(Adds CEO, analyst comment, details from conference call)
By Ashutosh Pandey
April 3 Canadian department store operator
Hudson's Bay Co, which bought U.S. luxury chain Saks
Inc last year, forecast weaker-than-expected 2014 earnings as it
spends more to build up its online shopping sites.
Hudson's Bay shares fell as much as 9 percent, making the
stock one of the biggest losers on the Toronto Stock Exchange as
the company also reported a steep fall in fourth-quarter profit.
The company said it expects adjusted earnings before
interest, taxes, depreciation and amortization (EBITDA) of C$580
million ($525.96 million) to C$620 million, well below the
average analyst estimate of C$680.1 million, according to
Thomson Reuters I/B/E/S.
"In the near-term, investments in our growth strategy will
initially moderate our EBITDA growth and margin expansion,"
Chief Executive Richard Baker said.
The company said it plans to make an additional C$40 million
investment in 2014 to enhance its e-commerce offerings as part
of its plans to achieve C$10 billion in sales by fiscal 2018.
Hudson's Bay also said it expects to open up to seven
full-line Saks Fifth Avenue stores and up to 25 Off 5th stores
in Canada over the next few years, leveraging its pool of real
estate and logistics capabilities.
The company holds a lucrative real estate portfolio,
including the flagship Saks Fifth Avenue store in Manhattan.
"Although guidance for 2014 is lower than we/the Street had
forecast, we believe management did a good job on the call of
explaining the source of the shortfall," RBC analyst Irene
Nattel said in a note.
Hudson's Bay forecast low-to-mid single-digit consolidated
same-store sales growth in 2014, primarily driven by strong
"One of our compelling aspects of acquiring Saks was their
digital capabilities were more developed than ours," Baker told
Reuters, noting that 70 percent of retail transactions were
influenced by the digital experience.
Online sales related to Hudson's Bay and Lord & Taylor
stores increased by about 59 percent in the fourth quarter.
The company's net profit from continuing operations fell
about 59 percent to C$37.4 million, or 11 Canadian cents per
share, hurt by higher expenses and a harsh winter.
Selling, general and administrative expenses more than
doubled, driven by a rise in non-cash share-based compensation
and costs related to the company's strategic initiatives, it
Hudson's Bay posted an about 74 percent rise in retail sales
to C$2.41 billion, largely driven by the inclusion of Saks,
which it acquired in November for $2.9 billion, including debt.
The company said consolidated same-store sales rose 6.6
percent, including the impact of foreign exchange, with an
increase of 5.2 percent at its namesake chain. Same-store sales
at Saks increased by 3.1 percent, but fell at Lord & Taylor by
1.3 percent, on a U.S. dollar basis.
Hudson's Bay, which traces its roots to the Canadian fur
trade in the late 1600s, operates The Bay and Home Outfitters in
Canada and Saks and Lord & Taylor in the United States.
Hudson's Bay shares were down more than 4 percent at C$18 on
Wednesday on the Toronto Stock Exchange.
The stock rose about 3 percent in the last six months to
Wednesday, lagging the TSX-Toronto Stock Exchange 300 Composite
Index, which rose more than 12 percent in the same
($1 = 1.1028 Canadian Dollars)
(Reporting by Ashutosh Pandey in Bangalore; Editing by
Saumyadeb Chakrabarty and Maju Samuel)