Online sales grew by 69.6% for Hudson’s Bay overall in 2016, and the retailer's off-price units prompt an $86.6 million writedown.

Integration issues between Saks Off 5th and Gilt Groupe caused Canada-based Hudson’s Bay Co. to take a C$116 million ($86.6 million) goodwill impairment charge, or a writedown, on its off-price business during the fourth quarter.

Hudson’s Bay, No. 75 in the Internet Retailer 2016 Top 500 Guide, reported online sales grew by 52.8% year over year during the fiscal fourth quarter ended Jan. 28. For the full year, online sales grew 69.6% compared with 2015. The retail group does not break out online sales figures in its quarterly earnings reports.

On the retail group’s Q4 2016 earnings call, CEO Jerry Storch addressed the company’s decision to take a significant writedown on its off-price business, which includes Gilt and Saks Off 5th. Hudson’s Bay acquired Gilt Groupe for $250 million in cash in January 2016, and Storch said it’s taking longer than expected to integrate Gilt with Saks Off 5th on the technology and personnel sides of the business.

“It’s not that we don’t think it’s going to work, or that we aren’t still very excited about it,” he told analysts on the call, according to a transcript from Seeking Alpha. “One of the biggest changes is being able to put the two websites, and Gilt, on the same platform. That will enable complete merchandising integration, which is really critical for capturing many of the benefits we talked about when we did the acquisition.”

One of the main benefits includes Gilt’s mobile and personalization capabilities as well as the talent of the people who work at Gilt.


“The first big step will happen this fall, when the entire assortment will be available on Gilt,” he said. “We thought we could do it faster.”

Despite the big writedown on its off-price business, Storch says Gilt in particular will be key to the retail group’s future success.

“The acquisition of Gilt continues to provide us with best-in-class digital capabilities and a strong online presence with the millennial audience,” he said.

For the fiscal  fourth quarter ended Jan. 28, Hudson’s Bay reported:

  • Total sales of C$4.600 billion ($3.434 billion), up 2.5% from C$4.486 billion ($3.349 billion) during the same period the previous year.
  • A net loss of C$152 million ($113.5 million) compared with a C$370 million ($276.2 million) profit.

For fiscal 2016, the retailer reported:

  • Total sales of C$14.455 billion ($10.792 billion), up 29.5% from C$11.162 billion ($8.334 billion) in fiscal 2015.
  • A net loss of C$516.0 million ($385.2 million), compared with a C$387.0 million ($288.9 million) profit.