012 as compared with $68.9 million, or 2.4% of net sales, in 2011. The decrease primarily reflects reduced income associated with our proprietary credit card program and gift card breakage.

        Costs and expenses:    Gross margin dollars increased $8.2 million to $1.046 billion in 2012, compared with $1.037 billion in 2011, reflecting the increased sales volume. The gross margin rate decreased 15 basis points to 35.8% of net sales, primarily due to an increase in the markdown rate and increased delivery expenses.

        SG&A expense marginally increased to $936.2 million in 2012 as compared with $936.1 million in 2011, reflecting the inclusion of the 53^rd week of operations in 2012. SG&A expense rate decreased 38 basis points to 32.1% of net sales, reflecting the continued execution of cost savings initiatives. We realized significant savings in our marketing expenditures as we focused on optimizing our resources and increasing efficiencies.

        Depreciation and amortization expense and amortization of lease-related interests decreased $6.8 million to $93.0 million. The expense reduction primarily reflects the reduced asset base.

        In 2012, we recorded $5.1 million of non-cash impairment charges which resulted in a reduction in the carrying amount of certain store properties due to their marginal operating performance. We recorded charges of $1.1 million for similar asset impairments in 2011. See Notes 2 and 3 in the Notes to Consolidated Financial Statements.

        In 2012, we recorded non-cash impairment charges of $0.8 million related to the reduction in the value of three indefinite-lived private label brand names. In 2011, due to the decline in our business performance, we recorded non-cash impairment charges of $2.6 million related to the reduction in the value of three indefinite-lived trade names and one indefinite-lived private label brand name. See Notes 2 and 4 in the Notes to Consolidated Financial Statements.

        Interest expense, net:    Net interest expense in 2012 was $82.8 million, or 2.8% of net sales, as compared with $89.5 million, or 3.1% of net sales, in 2011. The $6.7 million decrease primarily reflects reduced average borrowings, lower interest rates and decreased deferred fees.

        Loss (gain) on exchange/extinguishment of debt:    In 2012, we recorded a $7.1 million loss on exchange of debt related to fees associated with the exchange of our senior notes and a $1.4 million loss on extinguishment of debt related to the prepayment of mortgage debt associated with the sale of certain of our Rochester, New York stores and amortization of deferred fees associated with an amendment to our Second Amended Revolving Credit Facility. In 2011, we recorded a $9.5 million loss on the extinguishment of debt for fees associated with the voluntary prepayment of a term loan and termination of our prior revolving credit facility. Additionally, in 2011, our repurchase, at a discount, of $46.0 million (principal) amount of our Old Notes resulted in a pre-tax gain, net of costs, of $18.2 million. The aforementioned transactions resulted in a loss on exchange/extinguishment of debt of $8.5 million in 2012 and a net gain on extinguishment of debt of $8.7 million in 2011.

        Income tax provision (benefit):    The effective tax rate in each of 2012 and 2011 largely reflects the Company's valuation allowance position against all net deferred tax assets. The $0.2 million income tax provision in 2012 includes certain state income tax expense and recognition of deferred tax liabilities associated with indefinite-lived assets, partially offset by a $1.5 million benefit resulting from settlement of an uncertain tax position. The $2.0 million income tax benefit in 2011 includes a $3.2 million benefit resulting from reclassifying from accumulated other comprehensive loss the residual

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tax effect associated with certain interest rate swap contracts which expired on July 14, 2011, partially offset by certain state income tax expense and recognition of deferred tax liabilities associated with indefinite-lived assets.

2011 Compared with 2010

        Net sales:    Net sales in 2011 were $2.885 billion, a decrease of 3.2% from $2.981 billion in 2010. Comparable store sales decreased 2.8% from the prior year. Sales in merchandise categories with more traditional goods were particularly challenged in 2011, as our customer expressed a preference for updated styling. We significantly expanded our stronger selling updated merchandise throughout our families of business to increase representation of these goods. Additionally, sales of cold-weather goods across merchandise categories suffered in the fourth quarter of 2011 due to the adverse impact of milder weather in our markets. Investments in our eCommerce business resulted in significantly higher eCommerce sales in the period.

        The best performing merchandise categories in 2011 were Hard Home (included in Home), Cosmetics, Better Sportswear (included in Women's Apparel) and Footwear. Increases in Hard Home were largely due to sales of small electronics. The introduction of innovative treatment products, new fragrances and intensified sales associate education fueled the sales performance in Cosmetics. Better Sportswear sales increased due to favorable customer response to expanded offerings of trend-right fashions from key national and private brands. Footwear sales benefited from strategic capital investment for expansion and remodels in certain stores; updated assortments and new in-store environments resulted in increased sales. Our customer service training initiatives were another factor in the success in Footwear sales.

        The poorest performing categories in 2011 were Moderate Sportswear and the special size areas, Petite Sportswear and Women's Sportswear (all included in Women's Apparel). Sales in these categories were adversely impacted by substantial inventory investment in traditional product from private brand as well as national brand resources, particularly in the spring season.

        Other income:    Other income was $68.9 million, or 2.4% of net sales, in 2011 as compared with $66.0 million, or 2.2% of net sales, in 2010. Fiscal 2011 results include income of $6.5 million related to the cumulative breakage on certain unused gift and merchandise return cards issued since inception of these programs. The breakage income was partially offset by decreased revenues from our proprietary credit card operations, largely resulting from reduced sales.

        Costs and expenses:    Gross margin dollars decreased $83.0 million to $1.037 billion in 2011, reflecting both the decline in the sales volume and a decreased margin rate. Gross margin as a percentage of sales decreased 160 basis points to 36.0% in 2011, primarily reflecting an increased net markdown rate, a significant percentage of which is attributable to cold weather merchandise.

        SG&A expense decreased $6.6 million to $936.1 million in 2011 as compared with $942.7 million in 2010, primarily due to reduced incentive compensation accruals and a favorable insurance receipt, partially offset by increased marketing expenditures. We were not able to leverage the expense reduction due to the decreased sales; SG&A expense rate in 2011 increased 80 basis points to 32.4% of net sales.

        Depreciation and amortization expense and amortization of lease-related interests decreased $7.0 million, to $99.8 million in 2011 from $106.8 million in 2010, primarily due to a reduced asset base.

        In 2011, we recorded $1.1 million of non-cash asset impairment charges which resulted in a reduction in the carrying value of certain store properties due to their marginal operating performance. In 2010, we recorded $1.7 million of non-cash asset impairment charges which resulted in a reduction in the carrying value of certain store and distribution center properties.

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        In 2011, due to the decline in our business performance, we recorded non-cash impairment charges of $2.6 million related to the reduction in the value of three indefinite-lived trade names and one indefinite-lived private label brand name. There were no such similar charges in 2010.

        Interest expense, net:    Net interest expense in 2011 was $89.5 million, or 3.1% of net sales, as compared with $112.3 million, or 3.8% of net sales, in 2010. The $22.8 million decrease primarily reflects reduced borrowing levels and lower interest rates as a result of the prepayment of the term loan and the entry into the Second Amended Revolving Credit Facility, both of which occurred in the first quarter of 2011.

        Loss (gain) on exchange/extinguishment of debt:    In the first quarter of 2011, we recorded a $9.5 million loss on the extinguishment of debt, which primarily consisted of an early termination fee of $3.8 million and accelerated deferred financing fees of $4.4 million associated with the prepayment of our term loan and accelerated deferred financing fees of $1.3 million associated with our prior revolving credit facility. In the fourth quarter of 2011, we repurchased at a discount, in open market transactions, $46.0 million (principal amount) of our Old Notes. The repurchase resulted in a gain of $18.2 million. Together, the transactions resulted in a net gain on extinguishment of debt of $8.7 million.

        Income tax (benefit) provision:    The effective tax rate in each of 2011 and 2010 largely reflects the Company's valuation allowance position against all net deferred tax assets. The $2.0 million income tax benefit in 2011 includes a $3.2 million benefit resulting from reclassifying from accumulated other comprehensive loss the residual tax effect associated with certain interest rate swap contracts which expired on July 14, 2011, partially offset by certain state income tax expense and recognition of deferred tax liabilities associated with indefinite-lived assets. The $1.4 million income tax provision in 2010 includes certain state income tax expense and recognition of deferred tax liabilities associated with indefinite-lived assets, offset in part by a favorable $1.5 million tax benefit resulting from recognition of uncertain tax positions due to a statute of limitations expiration.

Liquidity and Capital Resources

        On April 2, 2012, in connection with the sale of two of our stores located in Rochester, New York, we prepaid outstanding indebtedness of $5.4 million under related mortgage loan agreements. We were required to pay an additional $1.0 million due to the early termination. In addition, $0.1 million of unamortized deferred financing fees related to the mortgage agreements was accelerated on the date of termination. The required additional payment and accelerated deferred financing fees were recognized in loss on exchange/extinguishment of debt.

        On June 4, 2012, The Bon-Ton Department Stores, Inc. (the "Issuer"), a wholly owned subsidiary of The Bon-Ton Stores, Inc. (the "Parent"), commenced an offer to certain eligible note holders to exchange the Old Notes for the New Notes upon the terms and conditions set forth in the Confidential Offering Memorandum and Consent Solicitation Statement dated June 4, 2012 (the "Exchange Offer"). The Exchange Offer expired on July 3, 2012, with the Issuer receiving tenders with consents from holders of $330.0 million principal amount of Old Notes, representing approximately 71% of the outstanding Old Notes. Upon the July 9, 2012 settlement, $330.0 million principal amount of New Notes was issued. The New Notes are guaranteed by the Parent and by each of its subsidiaries, other than the Issuer, that is an obligor under our Second Amended Revolving Credit Facility. The New Notes are secured by a second-priority lien on collateral owned by the Issuer and each of the guarantors consisting of substantially all of the Issuer's and guarantors' tangible and intangible assets securing the Second Amended Revolving Credit Facility, except for capital stock of the Issuer and certain of the Issuer's subsidiaries and certain other exceptions. The New Notes will mature on July 15, 2017. Interest on the New Notes is payable March 15 and September 15 of each year, beginning September 15, 2012. In addition, the Issuer entered into a supplemental indenture adopting

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amendments to the indenture under which the Old Notes were issued to permit the liens securing the New Notes. Fees associated with the exchange of the Old Notes and New Notes (together, the "Senior Notes") totaled $7.1 million and were recognized in loss on exchange/extinguishment of debt.

        On October 25, 2012, The Bon-Ton Department Stores, Inc. and certain subsidiaries as borrowers and certain other subsidiaries as obligors entered into a First Amendment to the Company's Second Amended Revolving Credit Facility dated March 21, 2011. Commitments for loans under the Second Amended Revolving Credit Facility are in two tranches which, prior to the First Amendment, consisted of Tranche A revolving commitments of $575.0 million (which includes a $150.0 million sub-line for letters of credit and $75.0 million for swing line loans) and Tranche A-1 revolving commitments of $50.0 million. The First Amendment (1) increased the Tranche A-1 revolving commitment to $100.0 million, (2) increased the margins applicable to borrowings under the Tranche A-1 revolving commitments by 0.25%, and (3) made certain other changes to the borrowing base calculations under the Second Amended Revolving Credit Facility. Unamortized deferred financing fees of $0.2 million associated with the Second Amended Revolving Credit Facility were accelerated upon entry into the First Amendment and were recognized in loss on exchange/extinguishment of debt.

        On January 23, 2013, we issued a notice of partial redemption for $65.0 million aggregate principal amount of our Old Notes at a cash redemption price equal to the principal amount plus accrued and unpaid interest. The redemption was completed on February 22, 2013, with associated interest of $2.9 million, for a total payment of $67.9 million. The redemption was realized through additional borrowings on the Second Amended Revolving Credit Facility and, as a result, the $65.0 million of redeemed Old Notes was classified as long-term debt as of February 2, 2013. The remaining outstanding $69.0 million aggregate principal amount of Old Notes is expected to be paid in 2013 and, therefore, was classified as current maturities of long-term debt as of February 2, 2013. Consequently, the expected maturity date of the Second Amended Revolving Credit Facility was classified as long-term debt as of February 2, 2013. The expiration date of the Second Amended Revolving Credit Facility heretofore for accounting purposes had been 60 days prior to the maturity date of the Old Notes (March 15, 2014). Given that the entirety of the Old Notes has been redeemed or is expected to be paid in 2013, for accounting purposes the maturity date of the Second Amended Revolving Credit Facility has, therefore, been extended to 2016. Unamortized deferred financing fees of $0.4 million associated with the Old Notes were accelerated upon redemption and were recognized in loss on exchange/extinguishment of debt in the first quarter of 2013.

        At February 2, 2013, we had $7.9 million in cash and cash equivalents and $517.6 million available under our Second Amended Revolving Credit Facility (before taking into account the minimum borrowing availability covenant under such facility). Excess availability was $437.8 million as of the comparable prior year period. The increase in excess availability reflects an increased borrowing base availability due to the aforementioned First Amendment, partially offset by increased direct borrowings. The year-to-year comparison of excess availability is impacted by the July 2012 receipt of a $50.0 million signing bonus from our new credit card provider, the application of which decreased borrowings. Conversely, we utilized $16.8 million of available monies for required qualified defined benefit pension plan funding in 2012.

        Typically, cash flows from operations are impacted by consumer confidence, weather in the geographic markets served by the Company, and economic and competitive conditions existing in the retail industry; a downturn in any single factor or a combination of factors could have a material adverse impact upon our ability to generate sufficient cash flows to operate our business. While the current economic uncertainty affects our assessment of short-term liquidity, we consider our resources (cash flows from operations supplemented by borrowings under the credit facility) adequate to satisfy our 2013 cash needs. While there can be no assurances, management believes there will be sufficient liquidity to cover our short-term funding needs, which includes the payment of the $69 million of outstanding Old Notes.

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        Our primary sources of working capital are cash flows from operations and borrowings under our Second Amended Revolving Credit Facility. Our business follows a seasonal pattern; working capital fluctuates with seasonal variations, reaching its highest level in October or November to fund the purchase of merchandise inventories prior to the holiday season. The seasonality of our business historically provides greatest cash flow from operations during the holiday season, with fiscal fourth quarter net sales generating the strongest profits of our fiscal year. As holiday sales significantly reduce inventory levels, this reduction, combined with net income, historically provides us with strong cash flow from operations at the end of our fiscal year.

        Cash provided by (used in) our operating, investing and financing activities is summarized as follows:

        The decrease in net cash provided by operating activities in 2012, as compared with 2011, primarily reflects the increase in the current year net loss and increased working capital requirements, partially offset by the change in loss (gain) on exchange/extinguishment of debt. Increased working capital needs in 2012 were primarily the result of increases in merchandise inventories, without the commensurate increase in accounts payable due to timing of payments, and current year pension plan contributions, partially offset by the deferred gain associated with the signing bonus from our new credit card service provider. The decrease in net cash provided by operating activities in 2011, as compared with 2010, primarily reflects a decline in business performance, resulting in a net loss in 2011 as compared with net income in 2010, partially offset by reduced working capital requirements and receipt of deferred income.

        Capital expenditures totaled $73.8 million, $67.2 million and $46.3 million in 2012, 2011 and 2010, respectively; these expenditures do not reflect reductions for external contributions (primarily leasehold improvement and fixture allowances received from landlords or vendors) of $6.9 million, $18.2 million and $6.8 million in 2012, 2011 and 2010, respectively. In 2012, significant investment was made to support our strategic initiatives in opening and remodeling of stores, information technology, and systems enhancements in our eCommerce business. We anticipate our 2013 capital expenditures will not exceed $89.0 million (excluding external contributions, primarily leasehold improvement and fixture allowances received from landlords or vendors, of $19.0 million, reducing budgeted net capital investments to $70.0 million). Projects include two new stores, ongoing store remodels, and continued information technology investments. We believe these investments will drive growth and profitable returns.

        The decrease in net cash used in financing activities in 2012 reflects net borrowings in the current year, largely due to reduced cash provided by operating activities as a result of increased working capital requirements and a decrease in the book overdraft balance. Net cash used in financing activities in 2011 was comparatively higher due to net debt payments as a result of greater cash provided by operating activities. The decrease in net cash used in financing activities in 2011, as compared with 2010, primarily reflects reduced net debt payments and cash flow generated in 2011 partially used to support cash requirements for increased capital expenditures. Financing fees incurred to amend the Second Amended Revolving Credit Facility increased cash requirements in 2011.

Credit Arrangements

        On March 21, 2011, The Bon-Ton Department Stores, Inc.; The Elder-Beerman Stores Corp.; Carson Pirie Scott II, Inc.; Bon-Ton Distribution, Inc.; and McRIL, LLC, as borrowers (the

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"Borrowers"), and the Company and certain other subsidiaries as obligors (together with the Borrowers and the Company, the "Obligors") entered into the Second Amended Revolving Credit Facility with Bank of America, N.A., as Agent, and certain financial institutions as lenders that amends and restates the Company's prior $675.0 million revolving credit facility, which was entered into on December 4, 2009 and scheduled to mature on June 4, 2013 (the "2009 Revolving Credit Facility"). The Second Amended Revolving Credit Facility initially provided for a revolving credit facility of $625.0 million that expires on the earlier of (a) March 21, 2016 and (b) the date that is 60 days prior to the earlier of the maturity date of our Old Notes and the mortgage loan facility. On October 25, 2012, the Obligors entered into the First Amendment to the Second Amended Revolving Credit Facility, which (1) increased the Tranche A-1 revolving commitment (one of two borrowing tranches that comprise the Second Amended Revolving Credit Facility) from $50.0 million to $100.0 million (resulting in an increased borrowing limit totaling $675.0 million), (2) increased the margins applicable to borrowings under the Tranche A-1 revolving commitments, and (3) made certain other changes to the borrowing base calculations under the Second Amended Revolving Credit Facility. All borrowings under the Second Amended Revolving Credit Facility are limited by amounts available pursuant to a borrowing base calculation, which is based on percentages of eligible inventory, real estate and credit card receivables, in each case subject to reductions for applicable reserves.

        The terms of the Second Amended Revolving Credit Facility are substantially based on the terms of the 2009 Revolving Credit Facility. The Borrowers are jointly and severally liable for all of the obligations incurred under the Second Amended Revolving Credit Facility and the other loan documents, which obligations are guaranteed on a joint and several basis by the Company, the other Obligors and all future domestic subsidiaries of the Obligors (subject to certain exceptions).

        Borrowings under the Second Amended Revolving Credit Facility bear interest at either (1) Adjusted LIBOR (based on the British Bankers Association per annum LIBOR Rate for an interest period selected by the Borrowers) plus an applicable margin or (2) a base rate (based on the highest of (a) the Federal Funds Rate plus 0.5%, (b) the Bank of America prime rate, and (c) Adjusted LIBOR based on an interest period of one month plus 1.0%) plus the applicable margin. The applicable margin is based upon the excess availability under the Second Amended Revolving Credit Facility. The Borrowers are required to pay an unused line fee to the lenders for unused commitments at a rate of 0.375% to 0.50% per annum, based upon the unused portion of the total commitment under the Second Amended Revolving Credit Facility.

        The Second Amended Revolving Credit Facility is secured by a first priority security position on substantially all of the current and future assets of the Borrowers and the other Obligors, including, but not limited to, inventory, general intangibles, trademarks, equipment, certain real estate and proceeds from any of the foregoing, subject to certain exceptions and permitted liens.

        The financial covenant contained in the Second Amended Revolving Credit Facility requires that the minimum excess availability be an amount greater than or equal to the greater of (1) 10% of the lesser of: (a) the aggregate commitments at such time and (b) the aggregate borrowing base at such time and (2) $50.0 million. The affirmative covenants include requirements that the Obligors and their subsidiaries provide the lenders with certain financial statements, forecasts and other reports, borrowing base certificates and notices; comply with various federal, state and local rules and regulations, their organizational documents and their material contracts; maintain their properties; and take certain actions with respect to any future subsidiaries. In addition, there are certain limitations on the Obligors and their subsidiaries, including limitations on any debt the Obligors may have in addition to the existing debt, and the terms of that debt; acquisitions, joint ventures and investments; mergers and consolidations; dispositions of property; dividends by the Obligors or their subsidiaries (dividends paid may not exceed $10.0 million in any year or $30.0 million during the term of the agreement; however, additional dividends may be paid subject to meeting other requirements); transactions with affiliates; changes in the business or corporate structure of the Obligors or their subsidiaries; prepaying,

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redeeming or repurchasing certain debt; changes in accounting policies or reporting practices, unless required by GAAP; and speculative transactions. The Second Amended Revolving Credit Facility also provides that it is a condition precedent to borrowing that no event has occurred that could reasonably be expected to have a material adverse effect, as defined in the agreement, on the Company. If we fail to comply with the financial covenant or the other restrictions contained in the Second Amended Revolving Credit Facility, mortgage loan facility or the indentures that govern our Senior Notes, an event of default would occur. An event of default could result in the acceleration of our debt due to the cross-default provisions within the debt agreements. The borrowing base calculation under the Second Amended Revolving Credit Facility contains an inventory advance rate subject to periodic review at the lenders' discretion.

        As of February 2, 2013, we had borrowings under the Second Amended Revolving Credit Facility of $154.3 million, with $517.6 million of borrowing availability (before taking into account the minimum borrowing availability covenant) and letter-of-credit commitments of $3.1 million. Our average and peak month-end borrowings under the Second Amended Revolving Credit Facility were $170.2 million and $317.3 million, respectively, in 2012.

        As of February 2, 2013, our long-term debt included $464.0 million aggregate principal amount of our Senior Notes; this balance is not reflective of the redemption of $65.0 million of Old Notes completed in February 2013. We may from time to time seek to redeem or repurchase additional outstanding Senior Notes. Such repurchases or redemptions, if any, will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors. The amounts involved may be material.

        Aside from planned capital expenditures, our primary cash requirements will be to service debt and finance working capital increases during peak selling seasons.

        We paid a quarterly cash dividend of $0.05 per share on shares of Class A common stock and common stock on February 1, 2012, May 1, 2012, August 1, 2012, November 1, 2012 and December 21, 2012 to shareholders of record as of January 13, 2012, April 13, 2012, July 13, 2012, October 15, 2012 and December 14, 2012, respectively. Additionally, a quarterly cash dividend of $0.05 per share was declared on March 19, 2013, payable May 6, 2013 to shareholders of record as of April 19, 2013. Our Board of Directors may consider dividends in subsequent periods as it deems appropriate.

Contractual Obligations and Commitments

        The following tables reflect our contractual obligations and commitments as of February 2, 2013:

Contractual Obligations

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        In addition, we expect to make cash contributions to our supplementary pension plans and the postretirement medical and life insurance benefit plan in the amount of $1.5 million, $1.3 million, $1.2 million, $1.1 million and $1.0 million in 2013, 2014, 2015, 2016 and 2017, respectively, and $3.6 million in the aggregate for the five years thereafter.

        In 2013, we expect to make a $14.5 million contribution to the qualified defined benefit pension plan. We presently do not anticipate making an additional contribution to the qualified defined benefit pension plan in 2013, but we may choose to do so in our discretion.

        Note 9 in the Notes to Consolidated Financial Statements provides a more complete description of our benefit plans.

Commitments

        Documentary letters of credit are primarily issued to support the purchasing of merchandise, which includes our private brand goods. Standby letters of credit are primarily issued as collateral for obligations related to general liability and workers' compensation insurance and other general corporate purposes. Surety bonds are for potential obligations related to workers' compensation.

        In the ordinary course of business, we enter into arrangements with vendors to purchase merchandise up to 12 months in advance of expected delivery. These purchase orders do not contain any significant termination payments or other penalties if cancelled.

Critical Accounting Policies

        Our discussion and analysis of financial condition and results of operations are based upon the Consolidated Financial Statements, which have been prepared in accordance with U.S. generally accepted accounting principles. Preparation of these financial statements required us to make estimates and judgments that affected reported amounts of assets and liabilities, revenues and expenses, and

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related disclosure of contingent assets and liabilities at the date of our financial statements. On an ongoing basis, we evaluate our estimates, including those related to merchandise returns, the valuation of inventories, long-lived assets, intangible assets, insurance reserves, contingencies, litigation and assumptions used in the calculation of income taxes and retirement and other post-employment benefits, among others. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

        Critical accounting policies are defined as those that are reflective of significant judgments and uncertainties, and could potentially lead to materially different results under different assumptions and conditions. We believe our critical accounting policies are as described below. For a discussion of the application of these and other accounting policies, see the Notes to Consolidated Financial Statements.

Inventory Valuation

        Inventories are stated at the lower of cost or market as determined by the retail inventory method. Under the retail inventory method, the valuation of inventories and the resulting gross margin is derived by applying a calculated cost-to-retail ratio to the retail value of inventories. The retail inventory method is an averaging method that has been widely used in the retail industry. Use of the retail inventory method will result in valuing inventories at the lower of cost or market if markdowns are taken timely as a reduction of the retail value of inventories.

        Inherent in the retail inventory method calculation are certain significant management judgments and estimates including, among others, merchandise markups, markdowns and shrinkage, which significantly impact both the ending inventory valuation and the resulting gross margin. These significant estimates, coupled with the fact that the retail inventory method is an averaging process, can, under certain circumstances, result in individual inventory components with cost above related net realizable value. Factors that can lead to this result include applying the retail inventory method to a group of products that is not fairly uniform in terms of its cost, selling price relationship and turnover; or applying the retail inventory method to transactions over a period of time that include different rates of gross profit, such as those relating to seasonal merchandise. In addition, failure to take timely permanent markdowns can result in an overstatement of inventory under the lower of cost or market principle. We believe the retail inventory method we use provides an inventory valuation that results in carrying inventory in the aggregate at the lower of cost or market.

        Factors considered in the determination of permanent markdowns include inventory obsolescence, excess inventories, current and anticipated demand, age of the merchandise, customer preferences and fashion trends. Demand for merchandise can fluctuate greatly. A significant increase in the demand for merchandise could result in a short-term increase in the cost of inventory purchases while a significant decrease in demand could result in an increase in the amount of excess inventory quantities on-hand. If our inventory is determined to be overvalued in the future, we would be required to recognize such costs in costs of goods sold and reduce operating income at the time of such determination. Therefore, although every effort is made to ensure the accuracy of forecasts of merchandise demand, any significant unanticipated changes in demand or in economic conditions within our markets could have a significant impact on the value of our inventory and reported operating results.

        As of February 2, 2013 and January 28, 2012, approximately 32% of the Company's merchandise inventories were valued using a first-in, first-out ("FIFO") cost basis and approximately 68% of merchandise inventories were valued using a last-in, first-out ("LIFO") cost basis. There was no effect on costs of merchandise sold for LIFO valuations in 2012, 2011 and 2010. If the FIFO method of inventory valuation had been used for all inventories, the Company's merchandise inventories would

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have been lower by $6.8 million at February 2, 2013 and January 28, 2012 due to the Company having recognized prior years' cost increases associated with its LIFO calculations. The Company's LIFO calculations yielded inventory increases due to deflation reflected in price indices used. The LIFO method values merchandise sold at the cost of more recent inventory purchases (which the deflationary indices indicated to be lower), resulting in the general inventory on-hand being carried at the older, higher costs. Given these higher values and the promotional retail environment, the Company has reduced the carrying value of its LIFO inventories to an estimated realizable value, with reductions of $38.9 million to offset the $45.7 million cumulative inventory increases generated by its computation of LIFO inventory as of February 2, 2013 and with reductions of $37.2 million to offset the $44.0 million cumulative inventory increases generated by its computation of LIFO inventory as of January 28, 2012.

Vendor Allowances

        As is standard industry practice, allowances from merchandise vendors are received as reimbursement for charges incurred on marked-down merchandise. Vendor allowances are recorded when determined to be collectable. Allowances are credited to costs of goods sold, provided the allowance is: (1) for merchandise permanently marked down or sold, (2) not predicated on a future purchase, and (3) not predicated on a future increase in the purchase price from the vendor. If the aforementioned criteria are not met, the allowances are recorded as an adjustment to the cost of merchandise capitalized in inventory and reflected as a reduction of costs of merchandise sold when the related merchandise is sold.

        Additionally, allowances are received from vendors in connection with cooperative advertising programs and for reimbursement of certain payroll expenses. To the extent the reimbursements are for specific, incremental and identifiable advertising or payroll costs incurred to sell the vendor's products and do not exceed the costs incurred, they are recognized as a reduction of SG&A expense. If the aforementioned criteria are not met, the allowances are recorded as an adjustment to the cost of merchandise capitalized in inventory and reflected as a reduction of costs of merchandise sold when the related merchandise is sold.

Income Taxes

        Significant management judgment is required in determining the provision for income taxes, deferred tax assets and liabilities, and the valuation allowance recorded against net deferred tax assets. The process involves summarizing temporary differences resulting from differing treatment of items for tax and accounting purposes. These differences result in deferred tax assets and liabilities, which are included within the consolidated balance sheet. In addition, we are required to assess whether valuation allowances should be established against our deferred tax assets based on consideration of all available evidence using a "more likely than not" standard. To the extent a valuation allowance is established in a period, an expense must generally be recorded within the income tax provision in the statement of operations.

        We reported net deferred tax liabilities of $5.2 million and $3.8 million at February 2, 2013 and January 28, 2012, respectively. In assessing the realizability of our deferred tax assets, we considered whether it is more likely than not that our deferred tax assets will be realized based upon all available evidence, including scheduled reversal of deferred tax liabilities, historical operating results, projected future operating results, tax carry-back availability and limitations pursuant to Section 382 of the Internal Revenue Code, among others. Significant weight is given to evidence that can be objectively verified. As a result, current or previous losses are given more weight than any projected future taxable income. In addition, a recent three-year historical cumulative loss is considered a significant element of negative evidence that is difficult to overcome.

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        We evaluate our deferred tax assets each reporting period, including assessment of the Company's cumulative income or loss over the prior three-year period, to determine if valuation allowances are required. With respect to our reviews during 2010, 2011 and 2012, our three-year historical cumulative loss and the continuation of uncertain near-term economic conditions impeded our ability to rely on our projections of future taxable income in assessing valuation allowance requirements. As such, we concluded it was necessary to continue to maintain a full valuation allowance on our net deferred tax assets.

        Our deferred tax asset valuation allowance totaled $152.7 million and $147.1 million at February 2, 2013 and January 28, 2012, respectively. If actual results differ from these estimates or these estimates are adjusted in future periods, the valuation allowance may need to be adjusted, which could materially impact our financial position and results of operations. If sufficient positive evidence arises in the future indicating that all or a portion of the deferred tax assets meet the more likely than not standard for realization, the valuation allowance would be reduced accordingly in the period that such a conclusion is reached.

        We recognize the effect of income tax positions only if those positions are more likely than not of being sustained. Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs. Interpretations and guidance surrounding income tax laws and regulations change over time, and changes to our assumptions and judgments could materially impact our financial position and results of operations.

Long-lived Assets

        Property, fixtures and equipment are recorded at cost and are depreciated on a straight-line basis over the estimated useful lives of such assets. Changes in our business model or capital strategy can result in the actual useful lives differing from estimates. In cases where we determined the useful life of property, fixtures and equipment should be shortened, we depreciated the net book value in excess of the salvage value over the revised remaining useful life, thereby increasing depreciation expense. Factors such as changes in the planned use of fixtures or leasehold improvements could also result in shortened useful lives. Our net property, fixtures and equipment amounted to $652.8 million and $677.1 million at February 2, 2013 and January 28, 2012, respectively.

        We are required to test a long-lived asset for recoverability whenever events or changes in circumstances indicate that its carrying value may not be recoverable. Factors that could trigger an impairment review include the following:

•

Significant underperformance of stores relative to historical or projected future operating results,



•

Significant changes in the manner of our use of assets or overall business strategy, and



•

Significant negative industry or economic trends for a sustained period.

        If the undiscounted cash flows associated with the asset are insufficient to support the recorded asset, an impairment loss is recognized for the amount (if any) by which the carrying amount of the asset exceeds the fair value of the asset. Cash flow estimates are based on historical results, adjusted to reflect our best estimate of future market and operating conditions. Estimates of fair value are determined through various techniques, including discounted cash flow models utilizing a discount rate the Company believes is appropriate and would be used by market participants and market approaches using data that includes recent sales of comparable properties with similar characteristics, as considered necessary. Should cash flow estimates differ significantly from actual results, an impairment could arise and materially impact our financial position and results of operations. Given the seasonality of operations, impairment is not conclusive, in many cases, until after the holiday period in the fourth quarter is concluded.

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        Newly opened stores may take time to generate positive operating and cash flow results. Factors such as store type, store location, current marketplace awareness of private label brands, local customer demographic data and current fashion trends are all considered in determining the time-frame required for a store to achieve positive financial results. If conditions prove to be substantially different from expectations, the carrying value of new stores' long-lived assets may ultimately become impaired.

        We evaluated the recoverability of our long-lived assets and, as a result, in 2012 we recognized impairment charges of $5.1 million which resulted in a reduction in the carrying amount of certain marginally performing store properties. In 2011 and 2010 we recognized asset impairment charges of $1.1 million and $1.7 million, respectively, which resulted in a reduction in the carrying amount of certain store and distribution center properties. These analyses anticipate certain economic conditions. Should economic conditions be worse than anticipated, additional impairment charges could result.

Intangible Assets

        Net intangible assets totaled $110.6 million and $119.2 million at February 2, 2013 and January 28, 2012, respectively. Our intangible assets at February 2, 2013 are principally comprised of $51.7 million of lease interests that relate to below-market-rate leases and $58.8 million associated with trade names, private label brand names and customer lists. The lease-related interests are being amortized using a straight-line method. The customer lists are being amortized using a declining-balance method. At February 2, 2013, lease-related interests and customer lists had average remaining lives of 12 years and six years, respectively, for amortization purposes. At February 2, 2013, trade names and private label brand names of $50.7 million have been deemed as having indefinite lives.

        Intangible assets subject to amortization are reviewed for impairment. Fair value is determined using a discounted cash flow analysis, which requires certain assumptions and estimates regarding industry economic factors, and utilizes a discount rate the Company believes is appropriate and would be used by market participants.

        Intangible assets not subject to amortization are reviewed for impairment at the reporting unit level at least annually or when events or changes in circumstances indicate it is more likely than not that the carrying value of these assets exceeds their implied fair values. In determining fair value for these intangible assets, the Company utilizes a relief from royalty method to determine the assets' fair value. The relief from royalty method estimates the theoretical royalty savings from ownership of these intangible assets. Key assumptions include royalty rates, sales projections and discount rates. The Company utilizes royalty and discount rates it believes are appropriate and would be used by market participants.

        The Company's policy is to conduct impairment testing based on its most current business plans, which reflect anticipated changes in the economy and the industry.

        In 2012, we recorded an asset impairment charge of $0.8 million related to a reduction in the value of three indefinite-lived private label brand names. As a result of the decline in our business performance in 2011, we recognized asset impairment charges of $2.4 million and $0.2 million on three indefinite-lived trade names and one private label brand name, respectively. No adjustment was required pursuant to our review of the carrying amount of intangible assets in 2010.

        Should significant changes in the manner of our use of assets or overall business strategy, future results or economic events cause us to adjust our projected cash flows, future estimates of fair value may not support the carrying amount of these assets. If actual results prove inconsistent with our assumptions and judgments, we could be exposed to a material impairment charge.

Insurance Reserve Estimates

        We use a combination of insurance and self-insurance for a number of risks, including workers' compensation, general liability and employee-related health care benefits, a portion of which is paid by

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our associates. We determine the estimates for the liabilities associated with these risks by considering historical claims experience, demographic factors, severity factors and other actuarial assumptions. A change in claims frequency and severity of claims from historical experience as well as changes in state statutes and the mix of states in which we operate could result in a change to the required reserve levels.

Pension and Supplementary Retirement Plans

        We provide an unfunded non-qualified defined benefit supplementary pension plan to certain key executives. Through acquisitions, we acquired a qualified defined benefit pension plan and assumed the liabilities of non-qualified defined benefit supplementary pension plans and a postretirement benefit plan. Major assumptions used in accounting for these plans include the discount rate and the expected long-term rate of return on the defined benefit plan's assets.

        The discount rate assumption is evaluated annually. We utilize the Citibank Pension Discount Curve to develop the discount rate assumption. A single constant discount rate is developed based on the expected timing of the benefit payments.

        We base our asset return assumption on current and expected allocations of assets, as well as a long-term view of expected returns on the plan asset categories. We assess the appropriateness of the expected rate of return on an annual basis and, when necessary, revise the assumption. At February 2, 2013, our target pension plan asset allocation was 57% equity securities, 33% fixed income and 10% hedge funds.

        Changes in the assumptions regarding the discount rate and expected return on plan assets may result in materially different expense and liability amounts. Actuarial estimations may differ materially from actual results, reflecting many factors including changing market and economic conditions, changes in investment strategies, higher or lower withdrawal rates and longer or shorter life-spans of participants. In addition, the funded status of this plan and the related cost reflected in our financial statements are affected by various factors that are subject to an inherent degree of uncertainty, particularly in the current economic environment. Losses of asset values of the defined benefit pension plan may require us to fund obligations earlier than we forecasted in order to meet minimum federal government requirements, which would have a negative impact on cash flows from operations.

Recently Issued Accounting Standards

        In February 2013, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2013-02, Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income ("ASU 2013-02"). ASU 2013-02 requires disclosure of amounts reclassified out of accumulated other comprehensive income by component. In addition, an entity is required to present either on the face of the statement of operations or in the notes, significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net income but only if the amount reclassified is required to be reclassified to net income in its entirety in the same reporting period. For amounts not reclassified in their entirety to net income, an entity is required to cross-reference to other disclosures that provide additional detail about those amounts. ASU 2013-02 is effective for interim and annual periods for fiscal years beginning after December 15, 2012. We do not expect the adoption of ASU 2013-02 to have an impact on our consolidated financial position, results of operations or cash flows as it requires only a change in the format of presentation.

        In July 2012, ASU No. 2012-02, Testing Indefinite-Lived Intangible Assets for Impairment ("ASU 2012-02"), was issued, amending FASB Accounting Standards Codification Topic 350 ("ASC 350") to simplify the impairment testing of indefinite-lived intangible assets by allowing an entity to make a qualitative impairment assessment. Entities are required to test indefinite-lived intangible assets for impairment at least annually and more frequently if indicators of impairment exist. The addition of the optional qualitative assessment permits an entity to consider events and circumstances

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that could affect the fair value of the indefinite-lived intangible asset and if the entity concludes, based on an evaluation of all relevant qualitative factors, that it is not more likely than not that the fair value of an indefinite-lived intangible asset is less than its carrying amount, it will not be required to perform the quantitative impairment test for that asset. The amendments to ASC 350 made by ASU 2012-02 are effective for interim and annual periods for fiscal years beginning after September 15, 2012. We do not expect the adoption of ASU 2012-02 to have a material impact on our consolidated financial statements.

Item 7A.    Quantitative and Qualitative Disclosures About Market Risk

Market Risk and Financial Instruments

        We are exposed to market risk associated with changes in interest rates. To provide some protection against potential rate increases associated with our variable-rate borrowing facilities, we have previously entered into, and may in the future enter into, interest rate swap agreements to change the fixed/variable interest rate mix of our debt portfolio in order to maintain an appropriate balance of fixed-rate and variable-rate debt and to mitigate the impact of volatile interest rates. We have not entered into new interest rate swap agreements since the expiration of our prior interest rate swaps on July 14, 2011. During 2012 and 2011, we did not enter into or hold derivative financial instruments for trading purposes.

        The following table presents principal cash flows and related weighted average interest rates by expected maturity dates at February 2, 2013:

Seasonality and Inflation

        Our business, like that of most retailers, is subject to seasonal fluctuations, with the major portion of sales and income realized during the second half of each fiscal year, which includes the holiday season. See Note 18 in the Notes to Consolidated Financial Statements for the Company's quarterly results for 2012 and 2011. Due to the fixed nature of certain costs, SG&A expense is typically higher as a percentage of net sales during the first half of each year. Working capital requirements fluctuate during the year as well and generally reach their highest levels during the third and fourth quarters.

        Because of the seasonality of our business, results for any quarter are not necessarily indicative of results that may be achieved for a full year. In addition, quarterly operating results are impacted by the

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timing and amount of revenues and costs associated with the opening of new stores and the closing and remodeling of existing stores.

        We do not believe inflation has had a material effect on operating results during the past three years. While we experienced some inflationary conditions in our merchandise and transportation costs in the spring season of 2012 and throughout 2011, we are anticipating merchandise cost decreases of approximately eight percent in the spring season of 2013 from spring 2012 levels, and merchandise costs ranging from flat to decreases of approximately six percent in fall 2013 from fall 2012.

Item 8.    Consolidated Financial Statements and Supplementary Data

        Information called for by this item is set forth in the Consolidated Financial Statements and Financial Statement Schedule contained in this report and is incorporated herein by this reference. See index at page F-1.

Item 9.    Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

        None.

Item 9A.    Controls and Procedures

        Attached as exhibits to this Form 10-K are certifications of the Company's Chief Executive Officer and Chief Financial Officer, which are required by Rule 13a-14 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). This "Controls and Procedures" section includes information concerning the controls and controls evaluation referred to in the certifications. This section should be read in conjunction with the certifications for a more complete understanding of the topics presented.

Evaluation of Disclosure Controls and Procedures

        We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in reports filed pursuant to the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC's rules, regulations and forms, and that such information is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. Our management, including our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) as of the end of the period covered by this report and, based on this evaluation, concluded that our disclosure controls and procedures are effective.

Management Report on Internal Control over Financial Reporting

        The Company's management is responsible for establishing and maintaining adequate internal control over financial reporting to provide reasonable assurance regarding the reliability of its financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles. Internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the Company's assets; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that the Company's receipts and expenditures are being made only in accordance with authorizations of management and the directors of the Company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of its assets that could have a material effect on the financial statements.

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        Management assessed the Company's internal control over financial reporting as of February 2, 2013, the end of its 2012 fiscal year. Management based its assessment on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Management's assessment included evaluation of such elements as the design and operating effectiveness of key financial reporting controls, process documentation, accounting policies and the Company's overall control environment.

        Based on its assessment, management has concluded that the Company's internal control over financial reporting was effective as of the end of the 2012 fiscal year to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external reporting purposes in accordance with U.S. generally accepted accounting principles. The results of management's assessment were reviewed with the Audit Committee of the Company's Board of Directors.

        KPMG LLP independently assessed the effectiveness of the Company's internal control over financial reporting. KPMG LLP has issued an attestation report, which is included below.

Report of Independent Registered Public Accounting Firm

The Board of Directors and Shareholders
The Bon-Ton Stores, Inc.:

        We have audited The Bon-Ton Stores, Inc.'s internal control over financial reporting as of February 2, 2013, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Bon-Ton Stores, Inc.'s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company's internal control over financial reporting based on our audit.

        We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

        A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

        Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject

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to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

        In our opinion, The Bon-Ton Stores, Inc. maintained, in all material respects, effective internal control over financial reporting as of February 2, 2013, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

        We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of The Bon-Ton Stores, Inc. and subsidiaries as of February 2, 2013 and January 28, 2012, and the related consolidated statements of operations, comprehensive (loss) income, shareholders' equity, and cash flows for each of the fiscal years in the three-year period ended February 2, 2013, and the related financial statement schedule, and our report dated April 17, 2013 expressed an unqualified opinion on those consolidated financial statements and the related financial statement schedule.

/s/ KPMG LLP

Harrisburg, Pennsylvania
April 17, 2013

Inherent Limitations on Effectiveness of Controls

        Our management, including the Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls or internal control over financial reporting will prevent or detect all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system's objectives will be met. The design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Further, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements because of error or fraud will not occur or that all control issues and instances of fraud, if any, within our Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of a simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based, in part, on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Projections of any evaluation of controls effectiveness to future periods are subject to risks. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures.

Changes in Internal Control Over Financial Reporting

        There were no changes to the Company's internal control over financial reporting that occurred during the fourteen weeks ended February 2, 2013 that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

Item 9B.    Other Information

        None.

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PART III

Item 10.    Directors, Executive Officers and Corporate Governance

        As part of our system of corporate governance, our Board of Directors has adopted a Code of Ethical Standards and Business Practices applicable to all directors, officers and associates. This Code is available on our website at www.bonton.com.

        The information regarding executive officers is included in Part I under the heading "Executive Officers." The remainder of the information called for by this Item is incorporated by reference to the sections entitled "Election of Directors," "Section 16(a) Beneficial Ownership Reporting Compliance" and "Corporate Governance and Board of Directors Information" of the Proxy Statement.

Item 11.    Executive Compensation

        The information called for by this Item is incorporated by reference to the section entitled "Executive Compensation" of the Proxy Statement.

Item 12.    Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

        The information called for by this Item is incorporated by reference to the sections entitled "Security Ownership of Directors and Executive Officers" and "Equity Compensation Plan Information" of the Proxy Statement.

Item 13.    Certain Relationships and Related Transactions, and Director Independence

        The information called for by this Item is incorporated by reference to the sections entitled "Related Party Transactions" and "Director Independence" of the Proxy Statement.

Item 14.    Principal Accountant Fees and Services

        The information called for by this Item is incorporated by reference to the section entitled "Fees Paid to KPMG" of the Proxy Statement.

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PART IV

Item 15.    Exhibits and Financial Statement Schedules

(a)

The following documents are filed as part of this report:



1.

Consolidated Financial Statements—See the Index to Consolidated Financial Statements and Financial Statement Schedule on page F-1.



2.

Financial Statement Schedule—See the Index to Consolidated Financial Statements and Financial Statement Schedule on page F-1.



(b)

The following are exhibits to this Form 10-K. If the exhibits are incorporated by reference, we have indicated the document previously filed with the SEC in which the exhibit was included.

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