Comprehensive operational review
HBC continues its focus on improving its business operations as it adapts to a changing retail environment. Late in 2016, the Company launched a comprehensive review of its business operations to identify efficiencies, streamline processes and improve back of store productivity, while also enhancing customer service. Management expects that these initiatives will provide opportunities to increase profitability while ensuring that the Company is prepared to meet the challenges of an evolving retail environment. Over the coming months, the Company expects to provide additional details as work progresses.
For the nine week period beginning
(1) Comparable sales are a Non-IFRS Measure. For the definition of comparable sales results expressed on a constant currency comparable basis, see "Non-IFRS Measures" below.
The following outlook is fully qualified by the "Forward-Looking Statements" section of this press release.
The Company's previously disclosed Fiscal 2016 outlook was based on management's expectations of flat to low single digit overall comparable sales growth, calculated on a constant currency basis, during the remainder of Fiscal 2016, which included the holiday selling period. Given the Company's sales results for the holiday selling period and lower than expected gross margins realized to date during the fourth quarter, management is reducing its sales, Adjusted EBITDAR and Adjusted EBITDA outlooks for Fiscal 2016(2). This outlook reflects, among other things, the Company's performance to date and an updated exchange rate assumption for the EUR/CAD.
|(Canadian dollars)||Fiscal 2016|
The Company now expects total capital investments, net of landlord
incentives, to be between
The above outlook reflects exchange rate assumptions of USD:CAD = 1:1.32 and EUR:CAD = 1:1.45. Any variation in these foreign exchange rate assumptions and/or other material assumptions and factors described in the "Forward-Looking Statements" section of this press release could impact the above outlook.
(2) Adjusted EBITDAR and Adjusted EBITDA are Non-IFRS Measures. See "Non-IFRS Measures" section for additional details.
EBITDA and EBITDAR are non-IFRS measures that the Company uses to assess its operating performance. EBITDA is defined as net (loss) earnings before finance costs, income tax benefit, share of net loss in the Company's two real estate joint ventures (the "Joint Ventures"), gain on contribution of assets to Joint Ventures, gain on sale of investments in Joint Ventures, dilution gains from investments in the Joint Ventures, non-cash pension expense, depreciation and amortization expense, impairment and other non-cash expenses and non-cash share based compensation expense. EBITDAR is defined as EBITDA before rent expense to third parties and net rent expense to Joint Ventures.
Adjusted EBITDA is defined as EBITDA adjusted to exclude: (i) business and organization restructuring/realignment charges; (ii) merger/acquisition costs and expenses; and (iii) normalization and joint venture adjustments, including those related to purchase accounting, if any, related to transactions that are not associated with day-to-day operations. Adjusted EBITDAR is defined as Adjusted EBITDA excluding third party rent expense, cash rent to Joint Ventures and cash distributions from Joint Ventures.
The Company has included EBITDA, Adjusted EBITDA and Adjusted EBITDAR to provide investors and others with supplemental measures of its operating performance. The Company believes EBITDA, Adjusted EBITDA and Adjusted EBITDAR are important supplemental measures of operating performance because they eliminate items that have less bearing on the Company's operating performance and thus highlight trends in its core business that may not otherwise be apparent when relying solely on IFRS financial measures. The Company also believes that securities analysts, investors, rating agencies and other interested parties frequently use EBITDA, Adjusted EBITDA and Adjusted EBITDAR in the evaluation of issuers, many of which present similar metrics when reporting their results. The Company's management also uses Adjusted EBITDAR in order to facilitate retail business operating performance comparisons from period to period, prepare annual operating budgets and assess its ability to meet its future debt service, capital expenditure and working capital requirements and our ability to pay dividends on our Common Shares. As other companies may calculate EBITDA, Adjusted EBITDA or Adjusted EBITDAR differently than the Company, these metrics may not be comparable to similarly titled measures reported by other companies.
This press release makes reference to certain comparable financial results expressed on a constant currency basis, including comparable sales and comparable digital sales. The Company calculates comparable sales on a year-over-year basis from stores operating for at least 13 months and includes digital sales and clearance store sales. In calculating the comparable sales change, including digital sales, on a constant currency basis, prior year foreign exchange rates are applied to both current year and prior year comparable sales. Additionally, where an acquisition closed in the previous twelve months, comparable sales change on a constant currency basis incorporate results from the pre-acquisition period. This enhances the ability to compare underlying sales trends by excluding the impact of foreign currency exchange rate fluctuations as well as by reflecting new acquisitions. Definitions and calculations of comparable sales and comparable digital sales differ among companies in the retail industry. The Company notes that results from acquisitions are only incorporated in the Company's reported consolidated financial results from and after the acquisition date.
HBC has significant investments in real estate joint ventures. It has
partnered with Simon Property Group Inc. in the
Certain statements made in this news release are forward-looking within the meaning of applicable securities laws, including, among others, with respect to improving the efficiency of the organization and opportunities to increase profitability, the Company's commentary on and revised outlook in respect of sales, Adjusted EBITDA and Adjusted EBITDAR, and other statements that are not historical facts. Often but not always, forward-looking statements can be identified by the use of forward-looking terminology such as "may", "will", "expect", "believe", "estimate", "plan", "could", "should", "would", "outlook", "forecast", "anticipate", "foresee", "continue" or the negative of these terms or variations of them or similar terminology.
Implicit in forward-looking statements in respect of sales, Adjusted
EBITDA and Adjusted EBITDAR, are certain current assumptions, including,
among others, the Company achieving additional savings from operational
initiatives, the Company's anticipated total capital investments, net of
landlord incentives, between
Although HBC believes that the forward-looking statements in this news
release are based on information and assumptions that are current,
reasonable and complete, these statements are by their nature subject to
a number of factors that could cause actual results to differ materially
from management's expectations and plans as set forth in such
forward-looking statements for a variety of reasons. Some of the factors
- many of which are beyond the Company's control and the effects of
which can be difficult to predict - include, among others: ability to
execute retailing growth strategies, ability to continue comparable
sales growth, changing consumer preferences, marketing and advertising
program success, damage to brands, dependence on vendors, ability to
realize synergies and growth from strategic acquisitions, ability to
make successful acquisitions and investments, successful inventory
management, loss or disruption in centralized distribution centres,
ability to upgrade and maintain our information systems to support the
organization and protect against cyber-security threats, privacy breach,
risks relating to our size and scale, loss of key personnel, ability to
attract and retain qualified employees, deterioration in labour
relations, ability to maintain pension plan surplus, funding requirement
in Saks' pension plan, funding requirement of the HBC Europe pension
plans, limits on insurance policies, loss of intellectual property
rights, insolvency risk of parties which we do business with or their
unwillingness to perform their obligations, exposure to changes in the
real estate market, successful operation of the Joint Ventures to allow
the Company to realize the anticipated benefits, loss of flexibility
with respect to properties in the Joint Ventures, exposure to
environmental liabilities, liabilities associated with Target
Corporation and its affiliates and other third parties who have assumed
leases from the Company, changes in demand for current real estate
assets, increased competition, change in spending of consumers including
the impact of unfavourable or unstable political conditions and
terrorism, international operational risks, fluctuations in the
HBC cautions that the foregoing list of important factors and
assumptions is not exhaustive and other factors could also adversely
affect its results. For more information on the risks, uncertainties and
assumptions that could cause HBC's actual results to differ from current
expectations, please refer to the "Risk Factors" section of HBC's annual
information form dated
The forward-looking statements contained in this news release describe HBC's expectations at the date of this news release and, accordingly, are subject to change after such date. Except as may be required by applicable Canadian securities laws, HBC does not undertake any obligation to update or revise any forward-looking statements contained in this news release, whether as a result of new information, future events or otherwise. Readers are cautioned not to place undue reliance on these forward-looking statements.
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