TOUGH QUARTER BROOKLYN HUDSON’S BAY CO. SEES LOSSES INCREASE DURING THE THIRD QUARTER DUE TO COSTS OF THE SAKS FIFTH AVENUE BOOM ACQUISITION — AND THE INCREASINGLY FASHION MANUFACTURING IS ON THE UPSWING IN PROMOTIONAL ENVIRONMENT. PAGE 2 THE NEW YORK CITY BOROUGH. PAGE MW1 2014 PRE-FALL COLLECTIONS WWDTHURSDAY, DECEMBER 12, 2013 ■ $3.00 ■ WOMEN’S WEAR DAILY Haute Rodeo Talk about a fashion hoedown. On Tuesday night, Karl did Dallas in a Texas-big way, staging Chanel’s Métiers d’Art show at the city’s vast Fair Park. The festivities featured a drive-in screening of Lagerfeld’s short fi lm “The Return” which was watched from 74 vintage cars; a postshow saloon shindig (mechanical bull, anyone?) and, most importantly, fabulous clothes. Here, Lagerfeld’s denim darlings, fi nished with frills, fl amboyant jewelry and, of course, cowboy hats, scaled down for an extra dash of chic. For more, see pages 4 to 6. PHOTO BY STEVE FOXALL 2 WWD THURSDAY, DECEMBER 12, 2013 WWD.COM Saks Deal, Promotions Sap HBC Net THE BRIEFING BOX tain sites. Some openings of Saks full-line and Off IN TODAY’S WWD By DAVID MOIN 5th outlets in Canada are seen, as are some full- line closings in the U.S. Some could be converted HUDSON’S BAY CO., impacted by its $2.9 billion to Lord & Taylor. Baker has stated the company is purchase of Saks Fifth Avenue and the promotion- prepared to invest $200 million to upgrade the Saks al environment affecting margins, saw its net loss Fifth Avenue flagship in Manhattan. Sources specu- grow in the third quarter despite revenue gains. late that an overhaul of the main floor and convert- The Toronto-based retailer said its loss rose ing the lower level to selling space are possible to to $124.2 million in the period ended Nov. 2, com- expand cosmetics, accessories and jewelry. pared with a loss of $14.4 million a year ago. “While we would prefer our year-to-date perfor- HBC, promoting aggressively to draw shoppers, mance to have been stronger, our investments in saw total sales rising 5.8 percent to $984.1 mil- both store productivity and our omnichannel plat- lion. On a same-store basis, sales at Lord & Taylor form have produced clear and promising results,” turned positive for the first time in a year, rising 1.6 Baker said. “We are confident that these investments percent. Sales at Hudson’s Bay department stores are necessary and will benefit earnings over the long in Canada grew 6.4 percent. E-commerce sales term. Further, the addition of Saks will allow us to were $48.9 million, an increase of 58.3 percent com- leverage these investments over a larger platform. KEENAN/WIREIMAGE pared with the third quarter of 2012. Saks also provides us with the opportunity to create In reporting the results Wednesday, HBC execu- considerable economies of scale. We are determined tives echoed widespread industry sentiment about to take full advantage of this and deliver $100 mil- Sarah Chalke, Rashida Jones and Cat Deeley STEFANIE how tough holiday business has been. With just two lion in synergies over the next three years.” at the Parker party. For more, see WWD.com. BY weeks to go before Christmas, “traffic patterns are A key initiative at the Hudson’s Bay department PHOTO going to be difficult,” warned Richard Baker, chair- store group entails ongoing upgrade and expansion man and chief executive officer of HBC, in a confer- of omnichannel operations, with expanded online as- ence call. “In November, we expected stronger sales.” sortments and fulfillment capabilities, “auto locate” Baker characterized apparel pricing as increas- capabilities in the stores to find items and sell them Hudson’s Bay Co. saw its net loss grow in the third quarter ingly competitive, and for next year, the planning faster and at better margins, and a more robust infra- despite revenue gains. PAGE 2 has been more conservative after an inventory re- structure. “Omni remains a start-up business,” Baker ceipt flow that has been too heavy. said, citing its high sales growth yet lower EBITDA Hennes & Mauritz AB will reveal today that it has collaborated In the last quarter, the company’s operations contribution than brick-and-mortar. “We have made with Alexia Niedzielski and Elizabeth von Guttman of Ever improved with “normalized” tremendous progress, starting PAGE 7 net earnings rising to $8.9 mil- from no online sales just a couple Manifesto on its new Conscious Exclusive line. lion, against the year-ago loss of of years ago. But we are not yet $300,000. Normalized earnings ex- satisfied with the level of service Inditex reported Wednesday that nine-month net profits and clude the impact of onetime costs and with all the sku’s [stockkeep- sales grew at a slower pace than in 2012, but it was steaming 5.8% PAGE 7 such as the Saks deal and restruc- ing units] we have available and ahead with store openings and renovations. turings. Earnings before interest, HUDSON BAY CO.’S SALES GROWTH volume levels. We are committed taxes, depreciation and amorti- IN THE THIRD QUARTER. to having a state-of-the-art online Fashion Girls for Humanity has lined up a series of one-of-a- zation were $64.3 million, an in- offering in Canada. We hope to be kind items and “experiences” for an online auction benefiting crease of $16.4 million compared there in the next 12 to 15 months. victims of Typhoon Haiyan in the Philippines. PAGE 7 with the third quarter of 2012. We don’t think the complexity of adding Saks online For the fourth quarter, HBC projects total sales of in Canada is going to slow down or divert any of our The Hollywood Reporter’s 22nd annual Women in $1.37 billion to $1.41 billion, and normalized EBITDA efforts. We will be leveraging our existing online and Entertainment breakfast at The Beverly Hills Hotel on of $160 million to $180 million. Same-store sales distribution capabilities in Canada to create a better Wednesday honored the magazine’s Power 100 list. PAGE 7 will benefit from the negative impact of Superstorm launch of Saks online. In the U.S., Saks has a more Sandy last year. However, with all the price promoting mature and higher-functioning online business, and Moncler’s road show ended Wednesday and shares are to and some higher costs, a lower gross profit rate in the we are using their quality people to help us with Lord be priced at 10.20 euros each, or $14.07 at current exchange, current quarter and full year is expected. & Taylor and Hudson’s Bay’s online businesses.” according to the company. PAGE 8 Saks’ figures were not included in the third-quarter “Calculated” investments in stores is another results or the guidance, since the deal was closed at initiative, Baker said, citing the recent renovation the beginning of the fourth quarter. In the call, how- of the Vancouver flagship, which has since seen a LVMH Moët Hennessy Louis Vuitton is launching a program ever, Michael Culhane, HBC’s chief financial officer, 34 percent sales lift, and the creation of Canada’s that seeks to train Chinese-Americans to ready them for PAGE 8 said Saks posted $795 million in total sales, with same- largest shoe floor at the Hudson’s Bay flagship on employment opportunities in the luxury retail sector. store sales ahead 9.6 percent driven by increased pro- Queen Street in Toronto. Six Hudson’s Bay loca- motional activity and continued strength in e-com- tions have received significant renovations. Luxury e-commerce site Moda Operandi has reeled in just merce. Normalized EBITDA came to $68.2 million. Developing partnerships with brands, such as over $20 million in Series D funding. PAGE 8 With the Saks deal done, HBC is “in the midst of Topshop/Topman in-store shops that are being rolled a transformational period,” Baker said, explaining out, is another initiative. Last quarter, Topshop/ Brand owners, factory operators and real estate developers that they are working on integrating Saks and mak- Topman, along with women’s and men’s apparel gen- are turning Brooklyn into a growing hub for apparel and ing the luxury retailer leaner. “There is lots of work erally, ladies shoes, handbags and accessories, were accessories manufacturing. PAGE MW1 ahead of us.” bestsellers at Hudson’s Bay. At Lord & Taylor, men’s Dramatic changes have already happened, and women’s apparel and handbags fared the best. Bergdorf Goodman Men has unveiled a boutique for luxury with HBC eliminating much of the senior team E-commerce was strong at both banners. men’s brand Berluti. PAGE MW4 at Saks and naming Marigay McKee as president. For the year to date, top-line growth has been Additional layoffs are expected as Saks’ back office strong at Hudson’s Bay, but disappointing at L&T Emerisque Brands, owner of MCS, is discontinuing the label’s operations get consolidated into the central opera- and Home Outfitters. Target in Canada has swiped women’s division and focusing on men’s wear. PAGE MW4 tions of the Toronto-based HBC. In January, Saks’ some business from Home Outfitters. distribution center in Maryland will close and op- With HBC owning valuable retail locations on erations will shift to the Lord & Taylor distribution Fifth Avenue and elsewhere, Baker said he is eval- ON WWD.COM center in Wilkes-Barre, Pa. That will lead to layoffs, uating “every option on how to share the value of as well as efficiencies in trucking.