Commodities: Hudson’s Bay Admits It Went Too Far on Cost Cuts — Update

By Austen Hufford 
 

Hudson’s Bay Co. has been trying to balance cost cuts with investments to win more online shoppers, like many struggling department stores. In its latest quarter, the company said its cost-reduction efforts went too far.

The Saks Fifth Avenue and Lord & Taylor owner said a recent initiative that included job cuts unexpectedly caused challenges, particularly in the company’s digital business during its third quarter. Hudson’s Bay said it would reduce promotional activity as it tries to fix the issues.

The department-store operator said it is now investing more in its digital platforms and online capabilities. Digital sales increased 2.1% on a constant-currency basis, well below the second-quarter increase of 11%.

Finance Chief Ed Record said results missed the company’s expectations.

Hudson’s Bay said it still expects to generate annual savings of $350 million. The company previously said it was on track to “realizing more” than the $350 million goal.

The company also recently announced that it would start selling goods from Lord & Taylor on Wal-Mart Stores Inc.’s Walmart.com next spring. Wal-Mart wants to attract more upscale and high-income shoppers online.

Wednesday’s report is the company’s first since Gerald Storch stepped down from his role as chief executive. Executive Chairman Richard Baker, who has previously served as Hudson’s Bay CEO, has been interim CEO since early last month.

Hudson’s Bay, which calls itself North America’s oldest company, started as a royal-chartered fur-trading company in 1670. Today, it is largely known for its retail stores.

In October, the company said it would sell its flagship Lord & Taylor New York City store for $850 million as it tries to capitalize off its significant real estate holdings. The move will convert most of the landmark building into office space and the headquarters of real-estate startup WeWork Cos.

The company also said last month it received an unsolicited offer for its German department store chain, Galeria Kaufhof, from its main rival in that country, but the company said the offer was incomplete and lacked financing.

In all for the company’s third quarter, consolidated comparable sales decreased by 5.1% and 3.2% on a constant currency basis.

The company posted a loss of 243 million Canadian dollars ($191.8 million), or a loss of C$1.33 a share, compared with a loss of C$125 million, or 69 Canadian cents, in the same quarter last year. On an adjusted basis, earnings per share came in at C$1.11.

Revenue fell 4.2% to C$3.16 billion.

Analysts polled by Thomson Reuters had expected an adjusted earnings per share loss of 74 Canadian cents on revenue of C$3.41 billion.

Write to Austen Hufford at [email protected]

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