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Report on Business Hudson’s Bay revenue falls lower sales at Lord & Taylor

Canadian department store operator Hudson’s Bay Co on Thursday posted a wider-than-expected loss as sales at its Lord & Taylor unit fell, but said it was optimistic about its ability to deal with the impact of U.S. tariffs on Chinese goods.

Shares of the company were up about 1 per cent at $9.39 in morning trading.

Hudson’s Bay, which also owns Saks Fifth Avenue, said earlier this week it is evaluating a $1.74 billion take-private cash offer as it competes with discount direct-to-consumer brands and e-commerce behemoths like Amazon Inc.

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The offer was put together by Executive Chairman Richard Baker and the retailer’s other shareholders.

Hudson’s Bay chief executive officer Helena Foulkes, who is not part of the shareholder bid group, highlighted the company’s success at Saks, particularly in its fast-growing men’s business, and at Hudson’s Bay, due to investments in improving the mobile app and its buy-online-pick-up-in-store business.

Foulkes told Reuters she expects to see the benefits of cost-cutting, including from the shuttering of underperforming shops, in the second half of the year.

The company sold its iconic Lord & Taylor Fifth Avenue flagship building to WeWork and partner Rhône Capital for $850 million in October 2017 and has underscored its prioritization of Saks and Hudson’s Bay.

Company executives told investors on an earnings call that Hudson’s Bay had not seen any impact from U.S. tariffs on Chinese imports and that it expects to use aggressive inventory and supply chain management to offset a potential further round of American tariffs on Chinese goods.

U.S. President Donald Trump has threatened to impose up to 25 per cent tariffs on an additional $300 billion in Chinese imports to the United States if the two sides cannot reach a trade deal.

“Our merchants are prepared to work with the vendor community to lessen the impact on HBC and our customers,” chief financial officer Edward Record said. “We hope the tariffs don’t go in place, but if they do, we think we are well-positioned, given the more than 70 per cent of revenue we have in Canada in luxury retail.”

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Hudson’s Bay, North America’s oldest company, also said earlier this week it would sell its stake in its real estate joint venture in Germany to Signa Retail Holdings in a deal valued at $1.5 billion, with the resulting proceeds expected to be used to pay down debt.

Lower debt would also make Baker’s take-private deal easier to finance.

The company said first-quarter comparable sales decreased 2.1 per cent. Excluding Lord & Taylor and Home Outfitters, which are both undergoing strategic reviews, same-store sales rose 0.3 per cent.

Same-store sales at its namesake stores tumbled 4.3 per cent in the quarter.

The bright spot for Hudson’s Bay Co in the first quarter was its upscale Saks Fifth Avenue business registering a 2.4 per cent rise in same-store sales as customers spent more on men’s and women’s apparel.

The company reported net profit from continuing operations of $275 million, or $1.15 per share, in the first quarter ended May 4, compared to a loss of $132 million, or 72 cents per share, a year earlier.

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First-quarter net income was buoyed by a $817 million gain from the sale of the Lord & Taylor flagship building in New York.

Excluding items, the company posted a loss of 87 cents per share, wider than the 56 cents 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 a year earlier.

Shares of the company had fallen 12.6 per cent this year before Baker’s offer earlier this week pushed shares up by as much as 48 per cent.

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