As Hudson’s Bay has expanded its retail and real estate initiatives, the company reported what it termed a challenging third quarter, posting a wider net loss.
For the 13 weeks ended October 29, Hudson’s Bay Co. posted a net loss, in U.S. dollars, of $94 million, or 52 cents per diluted share, compared to net earnings of $5.26 million, or three cents per diluted share, in the prior-year period.
Earnings in the year-earlier quarter included a net gain of $68.4 million related to the dilution gains from investments in joint ventures compared to $2.26 million in the current year, HBC maintained. Adjusted net loss was $76.71 million compared to an adjusted net loss of $750,000 in the prior-year quarter. The loss primarily resulted from increased rent expenses to joint ventures, a partnership Hudson’s Bay entered with real estate concerns in part to sell and lease back certain assets, and third parties, as well as higher depreciation and amortization expenses, lower comparable sales and increased finance costs.
Company comparable sales declined 4% or 3.6% on a constant currency basis, from the quarter a year previous. Comps, on a constant currency basis, slipped 2.4% at the Department Store Group, including the Hudson’s Bay and Lord & Taylor banners, 2.2% at HBC Europe, 8.4% at HBC Off Price and 4.6% at Saks Fifth Avenue. Total digital sales advanced 73% from the prior year, with total digital comparable sales up 5.4% on a constant currency basis. Total digital comps at Legacy HBC, which includes operations other than Gilt and HBC Europe, increased 12.9% on a constant currency basis.
Consolidated retail sales were $2.48 billion versus $1.93 million in the quarter a year earlier.
At the department store group, Hudson’s Bay and Lord & Taylor are focused on strengthening outperforming categories such as dresses and active wear while optimizing its home goods business while better utilizing existing space through the addition of new categories including toys, the company noted. Saks Fifth Avenue is emphasizing sourcing exclusive and limited distribution product in order to differentiate its offerings.
HBC’s off price banners, including Off 5th, are refocusing on their core strategy to move away from promotions, provide high end brands at everyday value and establish a wider range of pricepoints. The Gilt operation will develop a brand partnership program to include new up-and-coming labels in addition to securing exclusive launches and collaborations.
“During the third quarter we continued to execute our all channel strategy in the face of a retail environment where there were challenges in the women’s apparel, department store and luxury segments,” said Richard Baker, HBC’s governor and executive chairman. “To address this we are continuing to move aggressively, making specific improvements both in our digital and brick and mortar operations that will allow us to better serve our customers. During the quarter, we finished installing our world-class robotic fulfillment system in Canada and are already leveraging this technology at Hudson’s Bay during the busy holiday season. We are also excited about our progress in Europe. During the quarter, we took advantage of a favorable lending environment to reprice our term loan, which will reduce our interest costs going forward. We believe our world class real estate portfolio, which is less affected by near-term retail trends, continues to provide substantial value to the company.”
Jerry Storch, HBC’s CEO, added, “Sales were challenging in the third quarter, but we believe our all-channel strategy is the right long-term strategy for generating profitable growth. We continue to focus on delighting our customers and building a digital and brick and mortar platform that will allow them to shop whenever, wherever and however they choose. Many of our initiatives revolve around finding new ways to wow our customers and offering tailored, exclusive product, which we expect will drive sales across all of our banners. While we have made considerable progress on increasing efficiencies during the last year, we believe that there are further areas for improvement, and we will continue to evaluate our options. We remained focused on inventory management during the quarter and despite lower than expected sales, driven by challenges in some of our markets, comparable inventory levels decreased by approximately 2% from the prior year.”
Hudson’s Bay operates more than 480 stores across its retail banners.
