HUDSON’S BAY CO. LOSS WIDENS ON ‘HYPER-PROMOTIONAL’ RETAIL ENVIRONMENT
Heavy markdowns and a shrinking physical footprint have led to greater losses for Hudson’s Bay Company (HBC) in the second quarter.
The Toronto-based retail group, which posted on Thursday its financial results for the period ended August 3rd, saw losses widen to 462 million Canadian dollars ($350 million), or 2.51 CAD per share, compared with last year’s 104 million CAD. Revenues totaled 1.9 billion CAD, with comps down 0.4 percent including a 19 percent year-over-year increase in digital sales.
“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,” said Helena Foulkes HBC’s CEO. “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.”
Two weeks ago, HBC announced that it had agreed to sell its storied Lord & Taylor business to fashion rental service Le Tote in a deal worth $100 million. The acquisition, which is expected to close before the start of the 2019 holiday season, would allow the company to focus its resources on its North American operations, including better-performing banners Saks Fifth Avenue and Hudson’s Bay.
During the second quarter, Saks continued to prove its status as HBC’s golden brand, noting same-store sales that rose for the ninth consecutive quarter by 0.6 percent — driven by the men’s, women’s ready-to-wear, handbags and beauty categories. (It also logged comps that were up 7.3 percent on a two-year stacked basis.)
Meanwhile, Saks Off Fifth reported a 3.4 percent gain in same-store sales, marking the second straight period of customer growth. The outlet is also currently in the early stages of a shift in its buying, marketing and service model.
“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,” Foulkes continued. “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.”
Hudson’s Bay’s comps, however, decreased 3.4 percent as the retailer’s struggles with its merchandising mix have pushed HBC to drop more than 300 underperforming brands and add 100 new labels to “reset the fall assortment,” Foulkes said. “We expect these changes may take time to resonate in the market.”