Shoppers browse through the Hudson's Bay Company's custom brand products at their flagship store in downtown Toronto, Ontario Saturday Dec. 8, 2012Tim Fraser/The Globe and Mail
Hudson's Bay Co. is about one-third through its store renovations, a key part of its transformation efforts to draw more customers back to the iconic department store retailer.
And while the Toronto-based merchant, which consists mostly of Hudson's Bay in Canada and Lord & Taylor in the U.S., is making progress, it struggles with some forces beyond its control: last fall's hurricane Sandy in the Northeast States, where Lord & Taylor is mostly based, and this spring's cool, rainy spring in much of North America, which is pinching sales and profits.
"While we still have a great deal of work in front of us, we believe that both Hudson's Bay and Lord & Taylor are moving in the right direction," Richard Baker, chief executive office of HBC, told an analysts conference call on Thursday morning.
Even so, the retailer generated fewer sales than expected in its first quarter, particularly at Lord & Taylor, Mr. Baker said.
"In our opinion, this sales weakness can be attributed to unseasonably cold weather compared to last year's unseasonably warm weather," he said. "While 2013 has begun on a challenging note, I am confident we will enjoy a successful year.
"As a very significant long-term shareholder of this company, I truly believe we are just beginning to unlock the value embedded in these great businesses."
Other initiatives that he is counting on to bolster business include higher productivity -- which stood at $140 sales per square foot in 2012 at Hudson's Bay, up from $133 the previous year; five more Topshop store-within-stores and the launch of New York-based Kleinfeld Bridal salon at Hudson's Bay's flagship Toronto store; a re-launched e-commerce and digital strategy; a revamping of its high-margin private labels; more emphasis on shoes, apparel and accessories; "significant" renovations of four of each of Hudson's Bay and Lord & Taylor stores; and opening a new Lord & Taylor outlet in Boca Raton, Fla.
In fiscal 2013, HBC expects sales growth of 3 to 5 per cent at stores open a year or more -- an important retail measure. That is on the lower end of the company's goal of annual mid-single-digit same-store sales increases.
In 2012, its same-store sales picked up by 4 per cent overall, rising by 5.4 per cent at Hudson's Bay and 2.9 per cent at Lord & Taylor.
In 2013, HBC expects total sales to rise 1.5 per cent to 3.5 per cent, compared with 5.9-per-cent growth in 2012 from a year earlier. It expects normalized earnings before interest, taxes, depreciation and amortization (EBITDA) of $360-million to $390-million in 2013, compared with $310-million in 2012.
In its fourth-quarter, HBC profit dropped compared with a year ago as its Lord & Taylor operations in the United States felt the impact of hurricane Sandy. The company, which returned to the public stock markets in November, said net profit from continuing operations were $93.6-million or 81 cents per share for the 14 weeks ended Feb 28.
That was down $5.6-million from the year-earlier quarter, when net income from continuing operations was $99.2-million or 95 cents per share over 13 weeks.
Adjusted earnings that exclude some non-recurring items were $99.3-million or 86 cents per share in the most recent quarter, up from $94.8-million a year earlier.
Despite the U.S. weather problems, HBC's retail sales were up 6.7 per cent year-to-year due to an extra week of selling, higher online sales and strength at its Canadian stores, which enjoyed a 6.1-per-cent increase in same-store sales.
Overall sales grew $86.89-million to $1.386-billion, with the 14th week contributing $50-million of the increase. Online sales accounted for $58-million in the 14-week period ended Feb. 28, up from $35.6-million a year earlier. Lord & Taylor's same-store sales fell 2.9 per cent in U.S. currency.