Hudson’s Bay reports better than expected Q1 sales

Canadian retail group Hudson’s Bay Company (HBC) first quarter sales where better expected, as sales where driven by the company’s expansion push into European and its recent acquisition of online retailer Gilt.

For the 13 weeks which ended April 30, 2016, HBC reported consolidated retail sales increase of 59.4 percent, up 1.2 billion CA dollars to 3.3 billion CA dollars, with comparable sales up 4.4 percent. Total digital sales increased 86.2 percent, as gross profit rate increased 70 basis points to 41.9 percent, spurred by the recent addition of HBC Europe. Adjusted EBITDA increased 44.1 percent to 251 million CA dollars, mainly as a result of the addition of HBC Europe as well.

HBC purchased Germany’s Galeria Kaufhof along with its Belgian subsidiary Inno from German retailer Metro for approximately 2.7 billion US dollars last year to help counter the blow of declining consumer spend in the United States and Canada. The company also aims on entering the market in the Netherlands in 2017 and is slated to launch its Hudson’s Bay premium department store format and Saks Off 5th.

"In the face of a challenging retail environment we continue to execute our strategy and are excited about growth prospects for our businesses,” said Jerry Storch, HBC's Chief Executive Officer in a statement. “Our newly opened Saks stores in Canada are off to an impressive start, while our overall results at Saks were impacted by the current pressures in luxury retail. The integration of HBC Europe and Gilt are proceeding well and we are highly focused on continuing to leverage our scale to reduce expenses and increase efficiencies.”

“Given the seasonal nature of our business, with sales and earnings weighted toward the second half of the year, the flat net rent expenses associated with our Joint Ventures have a more significant impact on the early part of the year. As we look toward the rest of the fiscal year, we expect that our ongoing efforts to become more efficient, in conjunction with our all-channel strategy of combining exciting retail destinations with a best in class e-commerce platform, will drive both sales and earnings growth."

Net Loss increased from 48 million CA dollars to 97 million CA dollars during the 13 weeks, due primarily to net rent expenses related to the Company's real estate joint ventures. "With banners across multiple geographies and consumer segments, we believe HBC's diversified retail platform positions us well for future sales and earnings growth in all of our businesses. In the first quarter we continued to generate sales growth as a result of the Galeria and Gilt acquisitions and experienced continued strength at our Canadian operations,” said Richard Baker, HBC's Governor and Executive Chairman.

"Additionally, HBC's real estate portfolio, which is less impacted by short-term trends in retail, continues to provide the Company with opportunities to create value. In preparation for our planned flagship Saks Fifth Avenue store in New Jersey at American Dream, we agreed to modify our Saks Fifth Avenue lease at the Short Hills mall in New Jersey. Additionally, we made modifications to our Saks Fifth Avenue lease in Honolulu, Hawaii. These two lease modifications generated proceeds of 99 million dollars for the Company."