Canada’s oldest department store will sell its Gilt online retail business and shutter multiple Lord & Taylor locations as the struggling retailer attempts to boost its performance.
“These actions will allow us to focus our energy on businesses with the greatest potential to impact our results in a meaningful way,” Hudson’s Bay Co. executive chairman Richard Baker told a conference call with analysts Tuesday.
HBC has not been pleased with its off-price shopping segments, said CEO Helena Foulkes.
The company expects to dedicate resources to Saks Off Fifth, a discount designer clothing outlet, and “realize the full potential that this luxury off-price banner offers,” she said, adding a new leadership team is looking at every aspect of the business, including merchandising and store operations.
Gilt competitor Rue La La announced Monday it would purchase Gilt from HBC in a transaction expected to close in July 2018.
Both websites sell apparel, accessories and home goods online at a discount. Gilt was founded in 2007 and HBC announced it would acquire the online retailer for $250 million in January 2016.
The brands will continue to operate independently, Rue La La said in a statement Monday.
HBC, which confirmed the sale agreement in its quarterly earnings release Tuesday, also said it will close up to 10 Lord & Taylor locations through 2019 as it focuses on driving the brand’s digital business in an effort to reduce costs and optimize its performance.
HBC will vacate its Fifth Avenue location in New York City after co-working space company WeWork takes over the building. When it first struck the $1.6-billion deal to sell the flagship property, HBC expected to eventually house a smaller store at the Manhattan location.
Department stores have been struggling as consumers favour luxury, discount or specialty stores over one-stop shops. Like other retailers, HBC is also grappling with a continued shift to online shopping.
Last year, the company announced it would cut 2,000 jobs in an effort to trim hundreds of millions of dollars in annual costs. At the time, HBC said it was committed to investing in online shopping and expanding its European footprint.
However, its performance on the continent has been lacklustre, with comparable sales at HBC Europe falling for several quarters.
Overall comparable sales declined 0.7 per cent in the quarter, led by a 6.6 per cent decrease at HBC Europe, which includes Galeria Kaufhof and Galeria INNO.
Those challenging results came partly because of HBC’s missteps and overall retail trends in that region, said Foulkes.
“Across our European banners, we have a big opportunity to improve our marketing and merchandising assortment to better reflect the preferences of our consumers,” she said, adding the company expects to see the impact of some changes it has been making this year.
But, the company continues to evaluate its store portfolio everywhere, she said.
“We’re excited about the real estate that we own in Europe and the potential. But as I said before, everything’s on the table in terms of focusing on driving improved profitability for the business.”
The company’s shares fell in early-morning trading, losing nearly seven per cent on the Toronto Stock Exchange before regaining some of those losses. Shares dropped 35 cents or 3.3 per cent to $10.27 before noon ET.
HBC reported a $400-million loss in its first quarter ended May 5 compared with a loss of $221 million a year ago. The loss amounted to $1.70 per share compared to $1.21 per share in the same quarter last year.
On a normalized basis, HBC said its loss per share for the quarter amounted to $1.22 compared with a normalized loss of $1.15 per share a year ago.
Analysts on average had expected a loss of 87 cents per share, according to Thomson Reuters Eikon.
Revenue totalled nearly $3.09 billion, up from nearly $3.06 billion a year ago. North American results were encouraging, the company said, but the strength was offset by European performance.
Companies in this story: (TSX:HBC)
Aleksandra Sagan, The Canadian Press
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