The flagship Hudson's Bay Company store is shown in Toronto on January 27, 2014. Hudson's Bay Co. reported its fourth-quarter revenue slipped to $2.89 billion, down from $3.05 billion a year earlier when the quarter included an extra week.THE CANADIAN PRESS/Nathan Denette

TORONTO - A shift to lower-priced merchandise across the Hudson's Bay retail chain last year was a fixable mistake that resulted in disappointing revenue levels in the fourth quarter, the chief executive of Hudson's Bay Co. told analysts Wednesday.

Helena Foulkes, a former CVS Health executive who joined HBC as chief executive in February 2018, said revenue from Hudson's Bay stores was disappointing due to the adoption of lower-priced merchandise.

The strategy was successful in attracting former Sears Canada customers shortly after the rival chain closed, Foulkes said, but "I think we took it too far."

"The good news about all this is that it's fixable," Foulkes said.

Hudson's Bay has a new chief merchandise officer who will have a better product mix ready for stores later this year, she said.

Foulkes also said the overall company — which includes the Saks Fifth Avenue luxury brand, Lord & Taylor and Saks Off Fifth — "is a stronger and more capable company than a year ago."

HBC's fourth-quarter revenue from continuing operations fell by $167 million to $2.89 billion, compared with $3.05 billion a year earlier, due to a number of factors including a 14th week of sales in the year-earlier period.

Excluding the extra week, the Toronto-based company's overall revenue was down $47 million or 1.6 per cent.

Analysts had estimated $3.22 billion of revenue for the quarter, about 10 per cent more than reported, according to Thomson Reuters Eikon.

However, HBC did better than analyst estimates in terms of adjusted profit. It reported 41 cents per share of normalized net income from continuing operations for the quarter, compared with the estimate of 25 cents per share.

Foulkes said although some market watchers have been concerned about consumer spending capacity, "our belief is that our own merchandise choices created this shortfall."

"We've been addressing this challenge in 2019 and our fall assortment will reflect changes in our buying strategy."

Among other things, Foulkes said profitability improved across its remaining divisions compared with the prior year.

"We will continue to improve our cost structure while making strategic investments in technology, marketing, digital and our stores," Foulkes said.

Overall comparable store sales for the quarter were down 1.4 per cent, while they increased 3.9 per at HBC's Saks Fifth Avenue stores and fell 5.2 per cent at its Hudson's Bay, Lord & Taylor and Home Outfitters stores. Saks Off Fifth comparable sales declined 2.1 per cent.

Net profit including discontinued operations was $286 million or $1.20 per share for the quarter, up from $84 million or 39 cents per share in the same quarter last year.

However, excluding discontinued operations, HBC posted a loss of $226 million or 95 cents per share, compared with a year-earlier profit of $180 million or 84 cents per share a year ago.

HBC's discontinued operations are primarily its former European arm, which includes the Galeria Kaufhof department stores, since announcing a joint venture with Signa Retail Holdings in September.

Normalized net income from continuing operations, a measure of profitability used by HBC, improved to $98 million or 41 cents per share from $13 million or six cents per share.

On the Toronto Stock Exchange, HBC shares gained 35 cents, or 4.64 per cent, at $7.89 in morning trading.

Companies in this story: (TSX:HBC)

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