Hudson’s Bay Co., brought down by rent expenses from real estate ventures, reported a net loss of 142 million Canadian dollars, or $110.5 million, for the second quarter though on an operating basis the company performed well.

In the corresponding period a year ago, the Toronto-based retailer posted net earnings of 59 million Canadian dollars, or $45.9 million, which included a pre-tax gain of 133 million Canadian dollars, or $103.6 million, from the ventures as well as increased depreciation and amortization.

However, in the most recent quarter, ended July 30, adjusted EBITDAR [earnings before interest, taxes, depreciation, amortization and rent] increased 113.8 percent to 263 million Canadian dollars, or $204.8 million, and there was an increase of 210 basis points as a percentage of retail sales.

Adjusted earnings before interest, taxes, depreciation and amortization increased 55.8 percent to 81 million Canadian dollars, or $63 million, despite additional expenses related to the joint ventures.

As previously, reported total retail sales increased 59.6 percent to 3.3 billion Canadian dollars, or $2.57 billion, with comparable sales up 1.9 percent. They declined 1.3 percent on a constant currency basis.

“The second quarter was another solid quarter for HBC,” said Richard Baker, HBC’s governor and executive chairman. “We continued to execute on our expansion plans in Europe with the announcement that we would be introducing our iconic Hudson’s Bay banner to the Netherlands. We currently plan to open up to 20 stores, and during the quarter signed long-term lease agreements for 11 locations accounting for approximately 1.5 million square feet. We also announced the first five Saks Off 5th locations in Germany, which we expect to open next summer.”

“Our operating performance was great last quarter,” added Jerry Storch, HBC’s chief executive officer. “To understand the operating performance, you need to focus on EBITDAR because of the joint venture. EBITDAR more than doubled in the quarter.”

HBC’s rent costs will be ongoing, but sales, as they traditionally do, are expected to go up as the year progresses, mitigating the bottom-line impact of the rents. Creating the ventures enabled HBC to buy Galeria Kaufhof in Germany, which generates 3 billion euros, or $3.5 billion, annually and will contribute to profitability. Kaufhof brings HBC to between 14.5 billion Canadian dollars and 15.5 billion Canadian dollars in revenues for fiscal 2016, or $10.8 billion to $11.6 billion.

HBC acquired Kaufhof from Metro AG last year for 2.42 billion euros, or $2.72 billion. HBC funded the acquisition by selling at least 40 Kaufhof locations to its real estate venture with the Simon Property Group for 2.4 billion euros, or $2.7 billion. The Simon-HBC joint venture will pay for the 40 Kaufhof locations with a real estate term loan secured by the properties, debt secured by Saks and Lord & Taylor properties that the joint venture will own, $600 million in equity from third parties or HBC, and $179 million supplied by Simon to the joint venture. HBC said it expects to retain a 65 to 85 percent stake in the joint venture. Kaufhof will lease back the sites from the venture.

Last quarter, some retailers saw an uptick in certain apparel categories. Asked if that was also the case at HBC, Storch replied, “All our eyes are focused on the fall. Remember, the big drop off in apparel hit in fall last year,” so there will likely be improvement in sales comparisons later this year.

“In New York, we closed a $400 million, five-year mortgage on our Lord & Taylor flagship location on Fifth Avenue which valued the property at $655 million based on an independent appraisal commissioned by the lenders,” Baker said. “This transaction, as well as the attractive rate we secured, exemplifies both the value of our real estate portfolio and the significant financial flexibility that it provides to HBC as we work through a challenging retail environment.”

By division last quarter, HBC’s department store group, which includes Hudson’s Bay and Lord & Taylor, had a comparable sales increase of 1.1 percent. HBC’s off-price division, which includes Saks Off 5th and Gilt, saw a comparable sales decrease of 11.4 percent, which executives said was largely due to a change in the pricing format at Saks Off 5th, so it’s less promotional, and a more liberal return policy at Gilt. However, the pricing change contributed to significantly higher gross margins. Storch said the changes were “the correct decisions for the company and the customers.”

Saks Fifth Avenue had a comparable sales decrease of 1.3 percent and HBC Europe (Galeria Kaufhof, Galeria Inno and Sportarena)had a comparable sales decrease of 0.9 percent.