Saks owner Hudson's Bay to cut 2,000 jobs as loss widens more than expected

Key Points
  • Saks Fifth Avenue owner Hudson's Bay said on Thursday it would cut about 2,000 jobs across North America in a major restructuring effort.
  • The Canadian department store operator also posted a steeper-than-expected drop in quarterly retail sales.
Saks Fifth Ave's Off 5th grand opening in San Francisco.
Adam Jeffery | CNBC

Saks Fifth Avenue owner Hudson's Bay said on Thursday it would cut about 2,000 jobs across North America in a major restructuring effort as it reported a wider-than-expected first-quarter loss.

The Canadian department store operator, which also posted a steeper-than-expected drop in quarterly retail sales, said the move would help the company save more than C$350 million ($259 million) annually.

Hudson's Bay, also known as HBC, and other large retailers are struggling to reinvent themselves amid an industrywide upheaval, blamed in part on changing shopping trends that have seen shoppers migrate online.

"With all the changes taking place in the industry, we know we need to be a leaner organization, but we also want to make sure that we're a better one," Chief Executive Jerry Storch said in an interview, adding that no store closures are planned as part of the announcement.

HBC said the cuts, about 3 percent of the company's more than 66,000 employees, were decided after a six-month review of ways to slash costs and streamline its operations. Storch declined to give details on where the cuts would happen.

"Given the context of the highly promotional retail environment, we are skeptical that the transformational plan will meet the targeted savings estimates without further eroding revenue," said Canaccord Genuity analyst, Derek Dley, in a research note.

U.S. department store operator Nordstrom Inc said earlier on Thursday that members of the Nordstrom family were considering taking the company private and selling debt so they could reshape its operations.

"As far as whether we would consider that, I can't comment on that either. That's really up to our shareholders," Storch told Reuters, in response to whether HBC would consider a similar move.

As part of the announcement, the retailer said separate teams would focus on its Hudson's Bay and Lord & Taylor department-store chains.

Alison Coville, a nearly two-decade veteran of the company, will run Hudson's Bay, one of HBC's best performers. Storch said the chain's online store was seeing significant double-digit growth. Liz Rodbell, who previously headed both chains, will lead Lord & Taylor.

HBC's plan is expected to be fully implemented by the end of fiscal 2018, and includes C$75 million in savings announced earlier this year.

It said it expected to take about C$95 million in restructuring charges over the next year and that measures to achieve a total of C$125 million in annual savings had already been implemented.

Storch said HBC's expansion plans, including those in Europe and with its Saks discount chain, Off 5th, remain unchanged.

"We continue to be different from our competitors, in that we're focused on growth," said Storch.

Storch also said it remained committed to the Montreal market but declined to comment on the status of what will be Canada's largest Saks store, slated to open in fall 2018.
Reuters reported earlier that HBC has yet to file for a construction permit with the city for that location.

HBC operates Kaufhof department stores in Europe, and has plans to open the first international Hudson's Bay in the Netherlands later this year. Other projects include the launch of a new robotics fulfillment center in Pottsville, Pennsylvania later this year.

Hudson's Bay was founded in 1670 primarily as a fur trading company and once claimed more than 40 percent of the land in what is now Canada and a significant portion of what became North Dakota and Minnesota.

The company reported a loss of C$221 million, or C$1.21 per share, in the quarter ended April 29. The loss was wider than the average analyst forecast of 76 cents.

Retail sales totaled C$3.2 billion, down 3 percent from a year ago, below the average analyst forecast of C$3.26 billion.

It also announced a dividend cut to C$0.0125 per share, from C$0.05 per share.

The company's difficulties during the quarter surfaced last month when it reported a 2.9 percent drop in comparable store sales across all retail outlets, marking the fifth consecutive quarter of declines.