Sabahat Khan, an analyst at RBC Capital Markets, said while closing Home Outfitters will not make much of a financial difference to HBC, 'it will, however, help simplify the operating structure.'DON DENTON/The Canadian Press
Hudson’s Bay Co. is closing all 37 of its Home Outfitters stores in Canada as well as up to 20 of its Saks Off 5th outlets in the United States as the retailer races to revive its sagging fortunes.
Helena Foulkes, a retail veteran who became chief executive of HBC about a year ago, has said everything is on the table in her bid to turn around the Toronto-based retailer.
“Further streamlining our retail portfolio enables even greater focus on our businesses with the strongest growth opportunities,” she said in a statement late Thursday.
Sabahat Khan, an analyst at RBC Capital Markets, said while closing Home Outfitters will not make much of a financial difference to HBC, “it will, however, help simplify the operating structure.”
He said focusing on a smaller number of chains should better position HBC for improved profitability. But he’s uncertain whether the retailer’s estimate of 20 Off 5th store closings “is a potential maximum or whether the company could close a larger number of locations once the fleet review is completed.”
Ms. Foulkes has moved quickly since she arrived at HBC last year, deciding to sell its Gilt flash-sale online selling site, closing a deal to sell its flagship Lord & Taylor store in New York to workplace sharing startup WeWork and merging its Galeria Kaufhof retail operation in Germany with its key rival in that market. Now she is moving to shut more stores to focus on potential strong points.
In an interview in December, Ms. Foulkes hinted at closing Home Outfitters, saying the chain is “part of what we’re still assessing. ... Our business there has been struggling much more than it has been at Hudson’s Bay, so it’s certainly an area where we need to look hard."
She also said she is considering phasing out some furniture offerings although keeping other home-goods offerings. She said small appliances and kitchenware are examples of relatively strong categories for the company.
Last year, Hudson’s Bay identified home products as a weak area in its second quarter. But Ms. Foulkes said in the interview those sales were soft because of weak mattress sales after the retailer reduced its discounting, which drew fewer customers. The move came amid a Competition Bureau investigation into the retailer’s pricing strategies.
HBC, which is expected to report its fourth-quarter results in April, posted a third-quarter loss from continuing operations of $124-million, up from a loss of $116-million a year earlier. Sales rose 5.6 per cent to $2.19-billion. Its stock price has been cut by more than half since HBC returned to the public market in late 2012 at $17. It closed Thursday at $7.56.
In its third quarter, HBC’s off-price discount sales (mainly at its 133 Off 5th stores, 17 of them in Canada) suffered the biggest same-store sales drop of 7.6 per cent at outlets open a year or more among its various chains. Ms. Foulkes said she is focusing on stocking the stores with more enticing labels to attract more shoppers.