According to a news report by Bloomberg, the owner of Saks Fifth Avenue, Canadian department store company, Hudson’s Bay Co. announced that it was going to close down as many as 10 of its Lord & Taylor stores, including the flagship store in Manhattan, to try and revive the struggling units.
The company stated that these closures would take place through 2019. Hudson’s Bay said that it had tried to keep the Lord & Taylor store in the Renaissance Building on 5th Avenue open, however, the company finally agreed to sell it last October for a sum $850 million. That store had opened in 1914 and has been one of the icons of the industry for over a century.
In the statement it issued on Tuesday, the company stated that the company was increasing its focus on its e-commerce platform. This focus, combined with the company’s new leadership as well as optimization of their stores’ footprint would help bring down costs and also increase performance.
The department store company had already agreed to sell its flash-sale website, Gilt earlier this week, after it reported normalized losses of C$1.22 per share, which is higher than market estimates of C$0.76 per share. Comparable store sales were down by 0.7% for the quarter that closed on May 5. Thanks to these poor results, Hudson’s Bay’s shares plunged by as much as 13% in Toronto, which is the worst fall the company has seen since December 2017. Hudson’s Bay’s stocks were down by 3.6% to trade at C$10.24 per share.
The new Chief Executive Officer of Hudson’s Bay, Helena Foulkes has been taking step to try and turn the ailing company around. These measures have included job cuts, getting rid of the company’s minority stake in private equity firm to reduce its debt load as well as entering into partnerships with Walmart and WeWork Cos.
Saks Fifth Avenue was a revenue generator for Hudson’s Bay, with same-store sales going up by 6% in the last quarter. However, the company’s European chain did not do as well, with same-store sales falling by 6.6% as compared to the same time last year, which Foulkes admits is due in part to overloaded inventories.
To resolve issues in the European market, the new CEO stated that management has been re-organized in such a way that experienced executives would run the stores. To ensure that control was maintained on the European front, these executives would report directly to her.
In a conference call with analysts, Foulkes stated that the actions the company is taking is proof that they are serious about turning the company around by improving results and delivering profits as well as growth. She said that they had put everything on the table to help turn the company around.
On that call Hudson’s Bay’s Chief Financial Officer Ed Record admitted that the company’s debt levels were too high and that it had also spent too much money in 2017. He also promised that they would significantly improve the company’s free-cash flow situation this year.
Retailers across the market have shown mixed results in recent times. Macy’s Inc. recorded its second quarter of straight gains and even raised its full-year guidance. JC Penney Co., on the other hand, cut its profits guidance for the year after its first quarter sales fell below market estimates, which the company blamed on an unseasonable cold spell.
Among the mall-based stores, Lululemon Athletica’s comparable sales have gone up, which is in stark contrast to the drop in sales at Gap Inc.’s trademark stores.