Sun shines across Hudson’s Bay, outlook strong, work on Saks’ Manhattan flagship upgrade to start summer

All appears calm in a sunny Hudson’s Bay despite turbulent times for Canadian retail. The venerable retail giant had plenty of good news to deliver Tuesday with its businesses across the North America divide performing strongly in both Q4 and fiscal 2014, boosted further by an outlook that predicts an even sunnier 2015.

Stealing the main headline had to be its $2.9bn treasure Saks. The high-end department store group, acquired two years ago, outshone its sister banners on the same-store sales front and also performed strongly online. There was also news of a major revamp for its flagship Manhattan store too.

Elsewhere, Hudson’s Bay’s signature retail offer is all set to energise its womenswear business, tuning into the 1970s-style fashion vibe and expanding its ‘athleisure’ offer to help bolster a segment whose growth has lagged behind menswear.

“There’s a significant change in fashion,” HBC executive chairman Richard Baker told the Globe & Mail Tuesday. “Change is always good because people need to replenish their wardrobes to be in style.”

So how do those figures shape up? For the quarter ending January 3, HBC net earnings jumped to C$111m/61 cents a share from C$37m/21 cents a year earlier when expenses for the purchase of Saks in late 2013 skewed figures. The stronger US dollar, which appreciated 12.1% against the Canadian dollar during the period, also helped.

Analysts, however, had expected a profit of 72 cents.

Q4 sales rose around 9% to C$2.632bn from C$2.407bn a year ago, in line with analysts’ estimates. Comparable-store sales rose 2.3% during the final quarter. HBC also said online sales leapt 35% on-year to C$304m, accounting for around 11.5% of total sales.

Same-store sales at Off 5th grew 12.1%, compared with a 2.6% increase at Saks Fifth Avenue and 2.3% at the department-store group which includes the Hudson’s Bay and Lord & Taylor stores.

Sales growth at the latter were driven by menswear women’s footwear, coats and home goods.
Sales at Saks were strongest in top-end designerwear, menswear and accessories, while its discount banner Off 5th was led by menswear, women’s footwear and accessories.

“It was a strong conclusion to a successful year for our company,” Baker said. “Sales growth, further progress with the Saks integration and continued strength at HBC digital has us well-positioned to deliver on our fiscal 2015 strategic priorities and initiatives.”

For the coming fiscal year, HBC forecast sales of $9bn-$9.3bn, well above analysts’ $8.17bn estimate.

The company said it plans to invest C$50m in growth initiatives in the current fiscal year, including an accelerated pace of new store openings at Off 5th, bolstering its digital channel presence and for pre-opening costs related to the 2016 expansion of Saks and Off 5th into Canada.

HBC is opening its first two Saks Fifth Avenue locations in Canada next year in Toronto, on Queen Street and in Sherway Gardens. Up to seven Saks Fifth Avenue stores could operate in Canada over time, it said. The growth of Off-5th is also be accelerated, with 12-14 new units planned for this year. Next year, Off-5th will start opening units in Canada, where up to 25 are seen operating in a few years.

There was also late news of the long-awaited renovation of Saks Fifth Avenue flagship in Manhattan that will commence this summer. The upgrade is expected to take around 30 months, with the 8th floor footwear department among the first projects to be undertaken.

HBC currently operates 322 stores under the Hudson’s Bay, Lord & Taylor and Saks Fifth Avenue, Off 5th and Home Outfitters brands.

• Last week, Marigay McKee stepped down as president of Saks after just over a year on the job and replaced by Marc Metrick, who was most recently Hudson’s Bay’s chief administrative officer. Metrick was instrumental in the company’s acquisition of Saks and helped form the strategic plan Saks is now pursuing, including an overhaul of its flagship store on Fifth Avenue and a push to add more upscale offerings.

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