Hudson’s Bay Company Reports First Quarter 2016 Financial Results

Hudson's Bay Company (“HBC” or the “Company”) (TSX: HBC) today announced its first quarter financial results for the 13 week period ended April 30, 2016. Unless otherwise indicated, all amounts are expressed in Canadian dollars. Certain metrics, including those expressed on an adjusted, normalized, comparable and/or constant currency basis, are non-IFRS financial measures (for more information please refer to the “Supplemental Information” section of this press release and the reconciliation tables further below).

“With banners across multiple geographies and consumer segments, we believe HBC's diversified retail platform positions us well for future sales and earnings growth in all of our businesses. In the first quarter we continued to generate sales growth as a result of the GALERIA and Gilt acquisitions and experienced continued strength at our Canadian operations.” stated Richard Baker, HBC’s Governor and Executive Chairman. “Additionally, HBC’s real estate portfolio, which is less impacted by short-term trends in retail, continues to provide the Company with opportunities to create value. In preparation for our planned flagship Saks Fifth Avenue store in New Jersey at American Dream, we agreed to modify our Saks Fifth Avenue lease at the Short Hills mall in New Jersey. Additionally, we made modifications to our Saks Fifth Avenue lease in Honolulu, Hawaii. These two lease modifications generated proceeds of $99 million for the Company.”

Jerry Storch, HBC’s Chief Executive Officer, added “In the face of a challenging retail environment we continue to execute our strategy and are excited about growth prospects for our businesses. Our newly opened Saks stores in Canada are off to an impressive start, while our overall results at Saks were impacted by the current pressures in luxury retail. The integration of HBC Europe and Gilt are proceeding well and we are highly focused on continuing to leverage our scale to reduce expenses and increase efficiencies. Given the seasonal nature of our business, with sales and earnings weighted toward the second half of the year, the flat net rent expenses associated with our Joint Ventures have a more significant impact on the early part of the year. As we look toward the rest of the fiscal year, we expect that our ongoing efforts to become more efficient, in conjunction with our all-channel strategy of combining exciting retail destinations with a best in class e-commerce platform, will drive both sales and earnings growth."

Value Creating Initiatives

HBC continues its relentless focus on improving efficiencies, reducing expenses and optimizing its real estate portfolio:

North American realignment

In the third quarter of Fiscal 2015, HBC announced an initiative to reduce SG&A expenses by $75 million through its North American operations realignment. The Company currently expects to meet or exceed its target of $75 million in annualized savings, and realized approximately $28 million in savings during the first quarter of Fiscal 2016. One time charges of approximately $6 million were incurred during the quarter as a result of this initiative.

Voluntary restructuring program and back office efficiency initiatives

In addition to the above, the Company recently began a voluntary restructuring program in the merchandising department of its European operations to ensure the most efficient processes are in place to support the growth of HBC Europe. In North America, HBC has also outsourced IT systems maintenance positions. The Company expects to record total charges of approximately $21 million related to these two initiatives, of which $12 million was recorded in the first quarter of Fiscal 2016. Annualized savings as a result of these initiatives are expected to be approximately $16 million, which is in addition to the $75 million in annualized savings related to the North American operations realignment initiative. The Company is currently evaluating other cost savings opportunities as it continues its focus on profitable growth.

Distribution center automation

The Company has made significant progress on the implementation of best in class robotic technology in its Scarborough, Ontario distribution center. The technology is expected to reduce the fulfillment costs of online orders significantly while also improving the speed at which these orders are processed. In addition, the Company announced a new state-of-the-art, all-channel fulfillment distribution center in Pottsville, Pennsylvania. This distribution center is expected to open during the second quarter of Fiscal 2016, eventually utilizing the same highly innovative robotic technology.

Real estate assets

The Company continues to demonstrate the value of its real estate portfolio. Subsequent to the end of the first quarter, HBC entered into an agreement to modify its leasehold interests in the Saks Fifth Avenue stores at Short Hills Mall in New Jersey and in Honolulu, Hawaii in exchange for total proceeds of $99 million(1). The Company expects to receive these proceeds during the third quarter of Fiscal 2016.

(1) Assumes a USD:CAD exchange rate of 1.30

First Quarter Summary

All comparative figures below are for the 13-week period ended April 30, 2016 compared to the 13-week period ended May 2, 2015. DSG refers, collectively, to the Lord & Taylor, Hudson’s Bay and Home Outfitters banners. HBC Europe refers, collectively, to GALERIA Kaufhof, Galeria INNO and Sportarena. HBC Off Price refers, collectively, to the Saks Fifth Avenue OFF 5TH (“OFF 5TH”), Find @ Lord & Taylor and Gilt banners.

Consolidated retail sales were $3,303 million, an increase of 59.4% from the prior year, primarily as a result of the addition of HBC Europe and Gilt as well as an increase in comparable sales of 4.4%. On a constant currency basis, comparable sales grew 2.3% at DSG and 0.7% at HBC Europe, offset by declines of 4.1% at HBC Off Price and 5.7% at Saks Fifth Avenue, resulting in a total comparable sales decline of 1.0%. Total digital sales increased by 86.2% from the prior year, with comparable digital sales increasing by 7.4% on a constant currency basis.

During the quarter, HBC completed the implementation of its revised pricing strategy at OFF 5TH. This focus on offering great value on an everyday basis resulted in a substantial reduction in overall promotional activity, and drove the majority of the decline in HBC Off Price's comparable sales results. As a result of this revised pricing strategy, realized gross margins at OFF 5TH were significantly higher compared to the prior year, leading, as planned, to an overall improvement in profitability at OFF 5TH.

For HBC overall, gross profit rate as a percentage of consolidated retail sales was 41.9%, an increase of 70 basis points from the prior year. This increase was primarily related to the addition of HBC Europe, which operates at relatively higher gross margin and SG&A rates as well as increased margin at OFF 5TH.

SG&A expenses were $1,395 million compared to $780 million in the prior year, primarily as a result of the addition of HBC Europe. Normalized SG&A expenses were $1,300 million or 39.4% of consolidated retail sales, compared to 36.2% in the prior year. This rate increase was primarily driven by additional net rent expense incurred in connection with the Joint Ventures and the addition of HBC Europe. GALERIA Kaufhof and Galeria INNO operate with a significantly higher SG&A rate, which is offset by higher realized gross margins.

Adjusted EBITDAR was $251 million, an increase of 44.1% compared to $174 million in the prior year, primarily as a result of the addition of HBC Europe.

Following the creation of the Joint Ventures, management believes that Adjusted EBITDAR best reflects the performance of the retail business. This metric provides the most consistent view of the Company’s retail performance, as it is not impacted by, among other things, HBC’s ownership levels of the Joint Ventures and the resulting impact on net rents. In the first quarter, which is typically the Company's slowest quarter of the year, the Joint Ventures had a $61 million impact on Adjusted EBITDA, and a similarly large impact on Normalized Net Income. These Joint Venture expenses are essentially flat over the course of the year, while the retail business is seasonal, with sales and earnings weighted towards the second half of the fiscal year. While management believes that Adjusted EBITDA is less useful when evaluating the performance of the retail business, the Company will continue to disclose Adjusted EBITDA.

Finance costs were $45 million compared to $47 million in the prior year. Cash interest costs were $49 million, a $12 million increase over the prior year. The majority of this increase is related to timing of the monthly interest payments associated with the Company's mortgage on its Saks Fifth Avenue flagship property in Manhattan. A total of four monthly interest payments were made during the current quarter, compared to three in the prior year.

Net loss was $97 million compared to $49 million in the prior year. Normalized Net Loss was $91 million compared to $28 million in the prior year, primarily as a result of the creation of the Joint Ventures and the additional net rents associated with these entities, which are spread evenly over the course of the year. Normalized items include, among other things, the net-of-tax gain recognized on the sale of a portion of the Company’s equity in HBS Global Properties of $28 million in the first quarter.

Inventory

Inventory at the end of the first quarter increased by $981 million compared to the prior year. The addition of HBC Europe and foreign exchange rate fluctuations accounted for the majority of the increase. The remainder was driven by a marginal increase in comparable store inventory and additional inventory related to new store openings.

Store Network

During the first quarter, the Company opened its first Saks Fifth Avenue stores in Canada. The first store opened at the Toronto Eaton Centre on February 18, 2016, followed by the second store at the Sherway Gardens Mall in Etobicoke, Ontario, on February 25, 2016.

The Company also opened its first four OFF 5TH stores in Canada, located at: Vaughan Mills, in Vaughan, Ontario; Toronto Premium Outlets in Halton Hills, Ontario; Outlet Collections at Niagara in Niagara-on-the-Lake, Ontario and Tanger Outlets in Ottawa, Ontario.

In addition the Company opened eight OFF 5TH stores in the U.S., which are located in Tucson, Arizona; Atlanta, Georgia; Chicago, Illinois; Farmington Hills, Michigan; Minneapolis, Minnesota; Shrewsbury, New Jersey; New York, New York and Austin, Texas. The Company closed two OFF 5TH stores in Tucson, Arizona and Pearl, Mississippi, two Home Outfitters stores in Pickering, Ontario and Vaughan, Ontario and one GALERIA Kaufhof store in Heilbronn, Germany.

(1) Hudson’s Bay Company operates one Find @ Lord & Taylor store, one Hudson’s Bay outlet, two Zellers clearance centres and two Lord & Taylor outlets that are excluded from the store count and gross leasable area.

Capital Expenditure

Capital expenditures, net of landlord incentives, during the first quarter totaled $153 million, compared to $54 million in the prior year. HBC's initiatives during the quarter included the opening of the first two Saks Fifth Avenue stores in Canada, and a total of twelve OFF 5TH stores in North America. Additionally, the Company made significant progress on the remodeling of the 3rd and 4th floors of the Saks Fifth Avenue flagship in Manhattan, as well as construction of the new Brookfield Place and Hawaii Saks Fifth Avenue stores scheduled to open later this year. Work also began on the installation of automated fulfillment technology at the Company's distribution center in Toronto, which the Company expects will significantly increase the efficiency with which online orders are processed.

Debt Summary

As at April 30 2016, the Company had the following outstanding loans and borrowings on its balance sheet:

Dividend

The Company also announced today that its Board of Directors has approved a quarterly dividend to be paid on July 15, 2016, to shareholders of record at the close of business on June 30, 2015. The dividend is in the amount of $0.05 per Common Share and is designated as an “eligible dividend” for Canadian tax purposes.

Outlook

Management is confirming its Sales, Adjusted EBITDAR and EBITDA outlook for Fiscal 2016. Management currently expects Adjusted EBITDA growth compared to last year to be weighted toward the second half of the fiscal year due to net rent expense associated with the Company’s Joint Ventures, which is spread evenly over the course of the year. Adjusted EBITDAR, which management believes is more reflective of the underlying performance of the retail business, does not include these net rent expenses. The Company currently expects the following results for Fiscal 2016, which are fully qualified by the “Forward-Looking Statements” section of this press release.

This outlook assumes overall low single digit comparable sales growth, calculated on a constant currency basis.

The Company currently expects that in Fiscal 2016 it will make higher than normal investments in growth initiatives, with total capital investments, net of landlord incentives, expected to be between $750 million and $850 million, which is approximately 4.9%-5.5% of the midpoint of the Sales outlook. Included in these amounts is the anticipated capital spend associated with the Company’s recent acquisitions: HBC Europe and Gilt. Capital expenditure related to growth initiatives is expected to be approximately 70% of the total amount, with the remaining 30% representing maintenance capital expenditures.

The above outlook reflects exchange rate assumptions of USD:CAD = 1:1.32 & EUR:CAD = 1:1.50. Any variation in these foreign exchange rate assumptions could impact the above outlook.

Conference Call to Discuss Results

Richard Baker, HBC’s Governor and Executive Chairman, Jerry Storch, HBC’s Chief Executive Officer and Paul Beesley, HBC’s Chief Financial Officer, will discuss the first quarter financial results and other matters during a conference call on June 10, 2016 at 8:30 am EST.

The conference call will be accessible by calling the participant operator assisted toll-free dial-in number (800) 535-7056 or international dial-in number (253) 237-1145. A live webcast of the conference call will be accessible on HBC's website at: http://investor.hbc.com/events.cfm. The audio replay also will be available via this link.

Consolidated Financial Statements and Management's Discussion and Analysis

The Company's unaudited interim condensed consolidated financial statements for the 13 weeks ended April 30, 2016 and Management's Discussion and Analysis thereon are available under the Company's profile on SEDAR at www.sedar.com.

Consolidated Financial Information

The following tables set out summary consolidated financial information and supplemental information for the periods indicated. The summary financial information set out below has been derived from unaudited interim condensed consolidated financial statements, prepared in accordance with International Accounting Standard 34, Interim Financial Reporting, for the thirteen week period ended April 30, 2016 . The unaudited financial information presented has been prepared on a basis consistent with our audited consolidated financial statements for Fiscal 2015. In the opinion of our management, such unaudited financial data reflects all adjustments, consisting of normal and recurring adjustments, necessary for a fair presentation of the results for those periods. The results of operations for interim periods are not necessarily indicative of the results to be expected for a full year or any future period.

CONDENSED CONSOLIDATED STATEMENTS OF LOSS

(millions of Canadian dollars, except per share amounts)

(unaudited)

The following table shows additional summary supplemental information for the periods indicated:

(1) During the fourth quarter of Fiscal 2015, the Company changed its policy with respect to the valuation of inventory from the retail method to the cost method and its method of calculating the adjustment required that inventory be valued at its net realizable value. Due to this change, certain previously reported figures have been restated. For more information, please refer to Note 9 of the Company’s unaudited interim condensed consolidated financial statements for the 13 week period ended April 30, 2016
(2) For a reconciliation of the non-IFRS measure to the corresponding reported measure, see tables in “Supplemental Information” in this press release and in the MD&A for the first quarter.

CONDENSED CONSOLIDATED BALANCE SHEETS

As at April 30, 2016 and May 2, 2015

(millions of Canadian dollars)

(unaudited)

(1) During the fourth quarter of Fiscal 2015, the Company changed its policy with respect to the valuation of inventory from the retail method to the cost method and its method of calculating the adjustment required that inventory be valued at its net realizable value. Due to this change, certain previously reported figures have been restated. For more information, please refer to Note 9 of the Company’s unaudited interim condensed consolidated financial statements for the 13 week period ended April 30, 2016

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

For the thirteen weeks ended April 30, 2016 and May 2, 2015

(millions of Canadian dollars)

(unaudited)

(1) During the fourth quarter of Fiscal 2015, the Company changed its policy with respect to the valuation of inventory from the retail method to the cost method and its method of calculating the adjustment required that inventory be valued at its net realizable value. Due to this change, certain previously reported figures have been restated. For more information, please refer to Note 9 of the Company’s unaudited interim condensed consolidated financial statements for the 13 week period ended April 30, 2016

Supplemental Information

The following table shows the reconciliation of Net Loss to EBITDA, Adjusted EBITDAR as well as Adjusted EBITDA:

Notes:
(1) During the fourth quarter of Fiscal 2015, the Company changed its policy with respect to the valuation of inventory from the retail method to the cost method and its method of calculating the adjustment required that inventory be valued at its net realizable value. Due to this change, certain previously reported figures have been restated. For more information, please refer to Note 9 of the Company’s unaudited interim condensed consolidated financial statements for the 13 week period ended April 30, 2016
(2) Represents the gain realized as a result of the changes in ownership related to the Company’s investment in the Joint Ventures.
(3) Includes acquisition and integration expenses related to the acquisitions of Saks, Kaufhof and Gilt.
(4) Represents the Company’s expected share of costs associated with sub lease guarantee defaults confirmed in the thirteen week period ended April 30, 2016.
(5) Represents the impact of unrealized (gains) losses related to the translation of U.S. dollar and Euro denominated monetary asset and liability balances related to the overall tax and legal structure of the Company.
(6) Restructuring includes preliminary expected costs associated with programs initiated by HBC Europe to optimize operating efficiencies and additional costs associated with the North American realignment program announced in the third quarter of Fiscal 2015.
(7) Represents additional non-recurring credit card chargeback expenses attributed to industry legal liability changes effective October 2015.
(8) Primarily represents duplicative costs associated with the U.S. office consolidation.
(9) Rent expense to the Joint Ventures net of reclassification of rental income related to the Company’s ownership interest in the Joint Ventures (see note 10 to the unaudited interim condensed consolidated financial statements for the thirteen week period ended April 30, 2016).

The following table presents the reconciliation of Net Loss to Normalized Net Loss:

Notes:
(1) During the fourth quarter of Fiscal 2015, the Company changed its policy with respect to the valuation of inventory from the retail method to the cost method and its method of calculating the adjustment required that inventory be valued at its net realizable value. Due to this change, certain previously reported figures have been restated. For more information, please refer to Note 9 of the Company’s unaudited interim condensed consolidated financial statements for the 13 week period ended April 30, 2016
(2) Net of income tax as appropriate.
(3) Includes acquisition and integration expenses related to the acquisitions of Saks, Kaufhof and Gilt. In addition, includes the recognition of non-cash finance income (costs) related to Common Share purchase warrants of $8 million for the thirteen week period ended April 30, 2016 (May 2, 2015: $(8) million) .
(4) Restructuring includes preliminary expected costs associated with programs initiated by HBC Europe to optimize operating efficiencies and additional costs associated with the North American realignment program announced in the third quarter of Fiscal 2015.
(5) Represents the impact of unrealized (gains) losses related to the translation of U.S. dollar and Euro denominated monetary asset and liability balances related to the overall tax and legal structure of the Company.
(6) Relates to the Company’s share of unrealized foreign exchange gains incurred by the HBS Joint Venture on translation of a Euro denominated monetary liability related to the tax and legal structure of the joint venture.
(7) Represents the Company’s expected share of costs associated with sub lease guarantee defaults confirmed in the thirteen week period ended April 30, 2016
(8) Represents additional non-recurring credit card chargeback expenses attributed to industry legal liability changes effective October 2015.
(9) Primarily represents duplicative costs associated with the U.S. office consolidation.

Non-IFRS Measures

EBITDA is a non-IFRS measure that we use to assess our operating performance. EBITDA is defined as Net Loss before finance costs, income tax benefit, share of net loss in 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. Normalized Net Loss is defined as Net Loss adjusted to exclude: (i) business and organization restructuring/realignment charges; (ii) merger/acquisition costs and expenses; (iii) normalizing adjustments, including those related to purchase accounting, if any, related to transactions that are not associated with day-to-day operations. Normalized SG&A is defined as SG&A adjusted to exclude: (i) business and organization restructuring/realignment charges; (ii) merger/acquisition costs and expenses; (iii) normalizing adjustments, if any, related to transactions that are not associated with day-to-day operations. For further clarity, please refer to the detailed tables reconciling Net Loss to Adjusted EBITDA and to Adjusted EBITDAR, reported SG&A to Normalized SG&A and Net Loss to Normalized Net Loss.

We have included EBITDA, Adjusted EBITDA, Adjusted EBITDAR, Normalized Net Loss and Normalized SG&A to provide investors and others with supplemental measures of our operating performance. We believe EBITDA, Adjusted EBITDA, Adjusted EBITDAR, Normalized Net Loss and Normalized SG&A are important supplemental measures of operating performance because they eliminate items that have less bearing on our operating performance and thus highlight trends in our core business that may not otherwise be apparent when relying solely on IFRS financial measures. We also believe that securities analysts, investors, rating agencies and other interested parties frequently use EBITDA, Adjusted EBITDA, Adjusted EBITDAR, Normalized Net Loss and Normalized SG&A in the evaluation of issuers, many of which present similar metrics when reporting their results. Our management also uses Adjusted EBITDAR in order to facilitate retail business operating performance comparisons from period to period, prepare annual operating budgets and assess our ability to meet our 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, Adjusted EBITDAR, Normalized Net Loss or Normalized SG&A differently than we do, 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 store sales and comparable digital sales. The Company calculates comparable store 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 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 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.

For further discussion of the Company's financial and operating results, please refer to Management's Discussion and Analysis of Financial Condition and Results of Operations for the 13 week period ended April 30, 2016 (the “MD&A”).

About Hudson’s Bay Company

Hudson’s Bay Company is one of the fastest-growing department store retailers in the world, based on its successful formula of driving the performance of high quality stores and their all-channel offerings, unlocking the value of real estate holdings and growing through acquisitions. Founded in 1670, HBC is the oldest company in North America. HBC’s portfolio today includes ten banners, in formats ranging from luxury to better department stores to off price fashion shopping destinations, with more than 460 stores and 66,000 employees around the world.

In North America, HBC’s leading banners include Hudson’s Bay, Lord & Taylor, Saks Fifth Avenue, Gilt, and OFF 5TH, along with Find @ Lord & Taylor and Home Outfitters. In Europe, its banners include GALERIA Kaufhof, the largest department store group in Germany, Belgium’s only department store group Galeria INNO, as well as Sportarena.

HBC has significant investments in real estate joint ventures. It has partnered with Simon Property Group Inc. in the HBS Global Properties Joint Venture, which owns properties in the United States and Germany. In Canada, it has partnered with RioCan Real Estate Investment Trust in the RioCan-HBC Joint Venture.

Forward-Looking Statements

Certain statements made in this news release, including, but not limited to, the Company’s expectations for sales and earnings growth in the second half of Fiscal 2016, the benefits that are expected to result from the acquisitions of HBC Europe and Gilt, the impact on the Company’s reported gross profit and expense margins as a result of the acquisition of HBC Europe, the benefits that are expected to result from the North American operations realignment initiative and additional cost saving activities, expected expenditures on investments in growth initiatives, the Company’s prospects for future growth opportunities, including targeting acquisitions, anticipated store openings, the Company’s growth strategies of improving retail operations and unlocking the value of real estate, and the Company’s outlook in respect of Sales, Adjusted EBITDAR, Adjusted EBITDA and capital investments (net of landlord incentives) for Fiscal 2016, and other statements that are not historical facts, are forward-looking. 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, Adjusted EBITDAR and capital investments (net of landlord incentives) for Fiscal 2016, are certain current assumptions, including, among others, the Company achieving overall low single digit comparable store sales growth on a constant currency basis in Fiscal 2016, the Company realizing annualized cost savings and synergies during Fiscal 2016 totaling $75 million from the previously announced North American operations realignment program, the Company achieving an additional $16 million in annualized savings from operational initiatives, the Company opening new stores in North America, the Company maintaining a significant ownership interest in the HBS Joint Venture and the RioCan-HBC JV, and assumptions regarding currency exchange rates for Fiscal 2016. Specifically, we have assumed the following exchange rates for Fiscal 2016: USD:CAD = 1:1.32 and EUR:CAD = 1:1.50. These current assumptions, although considered reasonable by the Company at the time of preparation, may prove to be incorrect. Readers are cautioned that actual future operating results and economic performance of the Company, including with respect to our anticipated Sales, Adjusted EBITDA, Adjusted EBITDAR and capital investments (net of landlord incentives) for Fiscal 2016, are subject to a number of risks and uncertainties, including, among others described below, general economic, geo-political, market and business conditions, changes in foreign currency rates from those assumed, the risk that the Company may not achieve comparable store sales growth on a constant currency basis and the risk that the Company may not achieve the contemplated cost savings and synergies as described above, and could differ materially from what is currently expected as set out above.

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 HBC’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 store sales growth, changing consumer preferences, ability to realize synergies and growth from strategic acquisitions, ability to make successful acquisitions and investments, successful inventory management, ability to upgrade and maintain our information systems to support the organization and protect against cyber-security threats, privacy breach, loss of key personnel, ability to retain key personnel of HBC Europe and Gilt, ability to attract and retain qualified employees, 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, 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, fluctuations in the U.S. dollar, Canadian dollar, Euro and other foreign currencies, increase in raw material costs, extreme weather conditions or natural disasters, ability to manage indebtedness and cash flow, risks related with increasing indebtedness, restrictions of existing credit facilities reducing flexibility, ability to maintain adequate financial processes and controls, ability to maintain dividends, developments in the credit card and financial services industries, and other risks inherent to the Company’s business and/or factors beyond the Company’s control which could have a material adverse effect on the Company.

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 April 28, 2016, as well as HBC’s other public filings, available at www.sedar.com and at www.hbc.com.

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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