Hudson’s Bay Co. Sales Grow By Double-Digits In Q3; Saks Declines

Saks Off 5th storefront
A Saks Off 5th storefront.
Getty Images

Hudson’s Bay Co. has pulled off a decent performance in what has been a “difficult operating environment,” management said of Q3.

Total sales advanced 34 percent, while profit exited negative territory.

“This was an important quarter for our retail business as we continued to execute our strategy of delivering operational improvements while growing and diversifying our retail offerings through targeted acquisitions,” Richard Baker, HBC’s governor and executive chairman, said in a release. “With the addition of HBC Europe during the quarter, we now generate the majority of our sales outside the U.S. and have a significant European retail platform from which we can explore additional growth opportunities.”

HBC Europe — comprised of German mega-department store chain Galeria Kaufhof, Belgium department store Galeria Inno and Sportarena —  already produced a 6.6 percent same-store sales increase during the one month of HBC’s ownership, the company said.

Saks Fifth Avenue, however, was a weak spot for the company in Q3, posting a same-store sales decline of 3.6 percent.

“We are pleased with our third-quarter results in a difficult operating environment. We grew sales in both our stores and on the Internet, and our results reflect the benefits of our focus on SG&A and the diversity of our retail business in both geography as well as consumer segment,” said Jerry Storch, HBC’s CFO, in a statement. “In particular, our Department Store Group performed extremely well given overall market conditions. HBC Europe and Off 5th segments also saw solid growth, while the luxury business at Saks Fifth Avenue continues to face headwinds.”

Sales at the Saks Off Fifth concept climbed 2.8 percent.

HBC’s total year-over-year inventory growth of 53 percent outpaced sales growth.

Net Income: Net earnings for the third quarter, ending Oct. 31, 2015, were $1 million (CAD), or $740,000 at current exchange rates, an improvement over the year-ago quarter when the company posted a net loss of $13 million (CAD).

EPS: Diluted losses per share remained the same year-over-year, at 7 cents.

Net Revenue: Net revenues grew 34.1 percent, to $2.6 billion (CAD), or $1.9 billion at current exchange rates.

Looking Ahead: HBC reduced its 2015 sales forecast to $10.7 billion (CAD) to $11.2 billion (CAD) from $11.0 billion (CAD) to $11.5 billion (CAD). The company reduced its 2016 sales guidance to $14.2 billion (CAD) to $15.2 billion (CAD), from $14.5 billion (CAD) to $15.5 billion (CAD).

Analyst Insights: “Management acknowledged mixed performance among merchandise categories, with many categories performing well while a few categories saw some pressure. At [the Department Store Group], sales growth was driven by home products, menswear & cosmetics. At Off 5th, growth was led by women’s shoes, handbags and menswear, while at Saks, strength in outerwear and women’s advanced contemporary was more than offset by weakness in men’s luxury collections and women’s and men’s [ready-to-wear] collections.”
— Oliver Chen, Cowen & Co. analyst