Toronto—Hudson’s Bay Company reported today a second quarter profit below expectations and a sales increase helped by revamped stores. But its pending acquisition of Saks Inc. boosted costs and widened its loss from continuing operations.
For the quarter ended August 3, HBC posted net earnings of $3.9 million, or 3 cents a share, compared with a loss of $2 million, or 2 cents a share, a year ago. But the results missed analysts’ average estimate for 13.2 cents a share.
Net sales rose 4% to $947.7 million ahead of analysts’ estimate for $939 million. Total comparable store sales were up 3.5%. At Hudson’s Bay, comp sales rose 6.2%, while Lord & Taylor’s comp sales declined 1.2%.
“Sales at Hudson’s Bay were driven by strong performance of ladies’ and men’s apparel, ladies’ shoes, handbags and accessories, the continued growth of e-commerce and our five Topshop/Topman stores,” HBC stated, noting that sales were particularly strong at recently renovated locations, including the Vancouver flagship store.
Lower Traffic at Lord & Taylor
“Sales at Lord & Taylor were impacted by lower customer traffic compared to the second quarter of 2012,” the company said. “Relative strength in men’s apparel and shoes, handbags and watches and the continued growth of e-commerce was offset by underperformance in ladies’ apparel and other seasonal merchandise.”
Online sales performed particularly well, rising to $37.3 million, an increase of 56.1% compared with second quarter 2012.
“Hudson’s Bay continues to demonstrate industry-leading sales growth,” said Richard Baker, chief executive. “Our online business was a key factor in our results, and reflects our increased investment in this component of our business.” The company said e-commerce sales have increased 45% year-to-date.
HBC also reported a net loss from continuing operations of $82.3 million in its second quarter, or 69 cents a share. That compares with a year-earlier net profit of $22 million, or 21 cents a share, when HBC got a boost from the sale of its Zellers locations to Target. Financing costs rose to more than C$77 million, including nearly C$60 million related to its Saks Inc. acquisition.
As a consequence of the Saks deal, which is expected to close before the end of the year, HBC cut its dividend to 5 cents from 9 cents.
The 40-day go-shop period when Saks Inc. could seek out superior offers from has now elapsed, the company noted.