Retailer HBC reports $243M third-quarter loss, sales down from year ago
VANCOUVER -- 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 (TSX:HBC) said Wednesday the third-quarter 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, he 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, said Record, 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, and introduce new ones with the first scheduled to land in stores next fall.
The company also announced it 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 indicated 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 to sell its Lord & Taylor Fifth Avenue building to WeWork Property Advisors, a joint venture between WeWork and Rhone, for nearly $1.1 billion, 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, said interim CEO Richard Baker.