Canada’s oldest retailer’s strategy will remain the same whether or not it remains a public company, Hudson’s Bay Co. chief executive said as the department-store chain reported sluggish sales in its most recent quarter.
HBC shareholders are set to vote on a privatization bid, priced at $10.30 per share, led by the company’s executive chairman Richard Baker next week.
“Over the last month, many have asked if we expect our strategy to change,” CEO Helena Foulkes said during a conference call with analysts Tuesday after the company released its third-quarter financial results.
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“In short, the answer is no. Whether we are a public or private company, our strategy remains the same,” said Foulkes, highlighting a commitment to making focused investments designed to drive growth, enhancing customer experience, reducing operating costs, fixing fundamentals and capitalizing on real-estate value.
“These actions are crucial in ensuring we can drive both top- and bottom-line performance over the long term. While this will take time, we’re confident in our journey and our promise is to do everything within our power to deliver on the extraordinary heritage and potential of HBC.”
The takeover has faced increased scrutiny and several roadblocks ahead of the scheduled Dec. 17 meeting where a majority of the company’s minority shareholders must vote in favour in order for it to proceed.
Proxy advisory service Institutional Shareholder Services has recommended shareholders vote against the $10.30 per share offer that a special committee of the HBC board endorsed. The committee rejected a rival bid of $11 by Catalyst Capital Group because it says the Baker-led group, which controls about a 57 per cent take in HBC, is not interested in selling.
The comments by Foulkes came as HBC reported its same-store sales, a key retail metric, fell 1.7 per cent for the 13-week period ended Nov. 2.
“There is no doubt that we wanted more from our third quarter performance as we were up against our most difficult comparison from a year ago,” she said.
“Strong digital sales, continued cost control and inventory management were not enough to overcome headwinds, softening in the luxury category and the challenge of winning back market share in Canada.”
At Saks Fifth Avenue, the company noted a 2.3 per cent decrease in the quarter compared to a 7.3 per cent jump in the same quarter the previous year.
At Hudson’s Bay, same-store sales fell 3.9 per cent in the third quarter.
The challenges with these chains “are largely self-inflicted,” said Foulkes. The company continues working at reimagining the customer experience, she said. In the upcoming spring season, Hudson’s Bay will introduce 75 new designers and exit 600 brands, she said, mostly in apparel.
The retailer recorded a lift in digital sales with a 15 per cent bump in the quarter. The company has been focused on fixing fundamentals in this area, said Foulkes, including site speed and streamlining the checkout process, among other things.
Overall, the company reported a third-quarter loss of $226 million or $1.23 per share compared with a $161 million loss or 88 cents per share a year ago.
Revenue totalled $1.84 billion, down from nearly $1.89 billion in the same quarter last year. Meanwhile, retail sales came in at about $1.82 billion for the quarter, down from roughly $1.86 billion in the same quarter the previous year.
On what it called a normalized basis, HBC said it lost $128 million in its latest quarter compared with a comparable loss of $56 million a year ago.
The takeover fight for HBC is being fought on several fronts including a hearing that was requested by Catalyst at the Ontario Securities Commission that is set for Wednesday.
Catalyst, which is encouraging other minority shareholders to reject the Baker-led bid, has asked a regulator to block the privatization bid or at least require HBC to amend its information circular.
A New York-based investment firm has also filed a lawsuit at the Ontario Superior Court of Justice last week, seeking “an order permanently prohibiting” the privatization proposal from proceeding.
ISS wrote in its report that the HBC special committee tasked with reviewing the takeover proposals appears to have “handcuffed itself” from deeming another offer superior, which requires the competing bid to be reasonably capable of being completed without undue delay, as the insider shareholder group’s opposition makes other transactions not possible to complete.
HBC’s board of directors called the report “flawed” in a statement.