Hudson's Bay Company reports Q4 net loss of 152 mn dollars

Hudson's Bay Company’s (HBC) retail sales in the fourth quarter were 4,600 million Canadian dollars (3,431 million dollars), an increase of 114 million Canadian dollars (85 million dollars) or 2.5 percent, on the prior year. Net loss was 152 million Canadian dollars (113 million dollars) compared to net earnings of 370 million Canadian dollars (276 million dollars) in the prior year.

"In 2016 we took important steps to position all of our businesses for industry leadership. We executed on the organic growth of our existing store base and substantially increased our investment in digital. We believe our winning model of combining world class real estate assets, which are less impacted by short-term trends, with our diverse retail businesses will continue to provide value for the company and our shareholders." stated Richard Baker, HBC's Governor and Executive Chairman in a statement.

Fourth quarter results at HBC

The company said, increase in the fourth quarter retail sales was primarily driven by the addition of Gilt, which generated 177 million Canadian dollars (132 million dollars) in sales during the quarter, as well as the addition of five Saks Fifth Avenue and 32 Saks OFF 5TH stores, which contributed a total of 123 million Canadian dollars (91 million dollars) in sales during the quarter. These additions, HBC added, were partially offset by the combination of a negative 110 million Canadian dollars (82 million dollars) foreign exchange impact on the translation of US dollar and euro denominated sales and lower comparable sales of approximately 42 million Canadian dollars (31 million dollars) at the company as a whole.

On a constant currency basis, comparable sales grew by 0.6percent at DSG and 0.1 percent at Saks Fifth Avenue, offset by declines of 2 percent at HBC Europe and 5.9 percent at HBC Off Price, resulting in an overall consolidated comparable sales decline of 1.2 percent. Comparable sales during the quarter, the company said, were impacted by a highly promotional environment across HBC's markets. Additionally, sales at Gilt continue to be impacted by lower traffic, while Saks OFF 5TH has experienced lower sales driven in part by the decision to introduce more moderately priced apparel during fiscal 2016. Saks OFF 5TH is in the process of re-merchandising its product mix to have a higher concentration of products at the top end of its offering range, which is expected be fully implemented by the third quarter of fiscal 2017.

Digital sales increased by 52.8 percent from the prior year, and comparable digital sales on a constant currency basis increased by 13.3 percent. Excluding Gilt, comparable digital sales on a constant currency basis increased by 20.9 percent, reflecting the company's continued strategic focus on growing this channel.

For HBC overall, gross profit as a percentage of retail sales was 40.2 percent, which improved by 50 basis points compared to the prior year. Adjusted EBITDAR was 564 million Canadian dollars (420 million dollars), a decrease of 9.9 percent compared to the prior year. Adjusted EBITDA was 404 million Canadian dollars (301 million dollars), a decrease of 51 million Canadian dollars (38 million dollars) compared to 455 million Canadian dollars (339 million dollars) in the prior year.

The net loss reported in the fourth quarter was driven in part by the impairment charges which had a combined after tax impact of 136 million Canadian dollars (101 million dollars). Additionally, prior year earnings included net of tax gains of 333 million Canadian dollars (248 million dollars) on the sale of investments in the joint ventures and 27 million Canadian dollars (20 million dollars) on contribution of assets to the joint ventures. Normalized net earnings were 2 million Canadian dollars (1.49 million dollars) compared to 145 million Canadian dollars (108 million dollars) in the prior year.

During the fourth quarter, the company opened one Saks Fifth Avenue store in Miami, Florida, as well as one Saks OFF 5TH store in Braintree, Massachusetts. The company closed two Saks OFF 5TH stores located in Folsom, California and Kansas City, Kansas, one Galeria Kaufhof store in Karlsruhe, Germany and three Home Outfitters stores located in Calgary, Alberta; Edmonton, Alberta and Langford, British Columbia.

HBC retail sales rose 29.5 percent in FY16

For the fifty-two week period ended January 28, 2017, retail sales were 14.5 billion Canadian dollars (10.8 billion dollars), an increase of 29.5 percent from the prior year. Approximately 3 billion Canadian dollars of this increase is related to the addition of HBC Europe and Gilt during the year. The remainder of the increase has been driven by the opening of five Saks Fifth Avenue and 32 Saks OFF 5TH stores during the year, which contributed 320 million Canadian dollars (238 million dollars) in sales. There was also an additional 26 million Canadian dollars (19 million dollars) positive foreign exchange impact on the translation of US dollar and euro denominated sales. These positive sales impacts, HBC said, were partially offset by lower overall comparable sales of approximately 164 million Canadian dollars (122 million dollars).

Consolidated comparable sales at the company decreased by 0.7 percent. On a constant currency basis, comparable sales grew 0.4 percent at DSG, offset by declines of 1.2 percent at HBC Europe, 2.8 percent at Saks Fifth Avenue, and 7.4 percent at HBC Off Price, resulting in an overall consolidated comparable sales decline of 1.7 percent. The company said, comparable sales during the year were impacted by a highly promotional environment across HBC's markets. Additionally, sales at Gilt continue to be under pressure, while Saks OFF 5TH has experienced lower sales driven in part by the decision to introduce more moderately priced apparel during fiscal 2016.

Commenting on the company’s results, Jerry Storch, HBC's Chief Executive Officer, added in the statement, "The past year was a disruptive one for the retail industry. While the department store sector remains challenging, we are taking decisive action and making the tough decisions to ensure continued performance should the current environment persist.”

Digital sales increased by 69.6 percent from the prior year, and comparable digital sales on a constant currency basis increased by 8.1 percent. Excluding Gilt, comparable digital sales on a constant currency basis increased by 16.6 percent.

For HBC overall, gross profit as a percentage of retail sales was 41.3 percent, an increase of 80 basis points from the prior year. This increase was primarily related to the addition of HBC Europe, which operates at relatively higher gross margin and SG&A rates. Adjusted EBITDAR was 1,353 million Canadian dollars (1,010 million dollars), an increase of 12.8 percent on the last year. Adjusted EBITDA was 636 million dollars (474 million dollars), compared to 781 million Canadian dollars (582 million dollars) in the prior year.

Net loss was 516 million Canadian dollars (384 million dollars) compared to net earnings of 387 million Canadian dollars (288 million dollars) in the prior year. Normalized net loss was 313 million Canadian dollars (233 million dollars) compared to earnings of 55 million Canadian dollars (41 million dollars) in the prior year.

Picture:Gilt website

 

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