HBC touts extensive real estate holdings
Hudson’s Bay Co. executives sought to reassure investors Wednesday that the retailer is in a better position than its faltering industry rivals and revived talk about a deal to monetize real estate in the wake of a sizable fourthquarter loss.
The news breathed life into the flagging stock of Canada’s oldest company, whose shares rose 7.73 per cent to close at $10.45 in Toronto on Wednesday. That came after HBC reported a $152-million loss late Tuesday, citing weakness at some of its department stores and a sizable non-cash writedown of its off-price business, Saks Off Fifth and Gilt.com.
“We have a tremendously valuable portfolio of real estate which can be monetized in a variety of ways,” executive chairman Richard Baker told investors on a conference call Wednesday, adding that the company in hindsight might have done well to spin off its U.S. and Canadian real estate in public offerings six or eight months ago. But the real estate still has significant value, he said, and HBC can exercise alternative options such as selling off or financing pieces of real estate.
Baker, a seasoned real estate investor with a zest for retail, has executed a number of lucrative real estate deals in the past, including the sale of Zellers’s leases to Target for $1.8 billion and a sale-leaseback of its flagship Toronto store for $650 million. Two years ago, HBC partnered with large real estate investment trusts in the U.S. and Canada to form joint venture deals worth $4.2 billion.
While department store chains around the world have been struggling, HBC, with 480 stores across Canada, the U.S. and Europe, doesn’t “have the hundreds of stores that chains that are closing stores have,” chief executive Jerry Storch told analysts, such as Macy’s, J.C. Penney and Sears. Still, given the industry weakness, “we’re planning as if the environment is not going to improve,” he said.
HBC has embarked on a sweeping operational review and earlier announced it would cut $75 million in costs this year; executives said Wednesday that they aim to find additional cost savings and that number will be higher. The company is also lowering its level of capital investments in 2017 to between $450 million and $550 million, about $150 million less than 2016.