TORONTO — Hudson’s Bay Co. announced Thursday a major overhaul of its operational structure, laying off 2,000 employees as part of a plan to save $350 million per year by the end of fiscal 2018.

The news, which arrived as the retailer revealed it more than doubled its losses in the first quarter of the year as sales at stores dropped three per cent, comes amid period of widespread distress in the department store sector.

On Friday the shares tumbled $1.08, or 11.2 per cent, to $8.55, and earlier touched a record low of $8.44.

Bloomberg
Bloomberg

The layoffs and savings, which include numbers previously announced by HBC after it released disappointing sales results in February, will also incur one-time charges of about $95 million over the next 12 months, the company said in a statement.

“Clearly the department store and apparel sector is going through significant change right now,” Jerry Storch, president of HBC, said in an interview following the announcements after market close.

“Market conditions have been somewhat difficult, but that change provides an opportunity for retailers who adapt to it. Our objective is to create a more agile model for department stores in the future.”

To realize cost savings in addition to the layoffs, HBC said it will streamline and restructure operations in merchandise buying and planning, marketing and IT, integrate its digital functions throughout the company and use its scale to optimize procurement.

The company also announced it has split the Canadian and U.S department store operations back into two groups, five years after putting Hudson’s Bay in Canada and Lord & Taylor in the U.S. under the control of one management team.

The retailer named Hudson’s Bay company veteran Alison Coville as president of Hudson’s Bay. Liz Rodbell, who had previously run both chains as president for five years, remains president of Lord & Taylor.

Though running the chains as two divisions might not look like streamlining, Storch said the two units are better run separately because the market conditions are different in the U.S. and Canada.

“Hudson Bay in Canada has been one of our strongest performing businesses and remains so to this day, and we see many opportunities to grow our business in Canada,” he said.

“Meanwhile, the U.S. faces a different set of opportunities and challenges. The market in the U.S. is far more saturated, it’s far more over-stored and Lord & Taylor is a niche player in the U.S. competing against larger players.”

In the U.S., Sears, Macy’s and J.C. Penney have closed hundreds of stores and the specialty sector has seen the highest number of bankruptcies in 2017 since the recession. Nordstrom’s shares closed up 10 per cent Thursday after its controlling shareholders, the Nordstrom family, confirmed they were considering taking the company private. And HBC was rumoured in March to be in acquisition talks with distressed high-end department store chain Neiman Marcus.

“We believe the market needs to consolidate and we will play a role in that consolidation,” Storch said Thursday, declining to comment on Neiman Marcus.

HBC reported a net loss of $1.21 per share, or $221 million, compared with a loss of 58 cents per share ($97 million) in the same period a year ago. Adjusted losses were $1.19 per share, far lower than the projected loss of 69 cents in analyst estimates compiled by Bloomberg.

Retail sales were $3.2 million, down from $3.3 million a year ago, driven by a slide in its stores open for more than a year, a key retail measure known as same-store sales which strips out year over year square footage changes. Hudson’s Bay said comparable sales were lower due to fewer customers coming in to its stores and a “highly” promotional retail environment.

In constant currency, same-store sales fell 2.9 per cent overall. They were flat at HBC Europe and declined by 2.4 per cent at Hudson’s Bay and Lord & Taylor. Sales were worse at luxury chain Saks Fifth Avenue, falling 4.8 per cent, and its off-price business saw a same-store sales drop of 6.8 per cent.

Financial Post

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