With the holiday shopping season officially here, Hudson's Bay Co. posted an anticipated third-quarter loss Monday - taking into account an accounting rule change.
For the three-month period ending Oct. 31, Canada's largest retailing company earned $4.5-million or 3 cents per share compared with profit of $19.7-million or 24 cents per share the year ealier.
However, the Toronto-based owner of the Bay and Zellers said the beneficial impact of an accounting rule change increased third quarter operating profit by $11.5-million. Without that, the quarterly loss was $2-million or 7 cents a share.
Three analysts polled by Thomson Financial/First Call had forecast losses in a range of 5 Canadian cents to 8 Canadian cents a share.
In late October, Hudson's Bay warned of weaker-than-expected results, predicting a loss of $3.5-million to $7-million or 5 to 10 cents a share in its third quarter, before a one-time gain.
Analysts have said the Bay has been hurt by competitors Sears and Eatons clearing out excess merchandise at marked-down prices, prompting price wars.
Hudson's Bay said last month that sales of clothing, accessories and other so-called soft-line goods have been hurt more than hard-line goods, such as items for the home.
The Bay has been hit harder than Zellers, which as a discounter is more sheltered from the sluggish economy as consumers search for bargains.
In Monday's quarterly results, the company said that fourth quarter will not look much better, with continuing pressure on profit margins and no sales gains compared with a year ago, adding that current November sales were being impacted by unseasonable weather in Western and Central Canada.
"I hate to use weather but yesterday when I was out raking leaves in 16 degrees (Celsius) (61 degrees Fahrenheit), it is hard not to become pensive about it," president and chief executive officer George Heller said in a conference call for analysts.
Hudson's Bay sales for the quarter fell 0.5 per cent to $1.76-billion from $1.77-billion in last year's third quarter. Sales at its Bay department stores fell 2.6 per cent, while revenue at its Zellers discount chain rose 0.8 per cent.
"We are seeing cautious consumers and they truly are avoiding discretionary purchases," Mr. Heller said.
Furthermore, Hudson's Bay said it expects competition in the Canadian marketplace to get even more intense, with U.S. retailers, such as Old Navy, Williams Sonoma and Pottery Barn, entering the Canadian market.
Also, Wal-Mart - the world's biggest discount retailer - plans to open another eight stores across Canada in November, Hudson's Bay said in a statement.
In light of the sputtering economy and the terrorist attacks of Sept. 11, Canadian retailers have all been suffering, a prospect that does not bode well as they head into the key Christmas holiday season.
Toronto-based rival Sears Canada Inc. - the owner of Eatons - warned that its third-quarter profit was cut in half from a year earlier.
It blamed tight-fisted consumers, price discounting and the aftermath of the Sept. 11 terrorist attacks for the poor results, adding that an improvement will not come until the second half of next year.
With a file from Reuters.