HBC has announced its first quarter financial results for the 13th week period ended 29 April 2017, and also launched its Transformation Plan, currently expected to generate total annual savings of more than CAD 350 million.
“This was a tough quarter for HBC. While the retail apparel market remains particularly challenging, we are taking steps to adapt, beginning with our Transformation Plan announced today. This initiative will reshape our organization to accelerate delivery of a best-in-class all-channel experience to our customers while improving our cost structure. The Transformation Plan makes us more agile and better able to respond to evolving customer preferences and a rapidly changing retail landscape. We strongly believe that our model of combining world class real estate assets, which are less impacted by short-term trends, with our diverse retail businesses provides long-term value for the company and our shareholders,” stated Richard Baker, HBC’s Governor and Executive Chairman.
Jerry Storch, HBC’s Chief Executive Officer, added, “We know we can do better and we are taking bold decisive action. Rather than chase the rapid industry changes, our Transformation Plan will reposition HBC to get ahead and stay ahead. This North American based initiative, the result of a process we began more than six months ago, is designed to increase synergies across our portfolio of businesses, sharpen capabilities that give the ccompany a competitive edge and re-align our expenses to focus on growing our digital business. Savings from the changes we have announced today are required to help mitigate the pressures we are facing in the current environment. As we have developed our plan, we have been determined to become not just a leaner company but also a better one. These changes include significant improvements to our organizational structure, store operations and procurement strategy, all of which better reflect the company’s efforts to drive the business forward and deliver a best-in-class all-channel experience. Combined with our prudent management of capital expenditures, we believe that this improved structure will better position HBC for the future.”
As announced in a separate press release, HBC has largely completed the comprehensive review of its North American business operations started in late 2016. As part of this review, the company is implementing changes to drive its business forward and improve the company’s all-channel business model. This Transformation Plan will increase operational synergies, sharpen capabilities and reduce expenses. Including the CAD 75 million in savings announced in February, annual savings from this Transformation Plan are currently expected to total more than CAD 350 million by the end of Fiscal 2018, with approximately CAD 170 million anticipated to be realized during this fiscal year. Of this CAD 170 million, the actions necessary to secure CAD 125 million are complete. As part of this initiative, the company will reduce total headcount by approximately 2,000 positions, including those previously announced in February. These savings are required to help offset revenue, margin and cost pressures the company is facing in the current retail environment. In addition to the severance charges incurred as part of the company’s actions in February, HBC’s expects one-time charges related to this initiative of approximately CAD 95 million over the next 12 months.
Key Actions of HBC’s Transformation Plan:
- Creating two distinct leadership teams, one focused on Hudson’s Bay and one dedicated to Lord & Taylor, to drive market-specific strategies. The Hudson’s Bay leadership team will focus on accelerating plans to build upon its successful transformation in Canada, while the Lord & Taylor leadership team will focus on increasing the pace of change at that US banner, with an emphasis on driving digital opportunities while operating its stores more efficiently.
- Integrating digital functions throughout the organization to develop and maximize the impact of all-channel solutions for marketing, operations and technology in order to deliver the most seamless in-store and online experience for HBC’s customers.
- Realigning resources including IT and Digital, Store Operations & Visual Merchandising, Buying & Planning and Marketing to increase efficiencies and leverage scale, with world-class centers of excellence that support banners while preserving differentiation among the businesses.
- Optimizing in-store service and enhancing sales training for store associates to better serve HBC’s customers.
- Reducing our employee base by approximately 2,000 positions, including those previously announced in February, which will flatten the organization by removing layers to make HBC more nimble and streamline the decision making process.
Fully leveraging the size and scale of the company to optimize procurement and generate additional savings.