HBC still learning from European expansion

More than a year after Hudson's Bay Company entered Europe with its blockbuster purchase of Galeria Kaufhof, the largest department store chain in Germany and Belgium, the iconic retailer admits it's still learning the subtle cultural differences between shoppers on both continents.

"There is a lot for us to learn and there are a lot of nuances that are different," Richard Baker, HBC's governor and executive chairman, said in an interview Wednesday.

Some of these differences include the types of shoes, handbags and cosmetics Europeans prefer compared to Canadians and Americans.

"There is a more of a proclivity for women to wear high heels, spiky heels, in North America than there is in Europe," said chief executive Jerry Storch.

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"When you ask people why, well, Germans just have more practical sense, for example. Or that there are a lot of cobblestone streets so they don't like the spiky heels quite as much. Not that there shouldn't be some spiky heels in the assortment ... but not as much as we might have in downtown Toronto, for example."

The retailer bought Galeria for $3.9 billion last year in its first foray outside of North America. The purchase resulted in HBC taking over 135 retail locations, various logistics centres, warehouses and other properties, as well as the Galeria Kaufhof head office in Cologne, Germany.

Growth plan

Since then, it has unveiled a blueprint for a massive expansion plan in Europe to open up to 20 banner Hudson's Bay and Saks Off 5th stores in the Netherlands. Currently, it has signed long-term leases for 11 of these locations.

Storch said the company has brought over changes from Canada and the U.S. — such as tweaking the staffing at the beauty counters and offering more promotions — to its German operations, which have also been met with success.

"Everything we tried has worked. I mean that in humbleness," he said during an analyst call prior to the interview.

"When we bought Kaufhof, we said we're not going to come over like the North Americans know better."

Q2 loss

Hudson's Bay reported after stock markets closed Tuesday that it had a net loss of $142 million in its second-quarter 2016 financial results compared to net earnings of $59 million for the same period last year.

The company said much of the loss can be attributed to increased costs related to its joint venture deals with RioCan Real Estate Investment Trust and Simon Property Group.

But on the retail side, the Toronto-based company, which also owns luxury retailers Lord & Taylor and Saks Fifth Avenue, saw consolidated retail sales rise by 60 per cent to $3.25 billion for the quarter ending July 30, primarily due to the addition of HBC Europe and online shopping business Gilt.

Baker said the company, which was founded in 1670, isn't actively pursuing any more acquisitions abroad — for now.

"Frankly, we have plenty to do. There is tremendous growth and tremendous opportunity in what we already own and if we never purchased another company, ever, there is a long runway of growth in improving what we have," he told analysts during the call.

"Having said that, if an opportunity makes itself available to us ... then it's certainly something we would consider."

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