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Hudson's Bay Co loss widens on 'hyper-promotional' retail environment

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09/12/2019 | 12:29pm EDT
FILE PHOTO: FILE PHOTO: FILE PHOTO: People walk into the Hudson's Bay Company (HBC) flagship department store in Toronto

(Reuters) - Canadian department store operator Hudson's Bay Co reported a wider second-quarter loss on Thursday, hurt by store closures, deep discounts and declining sales at the retailer's name brand.

Shares of the company were down 0.94% at C$10.07 in afternoon trading after falling as low as $C9.77 earlier.

Hudson's Bay said its luxury department store chain Saks Fifth Avenue felt the biggest effect from a "hyper-promotional" retail environment. Like other brick-and-mortar stores, it has had to fend off fierce competition from e-commerce behemoths like Amazon.com Inc as shoppers migrate online.

Over the past few years, Hudson's Bay has been closing stores and selling units to focus on Saks Fifth Avenue and Hudson's Bay in Canada.

Last month, Hudson's Bay said it would sell its Lord + Taylor department store business to fashion rental service company Le Tote Inc for about $100 million, the latest divestiture.

The retailer announced in 2017 it would sell Lord + Taylor's Manhattan flagship store to co-working space manager The WeWork Co. Earlier this year, Hudson's Bay sold its remaining stake in its German real estate venture for C$1.5 billion.

Hudson's Bay Chief Executive Officer Helena Foulkes on Thursday highlighted continued investments in improving the e-commerce business by better-positioning inventory online and making the checkout process faster and easier and cited a 19% increase in digital sales. She also touted Saks' success, particularly in its fast-growing men's business.

Foulkes told Reuters a continuing priority is to improve product assortments with more modern merchandise at Hudson's Bay stores in Canada. She said Hudson's Bay will exit more than 300 "unproductive" brands and add roughly 100 new brands to its portfolio.

Hudson's Bay, North America's oldest company, said second-quarter comparable store sales decreased 0.4% across all units and tumbled 3.4% at its namesake stores.

The company's second-quarter bright spot was its upscale Saks Fifth Avenue business registering a 0.6% rise in same-store sales as customers spent more on men's and women's ready-to-wear apparel, handbags, and beauty.

The off-price business, Saks Off Fifth, saw a 3.4% bump in same-store sales driven by new customer growth and investments in targeted marketing, with notable gains in jewelry, women's modern clothing and men's classic apparel.

Rivals Macy's Inc's off-price Backstage business and Nordstrom Inc's Nordstrom Rack discount stores have also hit a sweet spot with shoppers hunting for bargains.

Foulkes told analysts on a post-earnings call that the company is not ruling out entering growing businesses within retail, including rental, resale or subscription.

"We continue to look very hard at those emerging places within retail because we think that's what the customer wants," she said.

Total revenue in the quarter ended Aug. 3 fell to C$1.85 billion from C$1.86 billion a year earlier and gross margin fell 530 basis points to 34%.

Net loss from continuing operations widened to C$462 million from C$104 million a year earlier.

In June, Executive Chairman Richard Baker teamed with other shareholders to offer to take the retailer private in a C$1.74 billion cash deal.

A special panel of the company reviewing the bid said in August an initial analysis showed it was inadequate.

(Reporting by Arundhati Sarkar in Bengaluru and Melissa Fares in New York; Editing by Shinjini Ganguli and David Gregorio)

By Melissa Fares and Arundhati Sarkar

Stocks mentioned in the article
ChangeLast1st jan.
AMAZON.COM -1.71% 1807.84 Delayed Quote.20.36%
HUDSON'S BAY CO -1.98% 9.91 Delayed Quote.38.68%
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