HBC CEO: Tech and marketing efforts 'are starting to pay off'

Dive Brief:

Hudson's Bay Co. on Wednesday reported that third quarter revenue rose $115 million Canadian ($86.9 million U.S.) or 5.6% to $2.2 billion ($1.7 billion U.S.). Total store comps rose 2.9%, (or, adjusting for the shift of its “Bay Days" promotional event into the third quarter from the fourth this year, total comps rose 1.2%), as total digital comps rose 8%, according to a company press release.
Store comps by banner in the quarter: Saks Fifth Avenue rose 7.3%, its sixth consecutive quarter of growth; DSG (which includes Hudson's Bay, Lord & Taylor and Home Outfitters) rose 0.9% or, adjusting for “Bay Days" fell 2.4%; and off-price Saks OFF 5TH fell 2.3%, the company said.
For HBC overall, gross profit as a percentage of revenue expanded 10 basis points to 39.4%, thanks mostly to improved full price and clearance margin rates. Net loss from continuing operations widened to $124 million from the year-ago quarter's $116 million net loss, mostly due to higher depreciation and amortization expenses and a higher reported loss from its share in joint ventures that in turn was largely driven by foreign exchange, the company said.

Dive Insight:

Hudson's Bay has done itself the favor of pulling back in Europe, giving it more legroom to capitalize on Saks Fifth Avenue's strength and improve its flagship Canadian operations.

Third quarter results didn't include HBC Europe, which has been classified as a discontinued operation, the company said in its press release. The closing of an agreement to sell its controlling interest in HBC Europe and to form a strategic partnership for that businesses is allowing the company "to concentrate on the North American business," CEO Helena Foulkes said in a statement.

On a conference call with analysts Wednesday, executives said that digital sales are in focus in Canada and at Saks. The company said new technology and marketing efforts are allowing its banners to get closer to their customers, Foulkes said, noting that the reorganized efforts "are starting to pay off."

So is Saks' relocation of its beauty sales to the second floor in New York, she also said, even though ongoing renovations will hurt holiday quarter sales. "[It] will have an impact on [Q4] performance, but we planned for that and are comfortable with that," she said. "The power of the Saks model is the combination of stores and digital together. We're already seeing success moving the beauty business from the first floor to the second — and [it's] helping [us] rethink the future of retail."

The company's deals in Europe and elsewhere are also helping shed some debt. With the initial proceeds of the European transaction the company repaid $175 million (U.S.) of its U.S. term loan debt. HBC also expects to fully repay its $400 million (U.S.) mortgage on its Lord & Taylor flagship when the company closes on the sale of that building to coworking company WeWork, according to a statement from HBC Governor and Executive Chairman Richard Baker. Those transactions, plus other deals in Europe and cash inflow from operations are expected to reduce debt by more than $2 billion during the fourth quarter and year-end debt by more than $1 billion compared to last year, he said.