Hudson’s Bay Co., boosted by strong digital growth, expense reductions and its diversity of retail formats in North America and Europe, reported fourth quarter net earnings increased over three times to 370 million Canadian dollars, or $283 million, from 115 million Canadian dollars, or $88 million.
On a per share basis, earnings rose to 1.88 Canadian dollars a share, or $1.44, from 62 Canadian cents, or 47 cents.
Comparable sales rose 11 percent, or 1.8 percent on a constant currency basis, for the quarter ended Jan 30. Total sales increased 70.4 percent to 4.5 billion Canadian dollars, or $3.44 billion. Sales growth has principally come from HBC’s offprice and digital operations, and last year’s acquisition of Kaufhof Galeria in Germany.
Adjusted earnings before interest, taxes, depreciation, amortization and real estate increased 61.1 percent to 630 million Canadian dollars, or $482 million. Executives emphasized that EBITDAR is a better indicator of how their retail operations performed.
For the year, net earnings rose to 387 million Canadian dollars, or $296 million, from 233 million Canadian dollars, or $178 million; adjusted EBITDAR increased 40.7 percent to 1.21 billion Canadian dollars, or $930 million.
Total sales rose 36.6 percent to 11.2 billion Canadian dollars, or $8.56 billion, with comparable store sales up 2.5 percent on a constant currency basis.
“I think our global diversity and brand diversity, focusing on luxury, better, midtier and off-price sectors, give us a strategic advantage when it comes to driving sales,” Richard Baker, HBC’s governor and executive chairman, told WWD on Monday. The strong dollar has been encouraging Canadians to shop in their home country, which is helping the Hudson’s Bay department stores in Canada. However, the decline in tourist spending in the U.S. has been hindering sales at Saks Fifth Avenue and other U.S. retailers.
The Toronto-based HBC’s portfolio, he added, both in terms of geography and targeted consumer segments “helped us navigate a challenging retail environment and resulted in 2015 comparable-store sales growth of 2.5 percent on a constant currency basis.”
Baker noted that HBC’s positive comparable sales growth distinguished his company from several competitors, including Neiman Marcus, Macy’s, Dillard’s and Sears Canada, which have been lately posting negative sales results. HBC operates Saks Fifth Avenue, Hudson’s Bay, Lord & Taylor, Saks Off 5th, Galeria Kaufhof and Gilt.
He also cited the company’s track record of making “targeted retail acquisitions” with the closing of the Galeria Kaufhof acquisition in Germany last September, which is seen doubling the company’s sales.
In addition, the group strengthened its balance sheet by selling a portion of its equity in the HBS Global Properties real estate joint venture with Simon Property Group, and is realizing the bulk of cost-saving synergies from the Saks Inc. acquisition in 2013.
Asked how apparel fared last quarter, Jerry Storch, HBC’s chief executive officer, told WWD, “Our sales were among the best in class, if not best in class.”
He added that despite the “well-documented” difficulties in apparel that many retailers experienced last year, “We were pleased with our results…For our leading retail banners, 2015 was a story of fostering innovation while focusing on operational efficiencies.”
Storch cited comparable digital sales growth of 23.2 percent on a constant currency basis, which he attributed to improvements in offerings, e-commerce platforms and fulfillment capabilities. In addition, HBC purchased Gilt in February, which is currently being integrated into the group’s operations. HBC is taking Gilt into brick and mortar for the first time, and last month a Saks Off 5th unit opened on 57th Street and Lexington Avenue, the first Gilt shop opened inside an off-price store.
Storch said the company continues to invest to grow its digital operations and sales. “Most data show Internet sales [at other retailers] grew in the low teens,” last year. “We are very pleased with our progress on the Internet.” He declined to say what percentage of HBC’s $7.7 billion-plus in sales is generated by digital sales. The Neiman Marcus Group says digital sales represent 30 percent of its total business.
“Throughout the year, we focused on increasing operational efficiencies and were able to generate new savings of over 60 million [Canadian dollars] during the year as the result of the Saks integration and our North American realignment initiative,” Storch said. “Our expense reduction initiatives are an ongoing process, and we will continue our focus on increasing operational efficiencies and implementing best practices across our banners throughout 2016.”
For 2016, the company projects sales to range from 14.9 billion Canadian dollars, or $11.45 billion, to 15.9 billion Canadian dollars, or $12.21 billion.
Adjusted EBITDAR is seen reaching between 1.56 billion Canadian dollars, or $1.2 billion, and 1.71 billion Canadian dollars, or $1.31 billion.
The outlook assumes overall low single digit comparable store sales growth, calculated on a constant currency basis.
The company currently expects that in fiscal 2016 it will make higher than normal investments in growth initiatives, with total capital investments, net of landlord incentives, expected to be between 750 million Canadian dollars, or $576.2 million and 850 million Canadian dollars, or $653.04 million.