Shares of retailer Hudson’s Bay Co. (TSX:HBC) were down 1.56% in early afternoon trading on December 8. The stock has dropped 22% in 2017. Hudson’s Bay released its third quarter results on December 6.
Retail sales dropped 4.2% to $3.2 billion, with lower overall comparable sales and negative foreign exchange impacts of $64 million. Closed stores resulted in a $34 million loss, somewhat vindicating the warnings from departed CEO Jerry Storch. Digital sales increased 2.1% on a constant currency basis, and the company had issues with merchandising as it continue to undergo its digital transformation.
Leadership vowed to work on improving margins and capital investments, as well as pushing for growth on its digital platform. The company has been dogged by Land and Buildings, an activist investor that has challenged management to monetize its real estate holdings. The tension appears to have dissipated after the over $1 billion sale of its Saks 5th Avenue store.
Hudson’s Bay is likely to see challenges mount in 2018. The company need only to look to the collapse of Toys “R” Us and Sears Canada to illustrate the pressure on traditional retailers in North America. However, the value of its real estate holdings should maintain a degree of optimism. Land and Buildings estimated that its stock price could more than triple if it fully committed to the monetization of its real estate holdings.
The stock has declined 39% since debuting on the TSX in November 2012. Investors should watch the company closely as it navigates a difficult retail environment and looks to real estate in 2018.
