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.
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.
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