Hudson’s Bay loss widens on expenses and forex losses

TORONTO — Canadian department store chain Hudson’s Bay Co reported a wider third-quarter loss on Wednesday on higher depreciation and amortization expenses and foreign exchange losses.

The owner of the Saks Fifth Avenue luxury retailer reported a net loss from continuing operations of $124 million, or 52 cents a share, for the three months ended Nov. 3, compared with a loss of $116 million, or 64 cents, a year earlier.

Including Hudson’s Bay’s European operations, which are in a joint venture with Austrian Signa Holding, the company posted a net loss of $164 million, or 69 cents a share, narrowing from $243 million, or $1.33 a share, a year earlier.

Gross margin improved 10 basis points from the same quarter a year earlier.

Hudson’s Bay has embarked on a mission to boost flagging sales under Chief Executive Officer Helena Foulkes, who took on the role early this year, as it combats market share erosion by e-commerce behemoths including Inc.

© Thomson Reuters 2018

Hudson’s Bay activist renews call for changes to ‘double or triple’ share price

Activist investor Jonathan Litt is renewing his calls for change at Canadian retailer Hudson’s Bay Co., saying he intends to talk to fellow investors about calling a special meeting to elect new board members.

“We believe Hudson’s Bay could see its share price double or triple if the company takes the necessary steps to maximize long-term shareholder value,” Litt said in a letter to shareholders Wednesday.

A representative for Hudson’s Bay didn’t immediately respond to a request for comment.

Litt’s Land & Buildings Investment Management has been advocating since June 2017 for changes at the Toronto-based retailer, including calling for it to sell off its Saks Fifth Avenue brand and to explore ways to unlock the value of its real estate. He reiterated his call for the company to sell Saks in the letter Wednesday. He also said it should sell its remaining interests in Galeria Kaufhof in Germany and the Lord & Taylor brand.

The company should also pursue a real estate investment trust structure for its Canadian real estate and sublease its excess space, Litt said.

Hudson’s Bay has taken several steps to unlock the value of its real estate in recent months, including selling its flagship Lord & Taylor building in Manhattan, selling part of its European business, and modifying the lease on a store slated to be closed in Vancouver.

Litt said the company trades at a discount to the value of its real estate, which he said is worth $31 a share based on Hudson’s Bay’s estimates. Changes are needed at the board level, he said, adding that he is working with an unnamed former Hudson’s Bay executive who would likely join a slate of directors he would put forth.

“Over the coming weeks, we intend to speak with shareholders about adding fresh perspectives to the board and calling a special meeting to effect immediate change on the board,” he said.

HBC cancels Saks Off Fifth store in Montreal Eaton Centre — but refuses to say why

TORONTO — European sports chain Decathlon is replacing Saks Off Fifth in a spot over two floors at the Montreal Eaton Centre.

Hudson’s Bay Company says it and mall developer Ivanhoe Cambridge have mutually agreed to no longer open a Saks Off Fifth location.

The Toronto-based department store chain owner tells The Canadian Press that plans for the location have been abandoned “due to a number of factors,” but refused to reveal what those factors are.

A spokesman for the Montreal Eaton Centre owner confirmed that the store would not be opening, but also did not provide a reason why.

France-based sporting goods store Decathlon will open in the Saks space next fall, the first for a downtown location in Canada.

“This location in the downtown core, which is a relatively new approach for us, will enable us to deliver even more effectively on our brand promise, which is to make sport accessible to as many people as we can,” Tristan Vende of Decathlon Canada said in news release.

Ivanhoe Cambridge leasing vice-president Jean Landry said the opening of Decathlon is one of the highlights of its $200-million revitalization project for a property that once housed the Eaton’s department store and adjacent mall.

Decathlon operates more than 1,400 stores in 42 countries and generates almost $13 billion in annual sales.

In addition, European-based Time Out Market will open in Canada for the first time in the mall. It will offer 16 food options, two bars, a demo kitchen, cooking academy and retail shop.

HBC announced in late 2015 that the purveyor of discount designer clothing and other goods would open at the centre in 2018, as part of the brand’s Canadian expansion.

The company said that the store would take over about 4,165 square meters (44,850 square feet) in the Montreal Eaton Centre and Complexe Les Ailes spaces that merged in 2016.

HBC says it operates 18 Saks Off Fifth locations in Canada in cities including Ottawa, Winnipeg and Niagara-on-the-lake, Vaughan and Pickering, Ont.

FAO Schwarz comes to Canada with holiday pop-ups at all Hudson’s Bay Co. stores

TORONTO — Iconic American toy brand FAO Schwarz is coming to Canada, but it won’t be here for long.

The New-York based retailer announced Tuesday that it is opening pop-up spaces at every Hudson’s Bay Co. store in a bid to bring some of the U.S.’s most beloved toys to Canada.

The spaces, ranging in size from 27 to 111 square metres (300 to 1,200 square feet), will stay open until the end of December and sell oversized plush animals, classic toy train sets and playmat replicas of the life-size piano that Tom Hanks danced on in the famous scene from the 1988 movie “Big.”

FAO Schwarz said the deal marks the first time the brand has had a physical presence in the country.

“We are thrilled to be entering the Canadian market,” FAO Schwarz chief merchandising officer David Niggli told The Canadian Press. “We have been known more as a U.S. company, (but) I would say toys are universal and we found that whether it is a teddy bear or it is a doll or a remote-control car, those kind of playthings are classic and work across the globe.”

The partnership comes months before the more-than-150-year-old FAO Schwarz reopened its New York flagship store after shutting down in July 2015. Around the same time, rival Toys “R” Us Inc., which once owned FAO Schwarz, was facing financial woes and began liquidating U.S. stores only to cancel its U.S. bankruptcy auction and announce plans to revive the brand days ago.

Toys “R” Us’s Canadian business remained open and mostly immune to the rocky period the business encountered, but in recent years it and other toy companies grappled with the growing popularity of video and online games, the expansion of rival brand Mastermind Toys stores and the dawn of e-commerce that has pitted legacy toy retailers against online giants Inc. and eBay Inc.

FAO Schwarz, which is known for its bright, large-scale displays, has attempted to counter these headwinds by opening stores within Macy’s, Saks Fifth Avenue and Bloomingdales department stores.

Niggli wouldn’t say whether the HBC partnership was a sign that FAO Schwarz will look to make a long-term foray into the Canadian market or open its own stores here.

“We always consider. We never say never,” he said.

“I think we will definitely have a good read, but right now it is us and Hudson’s Bay in Canada.”

It’s been two years since HBC re-entered the toy business after nixing the category almost a decade before.

HBC President Alison Coville said the FAO Schwarz opportunity was ideal because it is a chance to “see toys and the wonderment of the holidays brought to life in a really big and magical way.”

Shoppers who visit the pop-ups, she said, can expect to find a mix of hit toys like the Our Generation dolls, alongside technology-based playthings like microphones and mixing boards and FAO Schwarz favourites like oversized giraffes and the $120 pianos, which Coville even admitted she has to stop herself from jumping on.

However, she couldn’t say whether the FAO Schwarz partnership could stick around after the holidays.

“We have toy departments throughout our network of stores, so depending on the customers response, if it is strong and we see opportunity, we would definitely look at expanding or doing it again.”


Hudson’s Bay Company CEO vows changes at underperforming Lord & Taylor, Saks OFF 5th as loss widens

TORONTO — Canadian department store operator Hudson’s Bay Co said on Wednesday its second-quarter loss widened due to lower sales at its Lord & Taylor and Saks OFF 5th divisions.

Chief Executive Officer Helena Foulkes said the company, which announced a joint venture in Europe with Austrian rival Signa Holding on Tuesday, will focus on turning around the two underperforming divisions.

“We’ve made some poor decisions over the last few years that have hurt (the Saks OFF 5th brand’s) profitability,” Foulkes, who became chief executive in February, told Reuters. “But this is a business that fundamentally can be successful.”

Lord & Taylor was more challenging and a turnaround would take longer, she said, adding that the company was open to changes, including smaller stores.

Hudson’s Bay reported a net loss of $147 million, or 62 cents a share, in its North American operations for the quarter ended Aug. 4. That compared with a loss of $100 million, or 55 cents, a year earlier.

Sluggish sales have dogged the company as Inc and other online retailers lure consumers away from department stores. In all but one of the past 10 quarters, HBC has posted losses.

Shares have fallen 6.2 per cent this year, compared with a 0.7 per cent decline in the benchmark Toronto stock index.

Comparable sales in HBC’s department store group, which includes its Hudson’s Bay and Lord & Taylor banners, fell 3.8 per cent in the quarter from a year earlier, while sales at Saks OFF 5th, which offers discounted designer goods, dropped 7.6 per cent.

The company’s luxury Saks Fifth Avenue brand’s 6.7 per cent increase in sales couldn’t offset the declines in its other businesses.

Including its European business, Hudson’s Bay reported a net loss of $264 million, widening from $201 million a year ago, and deeper than the loss of $173 million that analysts expected, according to Thomson Reuters I/B/E/S.
Gross margins improved 240 basis points, lifting adjusted earnings before interest, taxes, depreciation and amortization, to $33 million from $3 million a year ago, the company said.

The European joint venture will merge HBC’s Galeria Kaufhof chain with Signa’s Karstadt brand to form the region’s third-biggest department store chain. The companies said on Tuesday that their combined regional sales in 2017 were 5.4 billion euros (US$6.25 billion).

That venture, which will include both HBC’s European retail operations and real estate assets, was the latest in the Toronto-based company’s efforts to boost its performance.

In June, the company said it would sell its unprofitable online banner Gilt, and close up to 10 Lord & Taylor stores including its Manhattan flagship, whose building it agreed to sell to Softbank-backed WeWork Cos. last year.

© Thomson Reuters 2018

Hudson’s Bay Company and Austria-based Signa form joint venture in European retail

TORONTO — Hudson’s Bay Co. has completed a deal with an Austrian retail heavyweight that will see the two firms create a joint venture to operate existing businesses in Germany, Belgium and elsewhere in Europe.

The Canadian retailer announced the agreement in a statement early Tuesday, saying it’s formed a “strategic partnership for its European retail and real estate assets” with Austria-based Signa Retail Holdings.

The deal has been in the works for some time, with HBC confirming in July that it was in talks with Signa.

The European firm had made an unsolicited offer late last year to buy HBC’s German operations, but withdrew it earlier this year after it was rejected by the HBC board because it undervalued the business.

Signa owns Kardstadt, a department store selling everything from apparel to household appliances, while HBC runs department stores overseas called Galeria Kaufhof and Galeria INNO.

The new venture will include those assets, as well as the European arm of HBC’s Saks Off Fifth brand, Hudson’s Bay in the Netherlands, Kardstadt sports stores and both companies’ food and catering businesses.

“This transaction builds on our recent efforts to streamline HBC and provides a clear path forward to improve our European operations,” HBC chief executive Helena Foulkes said in a statement.

“The creation of a stronger operator in Europe allows us to focus our attention on our North American banners, helping to ensure we are making the right strategic decisions to drive performance and profitability within those businesses.”

The deal is subject to regulator approval in Europe, and is expected to close within the next 90 days.

Hudson’s Bay agrees to sell half its European business to Signa Holding: report

DUESSELDORF/FRANKFURT — Hudson’s Bay has agreed to sell about half of its European business to Austria’s Signa Holding in a deal that will bring together two major German department store chains, according to media reports on Wednesday.

The agreement, described as a “proposed merger of equals for the European department store business” by German magazine WirtschaftsWoche, was signed by both parties on July 3, the weekly reported.

Under the deal, a joint venture will be created consisting of Kaufhof, the German department store chain owned by Canada-based Hudson’s Bay, and Karstadt, which is owned by Signa, the magazine said.

Signa will hold slightly more than half of the entity and will manage the operating business, it added.

In a separate article, the Wall Street Journal said Hudson’s Bay would receive 1.1 billion euros (US$1.3 billion) from Signa as part of the transaction. Signa, in turn, will assume 750 million in debt, the paper said.

Hudson’s Bay declined to comment. A spokesman for Signa was not immediately available for comment.

© Thomson Reuters 2018

Hudson’s Bay in talks with Signa for Kaufhof joint venture: sources

NEW YORK — Saks Fifth Avenue owner Hudson’s Bay Co is in discussions with Austrian property and retail group Signa Holding GmbH about a joint venture for its German retail chain Kaufhof, two people familiar with the matter said on Monday.

Canada-based Hudson’s Bay, which rejected Signa’s 3 billion euro bid (US$3.7 billion) for Kaufhof earlier this year, has been looking to improve its financial performance as shoppers move away from brick-and-mortar department stores and toward e-commerce giants like Inc.

The joint venture for Kaufhof being discussed by the companies calls for Signa’s department store operator Karstadt to acquire half of Kaufhof’s property company, and 51 per cent of its operating company, with the option to buy the rest at a later date, according to the people who asked not to be named because the matter is private.

If the talks are successful, a deal could be announced in the next few weeks, the people added. There is no guarantee the talks will result in a deal and the negotiations could still fall apart, the sources cautioned.

Signa and Hudson’s Bay could not immediately be reached for comment.

Hudson’s Bay has been re-shuffling its department store brands, and shoring up cash by making deals. It said earlier this month that it would shutter 10 Lord & Taylor stores, with the brand’s flagship Manhattan building sold for US$850 million last year.

It also sold its luxury e-commerce shop Gilt to peer Rue La La.

As of May 5, Hudson’s Bay had $3.8 billion (US$2.85 billion) in loans and borrowings on its balance sheet. Its debt to profit levels have been higher than the industry average.

Activist investor Land & Buildings has been critical of the company’s strategy, urging it last week to extract more value from its substantial real estate holdings.

Hudson’s Bay bought Kaufhof in 2015 for 2.8 billion euros from German retailer Metro AG.

It financed the deal with a joint venture that acquired the German retailer’s real estate, becoming its landlord.

But Kaufhof struggled to make the higher rent payments as shopper numbers fell.

Hudson’s Bay is also working with consulting firm AlixPartners LLP on cutting costs and reforming its business, Reuters reported in May.

© Thomson Reuters 2018