Hud­son’s Bay in­creases Q3 loss to $243-mil­lion

Hud­son’s Bay Com­pany lost $243-mil­lion on sales of $3.16-bil­lion in the third quar­ter of 2017. This com­pares with a loss of $125-mil­lion on sales of $3.3-bil­lion in Q3 of 2016.

Stockwatch Daily - - FRONT PAGE - Mr. Richard Baker re­ports

HUD­SON’S BAY Com­pany has re­leased its third quar­ter fi­nan­cial re­sults for the 13- and 39-week pe­ri­ods ended Oct. 28, 2017.

Ed Record, Hud­son’s Bay’s chief fi­nan­cial of­fi­cer, added: “While Saks Fifth Av­enue and Hud­son’s Bay are per­form­ing well, our over­all third quar­ter re­sults did not meet our ex­pec­ta­tions. The work force re­duc­tions made as part of our trans­for­ma­tion plan caused some op­er­a­tional chal­lenges, par­tic­u­larly in our dig­i­tal busi­ness, which we are work­ing to ad­dress. We know we can do bet­ter, and our high­est pri­or­i­ties in­clude in­creas­ing com­pa­ra­ble sales, im­prov­ing mar­gins and pri­or­i­tiz­ing our cap­i­tal in­vest­ments as we fo­cus on fur­ther de­vel­op­ing our dig­i­tal busi­ness. Our em­pha­sis on dig­i­tal con­tin­ues to grow, and we are re­al­lo­cat­ing re­sources to im­prove HBC’s dig­i­tal plat­forms and on-line ca­pa­bil­i­ties. We also plan on re­duc­ing to­tal in­ven­tory as part of an ef­fort to moder­ate pro­mo­tional ac­tiv­ity and in­crease full price sell­ing. Fi­nally, our trans­for­ma­tion plan re­mains on track to gen­er­ate an­nual sav­ings of $350-mil­lion, and we con­tinue to look at other ways to be­come more ef­fi­cient. These sav­ings, com­bined with our planned re­duc­tions in in­ven­tory and cap­i­tal in­vest­ments are ex­pected to sig­nif­i­cantly im­prove cash flow in 2018.” Third quar­ter sum­mary Re­tail sale s were $3,160-mil­lion, a de­crease of $140-mil­lion, or 4.2 per cent, from the prior year. The de­crease was driven pri­mar­ily by lower over­all com­pa­ra­ble sales of ap­prox­i­mately $104-mil­lion and neg­a­tive for­eign ex­change im­pacts of $64-mil­lion. Ad­di­tion­ally, closed stores had a $34-mil­lion neg­a­tive im­pact on over­all sales. These im­pacts were par­tially off­set by the open­ing of new stores, which added ap­prox­i­mately $61-mil­lion in sales dur­ing the quar­ter.

Con­sol­i­dated com­pa­ra­ble sales trends soft­ened dur­ing the quar­ter, de­creas­ing by 3.2 per cent on a con­stant cur­rency ba­sis and 5.1 per cent as re­ported. Com­pa­ra­ble sales dur­ing the quar­ter were im­pacted by lower traf­fic across Hud­son’s Bay’s ban­ners, higher pro­mo­tional ac­tiv­ity, op­er­a­tional chal­lenges de­scribed be­low and the ef­fects of the hur­ri­canes in Texas, Florida and Puerto Rico.

On a con­stant cur­rency ba­sis, dig­i­tal sales in­creased by 2.1 per cent, or by 9.0 per cent ex­clud­ing Gilt. The work force re­duc­tions that were made as part of Hud­son’s Bay’s trans­for­ma­tion plan caused some mar­ket­ing and mer­chan­dis­ing chal­lenges dur­ing the quar­ter. These chal­lenges had an ad verse im pact on t he busi­ness, par­tic­u­larly dig­i­tal, and process changes are un­der way to im­prove op­er­a­tions.

Net loss was $243-mil­lion com­pared with $125-mil­lion in the prior year. The higher net loss is pri­mar­ily due to lower gross mar­gin dol­lars com­bined with higher fi­nance costs, higher de­pre­ci­a­tion and amor­ti­za­tion ex­penses and a lower in­come tax ben­e­fit. Nor­mal­ized net loss was $203-mil­lion com­pared with $102-mil­lion in the prior year, pri­mar­ily as a re­sult of sim­i­lar fac­tors.

(See HBC Ta­ble 1 on page 36)

Hud­son’s Bay is ded­i­cated to pru­dent cap­i­tal man­age­ment and, given the cur­rent re­tail en­vi­ron­ment, is fo­cus­ing its cap­i­tal in­vest­ment pro­gram on in-progress and ex­pected high-re­turn projects, as well as its dig­i­tal busi­ness. Man­age­ment now ex­pects to­tal cap­i­tal in­vest­ments in fis­cal 2017, net of land­lord in­cen­tives, to be be­tween $575-mil­lion and $625-mil­lion, com­pared with $657-mil­lion in fis­cal 2016.

We seek Safe Har­bor.

Erika Flores con­densed this news re­lease (erikaf@stock­watch.com).

Richard Alan Baker, Robert C Baker, David Gor­don Leith, Wil­liam Lawrence Mack, Lee S Neibart, Denise Pick­ett, Wayne Long­mire Pom­men, Earl Isadore Rot­man, Matthew Evan Rubel, Ger­ald Leonard Storch, An­drea Lynn Wong

(HBC) Shares: 182,616,796

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