Toronto Star

HBC reports $243M loss, decline in quarterly sales

Hurricanes, workforce reduction caused operationa­l disruption­s amid retailer’s reconfigur­ation

- ALEKSANDRA SAGAN THE CANADIAN PRESS

Canada’s oldest department store chain lost $243 million in its latest quarter as some Hudson’s Bay Co. banners failed to grow sales.

The retailer said Wednesday the thirdquart­er loss amounted to $1.33 per diluted share for the 13 weeks ended Oct. 28, compared with a loss of $125 million, or 69 cents per diluted share, a year ago.

While the Hudson’s Bay and Saks Fifth Avenue businesses performed well, consolidat­ed comparable sales fell 3.2 per cent on a constant currency basis and 5.1 per cent as reported.

The company’s other banners, which include Lord and Taylor, Gilt and German department store group Galeria Kaufhof, recorded declines.

“We are not satisfied with these results and we know that we can do better,” said Edward Record, the company’s chief financial officer, during a conference call with analysts.

Hurricanes disrupted stores in Texas, Florida and Puerto Rico, Record said, and a “large reduction” in the company’s workforce during the previous quarter caused some operationa­l disruption­s, especially in the company’s digital business.

As part of HBC’s transforma­tion plan, the company announced in June that it was cutting 2,000 jobs across North America.

The company cut more than 900 positions in the corporate office, Record said, and more than a third of the employees who remained had new positions. HBC has worked through the majority of the disruption­s and did see digital sales bounce back in the fourth quarter, particular­ly on Black Friday, he said.

The company continues to prioritize cost reductions, as well as increasing comparable sales and developing its digital business.

HBC plans to grow sales by expanding its current private label brands, he said, as well as introducin­g new ones with the first scheduled to land in stores next fall.

The company also announced it had closed a previously disclosed deal with private equity firm Rhone Capital, which will invest roughly $632 million in HBC in the form of mandatory convertibl­e preferred shares.

Last week, an activist investor agreed to drop its opposition to the investment. Land & Buildings Investment Management LLC had criticized the Rhone deal and applied last month for Ontario Securities Commission to review a Toronto Stock Exchange conditiona­l approval of the investment.

Land & Buildings agreed last week it was “pleased and encouraged” that HBC’s management and board in- dicated they would continue to take steps to monetize the company’s real estate assets. The Rhone investment was announced as part of a deal that will see HBC sell its Lord & Taylor Fifth Avenue building to WeWork Property Advisors, a joint venture between WeWork and Rhone, for nearly $1.1billion, and pursue a strategic alliance with WeWork regarding future real estate transactio­ns.

The investment, the sale of a building and expected cash flow during the holiday season will improve the company’s balance sheet and allow HBC to navigate a rapidly changing retail industry from a strong position, interim CEO Richard Baker said.

 ?? NATHAN DENETTE/THE CANADIAN PRESS FILE PHOTO ?? HBC said it had closed a previously disclosed deal with private equity firm Rhone Capital, which will invest roughly $632 million in the hurting retailer.
NATHAN DENETTE/THE CANADIAN PRESS FILE PHOTO HBC said it had closed a previously disclosed deal with private equity firm Rhone Capital, which will invest roughly $632 million in the hurting retailer.

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