HBC to sell Gilt, close up to 10 Lord and Taylor stores through 2019

Aleksandra Sagan, The Canadian Press</span>
Published Tuesday, June 5, 2018 9:30AM EDT
Last Updated Tuesday, June 5, 2018 10:58AM EDT

Canada's oldest department store signed a deal to sell Gilt, an online retail business, and planned to focus on areas that could boost its performance as it posted a first-quarter loss that sent shares falling.

Hudson's Bay Co.'s shares fell in early-morning trading, losing 73 cents or nearly seven per cent to $9.89 on the Toronto Stock Exchange.

Online fashion retailer Rue La La announced Monday that it would purchase Gilt from HBC, a transaction that is expected to close during the second quarter of its 2018 financial year. HBC said it will also 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.

"These actions will allow us to focus our energy on businesses with the greatest potential to impact our results in a meaningful way," executive chairman Richard Baker told a conference call with analysts Tuesday.

CEO Helena Foulkes said HBC has not been pleased with its off-price shopping segment performance.

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.

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. 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, Foulkes said.

"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."

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