Hudson’s Bay Posts Loss Amid Expansion Moves

In its second quarter, Hudson’s Bay posted a net loss while sales surged as the department store retailer continued to expand in Europe and open new stores.

For the second quarter ended July 30, Hudson’s Bay Co. posted, in U.S. dollars, a net loss of $110 million, or 60 cents per diluted share, versus $45.7 million, or 22 cents per diluted share, in the fiscal 2015 quarter, while adjusted net loss was $94.5 million versus an adjusted net loss of $47.3 million in the year-prior period.

Comparable sales increased 1.9% in the quarter year over year, but slipped 1.3% on a constant currency basis. In the period year over year, on a constant currency basis, comparable sales grew 1.1% at the department store group, consisting of the Lord & Taylor, Hudson’s Bay and Home Outfitters banners, offset by declines of 0.9% at HBC Europe, consisting of Galeria Kaufhof, Galeria Inno and Sportarena banners, 11.4% at its off price division, consisting of the Saks Off 5th and Gilt banners, and 1.3% at Saks Fifth Avenue.

Consolidated retail sales were $3.25 billion, up 59.6% from the prior-year period, primarily as a result of the addition of HBC Europe and Gilt. Total digital sales increased by 84.4% from the prior year, with digital comps up 1.4% on a constant currency basis. Excluding off price results, digital comps increased 17.3%.

“The second quarter was another solid quarter for HBC,” said Richard Baker, Hudson’s Bay governor and executive chairman. “We continued to execute on our expansion plans in Europe with the announcement that we would be introducing our iconic Hudson’s Bay banner to the Netherlands. We currently plan to open up to 20 stores and during the quarter signed long-term lease agreements for 11 locations. We also announced the first five Saks Off 5th locations in Germany, which we expect to open next summer. In New York, we closed a U.S. $400 million, five-year mortgage on our Lord & Taylor flagship location on Fifth Avenue, which valued the property at U.S. $655 million based on an independent appraisal. This transaction, as well as the attractive rate we secured, exemplifies both the value of our real estate portfolio and the significant financial flexibility that it provides to HBC as we work through a challenging retail environment.”

Jerry Storch, HBC’s CEO, added, “In the second quarter, we made good progress on focusing on expenses and leveraging our scale to increase efficiencies. Gross margins increased 200 basis points as a result of the inclusion of HBC Europe as well as our revised pricing strategy at Saks Off 5th. To support our digital growth, we are bringing industry-leading robotic technology to Canada, which we expect will reduce digital order processing time and generate significant savings. As we look towards the second half, we are monitoring the retail environment closely and are taking prudent steps to ensure that HBC is in a position to capitalize on the opportunities presented as we anniversary last year’s tough third and fourth quarters. Despite the uncertainty in the current environment, we remain focused on executing on our long-term strategy for profitable growth.”

Hudson’s Bay operates 470 stores across its retail banners.