The Hudson’s Bay Co. reported that its second quarter net loss from continuing operations rose to 462 million Canadian dollars, or $350 million, from 104 million Canadian dollars, or $79 million, and comparable sales were down 0.4 percent.
All subsequent figures are in Canadian dollars.
The loss included $150 million to write down the value of deferred tax assets. In addition, the company cited early discounting in the quarter, which ended Aug. 3, and store closures as impacting the results.
On the positive side in the quarter, HBC said Saks Off 5th saw comp sales up 3.4 percent, driven by new customer growth; Saks Fifth Avenue’s comp sales were up 0.6 percent, and there was accelerated growth in digital.
Second-quarter revenues totaled $1.9 billion, which includes a 19 percent increase in digital sales, driven by data-driven marketing, assortment balance and technology improvements.
Saks Fifth Avenue’s comparable sales grew for the ninth consecutive quarter. Significant categories with above trend growth included men’s, women’s ready-to-wear, handbags and beauty.
At the Hudson’s Bay department stores in Canada, comparable sales decreased 3.4 percent in the second quarter, a sequential improvement from the 4.3 percent decline in the first three months. HBC said its team continues to correct previous merchandise choices and modernize the marketing mix, which increased omnichannel customers. It also nearly doubled the digital growth rate from a year ago.
Saks Off 5th is in the early stages of a new strategy, which includes shifts to its buying, marketing and service model. In the second quarter, Off 5th’s comp increased 3.4 percent with notable gains in jewelry, women’s modern clothing and men’s classic apparel.
“We continue to concentrate on controlling the ‘controllables’ — serving our customers and lowering expenses and inventory while making strategic investments for our future,” said Helena Foulkes, HBC’s chief executive officer. “While we’ve progressed in simplifying the business and strengthening operations, the second quarter demonstrates that we are still in the early stages of what HBC can become. This quarter we responded as the market moved early to discount merchandise in both luxury and Canadian retail. Our digital performance was a standout with a sharp increase in growth as our changes in strategy, people and infrastructure are paying off. With the Lord & Taylor sale agreement, our focus is now squarely on Saks Fifth Avenue and Hudson’s Bay — businesses that have the greatest potential for HBC amid the consolidating industry.”
In August, the company agreed to sell Lord & Taylor to Le Tote, pending Le Tote securing financing commitments for the full purchase price. The company will receive about $100 million in cash upon the transaction’s closing, a secured promissory note for about $33 million payable in cash after two years, and a 25 percent equity stake in the combined entity.
Foulkes continued, “Saks Fifth Avenue has been posting quarter-after-quarter of industry-leading sales growth by focusing on its ‘new luxury’ strategy, which includes merchandise and experiences that can only be found through Saks. The second quarter was bolstered by strong sales through the Fifth Avenue Club, our personal shopping service available in every store, and an acceleration in digital growth. The promotional activity in luxury was exceptionally intense in the second quarter and a notable change from the first quarter. For Hudson’s Bay, we are working to fix this business to recapture market share over time. Our merchants are modernizing our merchandise mix by exiting more than 300 unproductive brands, and adding 100 new and emerging brands to reset the fall assortment. We expect these changes may take time to resonate in the market. Finally, the positive change in Saks Off 5th’s performance demonstrates the power of a strategic shift in how we appeal to customers.”