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Hudson’s Bay Reports Second Quarter Results

After recently announcing its acquisition of Saks Inc., Hudson’s Bay Co. posted second quarter results for the 13-week period ended August 3. Consistent with the first quarter of fiscal 2013, strong comparable store sales growth at Hudson’s Bay and rising e-commerce revenues characterized the second quarter, the company reported, however, a decline in comparable store sales at Lord & Taylor partially offset positive operating trends.

Second quarter highlights included consolidated sales of $947.7 million, a 3.9% increase compared to the second quarter of 2012. With regard to comps: Consolidated same store sales grew 3.5%. Hudson’s Bay same store sales grew 6.2%, and Lord & Taylor same store sales declined 1.2%. E-commerce sales were $37.3 million, an increase of 56.1% compared to the second quarter of 2012. 

“Hudson’s Bay continues to demonstrate industry-leading sales growth,” stated Richard Baker, HBC’s governor and CEO. “This performance has been driven by a continued focus on our stated strategic initiatives. We are seeing strong performance from stores and departments that have recently received capital investments. We are also pleased by the continued growth of our e-commerce sales, which accelerated in the second quarter, and are up approximately 45% year-to-date following our re-launch of both banner websites. Our online business was a key factor in our results and reflects our increased investment in this component of our business. We are confident that our inventory is well-positioned for the fall season and expect stronger financial performance from Lord & Taylor and the overall business in the back half of the year.”

On July 29, Hudson’s Bay Co. and Saks Inc. announced that they entered into a definitive merger agreement, whereby Hudson’s Bay agreed to acquire all of the issued and outstanding shares of Saks in an all-cash transaction valued at approximately U.S. $2.9 billion, including debt. Subsequent to the end of the second quarter, on August 20, the company announced that it had entered into an underwriting agreement with a syndicate of underwriters to sell 16,050,000 subscription receipts  at a price of $17.15 per receipt, for aggregate gross proceeds of $275.3 million. The company will use the proceeds from the subscription receipts offering to finance a portion of the acquisition, the company reported.

The company has declared a dividend of 9.375 cents per common share of the Hudson’s Bay Co. stock, payable on October 15. Subsequent to the closing of the acquisition, the company expects to reduce its quarterly dividend to five cens per share to accelerate deleveraging of debt in the short-term.

The acquisition will bring together three of the retail industry’s best known department store brands, Hudson’s Bay, Lord & Taylor and Saks Fifth Avenue, to create a leading North American retailer addressing a broad consumer spectrum across the luxury, mid-tier and outlet retail sectors, according to HBC. The combined company will operate 321 stores, including 179 full-line department stores, 73 outlet stores and 69 home stores in prime retail locations throughout the U.S. and Canada, along with three e-commerce sites. The combined company would have generated pro forma sales and normalized EBITDA in fiscal 2012 of $7.2 billion and $600 million, respectively, before any synergies. Hudson’s Bay expects to achieve $100 million of annual synergies within three years, it reported.