Hudson’s Bay says German stores will boost sales

Hudson’s Bay Co. raised its financial performance expectations on Wednesday after finalizing the acquisition of German department store chain Galeria Kaufhof as it looked for other ways to save money across its international operations.

The Canadian retailer said it expects sales will “increase significantly” to a range of $11 billion to $11.5 billion from previous expectations of between $9 billion and $9.3 billion for the current 2015 fiscal year, which ends in January.

Sales are expected to rise to a range of $14.5 billion to $15.5 billion for the fiscal 2016 year.

The revised expectations come after Hudson’s Bay announced Tuesday plans to lay off 265 corporate-office employees in North America as part of an effort to save an extra $75 million starting this financial year.

The company found ways to reduce its labour expenses after digging into the mechanics of its operations over the past two years as it integrated the assets and staff of the acquired Saks department store chain.

Even further cost savings could be unearthed once Hudson’s Bay absorbs the Kaufhof operations into its overall business, executive chairman Richard Baker explained to analysts on a conference call.

“Clearly we’ll be driving for synergies — and there are wonderful opportunities — but frankly, the structuring of this transaction is such that the economics are wonderful even without these synergies,” he said.

He then stepped back from some of his comments on synergies, which are often seen as another way to describe layoffs.

“Over time, would you call them exactly synergies?” he said. “Or just say that by bringing all the skills and resources of our 65,000 employees to Galleria Kaufhof, I believe we’re going to improve the business performance there and we’re going to invest in that business.”

He added the decision to buy Kaufhof was “not predicated on cost savings” and that synergies in Germany hadn’t been considered by the executive team yet.

Overall, Hudson’s Bay expects its adjusted earnings before interest, tax, depreciation and amortization to increase to a range of $850 million to $925 million for the 2015 fiscal year.