TORONTO (Reuters) - Canada’s Hudson’s Bay Co (HBC.TO) reported a second-quarter loss on Wednesday as sales fell at its Lord & Taylor and Saks OFF 5th divisions even as improved margins boosted its adjusted earnings, and shares surged nearly 5 percent in morning trading.
Chief Executive Officer Helena Foulkes said the department store operator, which announced a joint venture in Europe with Austrian rival Signa Holding on Tuesday, will now focus on turning around the underperforming divisions. “We’ve made some poor decisions over the last few years that have hurt (the Saks OFF 5th brand’s) profitability,” Foulkes, who became chief executive in February, told Reuters. “But this is a business that fundamentally can be successful.”
Lord & Taylor was more challenging and a turnaround would take longer, she said, adding that changes could include smaller stores.
Hudson's Bay shares jumped 4.9 percent to $11.15 in early trading in Toronto, paring losses for the year to 3.6 percent. The benchmark Toronto stock index .GSPTSE was down 0.1 percent.
Sluggish sales have dogged HBC as Amazon.com Inc (AMZN.O) and other online retailers lure consumers away from department stores. In all but one of the last ten quarters, the company has posted losses.
Hudson’s Bay reported a net loss of C$147 million ($112.65 million), or 62 Canadian cents a share, in its North American operations for the quarter ended Aug. 4. That compared with a loss of C$100 million, or 55 cents, a year earlier.
Comparable sales in HBC’s department store group, which includes its Hudson’s Bay, Lord & Taylor and Home Outfitters banners, fell 3.8 percent, while sales at Saks OFF 5th, which offers discounted designer goods, dropped 7.6 percent.
Saks Fifth Avenue’s sales rose 6.7 percent.
Gross margins improved 240 basis points from the same quarter a year earlier, lifting adjusted earnings before interest, taxes, depreciation and amortization to C$33 million from C$3 million a year ago, the company said.
Including its European business, Hudson’s Bay reported a net loss of C$264 million, widening from C$201 million a year ago.
The European joint venture will merge HBC’s Galeria Kaufhof with Signa’s Karstadt brand to form the region’s third-biggest department store chain. The companies said on Tuesday that their combined regional sales in 2017 were 5.4 billion euros ($6.25 billion).
The venture was the latest in the Toronto-based company’s efforts to boost its performance.
In June, it said it would sell its unprofitable online banner Gilt, and close up to 10 Lord & Taylor stores including its Manhattan flagship, whose building it agreed to sell to Softbank-backed WeWork Cos. last year.
Reporting by Nichola Saminather; Editing by Bernadette Baum