Dive Brief:
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Saks Fifth Avenue parent Hudson’s Bay Co., the Canadian firm that also runs Lord & Taylor and its flagship department stores, reported a Q2 net loss of $142 million Canadian/$110 million U.S., down from net earnings of $59 million for the same period last year.
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Hudson’s Bay's Q2 consolidated retail sales increased a hefty 59.6% to $3.25 billion Canadian/$2.53 billion U.S., thanks to the company’s European expansion and $250 million acquisition of flash-sales company Gilt, as well as overall Q2 same-store sales growth of 1.9%, the company said.
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But on a constant currency basis, Q2 total comparable sales declined by 1.3% overall, with Q2 same-store increases of 1.1% at Lord & Taylor, Hudson's Bay and Home Outfitter stores and same-store decreases of 0.9% at HBC Europe, 11.4% HBC Off Price and 1.3% at Saks Fifth Avenue.
Dive Insight:
Citing what CEO Jerry Storch called “uncertainty in the current environment,” Hudson’s Bay said fiscal year 2016 sales would "trend towards the bottom end" of its previously estimated range between C$14.9 billion and C$15.9 billion.
Fewer discounts at its outlets boosted profits but hit sales, Hudson's Bay added. As part of its European expansion, the company plans to open as many as 20 stores in the Netherlands, including its first Hudson’s Bay stores outside of Canada.
Hudson's Bay also chalked up its Q2 net losses in part to a surge in revenue last year from its investments in joint ventures with Simon Property Group Inc. and RioCan Real Estate Investment Trust. The company has been unabashed about its moves to glean profit from its property holdings: Governor and Executive Chairman Richard Baker last year told investors that the company is on the hunt for more real estate as part of its growth strategy.
"During the quarter [Hudson's Bay] signed-long term lease agreements for 11 locations accounting for approximately 1,526,000 square feet," Baker said in a statement Tuesday. "We also announced the first five Saks Off 5th locations in Germany, which we expect to open next summer. In New York we closed a U.S. $400 million, five-year mortgage on our Lord & Taylor flagship location on 5th Avenue which valued the property at U.S. $655 million based on an independent appraisal commissioned by the lenders. 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.”
Storch also highlighted Hudson's Bay's investments in robotics technology, stating that expected reductions in e-commerce order processing time will generate significant savings. The first installation is expected to be fully functional sometime this fall, Storch added.
