‘Transformative’ period sees HBC return to profit

TORONTO — Real estate deals helped Hudson’s Bay Co. return to profit despite substantially higher spending on strategic initiatives in the second quarter, which HBC’s chairman says was a “transformative” period for the iconic Canadian retailer.

The latest quarter included a $107-million gain from HBC’s contributions of properties to real estate joint ventures. On a normalized basis, HBC had a $53-million loss in the quarter — up from a $28-million loss a year earlier. The higher normalized loss was largely driven by higher overhead expenses, referred to as SG&A, which grew by $131 million from a year ago to $752 million.

HBC said the increased costs included strategic investments in its digital business, which includes online and mobile sales, as well as the introduction of its Saks brand to Canada and the expansion of its Saks Off 5th chain in the United States.

Nevertheless, HBC’s governor and executive chairman said HBC’s businesses are “in excellent shape” for the fall and holiday quarters — typically the most important part of the year for retailers.

The Toronto-based company remains on track to achieve between $9 billion and $9.3 billion of revenue this fiscal year, HBC chairman Richard Baker told analysts Thursday.

He said HBC had been able to reduce its debt by $1 billion with proceeds from the transfer of some real estate to joint ventures with Simon Properties in the U.S. and RioCan in Canada.

Baker added an agreement to acquire German department-store chain Galeria Kaufhof for $3.36 billion — the company’s first move outside North America — remains on track to close in the current quarter.

HBC — which traces its history to the fur trade before Canada was a country — operates the Hudson’s Bay and Home Outfitters stores in Canada, Lord & Taylor in the United States and Saks Fifth Avenue, a global luxury brand based in the United States.