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Hudson’s Bay Company posts 28.6 percent rise in Q3 sales

By Prachi Singh

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Management

Hudson's Bay Company (HBC) said that consolidated retail sales in the third quarter were 3,300 million Canadian dollars (2,485 million dollars), an increase of 28.6 percent from the prior year. However comparable sales declined 4 percent and were down 2.4 percent on a constant currency basis. The company said comparable sales declined by 2.4 percent at DSG, 2.2 percent at HBC Europe, 8.4 percent at HBC Off Price and 4.6 percent at Saks Fifth Avenue, resulting in a total comparable sales decline of 3.6 percent.

Jerry Storch, HBC's Chief Executive Officer, said in a statement, "Sales were challenging in the third quarter but we believe our all channel strategy is the right long-term strategy for generating profitable growth. We continue to focus on delighting our customers and building a digital and brick and mortar platform that will allow them to shop whenever, wherever and however they choose. We believe we are well positioned for and excited about the current holiday season and remain focused on executing our all channel strategy across our banners and geographies."

Summary of the third quarter results

The company said total digital sales increased by 73 percent from the prior year, with total digital comparable sales increasing by 5.4 percent on a constant currency basis. Total digital comparable sales at Legacy HBC increased 12.9 percent on a constant currency basis. For HBC overall, gross profit rate as a percentage of retail sales was maintained at 42.2 percent compared to the prior year.

Adjusted EBITDAR was 276 million Canadian dollars (207 million dollars), a decrease of 1.4 percent compared to the prior year. This decrease, the company said, should be viewed in relation to the 52.2 percent increase in Adjusted EBITDAR reported in the prior year and the decline in the current quarter was driven primarily by lower comparable sales, offset by the addition of HBC Europe for part of the quarter.

Adjusted EBITDA was 89 million Canadian dollars (67 million dollars), a decrease of 81 million Canadian dollars (60 million dollars) compared to 170 million Canadian dollars (128 million dollars) in the prior year. Net loss was 125 million Canadian dollars (94 million dollars) compared to net earnings of 7 million Canadian dollars (5.2 million dollars) in the prior year.

During the third quarter, the company opened five Saks OFF 5TH stores in Canada, which are located in Toronto, Ontario; Ottawa, Ontario; Vancouver, British Columbia; Calgary, Alberta and Edmonton, Alberta. In the US, the company opened two Saks Fifth Avenue stores located in New York, New York and Honolulu, Hawaii, as well as 12 Saks OFF 5TH stores, which are located in Woodland Hills, California; Frisco, Texas; Fairfax, Virginia; Palm Desert, California; Springfield, Virginia; Washington, DC; Pittsburgh, Pennsylvania; Brooklyn, New York; Naples, Florida; Scottsdale, Arizona; Rockville, Maryland and Clarksburg, Maryland. The company closed two Saks Fifth Avenue stores in Short Hills, New Jerseyand Fort Myers, Florida, one Saks OFF 5TH store in Schaumburg, Illinois and three Home Outfitters stores in Ottawa, Ontario; Nepean, Ontarioand Montreal, Quebec.

Highlights of the year-to-date results

For the 39 weeks, consolidated retail sales were 9,855 million Canadian dollars (7,420 million dollars), an increase of 47.6 percent from the prior year, due to the addition of HBC Europe and Gilt as well as an increase in comparable sales of 0.7 percent. On a constant currency basis, comparable sales grew 0.2 percent at DSG, offset by declines of 0.9 percent at HBC Europe, 8 percent at HBC Off Price and 4 percent at Saks Fifth Avenue, resulting in a total comparable sales decline of 2 percent. Total digital sales increased by 81.8 percent from the prior year, with total digital comparable sales increasing by 5.5 percent on a constant currency basis. Total digital comparable sales at Legacy HBC increased 13 percent on a constant currency basis.

Adjusted EBITDAR increased 37.5 percent, which follows an Adjusted EBITDAR increase of 22.1 percent in the prior year. Net loss was 364 million Canadian dollars (274 million dollars) compared to net earnings of 17 million Canadian dollars (12.8 million dollars) in the prior year.

Announces dividend and outlook

The company has announced a quarterly dividend to be paid on January 13, 2017 of 0.05 Canadian dollar (0.04 dollar) per common share.

The management also confirmed its sales, adjusted EBITDAR and EBITDA outlook for fiscal 2016 which was updated on November 10, 2016, which reflects, among other things the company's performance to date and assumes flat to low single digit overall comparable sales growth, calculated on a constant currency basis, during the remainder of the fiscal year. The company expects to report sales in the range of 14.5 to 14.9 million Canadian dollars (10.9 to 11.2 million dollars), adjusted EBITDAR from 1,440 million to 1,525 million Canadian dollars (1,084 to 1,148 million dollars) and adjusted EBITDA between 700 to 785 million Canadian dollars (525 to 591 million dollars) for the whole year.

"During the third quarter we continued to execute our all channel strategy in the face of a retail environment where there were challenges in the women's apparel, department store and luxury segments. To address this we are continuing to move aggressively, making specific improvements both in our digital and brick and mortar operations that will allow us to better serve our customers," added Richard Baker, HBC's Governor and Executive Chairman.

Picture:Facebook/Saks Fifth Avenue

Hudson's Bay Company