Hudson's Bay Company announced its third quarter financial results for the 13 and 39 weeks ended October 31, 2015.
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The company board has approved a quarterly dividend to be paid on January 15, 2016, to shareholders of record at the close of business on December 31, 2015. Unless otherwise indicated, all amounts are expressed in Canadian dollars.
All comparative figures below are for the 13-week period ended October 31, 2015 compared to the 13-week period ended November 1, 2014.
Retail sales, which include digital sales from all banners, were $2,566 million, an increase of $653 million or 34.1% from $1,913 million in the prior year
Same store sales growth was 12.9%. On a constant currency basis, consolidated same store sales increased by 2.0%.
Same store sales on a constant currency basis increased by 5.1% at DSG, by 2.8% at OFF 5TH and by 6.6% at HBC Europe for the one month of ownership, and decreased by 3.6% at Saks Fifth Avenue. Digital sales increased by 23.9% on a constant currency basis compared to the prior year, reflecting the company's continued strategic focus on growing this channel.
There was variability of performance among merchandise categories, with many categories performing well while a few categories saw some pressure. At DSG there was sales growth in home products, menswear and cosmetics.
At OFF 5TH, growth was driven by women's shoes, handbags and menswear while at Saks Fifth Avenue, strength in outerwear and women's advanced contemporary was more than offset by weakness in men's luxury collections and women's and men's ready to wear collections.
Gross profit as reported was $1,074 million compared to $787 million for the prior year, a year-over-year improvement of $287 million.
The inclusion of HBC Europe for the month of October, as well as sales growth at our existing banners, combined with a favourable currency conversion on U.S. dollar denominated sales, drove the increase in gross profit dollars.
Going forward, the inclusion of HBC Europe is expected to impact HBC's reported gross profit and expense margins.
The cost structure in Europe is such that gross profit margins are generally higher than those experienced in North America. This is in turn offset by higher SG&A expense, driven in part by increased labor costs. As a result, gross profit and SG&A rates reported by HBC going forward will not be directly comparable to historical results.
SG&A expenses were $1,012 million compared to $690 million for the prior year. Excluding normalization items of $107 million ($19 million in the prior year), Normalized SG&A expenses were $905 million compared to $671 million, an increase of $234 million.
In addition to these normalization items, SG&A expenses were negatively impacted in the quarter by, among other things, the inclusion of HBC Europe, as well as the weakening of the Canadian dollar as U.S. dollar denominated expenses are converted into Canadian dollars.
Expense reduction is an area of focus for HBC. Recently, HBC announced an initiative to reduce SG&A expenses through its North American operations realignment program. The company is pleased to report that these efforts have already had a meaningful impact on our SG&A rate. ■