HBC in the RED as SALES SLUMP
RETAILER VOWS TO MAKE ‘ TOUGH DECISIONS’ AFTER POSTING $150-MILLION LOSS.
TORONTO• Hudson’ s Bay Co. posted a steep fourthquarter loss Tuesday after the retailer recorded weak holiday sales and took a $ 116- million impairment charge related to its ailing off-price business, which includes Saks Off Fifth and online deals retailer Gilt.
Amid a difficult time in the broader department store industry, the country’s oldest retailer said after market close that it is making “tough decisions” to safeguard its operation.
For the quarter ended Jan. 28, HBC posted a net loss of $ 152 million, or 83 cents per share, compared with net earnings of $370 million ($ 1.88) in the same period a year ago. Excluding the charges and a gain from the prior year, normalized net earnings were $ 2 million compared with $ 145 million in the prior year, HBC said.
Hudson’s Bay, which has 480 stores across Canada, U.S. and Europe, reported a 2.5- per- cent rise in retail sales to $4.6 billion, up from $4.49 billion.
Same- store sales, a key metric, slid 1.2 per cent in constant currency, driven down by a 5.9-per-cent slide at HBC’s off- price division and a 2- per- cent drop at HBC Europe, which includes the Kaufhof department store chain.
But same-store sales were tepid at the company’s department store division, which includes Hudson’s Bay and Lord & Taylor, growing just 0.6 per cent, and were even more disappointing at luxury retailer Saks Fifth Avenue, rising 0.1 per cent.
“The past year was a disruptive one for the retail industry,” said HBC chief executive Jerry Storch in a statement.
“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.”
Earlier this year the company said it will reach $ 75 million in annualized savings this year from an operational review. “We are cutting expenses, rationalizing and reallocating our capital spending, strengthening our balance sheet, and taking other necessary actions,” Storch said. “As we remain focused on the continued growth of our company, we are aggressively positioning HBC to adapt to the changing retail environment.”
The $ 116- million noncash goodwill impairment charge was driven by recent sales weakness at Gilt and Saks Off Fifth, the company said, and management has lowered future earnings expectations.
Gilt’s sales were hit by lower traffic and Saks Off Fifth was hurt by a decision to introduce lower- priced apparel last year, the company said. It is currently remerchandising to include pricier products.
In January, HBC’s shares sank to an all-time low since going public in 2012 after the retailer scaled back on its 2016 fiscal outlook for the second time since November. They recovered slightly in February and March. As of Tuesday’s close, HBC’s shares had fallen 42 per cent in the last six months.