Hudson’s Bay Co, Canadian parent of American department stores Lord & Taylor and Saks Fifth Avenue, announced on Friday it will lower its forecast for its full-year sales from between $14.9 billion to $15.9 billion to between $14.5 billion and $14.9 billion.
Despite an expectation that same-store sales would improve in the second half of the year, Hudson's Bay third quarter same-store sales fell 3.6%, compared to a 2% rise in the same period last year, or 4% when currency fluctuations are factored in, down from an increase of 12.9% last year.
The company’s off-price efforts, Saks Off 5th and Gilt, saw a Q3 same-store sales decrease of 8.4%, with Saks Off 5th falling 4.6%. Total e-commerce same-store sales rose 5.4% on a constant currency basis; without Gilt factored in, and e-commerce same-store sales grew 13.5% on a constant currency basis.
Hudson's Bay CEO Jerry Storch attributed the disappointing results to soft apparel sales, made worse last year by warm weather in the fourth quarter, he said in a statement. He added that the company hopes to improve profitability through its investment in robotic fulfillment, which the company claims can fill orders three times faster than other distribution center robotic systems.
“We remain optimistic about this year's upcoming extended holiday season following last year's tough fourth quarter which was impacted by warm weather, and are focused on executing our all channel strategy for long term growth and increased profitability,” Storch said. "Our investments in technology are continuing to pay off, with digital sales up across all of our department store banners. We believe that HBC is well positioned heading into the holiday season.”
Retailers in the East could indeed benefit from a forecast for cooler conditions compared to last year, which could drive demand up 7% or more year over year, according to a report from Planalytics emailed to Retail Dive.
When Hudson's Bay acquired Gilt Groupe earlier this year for $250 million it was seen to have had a strong mobile base, with about half of its orders coming in through its mobile platform. But so far, the flash-sales retailer hasn't advanced its online efforts, considering the drag it was on e-commerce sales this quarter.
Department stores across the country have been desperately trying to revamp e-commerce operations to stay competitive, but that doesn't mean Hudson's Bay wants to shutter its physical locations. Earlier this year, Storch delivered a robust defense of physical stores. “Everyone’s saying, ‘The internet is killing store-based retailing… the future belongs to internet-only companies,’” Storch said in May at Shoptalk’s 2016 retail conference in Las Vegas. “The problem with this is that it’s all wrong.”
He went on to say, “The internet is transformational, but it’s not yet transcendent. It doesn’t replace everything else,” he also said. “[W]e gotta do them all, because we gotta meet the customer’s needs.”
The retailer’s full Q3 report comes in Dec. 5.