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Hudson’s Bay to cut 2,000 jobs as losses mount; shares fall

Pedestrians walk past the Hudson's Bay store in Toronto.

Fred Lum/The Globe and Mail

Hudson's Bay Co. is cutting 2,000 jobs in its core North American retail business, or 4 per cent of its work force in that market, as its losses mount amid falling sales in a fast-changing retail climate.

The department-store retailer, which owns Hudson's Bay and Saks Fifth Avenue, said late on Thursday its first-quarter loss climbed to $221-million, or $1.21 a share, from $97-million, or 53 cents, a year earlier. Its sales slipped to $3.2-billion from $3.3-billion.

Hudson's Bay shares were down more than 9 per cent in morning trading in Toronto on Friday.

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The Toronto-based retailer unveiled a transformation plan aimed at streamlining operations, increasing efficiencies and getting more economies of scale from its operations. It anticipates it will realize more than $350-million in annual savings from the overhaul by the end of fiscal 2018.

"We know we can do better and we are taking bold, decisive action," said Jerry Storch, chief executive officer of HBC.

Related: Hudson's Bay Co. hoping Saks will provide a lift among changing retail environment

Read more: Hudson's Bay posts loss for holiday season

Related: Hudson's Bay cuts costs, plans reinvention

North American department stores have been hit hard by the changes sweeping the retail industry, including the rise of online shopping and a raft of bricks-and-mortar store closings and bankruptcies, forcing merchants to develop new strategies to draw customers.

Last month, HBC reported disappointing first-quarter sales at stores open a year or more, which is an important retail metric. HBC joined Macy's Inc., Nordstrom Inc. and other U.S.-based retailers in posting weaker-than-expected quarterly same-store sales, pushing down department-store stocks.

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On Thursday, Nordstrom said members of the founding Nordstrom family are considering buying out their fellow shareholders and taking the retailer private.

First-quarter results are "not an overly meaningful quarter for the company, and weather was certainly unfavourable, but the trends at both HBC and across the U.S. department-store space remain worrisome," Mark Petrie, retail analyst at CIBC World Markets, said in a report last month.

He said HBC's deteriorating financial results raise questions about the retailer's ability "to monetize a significant amount of real estate tied to a declining sector."

The retailer holds valuable real estate that it has said it could spin off in a real estate investment trust, which could potentially help its stock price.

Mr. Storch said in an interview he had nothing new to disclose about a possible REIT, but "we strongly believe in the value of our real estate."

HBC had been studying ways to shore up its business over the past six months. Mr. Storch said the changes include improvements to its organizational structure, store operations and purchasing strategy to bolster the "all-channel" shopping experience in both its bricks-and-mortar stores and its e-commerce.

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"Our team is taking the right steps to optimize our North American business and create efficiencies by leveraging the scale of our company," said Richard Baker, executive chairman of HBC. "At this critical moment of change in the retail industry, I believe in the future of our all-channel model and we are adapting to meet the evolving needs of our customers."

It will cut staff at its head office and in stores, mostly in the United States, Mr. Storch said. The reductions will "flatten" the organization by removing layers and streamlining decision-making, making HBC more nimble, he said.

He said mounting losses were a result of falling sales as well as rising costs tied to its e-commerce.

HBC expects to take one-time charges of about $95-million in the next year tied to the transformation efforts.

Among other leadership changes, HBC has appointed Alison Coville, an almost 20-year veteran of Hudson's Bay, as president of the Canadian chain. Liz Rodbell was president of Hudson's Bay and Lord & Taylor in the United States and will continue in the latter role.

HBC said same-store sales at all of its banners fell 2.9 per cent in its first quarter ended April 29, hurt by fewer customers shopping in its stores, particularly in the United States.

Same-store sales at Saks fell 4.8 per cent, a steeper decline than reported by Macy's, Nordstrom and J.C. Penney Co. Inc. HBC's discount operations, Saks Off 5th and online website, fell 6.8 per cent, a fifth consecutive decline.

Amid troubles in the department-store sector, HBC has doubled down on its exposure. It bought Saks Inc. in 2013 and Germany's Galeria Kaufhof in 2015. In February, it considered buying Macy's. More recently, it has been looking at acquiring debt-ridden Neiman Marcus Group Inc.

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