HBC shares slip after company reports softer sales

Shares of Hudson's Bay Co. slipped on the TSX on Friday, a day after the retailer reported a drop in its sales.

 The company's shares dropped more than four per cent, giving back 49 cents to close the week at $10.20.

On Thursday, the company said its first quarter comparable sales were down by 2.9 per cent.

 "The first quarter of the year has remained difficult, particularly in the U.S., where we have seen lower store traffic across our banners," HBC CEO Jerry Storch, said in a release. 

The company said its comparable sales in North America trended down relative to its fourth quarter, while European sales improved.

"This weakness is likely being caused by apparel retailers, in particular, facing a persistent promotional environment in addition to the ongoing shift of in-store sales to online," TD Securities analysts Brian Morrison and Meaghen Annett, wrote in a research report out Friday.

HBC said comparable sales at its Hudson Bay, Lord & Taylor and Home Outfitters stores fell collectively by 2.4 per cent from the first quarter of last year. 

Comparable sales at Saks 5th Avenue were down by 4.8 per cent, while the HBC's discount brands -- Saks Off 5th and Gilt -- saw a drop of 6.8 per cent.

The retailers's digital sales grew by 5.4 per cent year over year, and by 13.2 per cent when Gilt is excluded from the results.

Bloomberg Intelligence analysts Poonam Goyal wrote in a report that HBC has "slashed capital spending while to invest in its digital channel and other high-return projects."

TD Securities said the growth in digital sales was a positive point.

"Overall, while we have left our financial forecasts unchanged at this time...it is clear from these figures that HBC continues to operate within a very challenging retail environment that should continue to pressure its financial results," Morrison and Annett said in their report.

TD Securities has a one-year price target of $12 on HBC's stock.

HBC is to report its first-quarter financial results on June 8.