Hudson's Bay Update (03.17.2016)

Hudson’s Bay (HBC) has not done what we’ve wanted from the day of purchase, but I want to reiterate the thesis behind buying it, what we see for upside, and how much we like it.

 

Ultimately, the entire sector is down from the time we made our purchase. In comparison to its competitors, HBC is handily beating laggard, Sears, who’s circling the drain, but also barely behind the sector leader, Macy’s.

(Source: Bloomberg)

 

Hudson’s Bay is the perfect story of management being on the same side as investors. Richard Baker, the Chairman and Governor of the company, directly owns 10mil shares and another 10mil in a company he controls. Furthermore, his family controls nearly 10% of all shares outstanding – we love this alignment with shareholders.

(Source: Bloomberg)

 

We have a company that grows both organically and via acquisition, with a global roll-up strategy of department stores.

 

(Source: http://investor.hbc.com)

 

We then have a very strong backstop of value within the HBC real estate; the company has given a modelled number of nearly $40 per share of real estate value. This gives the growing retail company a value of less than $15 when the real estate is taken out. We obviously aren’t happy with short term stock performance, but the company has a good plan and is moving forward accordingly.

(Source: http://investor.hbc.com)

 

We obviously would prefer to have the lowest cost on our stocks at all times, but we do not see a long-term threat to the performance of Hudson’s Bay as a company. We expect them to continue their growth both via acquisition and organically. We love that they have diversified out of Canada into the USA and Europe.  As always, we watch closely and look forward to their next earnings report in April, which we expect to see continued revenue and earnings growth.

 

Have a terrific day. As always, any questions give us a call.

 

Chris

416-572-5429

 

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