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Kaufhof Acquisition Triples Hudson’s Bay Profit in Q4

Hudson’s Bay Company’s (HBC) costly acquisition of a German department store group is paying off.

The Toronto-based retailer on Monday revealed a whopping 70.4% increase in consolidated retail sales in the fourth quarter, or 4.5 billion Canadian dollars ($3.44 billion). That figure, which included a 61.6% jump in digital sales from all banners, was mainly due to the addition of HBC Europe following last September’s purchase of Galeria Kaufhof Group, the parent of Germany’s Galeria Kaufhof and Belgium’s Galeria Inno, for $2.8 billion.

In the three months ended Jan. 30, the company’s profit more than tripled to 370 million Canadian dollars (roughly $280 million), compared to net earnings of 115 million Canadian dollars in the prior year.

As previously reported in February, same-store sales at Saks Fifth Avenue declined 1.2% in the fourth quarter and 1 percent in fiscal 2015, which the company attributed to weakness in women’s ready-to-wear. Meanwhile, a strong performance by accessories and footwear drove off-price offshoot Saks Off 5th to achieve 2 percent growth in comps in Q4 and 6.3% for the full year.

HBC’s older banners, which include its namesake as well as Lord & Taylor, posted a 4 percent increase in consolidated comparable store sales in the fourth quarter and 4.7% in fiscal 2015, helped by womenswear and home.

“For our leading retail banners, 2015 was a story of fostering innovation while focusing on operational efficiencies,” Jerry Stoch, HBC’s chief executive officer, said in a statement. “Our expense reduction initiatives are an ongoing process and we will continue our focus on increasing operational efficiencies and implementing best practices across our banners throughout 2016.”

To that end, HBC said it expects to make “higher than normal” investments of between $750 million and $850 million in growth initiatives this year, which is roughly 4.9% to 5.5% of the midpoint sales outlook of between 14.9-15.9 billion Canadian dollars (around the $12 billion mark).

According to a press release, 40 percent of that will be related to store renovations, including an overhaul of the Saks Fifth Avenue New York flagship and restoring the HBC Europe stores; and 30 percent will be used to finance new additions on the digital side of the business, including the implementation of robotic automation in the Toronto warehouse and a new e-commerce distribution center in the U.S.

The remainder will be used for store openings, including seven Saks Fifth Avenues and around 32 more Saks Off Fifth locations.