Financial Performance

Hudson’s Bay Shares Plunge as Q3 Loss Widens

“We know we can do better," CFO Ed Record says as the retailer posts a net loss of $192 million and same-store sales decline 3.2%.
Matthew HellerDecember 6, 2017

Hudson’s Bay shares fell sharply on Wednesday after the retailer reported a much worse-than-expected quarterly loss, with both overall revenue and comparable store sales declining by more than 3%.

The net loss for the third quarter came to C$243 million ($192 million), or C$1.33 per share — up from C$125 million, or 69 cents, a year earlier and from analysts’ estimates of C$138.2 million, or 76 Canadian cents. It was Hudson’s Bay’s seventh straight quarterly loss.

Overall sales fell 4% to $3.16 billion while same-store sales were down 3.2%. Comp sales at the company’s Saks Fifth Avenue stores rose 0.2%, the second straight quarterly gain.

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On news of the earnings, Hudson’s Bay shares dropped 13% to C$10.35. “While Saks Fifth Avenue and Hudson’s Bay are performing well, our overall third-quarter results did not meet our expectations,” CFO Ed Record said in a news release.

He said staff reductions caused some “operational challenges,” particularly in the digital business, adding, “We know we can do better, and our highest priorities include increasing comparable sales, improving margins, and prioritizing our capital investments as we focus on further developing our digital business.”

Gross margin declined 60 basis points in the quarter to 41.6%, reflecting increased promotional activity. Hudson’s Bay said comp sales were hit by lower traffic, deeper discounts, and the effects of the recent hurricanes.

As Reuters reports, the company “has been under increasing pressure from activist investor Jonathan Litt to boost its sliding share price by extracting value from its substantial real estate holdings. He has called for the company to distance itself from a retail market in which brick-and-mortar store margins are shrinking and their market share [is being] eroded by nimble online operators.”

Litt last week dropped his opposition to a $500 million equity investment in Hudson’s Bay by an affiliate of Rhône Capital. Hudson’s Bay said Wednesday the deal had closed.

“The investment by Rhône Capital and sale of the Lord & Taylor Fifth Avenue building will … substantially strengthen our balance sheet,” Hudson’s Bay CEO Richard Baker said.