Hudson’s Bay Co. believes buying Gilt last year was a good decision, despite taking a steep charge on the off-price business in the fourth quarter.

“I think the business had more issues with it when we got it than we thought,” said Jerry Storch, chief executive officer of Hudson’s Bay Co., during a conference call with investors Wednesday.

The day before, HBC disclosed a onetime, non-cash goodwill impairment charge of 116 million Canadian dollars, or $87 million, related to its off-price businesses — Gilt and Saks Off 5th. That contributed heavily to the retailer’s fourth-quarter net loss of 152 million Canadian dollars, or $113.8 million.

“Most of the issue with the Gilt and Saks Off 5th is that it’s taking longer to accomplish the integration than we had thought,” Storch explained. “It’s not that we don’t think it’s going to work or that we aren’t still very excited about it.”

The plan is to put the two web sites, and, on the same platform. “That will enable complete merchandising integration, which is really critical for capturing many of the benefits we talked about when we did the acquisition. The first big step will happen this fall — when the entire assortment will be available on Gilt. That was a core premise of the acquisition and the systems work,” he said.

Storch called Gilt “a great asset” and a “fabulous brand name.”

“We know we have the right platform, but we have to complete the systems work, which is the major part of it.”

He sees Gilt providing “a lot of value throughout our organization,” with the Gilt team leading web site development for all HBC web sites.

“The talent that we got there particularly on the technology side, is quite important for where we’re going…but it’s taking us longer to accomplish the integration of Gilt and Saks Off 5th, which leads to really the bottom line dollars and top line sales from the Gilt business itself.

“I still think we got it for a great price….It had come down quite significantly over the preceding years.”

HBC purchased Gilt Groupe last year for $250 million in a relatively inexpensive deal, though the company had been declining in value given that it was once valued at close to $1 billion. HBC saw the acquisition as the ticket to advancing growth across all channels and banners, and not just to boost online sales overnight.

The Gilt business could improve, executives believed, by combining it with bricks-and-mortar, which would provide a venue for physical returns. At the time of the purchase, Storch said. “A major impediment at Gilt has been the difficulty of making returns.”

He also said Gilt shops would open inside Saks Off 5th stores for buying and returning Gilt products. So far, only one Gilt shop has opened inside Saks Off 5th, which is on 57th Street in Manhattan. A couple of Gilt pop-ups were also opened on cruise ships.

HBC saw Gilt providing prowess in technologies such as personalization online, expense savings through operational efficiencies and combining the businesses, reduced shipping costs, increased purchasing power and shared inventories across Gilt and Saks Off 5th.

Gilt, launched in 2007, saw rapid growth through the Great Recession when it was able to snap up excess inventory and develop significant scale and expand into additional categories. But the flash sale format became widely copied and off-price stores proliferated, slowing down Gilt’s growth.

Separately, HBC’s governor and executive chairman Richard Baker denied a media report that HBC would redevelop the Lord & Taylor flagship on Fifth Avenue by building up. “We are not at the present moment working on any plans to build out or expand that building.

“But what we do all the time on our entire real estate portfolio…is constantly analyze and work on what the options are for expanding our buildings, or redeveloping our buildings. And yes, there is an ability to expand that building on Fifth Avenue. The Lord & Taylor building is a very, very valuable building with or without a smaller Lord & Taylor, a bigger Lord & Taylor, and part of our job is supposed to be to maximize the value, especially in the city like New York, where values go up and down very rapidly,” he said.

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