Saks’ Modest Sales Gains Weren’t Enough to Bring HBC out of the Woods

Hudson’s Bay Co. today reported another round of sluggish revenues — although previously struggling Saks Fifth Avenue posted its second consecutive quarter of positive comparable sales.

After multiple quarters of deceleration, Saks’ comps rebounded in the previous quarter and stayed in the green into Q3 — albeit modestly, with a gain of 0.2 percent. The Hudson’s Bay department store chain also banked its 29th consecutive quarter of positive comps.

Overall, HBC said its third-quarter retail sales decreased 4.2 percent to $3.2 billion, while comparable sales on a constant-currency basis declined by 3.2 percent.

The Canada-based company — which has grappled with criticism from an activist investor amid continually dismal numbers — said it is working on several strategies it hopes will spur growth.

We are making the necessary changes in our retail operations to drive performance across our banners and took dramatic steps during the third quarter to continue the transformation of HBC and ensure that we are well-positioned to succeed in a rapidly evolving retail environment,” said Richard Baker, governor, executive chairman and interim CEO. “Our multifaceted strategic partnership with WeWork will provide a unique way to better utilize our physical space while increasing traffic and improving the economics at our stores.

Baker added that the investment by Rhône Capital and partial sale of the Lord & Taylor‘s Fifth Avenue building — announced in October — will generate total proceeds of $1.6 billion and “substantially strengthen our balance sheet.”

This will allow us to navigate our rapidly changing industry from a position of strength. At the same time, we continue to focus more on digital,” he said.

Among its other new growth strategies, HBC said in November that it would create a Lord & Taylor flagship on Walmart.com to extend the reach of this business.

CFO Ed Record also noted that the company will continue to place a heightened emphasis on digital, which grew 2.1 percent during the period.

“While Saks Fifth Avenue and Hudson’s Bay are performing well, our overall third-quarter results did not meet our expectations,” Record said. “The workforce reductions made as part of our Transformation Plan caused some operational challenges, particularly in our digital business, which we are working to address. We know we can do better, and our highest priorities include increasing comparable sales, improving margins and prioritizing our capital investments as we focus on further developing our digital business.”

By division, HBC said comparable sales declined by 3 percent at HBC Europe, 3.7 percent at DSG and 7.6 percent at HBC Off Price — the result of lower traffic across HBC’s banners, higher promotional activity, operational challenges and the effects of the hurricanes in Texas, Florida and Puerto Rico. (DSG refers, collectively, to the Hudson’s Bay, Lord & Taylor and Home Outfitters banners. HBC Europe refers, collectively, to the Galeria Kaufhof, Galeria Inno and Sportarena banners. HBC Off Price refers, collectively, to the Saks Fifth Avenue Off 5th and Gilt banners.)

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