Hudson

1
Hudsons Bay CompanyFirst Quarter ResultsMay
23, 2001George Heller, President Chief
Executive OfficerMichael Rousseau, EVP Chief
Financial OfficerThomas Haig, EVP Chief
Operating Officer, ZellersMarc Chouinard, EVP
Chief Operating Officer, the BayRob Moore, VP
Corporate Communications, HBC
2
Overview

• Revenue decline of 0.8
• unseasonable weather - Eastern Canada
• cautious consumer increased retail space
• E.P.S. at (0.20) vs. (0.12) last year
• additional closed store costs (0.04) impact
• Key strategic initiatives executed
• launch of HBC Rewards
• announced growth plans for Home Outfitters
• key IT programs on target

3
Financial Review

• Total Sales declined 2.0
• Comp. stores decline of 5.2

• EBIT of (6 million) vs. 9.6 last year

550.6
9.6
EBIT
Sales
539.8
497.9
M
M
(2.3)
(6.0)
1999
2000
2001
1999
2000
2001
4
General Review

• 1st Quarter
• Re-introduction of approximately 3.5 million
  selling sq. ft. of department store retail space
  accounted for 1/3 of comp. store decline.
• High margin fashion declined at a higher rate
  than hardlines, putting pressure on gross
  margins.
• Cost structure and inventory management well
  controlled
• inventory cost slightly above last year level
  reflecting investment in Big Ticket and Home
  Outfitters
• several cost reductions/deferment programs
  initiated to maintain cost structure at approx.
  same level as last year

5
General Review

• Looking Forward
• Improvement in comp stores sales trend in 2nd
  quarter adjusted for new store openings May/00.
• April results indicated a slightly stronger sales
  trend than the quarter
• Continued focus on cost and inventory management.
• Refinement of communication plans and promotional
  programs to generate higher level of value.
• Greater emphasis on value pricing through private
  brands
• Strategic fundamentals in place

6
Financial Review

• Total sales increased 0.1 , Comp. stores
  declined 1.2
• Comp store increase positive, excluding Eastern
  Canada

• EBIT of 7.2 million, increased 9 over last year
• Absorbed additional 4.5 M -closed store costs,
  will result in savings of approx. 1 M in annual
  operating losses

955.3
7.2
954.1
6.6
Sales
4.6
M
946.5
EBIT M
1999
2000
2001
1999
2000
2001
7
General Review

• 1st Quarter
• In stock position at 95, utilizing RETEK system,
  versus mid 80s last year
• Zellers announced as 2nd Best Company to work for
  in Canada.
• Real Estate activity - Closed 4, opened 1
  and expanded 4 locations - Average store size
  now close to 90,000 sq.ft.
• Inventory levels (at cost) at last years level,
  despite increase in square footage

8
General Review

• Looking Forward
• Well positioned in economic climate
• Private label brands continue to grow
• Continued real estate activity will result in
  approx. 20 million in closing costs (same level
  as last year)
• Accelerating the strategy of aggressively growing
  Famous Business concepts

9
Other Operations

• Credit Card EBIT increased 5.5 over last year
• Slightly lower volume
• Bad debts well controlled
• Lower operating expenses
• hbc.com hits volume increasing
• will add additional 10,000 skus by September
• state of the art fulfillment center will support
  several programs

10
Other Operations

• Revenue EBIT for Fields at last year levels
• Loyalty program - 1.4 million new members in
  addition to 6.5 million Club Z members.
• Early indications that HBC rewards is
  facilitating cross-shopping migration

11
Balance Sheet

• Debt structure maturity profile being extended
• New 160m Debenture issue expiring 04/2006
• New 100m Securitization expires 03/2006
• Debt/Equity at 0.471 versus 0.451 last year
• total debt levels increased by 62 million - to
  support working capital investments
• total debt at year end may be higher than last
  year dependent on decision to refinance Equity
  Subordinated Debentures maturing April 2002

12
Balance Sheet

• Purchased 347,200 shares at 16.94 average -
  total cost of 5.9 million
• will remain cautious for remainder of year
• Capital expenditures of 11.6 in the quarter
  versus 34.1 last year
• will remain cautious for remainder of year
• expect to spend between 180 200 million

13
Retail Environment

• Decrease in customer demand witnessed in 4th
  Quarter carried into 1st Quarter - with greater
  impact in department store channel.
• Cautiously optimistic that consumer confidence
  will return in back half as a result of interest
  rate policies and tax cuts.
• Consolidation in the sector finally setting in -
  limited new entrants, primarily specialty
  players.
• Further decline in channel exclusivity, the
  consumer is seeking greater value across all
  price points and commodities - supports HBCs
  goal of being Canadas shopping solution.

14
Guidance

• Expect 2nd Qtr. to show slight EPS improvement
  versus last year
• April comp. store increase strongest of 1st
  Quarter
• Improvement will not be sufficient to recover 1st
  quarter shortfall
• Full year EBIT growth of up to 5
• Depends on improving economic environment for the
  Bay
• Good control of capital expenditures, cost
  structure and working capital investments.
• Refinancing demands in early 2002 may result in
  additional debt levels by year-end.