Hudson’s Bay Company Reports Holiday Sales Results and Provides Update on Fiscal 2016 Outlook

TORONTO & NEW YORK–(BUSINESS WIRE)–Hudson’s Bay Company (“HBC” or the “Company”) (TSX:HBC)
today announced its comparable sales results for the nine week period
ending December 31, 2016, and provided an update on its financial
outlook for Fiscal 2016.

Jerry Storch, Chief Executive Officer, HBC commented, “Our holiday sales
trend improved considerably from what we experienced in the third
quarter. On a constant currency basis, the comparable sales trend
improved for the Company overall and across every banner, led by strong
digital sales growth of 21.7% at our department store banners. However,
the sales improvement that we experienced was not strong enough to
achieve the results we had expected. Also, while we were pleased with
our performance at Hudson’s Bay in Canada, the retail environment has
remained challenging in the U.S. and Europe and the significant
promotional activity during the holiday period had a negative impact on
our margins. This margin pressure was compounded by a declining value of
the Euro compared with the Canadian dollar which impacts our translated
earnings from HBC Europe. As we head into the new fiscal year, we are
focused on continuing to delight our customers with exclusive product
offerings and custom all-channel shopping experiences, and by creating
exciting retail destinations to increase foot traffic in our stores. The
retail environment is clearly changing, and we continue to work
diligently across all of our banners to adapt rapidly. This involves
evaluating all opportunities to increase the profitability of HBC, and
we expect to provide further details on this process in the coming
months.”

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.

Comparable Sales

For the nine week period beginning October 30, 2016 and ending December
31, 2016⁽¹⁾

• On a constant currency basis, consolidated comparable sales decrease
  of 0.7%
  • DSG (Hudson’s Bay, Lord & Taylor and Home Outfitters) comparable
    sales increase of 1.2%
  • Saks Fifth Avenue comparable sales decrease of 0.5%
  • HBC Off Price (Saks OFF 5TH and Gilt) comparable sales decrease of
    5.2%
  • HBC Europe (GALERIA Kaufhof, Galeria INNO and Sportarena)
    comparable sales decrease of 0.6%

  ^{(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.}

  Outlook

  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
  Sales		$14.4 to $14.6 billion
  Adjusted EBITDAR		$1,340 to $1,390 million
  Adjusted EBITDA		$615 to $665 million

  The Company now expects total capital investments, net of landlord
  incentives, to be between $660 million and $710 million, which is
  approximately 4.5%-4.9% of the midpoint of the Sales outlook. Included
  in these amounts is the capital expenditure associated with the recent
  acquisitions of the GALERIA Kaufhof, Galeria INNO, Sportarena and Gilt
  banners.

  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.}

  Non-IFRS Measures

  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.

  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 growing
  through acquisitions, driving the performance of high quality stores and
  their all-channel offerings and unlocking the value of real estate
  holdings. Founded in 1670, HBC is the oldest company in North America.
  HBC’s portfolio today includes ten banners, in formats ranging from
  luxury to premium department stores to off price fashion shopping
  destinations, with more than 480 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 Saks OFF 5TH, along with 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 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 $660 million and $710 million, the Company
  opening new stores in North America, the Company maintaining a
  significant ownership interest in the HBS Joint Venture and the
  RioCan-HBC Joint Venture, and assumptions regarding the overall retail
  environment and 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 = 1:1.45. 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 and Adjusted
  EBITDAR, 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 of unseasonal weather patterns and the risk that the
  Company may not achieve the contemplated cost savings and synergies, 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 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 U.S.
  dollar, Canadian dollar, Euro and other foreign currencies, increase in
  raw material costs, seasonality of business, 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, ability
  of a small number of shareholders to influence the business,
  uncontrollable sale of the Company’s Common Shares by significant
  shareholders could affect share price, constating documents discouraging
  favorable takeover attempts, increase in regulatory liability, increase
  in produce liability or recalls, increase in litigation, developments in
  the credit card and financial services industries, changes in accounting
  standards 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.

  Contacts

  Hudson’s Bay Company
  INVESTOR RELATIONS:
  Kathleen de
  Guzman, 646-802-7070
  kathleen.deguzman@hbc.com
  or
  Elliot
  Grundmanis, 646-802-2469
  elliot.grundmanis@hbc.com
  or
  MEDIA
  CONTACTS:
  Andrew Blecher, 646-802-4030
  andrew.blecher@hbc.com