* Same-store sales rise at both Hudson's Bay and Lord &
* Retail sales up 3.8 percent at C$930.4 million
* Superstorm Sandy to weigh on sales in current quarter
* CEO says company may one day spin off real estate assets
By Allison Martell
Dec 11 Hudson's Bay Co's chief
executive said on Tuesday that he does not see Canadian
customers taking their business away from his department stores
when Target Corp makes its debut north of the border in
Shares of HBC, which operates Hudson's Bay in Canada and
Lord & Taylor in the United States, have languished since the
company's November IPO. That partly reflects concern that Target
- which bought its first Canadian leases from HBC - will derail
HBC's turnaround once its stores open.
"We made the deal with Target, so we did a tremendous amount
of analysis before we made that deal," CEO Richard Baker told
Reuters on Tuesday after the company posted a quarterly net
loss, and warned that the impact of Superstorm Sandy would weigh
on sales in the current period.
"While they are a similar customer, there is very, very
little product overlap."
Customers will buy different products at Hudson's Bay and
Target, Baker said. When a new Target location opens south of
the border, nearby Lord & Taylor stores have not been affected
at all, he said.
HBC fell 0.4 percent to C$16.75 on Tuesday afternoon on the
Toronto Stock Exchange. The stock has been pinned below its C$17
offer price since its first day of trading.
FIRST RESULTS SINCE IPO
Hudson's Bay, North America's oldest continually operating
company, reported its first quarterly results on Tuesday since
the initial public offering.
In its third quarter ended Oct. 27, sales rose, but gross
profit margin fell to 39.0 percent from 41.3 percent a year
earlier, hurt in part by markdowns on seasonal goods. HBC turned
a small profit after stripping out restructuring charges and
other one-time items.
Founded in 1670, the company began as a fur trading business
and was granted control of a vast part of what is now Canada by
King Charles II. It went private in 2006.
NRDC Equity Partners, controlled by Baker and his family,
bought out HBC's other investors in 2008 and integrated the
company with Lord & Taylor.
Ahead of its long-anticipated IPO, HBC focused on its two
marquee banners, winding down discount chains Fields and
Zellers, and selling many of its Zellers leases to Target in a
C$1.83 billion deal.
Baker said his team has made progress in improving the
performances of both Hudson's Bay and Lord & Taylor, but he
allowed that the turnaround, which kicked off with their 2008
investment, was still a work in progress.
"We have what we believe is a long runway of opportunity,"
he said. "We didn't wait five years to go public until
everything was perfectly fixed and everything was one hundred
HEADWINDS FROM SANDY
In its earnings release, HBC warned that Superstorm Sandy
would weigh on sales. The storm battered the northeastern United
States in late October, just after the end of the company's
fiscal third quarter, forcing HBC to close or cut hours at 80
percent of its Lord & Taylor stores.
In November, consolidated sales at established stores were
little changed, with a 9.0 percent rise at Hudson's Bay
offsetting a 12.4 percent decline at Lord & Taylor.
The effects of the storm may reduce sales in the current
quarter by about $20 million and lead to "moderately higher"
inventory at Lord & Taylor, the company said. But so far, it
looks like the issue was temporary.
"We saw a really strong Thanksgiving, Black Friday weekend,
so we're encouraged that things are getting back to normal in
most areas," said Chief Financial Officer Michael Culhane in an
CONSIDERING A REIT
In a conference call with analysts and investors, Baker said
HBC may one day spin off its property assets into a real estate
investment trust, following a path taken recently by Loblaw Cos
Ltd, Canada's No.1 grocery store operator.
"We've always believed that sometime in the future we could
have the opportunity to create a REIT, similar to what Loblaw's
is proposing," said Baker, who is best known as a real estate
investor. "We are not presently working on this plan, but it is
something that we often talk about."
The company owns or ground leases more than 11 million
square feet of retail space.
SAME-STORE SALES RISE
In the third quarter, sales at stores open at least 13
months rose 4.5 percent at Hudson's Bay. The key metric
increased 5.2 percent at Lord & Taylor when measured in U.S.
Consolidated same-store sales were up 3.5 percent, weighed
down by a decline at Home Outfitters, HBC's housewares chain.
At the end of the third quarter, it had 90 Hudson's Bay
stores, 48 mainline Lord & Taylor locations and 69 Home
Outfitters outlets. It also operates two Lord & Taylor Home and
three Lord & Taylor Outlet stores.
The company reported a net loss of C$2.0 million, or 2
Canadian cents a share, compared with year-earlier earnings of
C$1.24 billion, or 12 Canadian cents a share.
Excluding restructuring costs and other items unrelated to
day-to-day operations, earnings were C$800,000, compared with a
loss of C$5.0 million a year earlier.
Total retail sales rose 3.8 percent to C$930.4 million.