EBITDA surges 35% at Hudson's Bay Company in Q2FY15

15 Sep '14

4 min read

Canadian fashion retailer Hudson's Bay Company (HBC) reported a 35% year-on-year EBITDA surge for the second fiscal quarter or 13-week period ended August 2, 2014.

In the second quarter of 2014, EBITDA rose to $81 million, up $21 million from $60 million in the second quarter of 2013, while EBITDA as a percentage of retail sales was 4.6% compared to 6.3% for the prior year quarter.

HBC said these EBITDA figures include positive impacts of $6 million and $2 million, respectively, due to the required implementation of IFRIC 21.

Inclusion of financials of Saks Fifth Avenue helped retail sales in second quarter of 2014 climb to $1,769 million, up $821 million or 86.6% from $948 million for the prior year.

Of this, Hudson's Bay and Lord & Taylor which are grouped under “Department Store Group” (DSG) grew by 1.1%, Saks Fifth Avenue grew by 2.2%, while that of Saks Fifth Avenue OFF 5TH surged 14.9%, all up from a year ago quarter.

On a local currency basis, consolidated same store sales at HBC in the second quarter of 2014 rose 1.9% year-on-year, with increases of 1.1% at DSG, 2.2% at Saks Fifth Avenue and 14.9% at OFF 5TH.

Digital commerce sales totalled $162 million, including $116 million from Saks and growth of 82.2% at DSG.

HBC said sales growth at DSG was driven by men’s apparel, home and cosmetics, at Saks Fifth Avenue by menswear, gifts and accessories, while sales growth at OFF 5TH was strong across majority of categories.

Again primarily attributable to the inclusion of Saks, gross profit climbed to $700 million in second quarter of 2014, up $332 million from $368 million for the prior year quarter.

Adjusted to exclude purchase price accounting charges related to the acquisition of Saks, gross profit as a percentage of retail sales was 39.7%, an increase of 90 basis points.

“The increase was driven by the inclusion of Saks, which contributed higher gross profit as a percentage of retail sales than HBC”, the fashion retailer explained.

In the second quarter of 2014, SG&A expense totalled $652 million, a rise of $325 million from $327 million for the comparable quarter of 2013, the increase, which HBC again attributed to inclusion of Saks.

Excluding normalization items of $31 million, SG&A as a percentage of retail sales stood at 35.1% in the quarter under review, compared to 32.5% for the prior year quarter, an increase of 260 basis points.

“This increase was a result of strategic investments in our HBC digital business, higher occupancy costs associated with the Queen Street sale and leaseback transaction and expected deleverage of our store expenses, partially offset by synergies and the inclusion of Saks”, HBC informed.

Finance costs fell massively in the second quarter of 2014 to $29 million, down $48 million from $77 million for the same quarter of 2013.

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