The Hudson’s Bay Co. is pushing to elevate productivity with new concepts surfacing at Saks Fifth Avenue, Kaufhof, Gilt and Lord & Taylor.
Meanwhile, the company is aggressively streamlining and instituting cost savings across its banners and web sites to reverse losses, and after a decade-long acquisition spree — Neiman Marcus has been eyed off and on — executives have backed off from pursuing any further big acquisitions.
Among the initiatives, Sephora and Topshop outposts are appearing inside Kaufhof locations in Germany, and on Friday, the third floor of the Saks flagship in Manhattan, which over the last several months has been renovated with new designer shops including Prada and Dior, will be feted. Later this fall, Saks will dismantle its second-floor Wellery pop-up and begin recasting the space for a new beauty department. The first floor will be renovated with a new accessories hall. In Canada, Pusateri food halls have been added to a few Saks stores. The renovations at the Saks flagship are seen proceeding into 2018 and potentially into 2019, as the company watches its cash.
In terms of business, “We are optimistic about the remainder of the year,” said Richard Baker, executive chairman and governor of Hudson’s Bay Co. on a conference call Wednesday, following the release of its second-quarter results the day before. “The current retail environment provides both challenges and opportunities, and while it was a tough second quarter as expected, we continue to take the actions necessary to succeed in this rapidly evolving landscape.”
Last quarter, HBC posted a net loss of 201 million Canadian dollars ($162.3 million at current exchange), an increase from 142 million Canadian dollars a year ago. Total sales reached 3.3 billion Canadian dollars ($2.66 billion), up 1.2 percent due to new store openings and a lower Canadian dollar. Consolidated comparable sales inched up 0.4 percent.
Saks and Hudson’s Bay delivered positive comparable sales, while digital sales at the department stores grew almost 20 percent. “These areas of strength combined with what we are seeing so far in the third quarter give us reason to be optimistic about the remainder of the year,” Baker said. “While stores are a critical part of HBC’s long-term all-channel strategy we continue to evaluate all opportunities to generate value from HBC’s extensive real estate portfolio. This includes increasing productivity of HBC’s real estate, streamlining our store portfolio and diversifying the assets of HBC’s real estate joint ventures.”
Earlier this year, HBC disclosed a dramatic “transformation plan” that reorganized its corporate teams and cut 2,000 jobs in an effort to create 350 million Canadian dollars in annual savings.
The company has grown over the last decade by acquiring Saks Fifth Avenue, Lord & Taylor, Gilt, Kaufhof and Hudson’s Bay in Canada. Deals have been financed by monetizing real estate but now HBC faces new rent expenses and higher debt amid a difficult selling environment. Currently, the company seeks to bolster its retail banners rather than adding more to the portfolio.
On Tuesday, HBC launched its first Hudson’s Bay store in Europe, in Amsterdam, The Netherlands and relaunched its Gilt web site by expanding the assortments and improving functionality. Gilt will offer Saks Off 5th inventory in time for the holiday season. Last quarter, Lord & Taylor moved onto the same online platform as Saks Fifth Avenue and Saks Off 5th, and Hudson’s Bay is expected to migrate over in early 2018, in further integrations of the businesses.
“Using a combined platform across North America allows us to leverage the same infrastructure across all our banners, improving our ability to test and implement new features,” said Jerry Storch, chief executive officer of HBC.
“We continue to explore ways to differentiate the in-store experiences at all of our banners by offering pop-up shops, food areas and wellness activations,” Storch added, citing this year’s launch of the Just Bobbi shop at Lord & Taylor and the opening of Topshop and Sephora store-within-store concepts at multiple Galeria Kaufhof locations in Germany.
During the call, Storch said inventories in general are in “pretty good condition,” that so far in the third quarter there’s better performance at several banners, and that HBC is focused on sustaining its 20 percent growth rate in the digital business.
Storch said there’s reason to believe business will pick up. “We’re seeing a little bit better environment overall. Secondly, we have to believe that we’re making investments on improvements in our business. We’ve been investing a lot of money. We haven’t done that mindlessly.
“I’ve said many times that people don’t dislike department stores. They dislike bad department stores and they like good ones, and I’ll stand by that if you look at our continued good performance with Hudson’s Bay in Canada where we made the investments over many years,” said Storch. “I think the gateway is that we’re in a deal business, we’re making deals with all kinds of exciting retailers around the world for them to have bricks-and-mortar exposure within our world-class locations.”