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HBC expands Q3 loss, but Saks shines

Hudson’s Bay Co. reported a higher loss in its third quarter amid higher depreciation and amortization expenses and foreign exchange losses.

The department store giant’s net loss for the third quarter widened to C$124 million ($93.36 million) from C$116 million in the year-ago period. Adjusted earnings before interest, taxes, depreciation and amortization rose to C$63 million from C$40 million, fueled by sales growth and improved gross margin and expense rates.

Revenue rose 5.6% to $2.187 billion. Overall same-store sales increased 2.9%, with total comparable digital sales increasing 8.0%. By brand, same-store sales increased 7.3% at Saks Fifth Ave., and 0.9% at DSG (Hudson's Bay, Lord & Taylor and Home Outfitters). Comp sales at Saks Off 5th fell 2.3%

Helena Foulkes, HBC’s CEO, said the company was encouraged by the ongoing improvement of its business, with year-to-date Adjusted EBITDA of $151 million, up $106 million from the prior year.

“The bold strategic actions we are taking are beginning to pay off, and the recent closing of the European transaction will now allow us to concentrate on the North American business,” she said. “We are driving our retail performance with a firm emphasis on fixing the fundamentals and improving our omnichannel customer experience.”

Foukes added that HBC is making strategic decisions to focus its efforts on the areas with the greatest opportunities for growth. Last month, the company completed its deal to sell a controlling interest in its European retail operations to Karstadt in Germany. It also is forming a 50-50 partnership in its European real estate with Karstadt.

“Saks Fifth Avenue’s exceptional performance further solidifies its leading position within the luxury segment and we are continuing to drive the upside in the business,” Foulks said. Performance at Hudson’s Bay has been solid, and we believe that there is a tremendous opportunity to build on our strength in the market as Canada’s preeminent multi-category retailer. Improved sales trends and better profitability at our smallest businesses, Lord & Taylor and Saks Off 5th, are also encouraging as we start to reposition those businesses for the future.”

HBC’s efforts to improve its business have not gone far enough for some investors enough. Hedge fund Land & Buildings, which owned 5% of HBC in its last (July 2017) disclosure, recently called for the company to sell Saks Fifth Avenue and Lord & Taylor and its 50% interest in the European joint venture to Signa, reported Reuters. The hedge fund said it may call for a special shareholder meeting to bring about changes to the company’s board.
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