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Hudson’s Bay Co. continued to clear out old merchandise at markdowns and introduce pricier, edgier fashions at its namesake chain, hurting its first-quarter results as the struggling retailer’s chairman seeks to take the company private.

Toronto-based HBC, which also owns luxury chain Saks Fifth Avenue, saw its sales drop 4.3 per cent at its Hudson’s Bay stores that were open a year or more – an important retail measure – while those sales over all at HBC slipped 2.1 per cent.

Despite the disappointing first-quarter results, including a wider-than-expected loss, chief executive officer Helena Foulkes said the company is making strides in turning around the troubled department-store retailer.

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Its Hudson’s Bay chain in Canada had shifted last year to less-expensive products to try to lure former customers of the bankrupt Sears Canada Inc., she said on Thursday after the release of the results. But Ms. Foulkes came to realize Hudson’s Bay customers were ready to pay more for better quality and more fashionable styles, she said. The chain is still in the midst of selling off last year’s inventory at reduced prices, which is pinching profit margins.

“We had self-inflicted wounds,” Ms. Foulkes, who arrived at HBC in early 2018 to fix it, said. “I feel very confident the team has corrected that for the second half of the year.”

As Ms. Foulkes makes bold moves to turn around the company’s flagging fortunes, its executive chairman, Richard Baker, is leading a group that wants to take HBC private for about $1-billion. Mr. Baker’s group, which owns 57 per cent of HBC shares, argues the retailer can repair the damage better away from the glare of the public markets and focus on long-term achievements rather than the pressure of making quarterly gains.

Many analysts think that Mr. Baker’s $9.45-a-share privatization proposal is reasonable given the company’s weak performance. Investors are indicating they don’t expect a better bid. HBC’s stock has traded at less than the proposed privatization price since it was disclosed on Monday. It closed at $9.34 a share on Thursday, while last Friday the shares were at just $6.37 a share – a far cry from the $17-a-share at which HBC had returned to the public markets in late 2012.

Still, some minority shareholders say they think the offer undervalues the company. That’s the view of Jonathan Litt, founder of U.S. investor Land & Buildings Investment Management LLC, a source familiar with Mr. Litt said, to whom The Globe and Mail granted anonymity because the person was not authorized to speak publicly. Mr. Litt has been pushing HBC over the past couple of years to make even more dramatic changes and sell more real estate to allow shareholders to cash in on its value.

Mr. Litt is assessing the privatization offer but thinks it should be much higher, the source said. Ms. Foulkes last fall had said that HBC’s real estate alone was worth $28 a share. Other minority shareholders, who declined to comment, also oppose the proposed privatization offer, although still others were ready to back it, they said, also declining to be named.

Oliver Chen, retail analyst at Cowen & Co. in New York, said this week the go-private proposal “appears modest” based on his “sum-of-parts” analysis and the “significant underlying real estate value.”

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Mr. Chen estimates HBC is worth as much as $13.10 a share, “depending on various assumptions.”

But Mr. Chen acknowledged that the privatization proposal may still succeed amid a tough department-store sector, rising online competition and a weak HBC performance at many of its divisions. Last month, HBC said it was looking for a potential buyer for its Lord & Taylor chain in the United States and has already closed some of its worst-performing stores.

Ms. Foulkes, a seasoned U.S. merchant, has moved quickly to sell-off underperforming divisions and stores as she focuses on what she sees as HBC’s most promising businesses: Saks Fifth Avenue and Hudson’s Bay.

She said on Thursday she expects improved results in the second half of 2019 but for now the company has “more work to do fixing the fundamentals and strengthening operations.” Saks Off 5th is starting to benefit from changes she is overseeing at that chain, including introducing more fashionable items.

The bright spot for HBC in its first quarter, which ended on May 4, was its Saks Fifth Avenue chain, whose same-store sales rose 2.4 per cent, including gains in its men’s and women’s designer fashions.

The company reported first-quarter profit from continuing operations of $275-million, or $1.15 a share, compared with a loss of $132-million, or 72 cents a share, a year earlier. The earnings were helped by a $817-million gain from the sale of the Lord & Taylor flagship store’s building in New York.

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Excluding such one-time items, the company posted a loss of 87 cents a share, wider than the 56-cent loss based on average estimates from two analysts, according to IBES data from Refinitiv. Total revenue fell to $2.12-billion from $2.19-billion.

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