Q3 Loss Widens at Hudson’s Bay on Saks Acquisition

In Reports, What's New, Industry News by Jeff Prine

Hudson's BayToronto— Hit by expenses associated with its acquisition of Saks Inc., Hudson’s Bay Company today said it swung into a wider third quarter loss.

For the quarter ended Nov. 2, the owners of Hudson’s Bay and Lord & Taylor, reported a loss of $124.2 million, or $1.04 a share, compared with a loss of $14.4 million, or 14 Canadian cents per share, a year earlier. Excluding costs related to its $2.4 billion purchase of Saks Fifth Avenue’s parent, adjusted earnings were $8.9 million, or 7 cents a share, missing analysts’ expectation for 10 Canadian cents a share.

Consolidated sales rose 5.8% to $984.1 million Canadian (about $927 million). Comparable store sales rose 6.4% at Hudson’s Bay stores. Lord & Taylor posted a 1.6% increase in comp sales, its first increase in four quarters.

Handbags, Accessories Strong Sellers

The company said sales were driven by strong performance of women’s and men’s apparel, women’s shoes, handbags and accessories, as well as Topshop/Topman stores. E-commerce sales grew by 58.3% to $48.9 million.

Richard Baker, Governor and CEO, said, “The critical holiday period is now upon us, and we are focused on making it a success,” said Richard Baker, chairman/ceo. “While we would prefer our year-to-date performance to have been stronger, our investments in both store productivity and our omni-channel platform have produced clear and promising results. We are confident that these investments are necessary and will benefit earnings over the long-term. Further, the addition of Saks will allow us to leverage these investments over a larger platform.”

Gross profit was $395.9 million, or 40.2% of retail sales. Selling, general and administrative expenses expanded to 39.5% of retail sales, about $389 million, compared to 38.5% a year ago, driven by costs related to omni-channel expansion, Topshop, and other costs.

Finance costs more than quadrupled to $134.2 million due mostly to the Saks acquisition. But Baker said HBC can still achieve its annual saving target of $100 million even after the Saks acquisition.

Looking forward to fourth quarter, HBC said competitive pricing pressures during the holiday season would be even greater than expected. Hence, the company lowered sales expectations.

Now, excluding Saks, comparable store sales are expected to increase 3.5% to 4%, compared to its previous estimate for 3% to 5% growth. Overall sales (except Saks) are expected to hit $1.37 billion to $1.41 billion.



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