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Hudson’s Bay Posts Q4 Loss, While Saks Fifth Comp Sales Rise

The strength of Saks Fifth Avenue was evident in the most recent quarter as the nameplate and Hudson’s Bay remain the two key growth opportunities for Hudson’s Bay Co.

In a Nutshell: For the fourth quarter ended Feb. 2, restructuring costs hurt the bottom line. But strength was also seen at its Saks Fifth Avenue nameplate, which saw fourth-quarter comparable sales up 3.9 percent. That gave Saks a two-year stacked comp of 7 percent. The positive comps in the quarter for Saks also represented the nameplate’s seventh consecutive quarter of comp growth, even as the main floor of the New York flagship on Fifth Ave. was undergoing construction during the important holiday season. The new main floor opened in February, which showcases an expansive collection of luxury handbags.

“At Hudson’s Bay, we are capable of better results from what is a solid business,” Helena Foulkes, HBC’s chief executive officer, said. “Merchandise choices parked the top-line momentum shift at Hudson’s Bay and we believe those are fixable with time. Saks Fifth Avenue and Hudson’s Bay offer HBC our greatest long-term growth opportunities and we are encourage about what lied ahead.”

During the quarter, HBC sold a portion of its 59 properties in Germany for $634 million, or a gain of $348 million over book value. It also sold the Lord & Taylor flagship building for $1.1 billion, with HBC retaining a preferred equity interest in the building. The company had a gain of $800 million on the sale, which will be reflected in first-quarter results.

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Richard Baker, HBC’s governor and executive chairman, said, “Our ability to identify undervalued real estate with great potential is a key long-term differentiator for HBC….Our sharpened financial discipline and streamlined focus creates a solid foundation to build upon in 2019.”

Sales: Sales were down 5.5 percent to 2.89 billion Canadian dollars ($2.17 billion) from 3.05 billion Canadian dollars ($2.29 billion). Comparable sales for the three months were down 1.4 percent, while comparable digital sales rose 8.7 percent.

By business, HBC said Saks is “benefiting from its unwavering focus on the luxury customers, with notably strong performance at its personal shopping service, the Fifth Avenue Club, during the fourth quarter.” At the department store group, which includes Hudson’s Bay, Lord & Taylor and Home Outfitters, comparable sales fell 5.2 percent. The New York flagship on Fifth Ave. for Lord & Taylor closed in January, and the company shuttered its Home Outfitters business after the end of the quarter. HBC said sales at Lord & Taylor continue to “decline year-over-year.” The company also said comp sales at its Saks Off 5th business fell 2.1 percent, but that was offset by a “substantial year-over-year increase in digital sales.”

Earnings: The net loss for continuing operations was 226 million Canadian dollars ($169.4 million), or 95 cents a diluted share, against net income of 180 million Canadian dollars ($135 million), or 84 cents, a year ago.

CEO’s Take: Foulkes said, “We are a far stronger company today than a year ago, despite some of the top-line challenges this quarter.” She noted that the company “returned to positive operating cash flow, improved the bottom line across all of our businesses, increased profitability by 30 percent and strengthened our balance sheet.”