Hudson's Bay Co. says preliminary Q3 results show sales up, margins squeezed

TORONTO – Hudson’s Bay Co. is reporting improved third-quarter revenue and says it sees no lasting effects from hurricane Sandy on its U.S. holdings as the privately held department store operator plans a return to the public markets.

In a revised prospectus filed as part of HBC’s plans for an initial public offering, Canada’s oldest company said revenues improved about 3.8 per cent in its most recent quarter, although margins were squeezed by shortages and seasonal clearance markdowns.

HBC also said there was no significant damage to its Lord & Taylor stores in the path of hurricane Sandy in the U.S. Northeast and that the storm probably won’t cause any significant effect on earnings or sales in the fourth quarter.

Last month, the owner of the Bay and Home Outfitters as well as Lord & Taylor filed a preliminary prospectus for an initial public offering after years of hinting that it was in the works.

HBC last traded on the Toronto Stock Exchange in 2006 before it was taken private by U.S. businessman Jerry Zucker, who later died unexpectedly.

New York-based NRDC Equity Partners acquired the company in 2008 for $1.1 billion from Zucker’s widow.

The company’s prospectus did not provide the specific number of shares to be sold or how much they would sell for.

However, Bloomberg news agency reports that according to “sale documents” Hudson’s Bay will sell up to 19 per cent of the company in a move to raise $400 million. The IPO share price would range between $18.50 and $21.50.

Meanwhile, the revised prospectus says preliminary results for the third quarter ended Oct. 27 show total revenue rose to $930.4 million from $896.7 million in the comparable year-earlier quarter.

However, inventory shortages and clearance markdowns would have a negative effect on profit margin, although no estimate was disclosed.

HBC did say it expects that normalized EBITDA margin for the third quarter will be above what was experienced in the first 26 weeks of this year.

It also says the margins for the current quarter will be improved over the same time last year.

“Gross profit rate is expected to improve as a result of a greater mix of higher margin cold-weather merchandise and tighter control over inventory levels, which will mitigate markdown activity,” the revised prospectus says.

It also disclosed that HBC’s current principal shareholder received a $26-million dividend payment on Oct. 16. About $7.4 million of that will be returned to the company as part of the public offering process.