- Second Quarter retail sales
increased 1.2% to $3.3 billion, led by digital sales
growth
- Comparable sales at Saks Fifth
Avenue grew the most in more than two years, up 1.7% on a constant
currency basis; Total HBC comparable sales trends improved from the
first quarter, declining by 1.3% on a constant currency
basis
- Second Quarter comparable digital
sales increased 11.0% on a constant currency basis, increasing
19.8% at HBC’s department store banners
- Second Quarter Adjusted EBITDAR of
$207 million; Net Loss of $201 million
- European expansion on track with
five Saks OFF 5TH stores opened in Germany during the quarter and
first Hudson’s Bay Netherlands store opened today
- Management remains focused on retail
operations while pursuing best use of HBC’s real estate assets to
create shareholder value
HBC (TSX: HBC) today announced its second quarter financial
results for the thirteen and twenty-six week periods ended July 29,
2017. Unless otherwise indicated, all amounts are expressed in
Canadian dollars. Certain metrics, including those expressed on an
adjusted, normalized, comparable and/or constant currency basis,
are non-IFRS financial measures. For more information please refer
to the “Supplemental Information” section of this press release and
the reconciliation tables further below.
“Heading into the fall season, we are optimistic about the
remainder of the year. The current retail environment provides both
challenges and opportunities, and while it was a tough second
quarter as expected, we continue to make the smart decisions
necessary to succeed in this rapidly evolving landscape. As part of
this, we are constantly evaluating the best use of both our retail
and real estate assets to create value for shareholders. HBC has a
long, successful history of accretive transactions with our real
estate assets, and we are actively exploring further opportunities
to build on this track record. We continue to believe that our
model of combining world class real estate assets, which are less
impacted by short-term trends, with our diverse retail businesses
is the right path to generating long-term value for our
shareholders,” stated Richard Baker, HBC’s Governor and Executive
Chairman.
Jerry Storch, HBC’s Chief Executive Officer, added, “We are
growing our business globally, digitally, and physically. Just
today we unveiled our first Hudson’s Bay store in the Netherlands
and re-launched our Gilt website. On Friday, we will be officially
opening the renovated designer floor of our Saks Fifth Avenue
flagship in New York. During the second quarter, our diversified
banners demonstrated areas of strength, with Hudson’s Bay and Saks
Fifth Avenue delivering positive comparable sales growth. Digital
sales grew double digits at our department store banners,
reflecting the ongoing execution of our long-term all-channel
retail strategy. We are also excited about the recent introduction
of Saks OFF 5TH in Germany and the improvements we are making at
Galeria Kaufhof, which are important examples of our strong and
ongoing commitment to our businesses in Europe. Additionally, we
expect that the Transformation Plan will have a much larger impact
on our second half results. These factors, combined with what
we are seeing so far in the third quarter, give us reason to be
optimistic about the remainder of the year. Across our banners, we
are focused on driving the business during the critical fall and
holiday seasons, which generate the vast majority of HBC’s annual
earnings. Creating shareholder value remains our top priority. This
includes assessing the best use of our retail and real estate
portfolio while making the right strategic and tactical decisions
to improve performance in our retail businesses going forward.”
Retail Initiatives
While the current retail environment is changing rapidly,
management believes that HBC continues to be well positioned to
succeed in the long term. The company operates diverse retail
offerings across multiple segments and geographies, all of which
are supported by a solid capital structure backed by the company’s
real estate assets. HBC’s recently announced Transformation Plan is
proceeding as expected, and management expects that the initiatives
associated with this plan will have a significant impact in the
second half of the year. Through streamlining operations,
increasing efficiencies and leveraging scale, the company currently
anticipates realizing more than $350 million in annual
savings when the plan is fully implemented by the end of Fiscal
2018, including the anticipated $75 million in annual
savings previously announced in February. The company anticipates
realizing approximately $170 million in savings during
Fiscal 2017, with most of these savings occurring in the second
half of the year.
Complementing the company’s efforts to increase efficiency are
the ongoing changes being made to adapt to evolving customer
preferences:
- Emphasizing digital sales by
investing further in improving its digital platforms and online
capabilities. During the quarter, Lord & Taylor moved onto
the same online platform as Saks Fifth Avenue and Saks OFF 5TH,
while Hudson’s Bay is expected to migrate over in early 2018. Using
a combined platform allows HBC to leverage the same infrastructure
across all of its banners, including improving the ability to test
and implement new features. The company is also extending Gilt to
an intent based offering while leveraging the Saks OFF 5TH banner.
Additionally, the “New Gilt”, including a redesigned website, was
launched earlier today to better reflect the buying habits of
Gilt’s member base. Saks OFF 5TH inventory is expected to be
offered on Gilt in time for the holiday season, further integrating
HBC’s luxury off price banners.
- Leveraging technology to reduce
fulfillment time for digital sales. Following the successful
installation of the case shuttle system at its Canadian
distribution centre in 2016, HBC remains on track with the
installation of the same robotic technology at its Pottsville,
Pennsylvania distribution centre, serving Saks OFF 5TH and Lord
& Taylor. The first phase of this installation is expected to
be completed in the coming months.
- Creating exciting in-store
experiences and unique offerings. The company continues to
explore ways to differentiate the in-store experiences at all of
its banners by offering events, pop-up shops, food areas and
wellness activations. Recent highlights include the launch of the
justBobbi Concept Shop at Lord & Taylor in New York and the
opening of Topshop and Sephora store-within-store concepts at
multiple Galeria Kaufhof stores in Germany.
- Growing HBC’s presence in the luxury
market. Significant progress has been made on the
transformational renovation of the Saks Fifth Avenue New York City
flagship, including the opening of its fifth floor, featuring new
concepts in women's contemporary and advanced designer
ready-to-wear. As a part of the renovation, Saks debuted an
innovative wellness-oriented concept called the Saks Wellery and is
preparing to officially launch the newly renovated third floor this
Friday, a one-of-a-kind destination for extraordinary designer
fashion from around the world. Finally, Saks Fifth Avenue continued
to advance its efforts to integrate the in-store and online
experiences with the introduction of first-to-market shareability
and styling functionality on its Saks mobile app as well as further
development of its capabilities to connect Saks store associates
with Saks.com customers.
Real Estate
HBC owns a valuable portfolio of real estate assets, and
management has a demonstrated track record of realizing underlying
value and providing efficient capital from these assets to fund
growth of the business. While stores are a critical part of HBC’s
long-term all-channel strategy, management continues to evaluate
all opportunities to generate value from HBC’s extensive real
estate portfolio, including:
- Increasing the productivity of HBC’s
real estate. Management is actively re-purposing existing floor
space for use by partners or others who drive additional traffic
and key customer segments to HBC’s stores. Examples of this include
the Pusateri’s food hall in the Saks Fifth Avenue Toronto flagship,
the recent introductions of Topshop and Sephora in Germany, and the
Wellery installation at the Saks Fifth Avenue flagship in New
York.
- Streamlining the store
portfolio. HBC’s strategy includes exiting owned and leased
stores when the economic incentives are accretive to its
shareholders and it makes sense for the business. This could
include the sale of existing leases or the sale or leasing of owned
real estate. Previous actions include the sale of the Saks lease in
the Short Hills Mall in New Jersey, the sale-leaseback of the
downtown Toronto flagship building, and the sale of Zellers leases
to Target. Total proceeds from these transactions were greater than
$2.5 billion.
- Diversifying the assets in HBC’s
Real Estate Joint Ventures. Management continues to seek
accretive real estate acquisition and sublease opportunities for
its Real Estate Joint Ventures, HBS Global Properties and the
RioCan-HBC JV, to diversify the asset base and overall credit of
each JV portfolio. HBC has deliberately structured its Real Estate
Joint Ventures to facilitate the future public listing of these
entities, and management believes that further diversification
would improve the opportunity to undertake an initial public
offering, subject to favourable market conditions.
Second Quarter Summary
All comparative figures below are for the thirteen week period
ended July 29, 2017 compared to the thirteen week period ended July
30, 2016. DSG refers, collectively, to the Hudson’s Bay, Lord &
Taylor and Home Outfitters banners. HBC Europe refers,
collectively, to the GALERIA Kaufhof, Galeria INNO and Sportarena
banners. HBC Off Price refers, collectively, to the Saks Fifth
Avenue OFF 5TH (“Saks OFF 5TH”) and Gilt banners.
Retail sales were $3,291 million, an increase of $39 million, or
1.2%, from the prior year. The increase was driven primarily by the
opening of three new Saks Fifth Avenue stores, 26 new Saks OFF 5TH
stores and five new Saks OFF 5TH Europe stores which together
contributed approximately $64 million sales, as well as a $59
million positive net foreign exchange impact on the translation of
U.S. dollar and Euro denominated sales. These increases were offset
by lower overall comparable sales of approximately $43 million and
a $41 million impact from store closures.
Consolidated comparable sales improved from the first quarter,
increasing by 0.4%. On a constant currency basis, comparable sales
increased by 1.7% at Saks Fifth Avenue while declining by 1.6% at
DSG, 2.3% at HBC Off Price and 2.8% at HBC Europe, resulting in an
overall consolidated comparable sales decline of 1.3%. Comparable
sales during the quarter were impacted by lower traffic across
HBC’s banners, as well as a highly promotional retail
environment.
Positive comparable sales at Saks Fifth Avenue, the largest
quarterly increase in more than two years, reflect the ongoing
improvements that are being made to deliver a seamless luxury
all-channel offering. Particular areas of strength included
handbags and men's, while women's designer apparel saw a notable
increase in full price sales. Additionally, there was a small
positive impact from the timing shift of a promotional event.
Through the remainder of the year, Saks Fifth Avenue will continue
its focus on investing in its digital business and creating unique
experiences while offering a differentiated and unique assortment
of modern fashion.
Although overall comparable sales at DSG declined, constant
currency comparable sales increased at Hudson's Bay, driven
primarily by strong overall digital sales. Active, kids and dresses
performed well while sportswear and accessory sales declined year
over year. Ongoing initiatives at Hudson's Bay include an increased
focus on key categories such as active, dresses, home and men's, as
well as focused digital marketing designed to drive all-channel
sales. Lower constant currency comparable sales at Lord &
Taylor were driven primarily by reduced traffic, partially offset
by improved conversion. Stronger categories included active,
beauty, denim and modern sportswear, while handbags, watches and
classic sportswear were weaker. In addition to increasing the
marketing reach of Lord & Taylor’s value-focused messaging,
Lord & Taylor is rolling out a new GUIDE service model that
allows store associates to be more consumer-centric and travel with
their clients from the beginning to the end of their visit.
As previously announced, the company created dedicated
leadership teams for each of Hudson’s Bay and Lord & Taylor.
These teams are driving market-specific strategies that support
plans for continued growth at Hudson’s Bay in Canada and increase
the pace of change at Lord & Taylor, with an emphasis on
driving digital opportunities within DSG.
The comparable sales decline at HBC Off Price was largely driven
by lower traffic at Saks OFF 5TH and Gilt, partially offset by
robust digital sales growth at Saks OFF 5TH. The company continues
to focus on elevating the assortment at Saks OFF 5TH, while growing
the amount of unique product both in store and online through
exclusive capsules and collections. The integration of Gilt and
Saks OFF 5TH is ongoing, with the expectation that Saks OFF 5TH
assortments will be available on Gilt’s website by the holiday
season, providing customers with more access to top designer
products and categories at attractive values. As part of making
Gilt more relevant to its members, a redesigned website was
launched earlier today featuring easier navigation and advanced
personalization for a tailored customer experience.
While HBC Europe experienced lower overall traffic, this was
partially offset by an increase in average basket size as HBC
Europe continues to fine tune its marketing activities and
introduce new brands both in store and online. The company
continues to execute on its growth strategy in Germany and achieved
significant milestones during the quarter including the opening of
the first five Saks OFF 5TH stores, as well as the introduction of
Sephora store-within-store concepts at Galeria Kaufhof. All of
these new concepts were very well received in Germany, with Saks
OFF 5TH attracting more than 1 million visits in the time since its
introduction. Looking ahead, creative marketing campaigns combined
with the ongoing roll-out of store-within-store concepts and the
further introduction of new brands are expected to drive sales in
Europe through the back half of the fiscal year. In the
Netherlands, HBC Europe opened its first Hudson’s Bay store today
and expects to open a total of ten Hudson’s Bay and two Saks Off
5TH stores over the coming weeks.
Digital sales increased by 12.7% from the prior year, with
comparable digital sales on a constant currency increasing by
11.0%, reflecting the company’s continued strategic focus on
growing this channel. Excluding Gilt, comparable digital sales
increased by 22.3% and on a constant currency basis increased by
19.8%.
For HBC overall, gross profit1 as a percentage of retail sales
was 40.2%, a decline of 130 basis points compared to the prior
year. This decrease was driven primarily by higher promotional and
clearance activity at the majority of the company’s banners.
SG&A expenses were $1,392 million compared to $1,286 million
in the prior year. The increase was primarily attributable to
higher restructuring costs of approximately $44 million resulting
from the Transformation Plan announced in the second quarter, a
negative foreign exchange impact of approximately $25 million,
additional pre-opening expenses associated with the expansion into
the Netherlands of approximately $25 million and higher rent
expense of $9 million.
Additionally, both the shift to digital sales from traditional
in-store sales as well as overall digital sales growth during the
quarter continues to have a negative impact on SG&A expenses as
a result of higher fulfillment costs associated with this channel.
Profit margins on digital sales are expected to improve over time,
as the company continues to invest in its digital supply chain,
reduces expenses related to its digital operations and introduces
store centric all-channel delivery options. These increases were
partially offset by initial savings from the company’s
Transformation Plan and $75 million cost reduction initiative
announced earlier in the year, an $18 million dollar benefit from
the balance sheet impact of foreign exchange rate movements and
various other items.
Adjusted SG&A1 expenses, which exclude certain non-cash
items and normalizing adjustments consistent with the company’s
other adjusted non-IFRS metrics, were $1,287 million or 39.1% of
retail sales, compared to $1,249 million or 38.4% in the prior
year. This increase in SG&A dollars was driven by the negative
impact of foreign exchange rate movements of $25 million,
additional investment in digital resources combined with an
increase in fulfillment expenses related to the sales growth in
this channel shift, additional SG&A related to new stores
opened during the last 12 months and various other items. These
factors, combined with the impacts associated with lower comparable
sales, resulted in an increased Adjusted SG&A1 expense
rate.
The company is focused on reducing its overall expense rate and
is progressing as expected on its recently announced Transformation
Plan. Management expects that this initiative will have a much
larger impact on the second half of the year, due both to timing of
the initial actions and additional progress that has been made over
the last few months.
Adjusted EBITDAR1 was $207 million, compared to $263 million in
the prior year. The decline in Adjusted EBITDAR1 can be attributed
to an increase in Adjusted SG&A1 expenses as discussed above
combined with a decline in gross profit dollars.
Total rent expense during the second quarter, including net cash
rent associated with HBC’s joint ventures, was higher compared to
the prior year. Accordingly, Adjusted EBITDA1 was $16 million, a
decrease of $65 million compared to the prior year and higher than
the decline in Adjusted EBITDAR1. While rent expenses are spread
evenly over the course of the fiscal year, the company’s pre-rent
earnings are typically highly seasonal, with the majority of
earnings generated in the back half of the fiscal year. The
formation of the two real estate joint ventures and the
establishment of additional rents payable to these entities
significantly increased rental expense as a percentage of the
seasonally low pre-rent earnings generated during the first half of
the fiscal year.
Net loss was $201 million compared to $142 million in the prior
year. The higher net loss is primarily due to lower gross margin
dollars combined with higher SG&A and depreciation and
amortization expenses. These negative impacts were partially offset
by a higher net earnings in joint ventures and a larger income tax
benefit. The change in the net earnings from joint ventures was
driven by the impact of translating intra-group monetary asset and
liability balances related to the overall tax and legal structure
of the HBS Joint Venture. Normalized Net Loss1 was $164 million
compared to $122 million in the prior year. This increased loss is
primarily a result of lower gross profit dollars and higher
Adjusted SG&A1, as described above, as well as increased
depreciation and amortization expenses.
Cash inflow from operating activities was $141 million during
the quarter, driven by changes in working capital. Cash outflow
from investing activities was $200 million, $189 million of which
was related to net capital investments. Management expects that net
capital expenditure will decline during the second half of the year
as HBC collects landlord incentives related to its expansion in the
Netherlands.
Finance costs were $53 million compared to $56 million in the
prior year, which included a write-off of deferred financing costs
of $3 million. Interest paid in cash was $49 million compared to
$37 million in the prior year. This increase in cash interest was
primarily a result of timing differences on the payment of the Saks
Fifth Avenue flagship mortgage, as well as the increased size of
the Lord & Taylor flagship mortgage and outstanding borrowings
on HBC’s Global ABL facility.
Note:1 These performance metrics have been identified by the
company as Non-IFRS measures. For the relevant definitions and
reconciliations, please refer to the “Non-IFRS Measures” and
“Supplemental Information” sections, respectively, of this
release.
Year-to-Date Summary
All comparative figures below are for the twenty-six week period
ended July 29, 2017 compared to the twenty-six week period ended
July 30, 2016.
Retail sales were $6,494 million, a decrease of $61 million, or
0.9%, from the prior year. The decrease was related primarily to
lower overall comparable sales of approximately $137 million and
the impact of closed stores of $66 million. The decrease was offset
by a positive $28 million foreign exchange impact on the
translation of U.S. dollar and Euro denominated sales and by the
opening of three Saks Fifth Avenue stores, 26 Saks OFF 5TH stores
and five Saks OFF 5TH Europe stores which contributed approximately
$114 million in sales.
Consolidated comparable sales decreased by 1.7%, and on a
constant currency basis decreased by 2.1% over the comparable
twenty-six week period ended July 30, 2016. On a constant currency
basis, comparable sales decreased by 1.4% at HBC Europe, 1.8% at
Saks Fifth Avenue, 2.0% at DSG and 4.6% at HBC Off Price.
Digital sales increased by 8.7% from the prior year, while
comparable digital sales on a constant currency basis increased by
7.9%, reflecting the company’s continued strategic focus on growing
this channel. Excluding Gilt, comparable digital sales increased
16.2% on a constant currency basis.
For HBC overall, gross profit1 as a percentage of retail sales
was 40.9%, a decline of 80 basis points compared to the prior year.
The decrease is the result of lower margins realized at the
majority of the company’s banners due, in part, to increased
promotional activity, partially offset by higher margins at Saks
Fifth Avenue.
SG&A expenses were $2,765 million compared to $2,681 million
in the prior year. The increase was primarily driven by a $54
million increase in restructuring charges related to the company’s
Transformation Plan, $46 million increase in expenses related to
HBC’s expansion into the Netherlands, a $16 million increase in
rent expense as well as incremental expenses related to new stores
and various other items. Additionally, both the shift to digital
sales from traditional in-store sales as well as overall digital
sales growth during the quarter had a negative impact on SG&A
expenses as a result of higher fulfillment costs associated with
this channel. Profit margins on digital sales are expected to
improve over time as HBC invests in its digital supply chain,
reduces expenses related to its digital operations and introduces
store centric all-channel delivery options.
As reported in the first quarter of Fiscal 2017, the Fourth
Circuit Court affirmed a U.S. $31 million judgment in favour of the
company with respect to its Lord & Taylor store in White Flint,
Maryland. This judgment was for damages resulting from changes made
to the attached White Flint mall that were undertaken without Lord
& Taylor’s consent. Cash proceeds from the judgment were
received during the first quarter, and the amount has been recorded
in SG&A in the company’s statement of loss.
SG&A expenses year to date also benefited from the absence
of lease guarantee provisions of $16 million in the prior year, a
$24 million reduction in acquisition and integration related
expenses as well as initial savings from HBC’s Transformation Plan
and $75 million cost reduction initiative announced earlier in the
year.
Adjusted SG&A1 expenses, which exclude certain non-cash
items and normalizing adjustments consistent with the company’s
other adjusted non-IFRS metrics, were $2,628 million or 40.5% of
retail sales, compared to $2,549 million or 38.9% in the prior
year. This increase in SG&A dollars was driven by additional
SG&A related to new stores opened over the last 12 months,
additional investment in digital resources combined with an
increase in fulfillment expenses related to the sales growth in
this channel and various other items. These factors, combined with
the impacts associated with lower comparable sales, resulted in an
increased Adjusted SG&A1 expense rate.
Adjusted EBITDAR1 was $375 million, compared to $513 million in
the prior year. The decline in Adjusted EBITDAR1 can be primarily
attributed to a decline in gross profit dollars combined with an
increase in Adjusted SG&A1 expenses as discussed above. Total
rent expense year to date, including net cash rent associated with
HBC’s joint ventures, was marginally higher compared to the prior
year. Accordingly, Adjusted EBITDA1 was negative $5 million, a
decrease of $148 million compared to the prior year.
Net loss was $422 million compared to $239 million in the prior
year. The increase in loss is primarily due to lower gross profit
dollars and higher SG&A expenses as discussed above, as well as
higher depreciation and amortization expenses and an increase in
finance costs. These impacts were partially offset by a lower share
of net loss from the joint ventures and higher income tax benefit
in the current year. In addition, the prior year included a net of
tax gain of $28 million on the sale of investments in joint
ventures.
Normalized Net Losses1 were $381 million compared to $213
million in the prior year. This increase in loss was primarily a
result of lower gross profit dollars and higher Adjusted SG&A1,
as described above, as well as increased depreciation and
amortization expenses.
Finance costs were $110 million compared to $101 million in the
prior year. The increase is primarily related to the reduction in
non-cash finance income generated from mark-to-market adjustments
associated with the valuation of Common Share purchase warrants
outstanding compared to the prior year, as well as an increase in
interest costs related to long-term borrowings. Interest paid in
cash was $94 million compared to $86 million in the prior year.
Note:1 These performance metrics have been identified by the
company as Non-IFRS measures. For the relevant definitions and
reconciliations, please refer to the “Non-IFRS Measures” and
“Supplemental Information” sections, respectively, of this
release.
Inventory
Inventory at the end of the second quarter increased by $2
million compared to the prior year. The balance at the end of the
quarter was driven primarily by higher inventory at HBC Europe,
largely as a result of the introduction of new brands and upgraded
concepts at Galeria Kaufhof, as well as the roll out of Saks OFF
5TH in Germany and Hudson’s Bay in the Netherlands. Saks Fifth
Avenue and Saks OFF 5TH also experienced a moderate increase in
inventory levels due to the addition of new stores. These increases
were almost entirely offset by foreign exchange rate movements and
lower inventory at DSG.
Store Network
During the second quarter, HBC opened two Saks OFF 5TH stores
located in Winnipeg, Manitoba in Canada and Honolulu, Hawaii in the
U.S. The company also opened five Saks OFF 5TH Europe stores in
Germany located in Düsseldorf, Frankfurt, Wiesbaden, Heidelberg and
Stuttgart. The company closed one Home Outfitters store in Toronto,
Ontario and two Galeria Kaufhof stores in the cities of Berlin and
Aachen in Germany.
Store information as at July 29, 2017 Store
Count(1) Gross Leasable Area (1)
/
Square Footage (000s)
Hudson’s Bay
90 15,837 Lord & Taylor
50 6,895 Saks Fifth Avenue
41 5,188
Saks OFF 5TH
124 3,727 Home Outfitters
51
1,793 HBC Europe (2)
127 27,854
Total
483 61,294
(1) HBC operates one Find @ Lord & Taylor store, one
Hudson’s Bay outlet, two Zellers clearance centres and two Lord
& Taylor outlets that are excluded from the store count and
gross leasable area.(2) Includes five Saks OFF 5TH Europe stores
opened in Germany during the quarter.
Capital Investments
Capital investments, net of landlord incentives, during the
second quarter totaled $189 million, flat compared to the prior
year. During the quarter, HBC opened seven Saks OFF 5TH stores,
including five in Germany, and made significant progress on the
build out of its first ten Hudson’s Bay stores in the Netherlands.
The landlord incentives for these projects are due to be received
upon the opening of the stores, which will reduce the run rate of
net capital expenditures in the second half of the year.
Additionally, HBC also continued work on its major renovation at
the Saks Fifth Avenue flagship store on 5th Avenue in New York, as
well as smaller renovations at various Hudson’s Bay, Lord &
Taylor and Saks stores. In Europe, HBC remains committed to its
sizeable renovation program at Galeria Kaufhof, which includes the
introduction of new store-within-store concepts as well as other
improvements.
HBC is dedicated to prudent capital management, and given the
current retail environment, is focusing its capital investment
program on in-progress and expected high-return projects.
Management continues to expect total capital investments in Fiscal
2017, net of landlord incentives, to be approximately $550
million, compared to $657 million in Fiscal 2016.
The above capital investment expectations reflect exchange rate
assumptions of USD:CAD = 1:1.25 and EUR:CAD = 1:1.50 for the
remainder of the year. Any variation in these foreign exchange rate
assumptions and/or other material assumptions and factors described
in the “Forward-Looking Statements” section of this press release
could impact the above outlook.
Debt Summary
As at July 29, 2017, HBC had the following outstanding loans and
borrowings on its balance sheet (refer to note 11 of the unaudited
interim condensed consolidated financial statements for the
thirteen and twenty-six weeks ended July 29, 2017):
(millions of Canadian dollars) TOTAL ($)
Global ABL
1,222 U.S. Term Loan B
622 Lord &
Taylor Mortgage
493 Saks Mortgage
1,556 Other loans
11 Total Outstanding Loans and Borrowings
3,904
At the end of the quarter, HBC had approximately $1.1 billion in
availability under its Global ABL Facility.
Dividend
HBC also announced today that its Board of Directors has
approved a quarterly dividend to be paid on October 13, 2017,
to shareholders of record at the close of business
on September 29, 2017. The dividend is in the amount
of $0.0125 per Common Share and is designated as an
"eligible dividend" for Canadian tax purposes. The declaration of
dividends is at the discretion of HBC’s Board of Directors.
Conference Call to Discuss Results
Management will discuss the second quarter financial results and
other matters during a conference call on September 6, 2017 at 8:30
am EST.
The conference call will be accessible by calling the
participant operator assisted toll-free dial-in number (800)
535-7056 or international dial-in number (253) 237-1145. A live
webcast of the conference call will be accessible on HBC’s website
at: http://investor.hbc.com/events.cfm. The audio replay also will
be available via this link.
Consolidated Financial Statements and Management’s Discussion
and Analysis
The company’s unaudited interim condensed consolidated financial
statements for the thirteen and twenty-six weeks ended July 29,
2017 and Management’s Discussion and Analysis (“MD&A”) thereon
are available under the company’s profile on SEDAR at
www.sedar.com.
Consolidated Financial Information
The following tables set out summary consolidated financial
information and supplemental information for the periods indicated.
The summary financial information set out below for the periods
ended July 29, 2017 and July 30, 2016 has been prepared
on a basis consistent with our audited annual consolidated
financial statements for Fiscal 2016. In the opinion of the
company’s management, such unaudited financial data reflects all
adjustments, consisting of normal and recurring adjustments,
necessary for a fair presentation of the results for those periods.
The results of operations for interim periods are not necessarily
indicative of the results to be expected for a full year or any
future period. The information presented herein does not contain
disclosures required by IFRS and should be read in conjunction with
the company’s audited annual consolidated financial statements for
Fiscal 2016.
CONDENSED CONSOLIDATED STATEMENTS OF
LOSS
(millions of Canadian dollars, except per
share amounts)
(Unaudited)
Thirteen week period ended Twenty-six week
period ended July 29, 2017 July 30, 2016
July
29, 2017 July 30, 2016 Retail sales
3,291 3,252
6,494 6,555 Cost of sales
(1,967 ) (1,901 )
(3,835 ) (3,821 ) Selling, general and administrative
expenses
(1,392 ) (1,286 )
(2,765 )
(2,681 ) Depreciation and amortization
(173 ) (154 )
(346 ) (312 ) Gain on sale of investments in joint
ventures
— —
—
45
Operating loss (241 ) (89 )
(452 ) (214 ) Finance costs, net
(53 )
(56 )
(110 ) (101 ) Share of net earnings (loss) in
joint ventures
4 (51 )
(23 ) (53 ) Dilution
gains from investments in joint ventures
— 8
3 12
Loss before
income tax (290 ) (188 )
(582 )
(356 ) Income tax benefit
89 46
160 117
Net loss for the period
(201 ) (142 )
(422 )
(239 )
Loss per common share Basic and diluted
(1.10 ) (0.78 )
(2.32 ) (1.31 )
The following table shows additional summary supplemental
information for the periods indicated (1):
Thirteen week period ended Twenty-six week
period ended July 29, 2017 July 30, 2016
July
29, 2017 July 30, 2016 Adjusted EBITDAR (1) 207
263 375 513 Adjusted EBITDA (1) 16 81 (5 ) 143 Adjusted SG&A
(1) 1,287 1,249 2,628 2,549 Normalized net loss for the period (1)
(164 ) (122 ) (381 ) (213 ) Normalized net loss per Common Share —
basic and diluted (1) (0.90 ) (0.67 ) (2.09 ) (1.17 ) Declared
dividend per Common Share 0.01 0.05 0.03 0.10
(1) See below for relevant definitions and tables for
reconciliations of net loss to EBITDA, Adjusted EBITDA and Adjusted
EBITDAR, SG&A to Adjusted SG&A and net loss to Normalized
net loss. These performance metrics have been identified by the
company as Non-IFRS measures. For the relevant definitions, please
refer to the “Non-IFRS Measures” section of this release and for
the relevant reconciliations of the nearest IFRS measures, please
refer to the “Supplemental Information” section of this
release.
CONDENSED CONSOLIDATED BALANCE
SHEETS
As at July 29, 2017 and July 30,
2016
(millions of Canadian dollars)
(Unaudited)
July 29, 2017 July 30, 2016
restated (1)
Assets Cash
112 114 Trade and
other receivables
343 505 Inventories
3,324 3,322
Other current assets
199 199
Total current
assets 3,978 4,140 Property, plant and equipment
5,273 5,204 Intangible assets and goodwill
1,705
1,984 Pensions and employee benefits
170 160 Deferred tax
assets
358 297 Investments in joint ventures
588 610
Other assets
22 21
Total assets
12,094 12,416
Liabilities Loans
and borrowings
1,206 830 Finance leases
28 24 Trade
payables
1,464 1,261 Other payables and accrued liabilities
946 1,051 Deferred revenue
103 107 Provisions
193 170 Other liabilities
157 140
Total current liabilities 4,097 3,583 Loans
and borrowings
2,604 2,729 Finance leases
500 493
Provisions
53 74 Pensions and employee benefits
690
664 Deferred tax liabilities
573 757 Investment in joint
venture
4 14 Other liabilities
1,683
1,437
Total liabilities 10,204 9,751
Shareholders’ equity Share capital
1,426 1,421
Retained earnings
44 772 Contributed surplus
128 93
Accumulated other comprehensive income
292 379
Total shareholders’ equity 1,890 2,665
Total liabilities and shareholders’ equity 12,094
12,416
(1) Subsequent to the acquisitions of Kaufhof and Gilt, the
company identified measurement period adjustments related to the
acquisitions based on new information. Due to this change, certain
previously reported figures have been restated. For more
information, please refer to Notes 4 and 5 of the company’s
unaudited interim condensed consolidated financial statements for
the thirteen and twenty-six week periods ended July 29,
2017.
CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS
For the 26 weeks ended July 29, 2017
and July 30, 2016
(millions of Canadian dollars)
(Unaudited)
July 29, 2017 July 30, 2016
Operating
activities Net loss for the period
(422 ) (239 )
Income tax benefit
(160 ) (117 ) Dilution gains from
investments in joint ventures
(3 ) (12 ) Share of net
loss in joint ventures
23 53 Finance costs, net
110
101 Operating loss
(452 ) (214 )
Net cash income taxes received (paid)
17 (12 ) Interest paid
in cash
(94 ) (86 ) Distributions of earnings from
joint ventures
105 100 Items not affecting cash flows:
Depreciation and amortization
346 312 Net defined benefit
pension and employee benefits expense
15 14 Other operating
activities
(17 ) (5 ) Share of rent expense to joint
ventures
(178 ) (185 ) Gain on sale of investments in
joint ventures
— (45 ) Share based compensation
17 11
Settlement of share based compensation grants
(2 ) (3
) Changes in operating working capital
(215 )
(267 )
Net cash outflow for operating activities (458
) (380 )
Investing activities Capital
investments
(474 ) (542 ) Proceeds from landlord
incentives
132 203 Capital investments
less proceeds from landlord incentives
(342 ) (339 )
Proceeds from lease terminations and other non-capital landlord
incentives
2 — Proceeds on disposal of assets
3 37
Proceeds from sale of investments in joint ventures
— 65
Acquisition of Gilt Groupe Holdings Inc., net of cash acquired
— (325 ) Other investing activities
(12 )
6
Net cash outflow for investing activities
(349 ) (556 )
Financing activities
Long-term loans and borrowings: Issuance
5 522 Repayments
(4 ) (326 ) Borrowing costs
—
(13 )
1 183 Short-term loans and borrowings: Net borrowings
from asset-based credit facilities
825 415 Borrowing costs
(2 ) (12 )
823 403 Payments on finance
leases
(17 ) (16 ) Dividends paid
(11 )
(18 )
Net cash inflow from financing activities
796 552 Foreign exchange gain (loss) on
cash
1 (9 ) Decrease in cash
(10
) (393 )
Cash at beginning of year 122
507
Cash at end of period 112
114
Supplemental Information
The following table presents the reconciliation of net loss to
EBITDA , Adjusted EBITDA and to Adjusted EBITDAR:
Thirteen week period ended Twenty-six week
period ended (millions of Canadian dollars) July 29,
2017 July 30, 2016 Jul 29, 2017 Jul
30, 2016 $ $ $ $
Net loss for the period (201
) (142 )
(422 ) (239 ) Finance costs, net
53 56
110 101 Income tax benefit
(89 )
(46 )
(160 ) (117 ) Depreciation and amortization
173 154
346
312
EBITDA (1) (5) (64 ) 22
(126 ) 57 Certain non-cash items (2)
16
53
59 19 Normalization adjustments (3)
85 27
98 109 Net rent expense to joint ventures (4)
43 40
86 80 Cash rent to joint ventures
(115 ) (110
)
(227 ) (222 ) Cash distributions from joint
ventures
51 49
105
100 Total adjustments
80 59
121 86
Adjusted EBITDA (5) 16 81
(5
) 143
Rent adjustments Third party rent
expense
127 121
258 248 Cash rent to joint ventures
115 110
227 222 Cash distributions from joint
ventures
(51 ) (49 )
(105
) (100 )
Adjusted EBITDAR (5)
207 263
375 513
Notes:
(1) Since the fourth quarter of Fiscal 2016, EBITDA as
previously reported has been redefined to exclude the add back for
‘Certain non-cash items’. These add backs are summarized in
footnote 2 and are now included as part of the adjustments to
calculate Adjusted EBITDA. See the definition of EBITDA in the
“Non-IFRS measures” section of this release.(2) Certain non-cash
items consist of:
Share of net (earnings) loss in joint ventures (4 )
51 23 53 Gain on sale of
investments in joint ventures — — — (45 ) Dilution gains from
investments in joint ventures (i) — (8 ) (3 ) (12 ) Non-cash
pension expense 8 7 15 14 Impairment and other non-cash items 6 (6
) 5 (8 ) Share based compensation 6 9
19 17 16 53 59 19
(i) Represents gains realized as a result of
the changes in ownership related to the company’s investments in
the joint ventures.
(3) Normalization adjustments consist of:
Acquisition and integration related expenses (i) 3
12 8 32 Lease guarantee
provision (ii) — — — 16 Foreign exchange adjustment (iii) (18 ) 1
(29 ) 3 Restructuring (iv) 51 7 88 34 Credit card chargeback
expense (v) — 2 1 10 European expansion (vi) 29 4 50 4 Onerous
lease provisions (vii) 10 — 9 — Other (viii) 10 1
(29 ) 10 85 27 98 109
(i) Includes acquisition and integration
expenses related to the acquisitions of Kaufhof and Gilt.(ii)
Represents the company’s expected share of costs associated with
default on subleases guaranteed by the company.(iii) Represents the
impact of unrealized (gains) losses resulting from the translation
of certain intra-group monetary asset and liabilities related to
the overall tax and legal structure of the company.(iv)
Restructuring includes expected costs associated with the
Transformation Plan, the $75 million initiative announced in
February and programs initiated by HBC Europe to optimize operating
efficiencies.(v) Represents additional non-recurring credit card
chargeback expenses attributed to industry legal liability changes
effective October 2015.(vi) Includes one-time start-up and
expansion costs related to HBC Europe’s opening of Hudson’s Bay and
Saks OFF 5TH stores in the Netherlands and Germany.(vii) Represents
provisions for the estimated costs associated with certain leased
locations in excess of anticipated recoveries.(viii) Other
normalized expenses for the thirteen week period ended July 29,
2017, includes duplicative costs associated with the U.S. office
consolidation of $6 million and other smaller items totaling a net
of $4 million. Other normalized income for the twenty-six week
period ended July 29, 2017 includes $42 million received in the
first quarter of Fiscal 2017 for a favourable verdict with respect
to a 2013 lawsuit brought forth by the company relating to White
Flint mall, which was partly offset by duplicative costs associated
with the U.S. office consolidation of $8 million and other smaller
items totaling a net of $5 million. Prior year balances primarily
represent duplicative costs associated with the U.S. office
consolidation of $9 million and $14 million for the thirteen and
twenty-six week periods ended July 30, 2016, respectively and other
smaller items totaling nil and $4 million for the thirteen and
twenty-six week periods ended July 30, 2016, offset by the share
based compensation expense adjustment of $8 million for the
thirteen and twenty-six week periods ended July 30, 2016.
(4) Rent expense to the joint ventures net of reclassification
of rental income related to the company’s ownership interest in the
joint ventures (see note 10 to the company’s unaudited interim
condensed consolidated financial statements for the thirteen and
twenty-six week periods ended July 29, 2017).(5) These performance
metrics have been identified by the company as Non-IFRS measures.
For the relevant definitions, please refer to the “Non-IFRS
Measures” section of this release.
The following table presents the reconciliation of SG&A to
Adjusted SG&A:
Thirteen week period ended Twenty-six week
period ended (millions of Canadian dollars) July 29,
2017 July 30, 2016 Jul 29, 2017 Jul
30, 2016 $ $ $ $
SG&A 1,392 1,286
2,765
2,681 Certain non-cash items (1)
(20 ) (10 )
(39 ) (23 ) Normalization adjustments (2)
(85
) (27 )
(98 ) (109 )
Total adjustments
(105 ) (37 )
(137 )
(132 )
Adjusted SG&A (3) 1,287
1,249
2,628 2,549
Adjusted SG&A (3) as
a percentage of retail sales 39.1 % 38.4 %
40.5 % 38.9 %
Notes:(1) Certain non-cash items consist of:
Non-cash pension expense (8 ) (7 )
(15 ) (14 ) Impairment and other non-cash
items (6 ) 6 (5 ) 8 Share based compensation (6 ) (9 )
(19 ) (17 ) (20 ) (10 ) (39 ) (23 )
(2) Normalization adjustments consist of:
Acquisition and integration related expenses (i) (3 )
(12 ) (8 ) (32 ) Lease guarantee
provision (i) — — — (16 ) Foreign exchange adjustment (i) 18 (1 )
29 (3 ) Restructuring (i) (51 ) (7 ) (88 ) (34 ) Credit card
chargeback expense (i) — (2 ) (1 ) (10 ) European expansion (i) (29
) (4 ) (50 ) (4 ) Onerous lease provisions (i) (10 ) — (9 ) — Other
(i) (10 ) (1 ) 29 (10 ) (85 ) (27 ) (98
) (109 )
(i) For details refer to footnote 3 to the
reconciliation of net loss to EBITDA, Adjusted EBITDA and to
Adjusted EBITDAR table above.
(3) This performance metric has been identified by the company
as a Non-IFRS measure. For the relevant definition, please refer to
the “Non-IFRS Measures” section of this release.
The following table presents the reconciliation of net loss to
Normalized net loss:
Thirteen week period ended Twenty-six week
period ended (millions of Canadian dollars) July 29,
2017 July 30, 2016 Jul 29, 2017 Jul
30, 2016 $ $ $ $
Net loss for the period (201
) (142 )
(422 ) (239 ) Certain non-cash
items (1)
— (7 )
(2 ) (38 ) Normalization
adjustments (2)
60 16
72 74 Financing related
adjustments
— 2
— 2 Adjustments to share of net
earnings (loss) in joint ventures (3)
(23 ) 9
(29 ) (12 ) Total adjustments
(4)
37 20
41 26
Normalized net loss (5)
(164 ) (122 )
(381 ) (213 )
Notes:
(1) Certain non-cash items consist of:
Gain on sale of investments in joint ventures —
— — (28 ) Dilution gains
from investments in joint ventures — (7 ) (2 )
(10 ) — (7 ) (2 ) (38 )
(2) Normalization adjustments consist of:
Acquisition and integration related expenses and finance costs (i)
(1 ) 9 4 15
Restructuring (ii) 33 5 58 23 Foreign exchange adjustment (iii) (7
) (1 ) (15 ) 10 Lease guarantee provision (iv) — — — 12 Credit card
chargeback expense (v) 1 1 1 6 European expansion (vi) 21 2 35 2
Onerous lease provisions (vii) 7 — 6 — Other (viii) 6
— (17 ) 6 60 16 72 74
(i) Includes acquisition and integration
expenses related to the acquisitions of Kaufhof and Gilt. In
addition, includes the recognition of non-cash finance (loss)
income related to Common Share purchase warrants of $2 million and
$1 million for the thirteen and twenty-six week periods ended July
29, 2017, respectively (thirteen and twenty-six week periods ended
July 30, 2016: nil and $8 million, respectively).(ii) Restructuring
includes expected costs associated with the Transformation Plan,
the $75 million initiative announced in February and programs
initiated by HBC Europe to optimize operating efficiencies.(iii)
Represents the impact of unrealized (gains) losses resulting from
the translation of certain intra-group monetary asset and
liabilities related to the overall tax and legal structure of the
company.(iv) Represents the company’s expected share of costs
associated with default on subleases guaranteed by the company.(v)
Represents additional non-recurring credit card chargeback expenses
attributed to industry legal liability changes effective October
2015.(vi) Includes one-time start-up and expansion costs related to
HBC Europe’s opening of Hudson’s Bay and Saks OFF 5TH stores in the
Netherlands and Germany.(vii) Represents provisions for the
estimated costs associated with certain leased locations in excess
of anticipated recoveries.(viii) Other normalized expenses for the
thirteen week period ended July 29, 2017, includes duplicative
costs associated with the U.S. office consolidation of $4 million
and other smaller items totaling a net of $2 million. Other
normalized income for the twenty-six week period ended July 29,
2017 includes $42 million ($25 million net of tax) received in the
first quarter of Fiscal 2017 for a favourable verdict with respect
to a 2013 lawsuit brought forth by the company relating to White
Flint mall, which was partly offset by duplicative costs associated
with the U.S. office consolidation of $5 million and other smaller
items totaling a net of $3 million. Prior year balances primarily
represent duplicative costs associated with the U.S. office
consolidation of $5 million and $9 million for the thirteen and
twenty-six week periods ended July 30, 2016, respectively, and
other smaller items totaling $1 million and $3 million for the
thirteen and twenty-six week periods ended July 30, 2016, offset by
the share based compensation expense adjustment of $6 million for
the thirteen and twenty-six week periods ended July 30, 2016.
(3) Relates to the Company’s share of net non-recurring items
incurred by the HBS Joint Venture, which is primarily represents
the impact of unrealized (gains) losses resulting from the
translation of certain intra-group monetary asset and liabilities
related to the overall tax and legal structure of the joint
venture.(4) All adjustments are tax-effected as appropriate.(5)
This performance metric has been identified by the company as a
Non-IFRS measure. For the relevant definition, please refer to the
“Non-IFRS Measures” section of this release.
Non-IFRS Measures
Gross profit, EBITDA, Adjusted EBITDA, Adjusted EBITDAR,
Normalized Net Loss and Adjusted SG&A are non-IFRS measures
that the company uses to assess its operating performance. Gross
profit is defined as retail sales less cost of sales. EBITDA is
defined as net earnings (loss) before net finance costs, income tax
expense (benefit) and depreciation and amortization expense. EBITDA
as previously reported has now been defined to exclude the add back
for ‘certain non-cash items’. These add backs are summarized above
and in note 2 to the reconciliation of net loss to EBITDA, Adjusted
EBITDA and Adjusted EBITDAR in the “Supplemental Information”
section of this press release. As a result of this change, previous
references to EBITDA have been updated to conform to this
basis.
EBITDAR is defined as EBITDA before rent expense to third
parties and net rent expense to joint ventures.
Adjusted EBITDA is defined as EBITDA adjusted to exclude: (A)
certain non-cash items which include: (i) share of net (earnings)
loss in joint ventures, (ii) gain on contribution of assets to
joint ventures, (iii) gain on sale of investments in joint
ventures, (iv) dilution gains from investments in the joint
ventures, (v) non-cash pension expense, (vi) impairment and other
non-cash items and (vii) non-cash share based compensation expense;
(B) normalization adjustments which include: (i) business and
organization restructuring/realignment charges, (ii)
merger/acquisition costs and expenses and (iii) adjustments,
including those related to purchase accounting, if any, related to
transactions that are not associated with day-to-day operations and
joint venture adjustments. Adjusted EBITDAR is defined as Adjusted
EBITDA before third party rent expense, cash rent to joint ventures
and cash distributions from joint ventures.
Adjusted SG&A is defined as selling general &
administrative expenses adjusted to exclude: (A) certain non-cash
items which include: (i) non-cash pension expense, (ii) impairment
and other non-cash items and (iii) non-cash share based
compensation expense, and (B) normalization adjustments which
include: (i) business and organization restructuring/realignment
charges and (ii) merger/acquisition costs and expenses and (iii)
adjustments, if any, related to transactions that are not
associated with day-to-day operations. Normalized net earnings
(loss) is defined as net earnings (loss) adjusted to exclude: (A)
certain non-cash items which include: (i) impairment of goodwill,
(ii) gain on contribution of assets to joint ventures, (iii) gain
on sale of investments in joint ventures and (iv) dilution gains
from investments in joint ventures; (B) normalization adjustments
which include: (i) business and organization
restructuring/realignment charges; (ii) merger/acquisition costs
and expenses and (iii) adjustments, including those related to
purchase accounting, if any, related to transactions that are not
associated with day-to-day operations and tax related adjustments;
(C) financing related adjustments and (D) adjustments to share of
net (earnings) loss in joint ventures.
For further clarity, please refer to the detailed tables
reconciling net (loss) earnings to Adjusted EBITDA and to Adjusted
EBITDAR, reported SG&A to Adjusted SG&A and net (loss)
earnings to Normalized net earnings (loss).
The company uses these non-IFRS measures to provide investors
and others with supplemental measures of its operating performance.
The company believes these non-IFRS measures are important
supplemental measures of operating performance because they
eliminate items that have less bearing on the company’s operating
performance and thus highlight trends in its core business that may
not otherwise be apparent when relying solely on IFRS financial
measures. The company also believes that securities analysts,
investors, rating agencies and other interested parties frequently
use these non-IFRS measures in the evaluation of issuers, many of
which present similar metrics when reporting their results. The
company’s management also uses Adjusted EBITDAR in order to
facilitate retail business operating performance comparisons from
period to period, prepare annual operating budgets and assess the
company’s ability to meet its future debt service, capital
expenditure and working capital requirements and the company’s
ability to pay dividends on its Common Shares. As other companies
may calculate these non-IFRS measures differently than the company,
these metrics may not be comparable to similarly titled measures
reported by other companies.
This press release makes reference to certain comparable
financial results expressed on a constant currency basis, including
comparable sales and comparable digital sales. The company
calculates comparable sales on a year-over-year basis from stores
operating for at least thirteen months and includes digital sales
and clearance store sales. In calculating the sales change,
including digital sales, on a constant currency basis where
applicable, prior year foreign exchange rates are applied to both
current year and prior year comparable sales. Additionally, where
an acquisition closed in the previous twelve months, comparable
sales change on a constant currency basis incorporate results from
the pre-acquisition period. This enhances the ability to compare
underlying sales trends by excluding the impact of foreign currency
exchange rate fluctuations as well as by reflecting new
acquisitions. Definitions and calculations of comparable sales
financial results differ among companies in the retail industry.
The company notes that results from acquisitions are only
incorporated in the company’s reported consolidated financial
results from and after the respective acquisition date.
For further discussion of the company’s financial and operating
results, please refer to the MD&A of Financial Condition and
Results of Operations for the thirteen and twenty-six weeks ended
July 29, 2017.
About HBC
HBC is a diversified global retailer focused on driving the
performance of high quality stores and their all-channel offerings,
growing through acquisitions, and unlocking the value of real
estate holdings. Founded in 1670, HBC is the oldest company
in North America. HBC's portfolio today includes formats
ranging from luxury to premium department stores to off price
fashion shopping destinations, with more than 480 stores and over
66,000 employees around the world.
HBC's leading banners across North
America and Europe include Hudson's
Bay, Lord & Taylor, Saks Fifth Avenue, Gilt, Saks OFF
5TH, Galeria Kaufhof, the largest department store group
in Germany, and Belgium's only department store
group Galeria INNO.
HBC has significant investments in real estate joint ventures.
It has partnered with Simon Property Group Inc. in the HBS
Global Properties Joint Venture, which owns properties
in the United States and Germany. In Canada, it
has partnered with RioCan Real Estate Investment Trust in the
RioCan-HBC Joint Venture.
Forward-Looking Statements
Certain statements made in this news release, including, but not
limited to, the benefits of the company’s model of combining world
class real estate assets with diverse retail businesses,
management’s optimism about the remainder of the year, the
anticipated benefits and annualized savings from HBC’s
Transformation Plan, including the anticipated timing of realizing
such savings, the company’s ongoing exploration and evaluation of
real estate strategies and its ability to generate value from HBC’s
extensive real estate portfolio, ongoing store openings and
renovations, ongoing activities expected to drive sales in Europe,
including the introduction of new banners, ongoing digital
initiatives, including the migration on to a common online platform
for HBC’s banners, the ongoing integration of Gilt and Saks OFF
5TH, the installation of automated fulfillment technology at the
Pottsville distribution centre, the company’s anticipated gross
capital investments and capital investments, net of landlord
incentives, for Fiscal 2017, and the intended use of such capital
investments, and other statements that are not historical facts,
are forward-looking. Often but not always, forward-looking
statements can be identified by the use of forward-looking
terminology such as “may”, “will”, “expect”, “believe”, “estimate”,
“plan”, “could”, “should”, “would”, “outlook”, “forecast”,
“anticipate”, “foresee”, “continue” or the negative of these terms
or variations of them or similar terminology.
Implicit in forward-looking statements in respect of capital
investments, including, among others, the company’s anticipated
Fiscal 2017 total capital investments, net of landlord incentives,
to be approximately $550 million, are certain assumptions
regarding, among others, the overall retail environment and
currency exchange rates for Fiscal 2017. Gross capital investment
is expected to be approximately $1.1 billion, of which
approximately $800 million is related to growth initiatives.
Specifically, the company has assumed the following exchange rates
for the remainder of Fiscal 2017: USD:CAD = 1:1.25 and EUR:CAD =
1:1.50. These current assumptions, although considered reasonable
by the company at the time of preparation, may prove to be
incorrect. Readers are cautioned that actual capital investments
could differ materially from what is currently expected and are
subject to a number of risks and uncertainties, including, among
others described below, general economic, geo-political, market and
business conditions, changes in foreign currency rates from those
assumed, the risk of unseasonal weather patterns and the risk that
the company may not achieve overall anticipated financial
performance.
Although HBC believes that the forward-looking statements in
this news release are based on information and assumptions that are
current, reasonable and complete, these statements are by their
nature subject to a number of factors that could cause the
company’s actual results, level of activity, performance,
achievements, future events or developments to differ materially
from management’s expectations and plans as set forth in such
forward-looking statements, including, without limitation, the
following factors, many of which are beyond HBC’s control and the
effects of which can be difficult to predict: ability to execute
retailing growth strategies, ability to continue comparable sales
growth, changing consumer preferences, marketing and advertising
program success, damage to brands, dependence on vendors, ability
to realize synergies and growth from strategic acquisitions,
ability to make successful acquisitions and investments, successful
inventory management, loss or disruption in centralized
distribution centres, ability to upgrade and maintain the company’s
information systems to support the organization and protect against
cyber-security threats, privacy breach, risks relating to the
company’s size and scale, loss of key personnel, ability to attract
and retain qualified employees, deterioration in labour relations,
ability to maintain pension plan surplus, funding requirement of
Saks’ pension plan, funding requirement of the HBC Europe pension
plan, limits on insurance policies, loss of intellectual property
rights, insolvency risk of parties which the company does business
with or their unwillingness to perform their obligations, exposure
to changes in the real estate market, successful operation of the
joint ventures to allow the company to realize the anticipated
benefits, loss of flexibility with respect to properties in the
joint ventures, exposure to environmental liabilities, changes in
demand for current real estate assets, increased competition,
change in spending of consumers including the impact of
unfavourable or unstable political conditions and terrorism,
international operational risks, fluctuations in the U.S. dollar,
Canadian dollar, Euro and other foreign currencies, increase in raw
material costs, seasonality of business, extreme weather conditions
or natural disasters, ability to manage indebtedness and cash flow,
risks related with increasing indebtedness, restrictions of
existing credit facilities reducing flexibility, ability to
maintain adequate financial processes and controls, ability to
maintain dividends, ability of a small number of shareholders to
influence the business, uncontrollable sale of the company’s Common
Shares by significant shareholders could affect share price,
constating documents discouraging favorable takeover attempts,
increase in regulatory liability, increase in product liability or
recalls, increase in litigation, developments in the credit card
and financial services industries, changes in accounting standards,
other risks inherent to the company’s business and/or factors
beyond its control which could have a material adverse effect on
the company.
HBC cautions that the foregoing list of important factors and
assumptions is not exhaustive and other factors could also
adversely affect its results. For more information on the risks,
uncertainties and assumptions that could cause HBC’s actual results
to differ from current expectations, please refer to the “Risk
Factors” section of HBC’s Annual Information Form dated April 28,
2017, the “Risk Factors” section of HBC’s MD&A dated September
5, 2017, as well as HBC’s other public filings, available at
www.sedar.com and at www.hbc.com.
The forward-looking statements contained in this news release
describe HBC’s expectations at the date of this news release and,
accordingly, are subject to change after such date. Except as may
be required by applicable Canadian securities laws, HBC does not
undertake any obligation to update or revise any forward-looking
statements contained in this news release, whether as a result of
new information, future events or otherwise. Readers are cautioned
not to place undue reliance on these forward-looking
statements.
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version on businesswire.com: http://www.businesswire.com/news/home/20170905006520/en/
HBCINVESTOR RELATIONS:Elliot Grundmanis,
646-802-2469elliot.grundmanis@hbc.comorMEDIA:Andrew Blecher,
646-802-4030Andrew.blecher@hbc.com