Thanks To Saks, HBC's Sales & Profit Soar In Q2

September 12, 2014

Hudson's Bay Company is reaping the rewards of its acquisition last year of Saks.  The company's retail sales soared 86.6% to $1.8 billion, from $948 million in the prior year.

Consolidated same-store sales increased by 1.9% on a local currency basis, with increases of 1.1% at HBC's department store group (DSG), 2.2% at Saks Fifth Avenue and 14.9% at Off 5th.  Digital commerce sales totaled $162 million, including $116 million from Saks and growth of 82.2% at DSG.

In terms of merchandise category performance, sales growth at DSG was driven by men's apparel, home and cosmetics.  Sales growth at Saks Fifth Avenue was led by menswear, gifts and accessories.  Sales growth at Off 5th was strong across the majority of categories.

Gross profit jumped to $700 million, from $368 million in the prior year, again primarily attributable to the inclusion of Saks.

"HBC's quarter was characterized by strong performance from the higher end of our businesses, demonstrating the sustained strength of affluent consumers, and softer performance from our more moderate businesses.  Off 5th, buoyed by its new digital business, experienced outsized same store sales growth for the quarter," said Richard Baker, HBC's governor and CEO.  "We continued to invest in HBC Digital, where we witnessed tremendous sales growth.  Based upon our results for the first half of the year and our positioning for the back-to-school and holiday quarters, we are affirming our outlook for full-year fiscal 2014."

During the second quarter, HBC began the integration of the Home Outfitters business with the Home business of the Hudson's Bay banner.

"Joining our two Home businesses not only allows us to create a more powerful Home destination, but also drives efficiency by combining our merchandising and marketing efforts and organizations," said Donald Watros, HBC's president.

HBC is currently in the process of assessing its Home Outfitters locations and previously announced the closing of locations in Mississauga, Ontario, and Abbotsford, British Columbia, in December 2014 and January 2015, respectively.  Beginning with this year's third quarter results, Home Outfitters will be included in HBC's department store segment.

During the quarter, the company opened four new Off 5th stores located in Boston, Massachusetts; San Diego, California; Charlotte, North Carolina and Lousiville, Kentucky.  During the third quarter, HBC expects to open a Lord & Taylor store in Albany, New York, Off 5th stores in Eagan, Minnesota; Costa Mesa, California; and Columbus, Ohio and a Hudson's Bay Outlet in Mirabel, Quebec.

HBC also recently announced the planned opening of a Saks Fifth Avenue store in the fall of 2016 at Brickell City Centre in downtown Miami, Florida.  Previously, the company has announced plans for Saks Fifth Avenue stores in San Jual, Puerto Rico, in the spring of next year and in Honolulu, Hawaii, in the spring of 2016.

Looking ahead to the full fiscal year, the company anticipates total sales ranging from $7.8 billion to $8.1 billion.  This implies low-to-mid single-digit consolidated same store sales growth calculated on a local currency basis, driven in part by strong digital sales growth.

As previously announced, Paul Beesley joined the company during the second quarter as CFO.  Subsequent to the second quarter, John Caplice joined HBC as SVP, treasury and investor relations, a week ago.  Caplice most recently served as SVP, treasurer and investor relations, at Shoppers Drug Mart Corporation, Canada's largest retail drug store chain with annual sales in excess of $11 billion, from 2000 to 2014.

Source: Retailing Today