Jerry Storch hudson's bau

Hudson’s Bay Co., with fourth-quarter margins and holiday sales lower than expected, has reduced its outlook for 2016.

The Toronto-based retailer now expects 2016 sales to reach 14.4 billion to 14.6 billion Canadian dollars, or $10.9 billion to $11 billion at current exchange. That compares with a previously forecast 14.5 billion to 14.9 billion, or $10.9 billion to $11.25 billion.

HBC also forecast adjusted earnings before interest, taxes, depreciation, amortization and rents of 1.34 billion to 1.39 billion Canadian dollars, or $1 billion to $1.05 billion.

Adjusted earnings before interest, taxes, depreciation and amortization is seen as ranging from 615 million to 665 million Canadian dollars, or $464.4 million to $502.1 million.

For the nine weeks from Oct. 30 to Dec. 31, consolidated comparable sales decreased 0.7 percent. At the department store group, which includes Hudson’s Bay, Lord & Taylor and Home Outfitters, comparable sales increased 1.2 percent.

In the nine weeks, Saks Fifth Avenue’s comparable sales decreased 0.5 percent; Saks Off 5th and Gilt saw comparable sales decrease 5.2 percent, and HBC Europe, which includes Galeria Kaufhof, Galeria Inno and Sportarena, saw comparable sales decrease 0.6 percent.

Total digital sales, which include Gilt on a pro forma basis, increased 14.7 percent on a constant currency comparable basis. Excluding Gilt, total digital sales increased 21.7 percent on a constant currency comparable basis.

“Our holiday sales trend improved considerably from what we experienced in the third quarter,” said Jerry Storch, HBC’s chief executive officer. “On a constant currency basis, the comparable sales trend improved for the company overall and across every banner, led by strong digital sales growth of 21.7 percent at our department store banners. However, the sales improvement that we experienced was not strong enough to achieve the results we had expected. Also, while we were pleased with our performance at Hudson’s Bay in Canada, the retail environment has remained challenging in the U.S. and Europe and the significant promotional activity during the holiday period had a negative impact on our margins. This margin pressure was compounded by a declining value of the euro compared with the Canadian dollar which impacts our translated earnings from HBC Europe.

“The retail environment is clearly changing,” Storch added. “And we continue to work diligently across all of our banners to adapt rapidly. This involves evaluating all opportunities to increase the profitability of HBC, and we expect to provide further details on this process in the coming months.”

The company’s performance to date and updated exchange rate assumptions have been taken into account.

Last week, Macy’s and Kohl’s also reported disappointing holiday sales.