Kevin O’Leary says that, while Hudson’s Bay Co.’s latest financial results are impressive, he’s not sure the profitability will last.
O’Leary told CTV News Channel that the company’s recent profits are driven by the trend of older retailers unlocking the value of their prime real estate.
“If you’ve owned a store for 50 years, the value of that real estate has gone up dramatically, maybe even more so than the value of your business,” said the CTV business commentator.
“One of the strategies has either been to sell off the real estate or turn it into a separate REIT (Real Estate Investment Trust), which investors can invest in, and then you lease back your own property,” he explained.
“This is the same thing Hudson’s Bay is doing,” he added. “My question as an investor … is this sustainable?”
O’Leary added that he is “always suspect of retail,” because of the tendency for brands to “lose their mojo,” in part by failing out of touch with what’s fashionable.
O’Leary said that, “Sears is a worthless brand now” and that Gap Inc. “has lost so much of its mojo over the last 15 years … because they haven’t been able to buy the right products.”
Hudson’s Bay Co. said Wednesday that it had returned to profit in the second quarter, in large part due to a $107-million gain from real estate joint ventures.
HBC's net income for second quarter ended Aug. 1 was $67 million, which compared with a loss of $36 million in the second quarter of 2014, and $33 million in the first quarter of 2015.
HBC operates under the brands Lord & Taylor and Saks Fifth Avenue in the U.S., and Hudson's Bay and Home Outfitters in Canada.
HBC's sales totalled $2.04 billion in the second quarter, which was up $269 million or 15.2 per cent from a year earlier.
With files from The Canadian Press
