Online shopping, Saks fuels HBC fourth-quarter boom

TORONTO – Canada is a growth opportunity for the Saks Fifth Avenue luxury retail brand and its less pricey Off 5th offshoot, the head of Hudson Bay Co. said Tuesday as the company posted significant fourth-quarter gains fuelled in part by Saks.

HBC executive chairman Richard Baker said he’s not worried about the recent drop in oil prices to six-year lows and an economy that’s growing more slowly than expected a few months ago.

“We have no plans to change our business or change our position based on short-term swings in the economy,” Baker said in an interview Tuesday.

“Hudson’s Bay is performing very well in Canada and we think there’s lots of opportunity both for Hudson’s Bay, Saks Fifth Avenue and Off 5th.”

The company’s net income jumped to $111 million, or 61 cents per share, in the quarter that ended Jan. 31. That’s nearly four times higher than a year earlier when HBC had unusual expenses related to its purchase of Saks Inc. in mid-2013.

Sales were up about nine per cent, rising to $2.632 billion from $2.407 billion in the fourth quarter of fiscal 2014.

Digital sales were up 35.1 per cent from a year earlier, soaring to $304 million — about 11.5 per cent of the total.

Baker said HBC has embraced the rising importance of online shopping.

“Everything is selling well on the Internet, from the high end to the low end. Shoppers of all demographics are flocking to the Internet and it’s clearly the most rapidly growing part of the whole retail universe right now,” he said.

Nonetheless, physical stores remain an integral part of HBC’s business, including Saks and its Off 5th stores that will start opening in Canada next spring.

“Our sales, in-store, continue to grow at Hudson’s Bay and we’re very dedicated to renovating our stores and treating our brand, both online and in-store, in an appropriate fashion.”

Indeed, one of the fastest-growing parts of HBC in the fourth quarter were the Off 5th stores. They arrive in Canada at about the same time HBC opens its first two Canadian Saks Fifth Avenue stores in Toronto.

“We believe Canada can be a lucrative location for between 20 and 25 Saks Off 5th stores over the next five years, let’s say,” HBC chief executive Jerry Storch said.

In the same time period, HBC expects there’s room for seven full-line Saks Fifth Avenue stores in Canada, starting in Toronto’s downtown and at a high-end shopping mall.

“The two Saks Fifth Avenue stores that are being built in Canada are specifically designed for our Canadian customer in that particular trade area. … It will be fabulously Canadian,” Baker said.

HBC currently operates a total of 322 stores in North America under the Hudson’s Bay, Lord & Taylor and Saks Fifth Avenue, Off 5th and Home Outfitters brands.

For its first full financial year with Saks under its belt, HBC had nearly $8.2 billion of revenue and $238 million of net earnings. That included $2.6 billion of revenue and $111 million of net earnings in the fourth quarter, which spans the important Christmas-New Year shopping period.

In the previous year, HBC had a $177-million loss for the year and $29 million of net earnings in the fourth quarter of 2013-14.