Hudson’s Bay Co. widened its net loss to 147 million Canadian dollars, or $172.2 million, in the second quarter compared to a loss of 100 million Canadian dollars, or $115.8 million, a year ago.
All subsequent figures are reported in Canadian dollars.
Total sales decreased 2 percent to $2.2 billion, while total comparable sales declined 0.4 percent.
The Saks Fifth Avenue division continued on its positive trends of the past few seasons by posting a 6.7 percent comparable sales gain. HBC also operates Saks Off 5th, Lord & Taylor and Hudson’s Bay in North America, and Galeria Kaufhof in Germany, among other retail holdings.
Earnings before interest, taxes, depreciation and appreciation rose to $33 million, up significantly from $3 million in the prior year driven by gross margin improvement.
Proceeds from HBC’s transactions with Signa in Germany, involving establishing a joint venture leading to a merger of the Kaufhof and Karstadt department store chains and shared stakes in the real estate, as well as the upcoming sale of the Lord & Taylor flagship building are expected to materially reduce leverage, the company said. HBC has more than $4 billion in debt.
“We have emphasized improving bottom line performance across all of our banners, resulting in a significant increase in adjusted EBITDA during Q2 and year to date. This improvement is encouraging, and was driven by higher gross margins and better inventory management,” said Helena Foulkes, HBC’s chief executive officer. “We have been making the tough decisions necessary to set HBC up for long-term success and see even more opportunity to drive growth and profitability. By strengthening our retail portfolio, including a particular focus on the customer experience, and maximizing the value of our real estate, we expect to drive performance and unlock shareholder value.”
Foulkes added, “We continue to focus on increasing accountability and improving profitability, and our recent results are a step in the right direction. Saks Fifth Avenue’s strong performance is especially encouraging. The business’ ongoing strategy to elevate the brand through enhancement of its fashion offering, increased customer engagement and efforts to bring together the online and off-line shopping experience continues to drive traction within the luxury segment. Going forward, we see even greater runway for this business. While earnings have stabilized, there is still significant work to be done to improve our topline at Lord & Taylor and Saks Off 5th, which have not met expectations. With the right leadership team now in place, our banners are empowered to develop and implement strategies that will best drive their businesses forward.”
“Our recent strategic partnership in Europe significantly strengthens HBC’s retail portfolio and continues our track record of executing transactions that unlock the value of our real estate portfolio,” said Richard Baker, HBC’s governor and executive chairman. “This transaction highlights the significant value of our European assets, creating more than $1.1 billion in real estate value, and generates cash that will improve our liquidity and overall leverage. The combination of HBC Europe with the next largest retail group in Germany provides the groundwork for this newly formed operating company to stabilize performance and tackle the evolving European retail industry head-on.”