Hudson’s Bay Company (HBC) CEO Helena Foulkes has hailed progress on a “number of crucial fronts” despite a drop in first-quarter sales.
For the 13 weeks ended 4 May, net income totalled CAD275m, compared to a net loss of CAD398m in the prior-year quarter. The increase in profit reflected the CAD817m gain from the sale of the Lord and Taylor flagship building in New York City. In February, HBC sold the flagship for a transaction value of CAD1.1bn, while retaining a preferred equity interest in the building which is expected to be transformed into a higher use by its partners. Excluding one time items, HBC’s normalised net loss was CAD209m.
First quarter gross profit declined year-over-year by CAD48m, which was offset by a $54m decrease in selling, general and administrative expenses (SG&A).
Gross margin in the period was 39%, down 90 basis points year-over-year. HBC said about half of the decline is due to store closures, with the balance driven by a higher proportion of clearance sales in this year’s first quarter.
First-quarter revenue, meanwhile, amounted to CAD2.1bn, a decrease of CAD72m, or 3.3%, primarily due to operating fewer stores than a year ago and the comparable sales decline at Lord and Taylor.
HBC announced last month it is pursuing strategic alternatives for the Lord and Taylor operating business, including a possible sale or merger, and is closing Home Outfitters by the end of the second quarter.
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By GlobalDataOverall comparable sales decreased by 2.1% but edged up 0.3% excluding Lord + Taylor and Home Outfitters.
Comparable sales at Saks Fifth Avenue grew for the eighth consecutive quarter, increasing by 2.4%, delivering an “industry-leading” two-year stacked comp of 8.4%. HBC said each major merchandise category grew year-over-year, with notable strength in men’s and women’s designer and ready-to-wear.
Hudson’s Bay’s comparable sales decreased by 4.3%, however, with its two-year stacked comp down 1.1%, an improvement from the prior quarter’s two-year stacked comp due to sequential improvements at flagship locations.
Meanwhile, Saks Off 5th returned to comparable sales growth for the first time since the second quarter of fiscal 2017. First-quarter comparable sales increased 4.4% propelling the business unit to a two-year stacked comp of up 0.9%.
“We are seeing progress on a number of crucial fronts from our continued work to fix the fundamentals and reposition HBC for the future,” said Helena Foulkes, HBC CEO. “Strategically, we have simplified the organisation and placed a greater emphasis on our North American retail operations. We are exercising financial discipline while making the necessary investments to capitalise on our greatest opportunities – Hudson’s Bay and Saks Fifth Avenue.
“Once the European transactions are complete, we will have finished two real estate transactions at near or better than our estimated equity values. The real estate transactions and our pursuit of strategic alternatives for Lord and Taylor, further demonstrate the bold actions we’ve taken to move the company forward and we are optimistic about our prospects.”
Last week, HBC agreed to sell the company’s remaining stake in its German real estate joint venture, divest its related retail joint venture, and assume certain obligations for a total consideration of CAD1.5bn (US$1.13bn).
The announcement came amid the news a group of its shareholders wants to take the company private with a special committee having been formed by the HBC board to review plans to privatise the company at a cash price of CAD9.45 per share.
