For the quarter ended May 3, Hudson’s Bay posted a profit of $176 million Canadian (about $161.5 million), or 97 Canadian cents a share, compared with a loss including discontinued operations of C$82 million, or 68 Canadian cents, a year earlier.
Net retail sales jumped to $1.855 billion Canadian from $884 million Canadian. Total comparable store sales were up 2.8%. By department store, Hudson’s Bay and Lord & Taylor had a 2.5% rise in comp sales while Saks Fifth Avenue rose 2.6%. Off Fifth outlet sales were up 15.1%.
Digital sales were $207 million in the quarter and included sales at Hudson’s Bay Company, Saks and Lord & Taylor.
They accounted for 11% of the company’s overall sales in the quarter–a figure HBC is hoping to raise to 20% over the next five years. One of the reasons HBC bought Saks last year was that its digital capabilities were more developed.
Gross margin rate improved by 30 bps to 40.6% on strong demand in key categories.
“Overall first quarter performance was in the range of our expectations,” CEO Richard Baker said. “We are encouraged by the business trends witnessed through the quarter, which bode well for the balance of this year.”
Baker also said the Hudson’s Bay Co. wants to increase digital sales across its retail brands and growth will also include new stores in the United States and Canada. The company has said two Toronto locations will open in the fall of 2015. Meanwhile, the retailer is bringing more high-end merchandise to its Saks stores while also moving ahead with plans to double the number of Off 5th outlet stores.
HBC said it completed the sale and lease back of its Queen Street flagship store and Simpson Tower office complex in Toronto for a purchase price of $650 million and used most of the net proceeds to reduce debt.
The company completed its acquisition of luxury U.S. retailer Saks late in 2013 for $2.9 billion including debt and is planning to bring the brand to Canada.
Hudson’s Bay Co. reaffirmed its outlook for fiscal 2014. Total sales are expected to be in the range of $7.8 billion to 8.1 billion Canadian. This implies low-to-mid single-digit consolidated same store sales growth calculated on a local currency basis, driven in part by strong digital sales growth.