TORONTO & NEW YORK--(BUSINESS WIRE)--Hudson's Bay Company (“HBC” or the “Company”) (TSX:HBC) today announced its financial results for the fourth quarter and fiscal year ended January 31, 2015. Unless otherwise indicated, all amounts are expressed in Canadian dollars.
Fourth Quarter Year-Over-Year Highlights
-
Consolidated sales growth of 9.3% to over $2.6 billion, on a same
store sales (local currency basis) increase of 3.2%
- Department Store Group (“DSG”) same store sales increase of 2.3%
- Saks Fifth Avenue same store sales increase of 2.6%
- Saks Fifth Avenue OFF 5TH (“OFF 5TH”) same store sales increase of 12.1%
- Digital sales of $304 million, an increase of 35.1%
-
Normalized EBITDA of $318 million compared to $253 million
- Normalized EBITDA margin of 12.1% compared to 10.5%
Fiscal 2014 Highlights
HBC’s financial results for the comparative 52 weeks ended February 1, 2014 include the results of Saks Incorporated (“Saks”) for the fourth quarter only.
-
Consolidated sales growth of 56.4% to approximately $8.2 billion,
on a same store sales (local currency basis) increase of 2.7%
- DSG same store sales increase of 1.5%
- Saks Fifth Avenue same store sales increase of 2.1%
- OFF 5TH same store sales increase of 15.1%
- Digital sales of $900 million, including an increase of 66% at DSG
-
Normalized EBITDA of $612 million compared to $405 million
- Normalized EBITDA margin of 7.5% compared to 7.8%
“We are pleased with our fourth quarter and full year operating and financial results,” stated Richard Baker, HBC’s Governor and Executive Chairman. “It was a strong conclusion to a successful year for our Company. Sales growth, further progress with the Saks integration and continued strength at HBC Digital has us well-positioned to deliver on our Fiscal 2015 strategic priorities and initiatives.”
Mr. Baker went on to say, “On behalf of our shareholders and the Board of Directors, I would like to thank our Associates for their efforts and contributions to our collective success in 2014. Together, we remain focused on enhancing our product and service offering across all banners to ensure that our customers experience an elevated and differentiated shopping experience.”
Added Jerry Storch, HBC’s recently appointed Chief Executive Officer, “I am thrilled to have joined Hudson’s Bay Company at such an exciting time in the Company’s history. With great teams in place and building off the momentum established in 2014, we believe there are tremendous opportunities to drive growth across our retail banners, including strengthening the connection between our store and digital businesses, expanding our off-price business and investing in our world-class store base.”
Financial Results
Throughout this press release, the terms "Normalized SG&A" and "Normalized EBITDA" refer to financial results that have been adjusted to exclude certain non-recurring items and charges. For a full explanation of the Company's use of non-IFRS measures, including the relevant definitions and reconciliations to reported measures, please refer to the “Supplemental Information” section of this press release. For further discussion of the Company's financial and operating results, please refer to Management's Discussion and Analysis of Financial Condition and Results of Operations for the Thirteen and Fifty-Two Weeks Ended January 31, 2015 (the “MD&A”). DSG refers to the Company as structured prior to the acquisition of Saks (i.e., excluding Saks).
Fourth Quarter Summary
All comparative figures below are for the 13-week period ended January 31, 2015 compared to the 13-week period ended February 1, 2014.
Retail sales, which include digital sales from all banners, were $2,632 million, an increase of $225 million or 9.3% from $2,407 million in the prior year. On a local currency basis, consolidated same store sales increased by 3.2%, with increases of 2.3% at DSG, 2.6% at Saks Fifth Avenue and 12.1% at OFF 5TH. Digital commerce sales totaled $304 million, a year-over-year increase of 35.1%.
In terms of merchandise category performance, sales growth at DSG was driven by men’s apparel, ladies’ shoes, outerwear and home products. Sales growth at Saks Fifth Avenue was led by designer clothing, menswear and accessories. Sales growth at OFF 5TH was driven by strength in menswear, women’s shoes and accessories.
Gross profit, inclusive of a $13 million benefit from a conforming change related to the classification of advertising expense credits between SG&A and cost of sales at Saks, was $1,073 million. Excluding the impact of this item, adjusted gross profit was $1,060 million in the fourth quarter of Fiscal 2014 compared to $925 million in the fourth quarter of the prior year. Adjusted gross profit for the comparable prior year period excludes a negative $39 million impact stemming from the amortization of inventory-related purchase price accounting adjustments related to the acquisition of Saks. The increase in adjusted gross profit dollars of $135 million can be attributed to improved performance at DSG and Saks, combined with a favourable reporting benefit arising from the conversion of US dollars to Canadian dollars. Adjusted gross profit as a percentage of retail sales was 40.3% in the fourth quarter of Fiscal 2014 compared to 38.4% in the fourth quarter of the prior year.
Fourth quarter SG&A expenses were $736 million compared to $796 million in the prior year. Excluding the $13 million impact of the conforming change related to the classification of advertising expense credits referenced above, adjusted SG&A expenses were $723 million in the fourth quarter of Fiscal 2014. Further excluding the net impact of normalization adjustments of ($20) million ($120 million in the prior year), normalized SG&A expenses as a percentage of retail sales were 28.2% in the fourth quarter of Fiscal 2014 compared to 28.1% in the fourth quarter of the prior year. Despite making significant investments in our HBC digital business, incurring higher occupancy costs associated with the Queen Street sale and leaseback transaction completed in the first quarter of Fiscal 2014 and accruing for additional performance-based incentive compensation, fourth quarter normalized SG&A expenses expressed as a percentage of sales were essentially flat on a year-over-year basis. (For additional detail with respect to “normalization adjustments”, please refer to the “Supplemental Information” section of this press release).
Excluding the net impact of normalization adjustments of ($10) million ($157 million in the prior year), normalized EBITDA was $318 million compared to $253 million in the prior year, a year-over-year increase of $65 million. Normalized EBITDA as a percentage of retail sales was 12.1% in the fourth quarter of Fiscal 2014 compared to 10.5% in the prior year.
Finance costs were $111 million compared to $38 million in the fourth quarter of the prior year, an increase of $73 million. The increase can be primarily attributed to a $34 million non-cash write-off of deferred financing costs related to the fourth quarter mortgage financing on the ground portion of the Saks Fifth Avenue flagship property in New York City, along with a net increase of $53 million in non-cash finance-related charges associated with the mark-to-market of outstanding share purchase warrants issued in connection with the acquisition of Saks. These cost increases were partially offset by a decline in other interest expense.
Fiscal 2014 Summary
All comparative figures below are for the 52-week period ended January 31, 2015 compared to the 52-week period ended February 1, 2014.
Retail sales were $8,169 million, an increase of $2,946 million or 56.4% from $5,223 million in the prior year. The increase is primarily attributable to the inclusion of Saks for the full fifty-two week period ended January 31, 2015. On a local currency basis, consolidated same store sales increased by 2.7%, with increases of 1.5% at DSG, 2.1% at Saks Fifth Avenue and 15.1% at OFF 5TH. Digital commerce sales totaled $900 million, including $651 million from Saks and growth of 66% at DSG.
In terms of merchandise category performance, sales growth at DSG was driven by men’s apparel, ladies’ shoes, dress clothes and outerwear. Sales growth at Saks Fifth Avenue was led by menswear and accessories. Sales growth at OFF 5TH was strong across the majority of categories.
Fiscal 2014 gross profit, inclusive of the fourth quarter $13 million benefit from the conforming change related to the classification of advertising expense benefits referenced above, was $3,276 million compared to $2,006 million in the prior year. Excluding the impact of this item, and the negative $40 million (negative $39 million in the prior year) impact stemming from the amortization of inventory-related purchase price accounting adjustments related to the acquisition of Saks, adjusted gross profit was $3,303 million for Fiscal 2014 compared to $2,045 million in the prior year, an increase of $1,258 million. The year-over-year increase in adjusted gross profit dollars can be primarily attributed to the inclusion of Saks for the full fifty-two week period, combined with a favourable reporting benefit arising from the conversion of US dollars to Canadian dollars. Adjusted gross profit as a percentage of retail sales was 40.4% in Fiscal 2014 compared to 39.2% in the prior year, an increase of 120 basis points. This increase was driven in large part by the inclusion of Saks for the full fifty-two week period, which contributed higher gross profit as a percentage of retail sales than DSG, along with year-over-year improvement in the gross profit rate at DSG.
Fiscal 2014 SG&A expenses were $2,759 million compared to 1,826 million in the prior year. Excluding the $13 million impact of the conforming change related to the classification of advertising expense credits referenced above, adjusted SG&A expenses were $2,746 million in Fiscal 2014. The year-over-year increase can be primarily attributed to the inclusion of Saks for the full fifty-two week period combined with an unfavourable reporting impact arising from the conversion of US dollars to Canadian dollars. Further excluding the net impact of normalization adjustments of $54 million ($182 million in the prior year), normalized SG&A expenses as a percentage of retail sales were 33.0% in Fiscal 2014 compared to 31.5% in the prior year, an increase of 150 basis points. This increase was driven in large part by the full-year impact of incremental strategic investments in our HBC digital business, higher occupancy costs associated with the Queen Street sale and leaseback transaction and performance-based incentive compensation, partially offset by the operating synergies of approximately $50 million realized in Fiscal 2014. Absent these items, normalized SG&A expenses as a percentage of retail sales were 32.3% in Fiscal 2014. (For additional detail with respect to “normalization adjustments”, please refer to the “Supplemental Information” section of this press release).
Excluding a first quarter gain of $308 million on the Queen Street sale and leaseback transaction, partially offset by the net impact of normalization adjustments of $73 million ($191 million in the prior year), normalized EBITDA was $612 million in Fiscal 2014 compared to $405 million in the prior year, an increase of $207 million. Normalized EBITDA as a percentage of retail sales was 7.5% in Fiscal 2014, compared to 7.8% in the prior year.
Finance costs were $262 million in Fiscal 2014 compared to $261 million in the prior year. Finance costs for the current year include $71 million of incremental interest expense on long-term debt primarily incurred to finance the acquisition of Saks, $34 million of non-cash charges from the write-off of deferred financing costs in conjunction with the fourth quarter mortgage financing on the ground portion of the Saks Fifth Avenue flagship property in New York City, $18 million of non-cash charges and $12 million of penalties related to the retirement of debt utilizing proceeds from the Queen Street sale and leaseback transaction, and $44 million in non-cash finance-related charges associated with the mark-to-market of outstanding warrants. Finance costs in the prior year included $153 million of non-cash mark-to-market charges on equity commitment forwards and $12 million of bridge financing fees, both of which related to the acquisition of Saks.
Store Network
| Store Count(1) |
Gross Leasable |
|||||
| STORE INFORMATION AS AT January 31, 2015 | ||||||
| Hudson’s Bay | 90 | 16,123 | ||||
| Lord & Taylor | 50 | 6,898 | ||||
| Saks Fifth Avenue | 38 | 4,499 | ||||
| OFF 5TH | 77 | 2,117 | ||||
| Home Outfitters | 67 | 2,444 | ||||
| Total | 322 | 32,081 | ||||
| (1) | HBC operates two Hudson’s Bay Outlets, two Zellers stores and four Lord & Taylor Outlets that are excluded from store count and gross leasable area. | |
Fiscal 2015 Outlook
The Company’s Fiscal 2015 outlook incorporates management’s views and assumptions with respect to, among other considerations, economic conditions, the current and expected operating environment, competition, consumer preferences, currency and exchange rates, and its ability to successfully execute on its strategic priorities and initiatives. The following outlook is fully qualified by the “Forward-Looking Statements” section of this press release:
- Total sales of between $9.0 and $9.3 billion. This implies low single digit consolidated same store sales growth, calculated on a local currency basis.
- Capital investments, net of landlord incentives, of between $350 million and $400 million. This activity includes the addition of one Saks Fifth Avenue store and between 12 and 14 OFF 5TH stores.
In Fiscal 2015, the Company intends to invest an incremental $50 million in strategic growth initiatives, including an accelerated pace of new store openings at OFF 5TH, strengthening its digital and all-channel presence and capabilities, and incurring pre-opening costs associated with the 2016 expansion of Saks and OFF 5TH into Canada.
This guidance reflects a U.S. dollar foreign exchange rate assumption of USD:CAD = 1:1.24 for Fiscal 2015. Significant variation in this foreign exchange rate assumption would impact the guidance. The actual average foreign exchange rate incorporated in the Company’s reported sales results for Fiscal 2014 was USD:CAD = 1:1.12.
Conference Call to Discuss Results
Richard Baker, HBC’s Governor and Executive Chairman, Jerry Storch, HBC’s Chief Executive Officer and Paul Beesley, HBC’s Chief Financial Officer, will discuss the fourth quarter and Fiscal 2014 financial results and other matters during a conference call on April 7, 2015 at 8:30 am ET.
The conference call will be accessible by calling the participant operator assisted toll-free dial-in number (877) 852-2926 or international dial-in number (253) 237-1123. A live webcast of the conference call will be accessible on HBC's website at: http://investor.hbc.com/events.cfm. The audio replay also will be available via this link.
Consolidated Financial Statements and Management's Discussion and Analysis
The Company's annual consolidated financial statements for year ended January 31, 2015 and Management's Discussion and Analysis thereon will be available under the Company's profile on SEDAR at www.sedar.com.
Selected Consolidated Financial Information
The following tables set out consolidated financial information and supplemental information for each of Fiscal 2014 and Fiscal 2013. The summary financial information set out for the quarters ended January 31, 2015 and February 1, 2014 has been prepared on a basis consistent with our audited consolidated financial statements for Fiscal 2014. In the opinion of our management, such unaudited financial data reflects all adjustments, consisting of normal and recurring adjustments, necessary for a fair presentation of the results for these periods. The results of operations for interim periods are not necessarily indicative of the results to be expected for a full year or any future period. The information presented herein does not contain disclosures required by IFRS and should be read in conjunction with the Company’s audited consolidated financial statements for Fiscal 2014.
|
CONSOLIDATED STATEMENTS OF EARNINGS (LOSS) |
||||||||||
| Unaudited | Audited | |||||||||
| 13 Weeks Ended | 52 Weeks Ended | |||||||||
| January 31, 2015 | February 1, 2014(1) | January 31, 2015 | February 1, 2014(1) | |||||||
| Retail sales | 2,632 | 2,407 | 8,169 | 5,223 | ||||||
| Cost of sales | (1,559) | (1,521) | (4,893) | (3,217) | ||||||
| Selling, general and administrative expenses | (736) | (796) | (2,759) | (1,826) | ||||||
| Depreciation and amortization | (97) | (84) | (344) | (175) | ||||||
| Gain on sale and leaseback transaction | - | - | 308 | - | ||||||
| Operating income | 240 | 6 | 481 | 5 | ||||||
| Total interest expense, net | (76) | (55) | (218) | (95) | ||||||
| Acquisition-related finance (costs) income | (35) | 17 | (44) | (166) | ||||||
| Finance costs | (111) | (38) | (262) | (261) | ||||||
|
Earnings (loss) before income tax – |
||||||||||
|
continuing operations |
129 | (32) | 219 | (256) | ||||||
| Income tax (expense) benefit | (18) | 69 | 19 | 79 | ||||||
|
Net earnings (loss) for the period — |
||||||||||
|
continuing operations |
111 | 37 | 238 | (177) | ||||||
|
Net loss for the period — discontinued |
||||||||||
|
operations, net of income taxes |
- | (8) | - | (82) | ||||||
| Net earnings (loss) for the period | 111 | 29 | 238 | (259) | ||||||
|
Basic net earnings (loss) per common |
||||||||||
|
share |
||||||||||
| Continuing operations | 0.61 | 0.21 | 1.31 | (1.31) | ||||||
| Discontinued operations | - | (0.05) | - | (0.61) | ||||||
| 0.61 | 0.16 | 1.31 | (1.92) | |||||||
| (1) | Certain previously reported figures have been restated due to the implementation of IFRIC 21. For more information, please refer to the “New Accounting Policies – Levies” section of the MD&A and Note 2 of the Company’s audited Annual Consolidated Financial Statements for the year ended January 31, 2015. | |
|
CONSOLIDATED BALANCE SHEETS |
||||||
| January 31, 2015 | February 1, 2014(1) | |||||
| ASSETS | ||||||
| Cash | 168 | 21 | ||||
| Trade and other receivables | 212 | 137 | ||||
| Inventories | 2,349 | 2,048 | ||||
| Financial assets | 24 | 8 | ||||
| Income taxes recoverable | 7 | 23 | ||||
| Other current assets | 69 | 71 | ||||
| Assets of discontinued operations | - | 2 | ||||
| Total current assets | 2,829 | 2,310 | ||||
| Property, plant and equipment | 4,606 | 4,110 | ||||
| Intangible assets | 1,076 | 980 | ||||
| Goodwill | 237 | 208 | ||||
| Pensions and employee benefits | 69 | 72 | ||||
| Deferred tax assets | 240 | 249 | ||||
| Other assets | 15 | 13 | ||||
| Total assets | 9,072 | 7,942 | ||||
| LIABILITIES | ||||||
| Loans and borrowings | 265 | 532 | ||||
| Trade payables | 945 | 585 | ||||
| Other payables and accrued liabilities | 603 | 489 | ||||
| Other liabilities | 76 | - | ||||
| Deferred revenue | 130 | 152 | ||||
| Provisions | 115 | 149 | ||||
| Income taxes payable | 8 | 10 | ||||
| Financial liabilities | 2 | 1 | ||||
| Liabilities of discontinued operations | - | 89 | ||||
| Total current liabilities | 2,144 | 2,007 | ||||
| Loans and borrowings | 2,859 | 2,923 | ||||
| Provisions | 63 | 16 | ||||
| Financial liabilities | 68 | 24 | ||||
| Pensions and employee benefits | 109 | 96 | ||||
| Deferred tax liabilities | 668 | 631 | ||||
| Other liabilities | 669 | 202 | ||||
| Total liabilities | 6,580 | 5,899 | ||||
| Shareholders’ Equity | ||||||
| Share capital | 1,420 | 1,420 | ||||
| Retained earnings | 693 | 491 | ||||
| Contributed surplus | 60 | 43 | ||||
| Accumulated other comprehensive income | 319 | 89 | ||||
| Total shareholders’ equity | 2,492 | 2,043 | ||||
| Total liabilities and shareholders’ equity | 9,072 | 7,942 | ||||
| (1) | Certain previously reported figures have been restated due to the implementation of IFRIC 21. For more information, please refer to the “New Accounting Policies – Levies” section of the MD&A and Note 2 of the Company’s audited Annual Consolidated Financial Statements for the year ended January 31, 2015. | |
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CONSOLIDATED STATEMENTS OF CASH FLOWS |
||||||||||
| 52 Weeks Ended | ||||||||||
|
January 31, |
February 1, 2014(1) |
|||||||||
|
Continuing |
Discontinued |
Total |
||||||||
| Operating activities | ||||||||||
| Net earnings (loss) for the year | 238 | (177) | (82) | (259) | ||||||
| Deduct: Income tax benefit | (19) | (79) | (28) | (107) | ||||||
| Add: Finance costs | 262 | 261 | - | 261 | ||||||
| Operating income (loss) | 481 | 5 | (110) | (105) | ||||||
| Net cash income taxes received | 4 | 1 | 93 | 94 | ||||||
| Interest paid in cash | (143) | (82) | - | (82) | ||||||
| Items not affecting cash flows: | ||||||||||
| Proceeds on sale of leasehold interests recognized | - | - | (33) | (33) | ||||||
| Depreciation and amortization | 344 | 175 | - | 175 | ||||||
| Impairment of property, plant and equipment | 1 | 4 | - | 4 | ||||||
| Net defined benefit pension and employee benefits expense | 6 | 21 | 6 | 27 | ||||||
| Other operating activities | (57) | (14) | - | (14) | ||||||
| (Gain) loss on sale and leaseback transaction and sale of assets | (308) | - | 16 | 16 | ||||||
| Share based compensation | 17 | 10 | - | 10 | ||||||
| Redemption of share based compensation grants | - | (3) | (5) | (8) | ||||||
| Changes in operating working capital: | ||||||||||
| (Increase) decrease in trade and other receivables | (165) | 22 | 8 | 30 | ||||||
| (Increase) decrease in inventories | (86) | 180 | 151 | 331 | ||||||
| Decrease in other current assets | 9 | 5 | 6 | 11 | ||||||
| Increase (decrease) in trade and other payables, accrued liabilities and provisions | 326 | (165) | (211) | (376) | ||||||
| Increase (decrease) in other liabilities | 118 | 5 | (7) | (2) | ||||||
| Net cash inflow from (outflow for) operating activities | 547 | 164 | (86) | 78 | ||||||
| Investing activities | ||||||||||
| Acquisition of Saks, net of cash acquired | - | (2,766) | - | (2,766) | ||||||
| Capital investments | (426) | (292) | - | (292) | ||||||
| Proceeds from landlord incentives | 113 | 42 | - | 42 | ||||||
| (313) | (250) | - | (250) | |||||||
| Proceeds from lease termination and other non-capital landlord incentives | 71 | 4 | - | 4 | ||||||
| Proceeds from sale of assets | 35 | - | 3 | 3 | ||||||
| Proceeds from sale and leaseback transaction | 650 | - | - | - | ||||||
| Other investing activities | (2) | (1) | - | (1) | ||||||
| Net cash inflow from (outflow for) investing activities | 441 | (3,013) | 3 | (3,010) | ||||||
| Financing activities | ||||||||||
| Long-term loans and borrowings: | ||||||||||
| Issuance | 1,420 | 2,659 | - | 2,659 | ||||||
| Repayments | (1,882) | (684) | - | (684) | ||||||
| Borrowing costs | (48) | (85) | - | (85) | ||||||
| Net decrease in other long-term borrowings | - | (2) | - | (2) | ||||||
| (510) | 1,888 | - | 1,888 | |||||||
| Short-term loans and borrowings: | ||||||||||
| Net (repayments to) borrowings from asset-based credit facilities | (287) | 36 | - | 36 | ||||||
| Borrowing costs | (2) | (14) | - | (14) | ||||||
| Net decrease in other short-term borrowings | (13) | - | - | - | ||||||
| (302) | 22 | - | 22 | |||||||
| Issuance of common shares | - | 1,039 | - | 1,039 | ||||||
| Dividends paid | (36) | (43) | - | (43) | ||||||
| Net cash (outflow for) inflow from financing activities | (848) | 2,906 | - | 2,906 | ||||||
| Foreign exchange gain (loss) on cash | 7 | (1) | - | (1) | ||||||
| Increase (decrease) in cash | 147 | 56 | (83) | (27) | ||||||
| Transfer from continuing operations | - | (83) | 83 | - | ||||||
| Increase (decrease) in cash | 147 | (27) | - | (27) | ||||||
| Cash at beginning of year | 21 | 48 | - | 48 | ||||||
| Cash at end of year | 168 | 21 | - | 21 | ||||||
| (1) | Certain previously reported figures have been restated due to the implementation of IFRIC 21. For more information, please refer to the “New Accounting Policies – Levies” section of the MD&A and Note 2 of the Company’s audited Annual Consolidated Financial Statements for the year ended January 31, 2015. | |
Supplemental Information
The following table shows the reconciliation of Net Earnings (Loss) – Continuing Operations to EBITDA as well as Normalized EBITDA.
| Unaudited | ||||||||||
| 13 Weeks Ended | 52 Weeks Ended | |||||||||
| (millions of Canadian dollars) |
January 31, |
February 1, |
January 31, |
February 1, |
||||||
| $ | $ | $ | $ | |||||||
| Net Earnings (Loss) for the Period – Continuing Operations | 111 | 37 | 238 | (177) | ||||||
| Finance costs | 111 | 38 | 262 | 261 | ||||||
| Income tax expense (benefit) | 18 | (69) | (19) | (79) | ||||||
| *Non-cash pension (recovery) expense | (14) | - | 6 | 21 | ||||||
| Depreciation and amortization | 97 | 84 | 344 | 175 | ||||||
| Impairment and other non-cash expenses | 1 | 4 | 1 | 4 | ||||||
| *Share based compensation | 4 | 2 | 15 | 9 | ||||||
| EBITDA | 328 | 96 | 847 | 214 | ||||||
|
Normalization Adjustments |
||||||||||
| Gain on Queen Street sale | - | - | (308) | - | ||||||
| *Saks acquisition and integration related expenses | 13 | 110 | 62 | 124 | ||||||
| Amortization of Saks inventory purchase price accounting adjustment | - | 39 | 40 | 39 | ||||||
| *Lease provision(2) | 14 | - | 14 | - | ||||||
| *Foreign exchange adjustment(3) | (14) | - | (14) | - | ||||||
| *Loyalty Zellers adjustment(4) | (24) | - | (24) | - | ||||||
| *Restructuring and other | 1 | 8 | (5) | 28 | ||||||
| Total normalizing adjustments | (10) | 157 | (235) | 191 | ||||||
| Normalized EBITDA | 318 | 253 | 612 | 405 | ||||||
*Denotes items included in “normalization adjustments” in calculating “normalized SG&A”. Total for Fiscal 2014 was $54 million (2013: $182 million) and for fiscal quarter ended January 31, 2015 ($20) million (February 1, 2014: $120 million).
| (1) | Certain previously reported figures have been restated due to the implementation of IFRIC 21. For more information, please refer to the “New Accounting Policies – Levies” section of the MD&A and Note 2 of the Company’s audited Annual Consolidated Financial Statements for the year ended January 31, 2015. | |
| (2) | Represents provisions related to identified Home Outfitters stores. | |
| (3) | Represents the impact of unrealized gains related to the translation of U.S. dollar denominated asset and liability balances. | |
| (4) | Represents the one time positive impact recognized in the fourth quarter related to the recognition of the change in redemption patterns of previous Zellers customers. | |
The following table shows the reconciliation of Net Earnings (Loss) – Continuing Operations to Normalized Net Earnings.
| Unaudited | ||||||||||
|
|
13 Weeks Ended | 52 Weeks Ended | ||||||||
| (millions of Canadian dollars) |
January 31, |
February 1, |
January 31, |
February 1, |
||||||
| $ | $ | $ | $ | |||||||
| Net Earnings (Loss) – Continuing Operations | 111 | 37 | 238 | (177) | ||||||
|
Normalization Adjustments(2) |
||||||||||
| Gain on Queen Street sale | - | - | (261) | - | ||||||
| Saks acquisition and integration related expenses and finance costs(3) | 43 | 64 | 84 | 256 | ||||||
| Restructuring and other | 1 | 5 | (4) | 20 | ||||||
| Financing related adjustments(4) | 25 | 4 | 47 | 8 | ||||||
| Amortization of Saks inventory purchase price accounting adjustment | - | 24 | 24 | 24 | ||||||
| Lease provision(5) | 10 | - | 10 | - | ||||||
| Foreign exchange adjustment(6), | (12) | - | (12) | - | ||||||
| Loyalty Zellers adjustment(7) | (18) | - | (18) | - | ||||||
| Tax related adjustments | (7) | (53) | (7) | (52) | ||||||
| Total normalizing adjustments | 42 | 44 | (137) | 256 | ||||||
|
Normalized Net Earnings |
153 | 81 | 101 | 79 | ||||||
| (1) | Certain previously reported figures have been restated due to the implementation of IFRIC 21. For more information, please refer to the “New Accounting Policies – Levies” section of the MD&A and Note 2 of the Company’s audited Annual Consolidated Financial Statements for the year ended January 31, 2015. | |
| (2) | Net of tax as appropriate. | |
| (3) | Includes the recognition of non-cash finance costs (recoveries) related to warrants of $44 million (2013: nil) for the fiscal year and $35 million (2013: ($18 million)) for the quarter. | |
| (4) | Includes write-off of deferred financing costs and penalties on early extinguishment of debt. | |
| (5) | Represents provisions related to identified Home Outfitters stores. | |
| (6) | Represents the impact of unrealized gains related to the translation of U.S. dollar denominated asset and liability balances. | |
| (7) | Represents the one time positive impact recognized in the fourth quarter related to the recognition of the change in redemption patterns of previous Zellers customers. | |
EBITDA is a non-IFRS measure that we use to assess our operating performance. EBITDA is defined as net earnings before finance costs, income tax, non-cash share based compensation expense, depreciation and amortization expense, impairment and other non-cash expenses, and non-cash pension expense. The Company’s Canadian defined benefit pension plan is currently over-funded and as a result, pension expense is adjusted as management does not expect to make any payments in the foreseeable future.
Normalized EBITDA is defined as EBITDA adjusted to exclude: (i) business and organization restructuring/realignment charges; (ii) merger/acquisition costs and expenses; (iii) normalizing adjustments, if any, related to transactions that are not associated with day-to-day operations; and (iv) EBITDA related to discontinued operations. Normalized Net Earnings (Loss) is defined as net earnings (loss) adjusted to exclude: (i) business and organization restructuring/realignment charges; (ii) merger/acquisition costs and expenses; (iii) normalizing adjustments, including those related to purchase accounting, if any, related to transactions that are not associated with day-to-day operations; and (iv) net earnings (loss) related to discontinued operations. Normalized SG&A expenses are defined as SG&A expenses adjusted to exclude: (i) business and organization restructuring/realignment charges; (ii) merger/acquisition costs and expenses; (iii) normalizing adjustments, if any, related to transactions that are not associated with day-to-day operations; and (iv) expenses related to discontinued operations. We have included Normalized EBITDA, Normalized Net Earnings and Normalized SG&A expenses to provide investors and others with supplemental measures of our operating performance. We believe Normalized EBITDA, Normalized Net Earnings and Normalized SG&A expenses are important supplemental measures of operating performance because they eliminate items that have less bearing on our operating performance and thus highlight trends in our core business that may not otherwise be apparent when relying solely on IFRS financial measures. We also believe that securities analysts, investors, rating agencies and other interested parties frequently use EBITDA, Normalized EBITDA, Normalized Net Earnings and Normalized SG&A expenses in the evaluation of issuers, many of which present similar metrics when reporting their results. Our management also uses Normalized EBITDA in order to facilitate operating performance comparisons from period to period, prepare annual operating budgets and assess our ability to meet our future debt service, capital expenditure and working capital requirements and our ability to pay dividends on our shares. As other companies may calculate EBITDA, Normalized EBITDA, Normalized Net Earnings or Normalized SG&A differently than we do, these metrics are not comparable to similarly titled measures reported by other companies.
About Hudson’s Bay Company
Hudson's Bay Company, founded in 1670, is North America's longest continually operated company. Today, HBC offers customers a range of retailing categories and shopping experiences primarily in the United States and Canada. Our leading banners – Hudson's Bay, Lord & Taylor, Saks Fifth Avenue and Saks OFF 5TH – offer a compelling assortment of apparel, accessories, shoes, beauty and home merchandise. Hudson’s Bay is Canada's most prominent department store with 90 full-line locations, two outlet stores and thebay.com. Lord & Taylor operates 50 full-line locations primarily in the northeastern and mid-Atlantic U.S., four Lord & Taylor outlet locations and lordandtaylor.com. Saks Fifth Avenue, one of the world's pre-eminent luxury specialty retailers, comprises 39 U.S. stores, five international licensed stores and saks.com. OFF 5TH offers value-oriented merchandise through 78 U.S. stores and saksoff5th.com. Home Outfitters is Canada's largest kitchen, bed and bath specialty superstore with 67 locations. The Company also operates two Zellers clearance centers in Canada. Hudson’s Bay Company trades on the Toronto Stock Exchange under the symbol “HBC”.
Forward-Looking Statements
Information in this press release that is not current or historical factual information may constitute forward-looking information within the meaning of securities laws, including future-oriented financial information and financial outlooks, such as those described under “Fiscal 2015 Outlook”. This information is based on certain assumptions regarding expected growth, results of operations, performance, and business prospects and opportunities. While the Company considers these assumptions to be reasonable, based on information currently available, they may prove to be incorrect. Forward-looking information is subject to a number of risks, uncertainties and other factors that could cause actual results to differ materially from what the Company currently expects. These risks, uncertainties and other factors include, but are not limited to: credit, market, currency, operational, liquidity and funding risks, including changes in economic conditions, interest rates or tax rates, the timing and market acceptance of future products, competition in the Company’s markets, the growth of certain business categories and market segments and the willingness of customers to shop at the Company’s stores, the Company’s margins and sales and those of the Company’s competitors, the Company’s reliance on customers, risks and uncertainties relating to information management, technology, supply chain, product safety, changes in law, regulations, competition, seasonality, commodity price and business disruption, the Company’s relationships with suppliers and manufacturers, changes to existing accounting pronouncements, the ability of the Company to successfully implement its strategic initiatives, changes in consumer spending, managing our portfolio of brands and our merchandising mix, seasonal weather patterns, economic, social, and political instability in jurisdictions where suppliers are located, increased shipping costs, potential transportation delays and interruptions, the risk of damage to the reputation of brands promoted by the Company and the cost of store network expansion and retrofits, compliance costs associated with environmental laws and regulations, fluctuations in currency and exchange rates, commodity prices, the Company’s ability to maintain good relations with its employees, changes in the law or regulations regarding the environment or other environmental liabilities, the Company’s capital structure, funding strategy, cost management programs and share price, the Company’s ability to integrate acquisitions and the Company’s ability to protect its intellectual property.
For more information on these risks, uncertainties and other factors the reader should refer to the Company’s filings with the securities regulatory authorities, including the MD&A and the Company’s Annual Information Form, which are available on SEDAR at www.sedar.com. To the extent any forward-looking information in this press release constitutes future-oriented financial information or financial outlooks, within the meaning of securities laws, such information is being provided to demonstrate the potential of the Company and readers are cautioned that this information may not be appropriate for any other purpose. Future-oriented financial information and financial outlooks, as with forward-looking information generally, are based on assumptions and subject to risks, uncertainties and other factors. Actual results may differ materially from what the Company currently expects. Other than as required under applicable securities laws, the Company does not undertake to update any forward-looking information at any particular time. The reader should not place undue importance on forward-looking information and should not rely upon this information as of any other date. All forward-looking information contained in this press release is expressly qualified in its entirety by this cautionary statement.
