HBC reports higher Q2 sales, $3.9M in adjusted earnings
A shoppers leaves the Hudson Bay Company store on Thursday, Jan. 26, 2006 in Toronto, Ont. (The Canadian Press/Nathan Denette)
Published Thursday, September 12, 2013 1:52PM EDT
TORONTO -- Hudson's Bay Co. (TSX:HBC) reported improved overall profit and sales from continuing operations in the second quarter but its Lord & Taylor stores in the United States showed the lingering effects of weak market conditions.
HBC's "normalized" net earnings from continuing operations rose to $3.9 million or three cents per share in the quarter ending Aug. 4, compared with a loss of two cents per share or $2 million in the second quarter of 2012.
The Toronto-based company's overall retail sales rose to $947.7 million, from $911.9 million a year earlier as Hudson's Bay stores in Canada offset slippage at Lord & Taylor in the eastern United States.
HBC chief executive Richard Baker said the Lord & Taylor stores were contending with several unfavourable conditions during the quarter, while its Hudson's Bay stores in Canada were outperforming their peers.
Two weather-related factors in the U.S. Northeast -- an unseasonable cool period early this year and Hurricane Sandy in the fall of 2012 -- had lingering effects for Lord & Taylor in the second quarter.
In addition, Lord & Taylor stores in and around the U.S. capital saw sales drop, presumably because of the cuts in government spending, Baker said.
"Our opinion is that we're charting very much in course with our peers, who have stores in those same markets," Baker said in a phone interview from New York.
"Having said that, frankly, we'd like to be performing better than our peers but that seems to be where we are."
Hudson Bay's stores open at least a year showed same-store sales growth of 6.2 per cent, compared with a decline of 1.2 per cent at Lord & Taylor during the period.
The revenue was ahead of estimates compiled by Thomson Reuters but the normalized earnings were far short of the 12 cents per share that had been anticipated.
Baker added that HBC's Canadian sales were "far, far better than anyone else in Canada" and that it's well-positioned to bring the Saks Fifth Avenue luxury brand to Canada, once the proposed deal closes.
HBC announced in July that it plans to buy Saks in a friendly deal worth US$2.9 billion, including assumed debt.
The Saks Fifth Avenue luxury brand, combined with the well-placed Hudson's Bay retail locations, will put HBC in a unique position, he said.
"We have an existing backbone of infrastructure in order to make our entry very economical for the Hudson's Bay Co., which means we can make more money on less volume than anyone else."
HBC shares traded as high as $17.12 on Thursday but slipped later. Just after midday, they were down five cents or less than a per cent at $17. They began trading on the Toronto market Nov. 26, when the closed the day at $16.89.
The Canadian retail scene is preparing for a number of major changes, including in the department store segment occupied by HBC and its longstanding rivals Sears Canada (TSX:SCC) and Holt Refrew, a private chain of upscale stores.
In addition to the expected arrival of Saks, Nordstrom announced a year ago that it plans to move into Canada -- including in former Sears locations in several cities. Meanwhile, Target has been opening its first Canadian stores since March, mostly in locations formerly occupied by HBC's Zellers discount arm.
In addition to its adjusted profit, HBC also reported Thursday that it had a net loss of $82.3 million in its fiscal second quarter, or 69 cents per share.
That compares with a year-earlier net profit of $22 million, or 21 cents per share, when HBC's bottom line was boosted by gains from the sale of many of its Zellers locations to Target.