Dive Brief:

• Hudson’s Bay Co. on Thursday reported that second quarter revenues fell to $1.85 billion Canadian dollars ($140 billion) from CA$1.859 billion in the year-ago quarter. Retail sales fell to CA$1.825 billion from CA$1.831 billion last year, though digital revenue rose 19%, according to a company press release. 

• Comparable sales fell 0.4%, the company said. By unit, Saks Fifth Avenue comps rose 0.6%, the ninth straight quarter of growth thanks to "above trend" results in men’s, women’s ready-to-wear, handbags and beauty. Namesake Hudson’s Bay comps fell 3.4% (after a 4.3% decline in the first quarter). At off-pricer Saks Off 5th comps rose 3.4%, "with notable gains in jewelry, women’s modern clothing and men’s classic apparel."

• Net loss from continuing operations widened to CA$462 million from CA$104 million a year ago. Adjusted EBITDA of CA$52 million was less than half last year’s CA$106 million. Gross margin shrank 530 basis points to 34%, in part due to closures of Home Outfitters and some Saks Off 5th stores. But expense cuts were also "widespread" thanks to closures and cuts in corporate and store operations, the company said.

Dive Insight:

Hudson's Bay executives on Thursday said they're focused on "controlling the controllables." That doesn't include a "hyper-promotional market environment" that accounted for a third of the company's gross margin decline.

That promotional pressure was felt most keenly at Saks, they said — an alarming development for a retailer that has staked so much (including a multi-million dollar renovation of its Manhattan flagship) on luxury sales. The location has revamped areas for men's shoes, jewelry and watches, handbags, an expanded second-floor beauty space and a dramatic escalator designed by Dutch architect Rem Koolhaas.

HBC has other irons in the fire, however. By the holidays, the company expects to be done with its deal to unload its Lord & Taylor department store to secondhand-apparel subscription service Le Tote. That will bring in $100 million, and executives reminded analysts that it's now also clear of its mortgage on Lord & Taylor's Fifth Avenue flagship, which was sold early this year to coworking company WeWork. 

Executives stayed mum on the progress of a go-private deal offered by Richard Baker, the company's governor and executive chairman, because the bid is still being looked at by a special committee of the board. It's unclear how far it will get, considering the objections of activist investors who say the offer is inadequate.

Those opposed include Canadian private equity firm Catalyst Capital Group, which has boosted its stake in the company to nearly 16%, according to a Sept. 10 filing with the Canadian stock exchange. In August the firm announced it had acquired 10% of outstanding shares and urged the Special Committee to "reject any effort by the controlling shareholders of the Company" and characterized the Baker group proposal as an attempt "to disenfranchise the Company's minority owners."

A 21.5% stake would allow an investor to block the take-private deal, according to The Financial Post.