Hudson's Bay sales up; to cut dividend after Saks deal closes
TORONTO (Reuters) - Retailer Hudson's Bay Co (HBC.TO) reported higher quarterly sales and a small adjusted profit on Thursday as robust demand for apparel at its Canadian namesake stores offset lower traffic at its Lord & Taylor chain in the United States.
The company, which announced a deal in July to buy U.S. luxury chain Saks Inc SKS.N for $2.4 billion, also said it would cut its quarterly dividend after the deal closes so that it can reduce debt faster. The acquisition is due to close by yearend.
HBC stock edged down 5 Canadian cents to C$17, exactly the same share price as in its November 2012 initial public offering, with 10 months of high volatility in between.
Hudson's Bay said sales at Lord & Taylor stores open for at least a year declined 1.2 percent, while same-store sales at its Hudson's Bay stores in Canada climbed 6.2 percent.
Faced with increasing competition from U.S. retailers looking to do business north of the border, HBC has been revamping its Canadian stores to boost revenue. It said a recently renovated Vancouver store had strong sales.
"The Bay seems to be improving its performance, but I'm sure they'd like it to go much faster," said Ed Strapagiel, a retail industry consultant based in Toronto. "They've renovated some stores, but they have a long way to go to get to where they want to be."
Hudson's Bay, which is North America's oldest corporation, had its roots in the Canadian fur trade, and it once controlled much of the land in the Canadian West. Its outlets in Canada now also offer branded goods from Lord & Taylor, whose flagship store is on Fifth Avenue, in central Manhattan.
Adjusted to exclude certain nonrecurring items and charges, Hudson's Bay earned C$3.9 million ($3.78 million), or 3 Canadian cents a share, in its second quarter, ended August 3. In the year-before quarter it had an adjusted loss of C$2 million, or 2 Canadian cents a share.
Sales rose 3.9 percent to C$947.7 million.
The results were hit by a surge in financing costs related to the Saks acquisition. About C$60 million of the quarter's total financing costs of about C$77 million were tied to the deal.
The company said it would cut its dividend to 5 Canadian cents a share from 9.375 Canadian cents after the Saks deal closes.
Strapagiel described Saks as a great brand, but added: "The question is whether HBC can turn it around quickly and start making money."
(Reporting by Solarina Ho and John Tilak; Editing by Jeffrey Benkoe and Peter Galloway)