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Hudson’s Bay Co. eyes reinvention amid steep Q4 loss, dismal year


Hudson’s Bay Co. mirrored the challenges confronting the department store industry as it swung to a loss in its fourth quarter and said it would cut costs and capital spending.

HBC reported a loss of C$152-million in the quarter, compared with a profit of C$370 million in the year-ago period. The company took a C$116-million write-down in the quarter tied to its struggling Saks Off 5th and operations. Gilt sales continue to be impacted by lower traffic, HBC said, while Saks Off 5th has experienced lower sales, driven in part by the decision to introduce more moderately priced apparel last year. Higher-priced items are currently being put into the mix.

Total sales rose to C$4.6 billion from C$4.49 billion. Same-store sales fell 1.2%, with a 5.9% decrease at the company’s off-price division. Digital sales increased by 52.8% from the prior year.

“The past year was a disruptive one for the retail industry,” stated CEO Jerry Storch. “While the department store sector remains challenging, we are taking decisive action and making the tough decisions to ensure continued performance should the current environment persist. We are cutting expenses, rationalizing and reallocating our capital spending, strengthening our balance sheet, and taking other necessary actions.”

On a call with investors, HBC executives said the company was aggressively working on fundamental changes in its business to improve performance and further cut costs, Reuters reported.

“It is a major league, full-time effort in our company right now," said Richard Baker, HBC’s governor and executive chairman. "We're not just looking at a little tinkering with the business model. We are looking on major reinvention and change in the business.”

On the call, executives would not comment on media reports that HBC was in early talks to acquire Neiman Marcus Group. But they did say that acquisitions remained a part of its overall corporate strategy.

"In no way would we do an acquisition that affected our debt ratios and impacted our existing business in a material way, but we do view ourselves as a global consolidator,” Baker said. 

For the year, HBC reported that retail sales rose 29.5% C$14.5 billion. Approximately C$3 billion of this increase is related to the addition of HBC Europe and Gilt during the year. The remainder of the increase has been driven by the opening of five Saks Fifth Avenue and 32 Saks Off 5TH stores during the year which contributed $320 million in sales.

Consolidated same-store sales decreased by 0.7%.

Digital sales increased by 69.6% from the prior year.

“Our team remains focused on our all-channel model, anticipating our customers’ evolving needs and adapting to our customers’ expectations both in store and online,” stated Baker. “We executed on the organic growth of our existing store base and substantially increased our investment in digital.”

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