TORONTO — Hudson's Bay Co. sees the planned divestiture of its European operations as an opportunity to focus on strengthening its North American base, anchored by the Saks Fifth Avenue and Hudson's Bay retail banners, HBC chief executive Helena Foulkes said Wednesday.
"While some actions have required tough decisions, we believe they will help set us up for long-term success," Foulkes said in a conference call with analysts after the Toronto-based company released its second-quarter results, which included higher losses and lower revenue from continuing operations.
"We're beginning to see improvement in our North American business and I believe we have a real opportunity to drive performance and unlock shareholder value."
The bright spots, from HBC's perspective, included stronger sales at its Saks luxury department chain, which has most of its stores in the United States plus a few in Canada, and improved profit margins throughout the business.
However, comparable-store sales at Hudson's Bay — its main banner in Canada — were down slightly and its Saks OFF Fifth chain's comparable sales in the United States and Canada were down 7.6 per cent, HBC officials said.
"In Canada, Hudson's Bay has a solid foundation to build upon the growth seen over the last two years," Foulkes said.
"The team is diligently working to take advantage of Hudson's Bay's strong position as the only true national department store in the market."
HBC is slightly head of its estimates of winning about $100 million of annual revenue that would have gone to its rival Sears Canada, which closed its last locations early this year after failing to find a buyer or partner, HBC official said.
However, Foulkes said there's room for improvement at Hudson's Bay — particularly in terms of combining its in-store and digital sales channels.
"I think overall, not just at Hudson's Bay, we made some mistakes late last year with digital. We took a lot of costs out of that business but we really didn't look at the digital end-to-end experience from a customer perspective."
Chief financial officer Edward Record said that Hudson's Bay will likely get an outsized portion of HBC's total capital spending, which will be between $375 million and $425 million this financial year, down from $599 million last year.
"Frankly, I would say we've probably underinvested there from a technology point in the last couple of years and we're looking to rectify that as we move forward," Record said.
He also said that — despite revenue challenges — all of HBC's banners had positive margins during the second quarter.
Earlier, HBC announced a $264 million net loss in the quarter ended Aug. 4, up $63 million from the same time last year, due to the impact of foreign exchange, lower income tax benefits and a higher loss at discontinued operations.
Excluding the HBC Europe operations that will be merged into a strategic partnership announced Tuesday, Hudson's Bay's net loss from continuing operations was $147 million, which was $47 million more than last year's second quarter — again, mostly due to foreign exchange and a lower income tax benefit.
HBC's loss amounted to $1.12 per share, including 50 cents from discontinued operations and 62 cents from continuing operations.
Its normalized loss from continuing operations, a non-standardized measure that's closely watched by analysts, was $124 million or 53 cents per share — which was better than the 67 cents per share estimated by analysts, according to Thomson Reuters Eikon.
Revenue for the owner of Hudson's Bay, Saks Fifth Avenue and other retail chains was $2.16 billion for the quarter ended Aug. 4, down from $2.2 billion from a year earlier.
Revenue from the discontinued operations, which was excluded in HBC's restated results, was $1.05 billion — down from $1.09 billion last year.
Comparable-store sales at Saks Fifth Avenue stores open at least a year was up 6.7 per cent.
Comparable sales at the division that includes Hudson's Bay, Lord & Taylor and Home Outfitters stores fell 3.8 per cent. Comparable-store sales were down by 7.6 per cent at the Saks OFF 5th chain.
The quarterly report comes a day after HBC announced a deal to merge its European business, which owns Galeria Kaufhof and stores under other HBC banners, into a partnership that will also own the Karstadt retail business.
HBC will earn $616 million from the deal which will be funnelled into reducing debt.
Companies in this story: (TSX:HBC)
David Paddon, The Canadian Press