HBC Q2 loss grows as retailer repositions to focus on Hudson's Bay, Saks banners

TORONTO — Hudson's Bay Co. reported a $984-million loss in its latest quarter as its bottom line was eroded by a number of one-time charges and its flagship Canadian retail banner experienced weaker sales compared with last year.

The owner of the Hudson's Bay chain of department stores, as well as the New York-based Saks Fifth Avenue luxury chain and Saks Off 5th outlets, said the loss amounted to $5.35 per share for the quarter ended Aug. 3.

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That compared with a year-earlier loss of $280 million or $1.45 per share.

HBC's overall revenue totalled $1.9 billion, roughly the same as a year ago, while comparable sales fell 0.4 per cent.

Comparable sales at the Hudson's Bay chain fell 3.4 per cent in the quarter. Saks Fifth Avenue’s comparable sales grew 0.6 per cent, while Saks Off 5th comparable sales increased 3.4 per cent.

Hudson's Bay officials said in a conference call that the second quarter was disappointing, but expressed confidence that they're taking the steps necessary build to build its two core retail businesses and to find value from its real estate.

"At Saks Fifth Avenue, we feel strongly about our position in an increasingly competitive environment and remain committed to driving further upside to this business," HBC chief executive Helena Foulkes said.

"For Hudson's Bay, we are continuing to fix the fundamentals within our merchandise strategy and service model."

Foulkes said there is more to be done to re-invigorate The Bay's product lineup to be more appealing to a slightly more upscale customer but repeatedly expressed confidence that it has a distinctive, valuable role to play for the long-term.

"Even so, on a two-year basis, Hudson's Bay (comparable sales) declined four per cent — a clear signal that we have more work to do."

Foulkes, who has been bluntly critical of The Bay's attempt to woo former customers of Sears Canada with middle-of-the-road merchandise and price discounting, said Thursday that HBC has cut out more than 300 unproductive brands.

The Hudson's Bay stores that remain in its lineup are profitable so no closures are planned, she said, but HBC is looking at different uses for space within the locations — such as WeWork short-term office space in Toronto.

Merchandise brands are also interested in entering the Canadian market through the Bay stores, she said.

"For 50 per cent of Canadians, they live within 16 kilometres of our store. I think that speaks to the overall brand we have in the country."

The results came as HBC's independent directors evaluate an offer by a group of shareholders led by executive chairman Richard Baker, who want to take the company private at a price of $9.45 per share.

The deal is opposed by other investment firms including Catalyst Capital Group Inc., which revealed in a regulatory filing this week that it controlled about a 16 per cent stake in HBC, as well as Land & Buildings Investment Management.

HBC's shares traded Thursday in a narrow range between $9.77 and $10.13 in Toronto, above the Baker group's offer and closer to the $10.11 per share that Catalyst said it paid to buy 18.5 million shares last month.

Among the one-time items in HBC's most recent quarter that added to its net loss was a $150-million non-cash writedown of the value of Canadian deferred income tax assets, which may not be fully usable.

Other unusual items were related to the closure of HBC's Home Outfitters chain in Canada and some Saks Off 5th locations. There were also items related to a change in vendor relationships.

Excluding one-time items, HBC says its normalized net loss for the quarter was $171 million or 93 cents per share, compared with a normalized net loss of $85 million or 46 cents per share in the same quarter last year.

Analysts had estimated an adjusted loss of 73 cents per share with about $2.1 billion of revenue for the quarter, according to financial markets data firm Refinitiv.

In August, HBC announced it will sell its Lord & Taylor banner to Le Tote, a clothing rental company.

That follows HBC's previously announced plan to sell its remaining German holdings for $1.5 billion to its joint venture partner, a deal that was announced almost simultaneously with the Baker group's offer to take the company private.

HBC executives said Thursday that the process for selling the German holdings has advanced but hasn't yet closed.

Companies in this story: (TSX:HBC)

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