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First quarter earnings results have been released for Canada's Hudson's Bay Company, and they appear positive. In the first quarter, Canadian operations saw a sales increase of 7.6% over last year.

Specific earnings numbers are provided in this Financial Post article. Instead of going into detailed numbers, we'll start delving into Hudson's Bay's strategy and some potential shortcomings.

Hudson's Bay's modernization strategy has included selected store renovations and the introduction of TopShop/TopMan concessions at several of its stores. Top Shop's moderate prices and youthful designs have seen Canadian earnings in excess of $500 per square foot according to a source at Hudson's Bay. Other new designer brands and the introduction of the 'White Space' contemporary/bridge women's departments in selected Bay stores have also increased per-square-foot store revenues. As increased concentration on women's shoes has seen some new moderate-to-upscale brands added, including Friday's opening of a 50,000 square foot women's shoe hall at the chain's Toronto flagship store.

Luxury accessories, de Bijenkorf, Amsterdam [Image Source]
Despite the apparent success of its modernization strategy, Hudson's Bay has continued to fall short in one of retail's greatest sales drivers - women's handbags. Despite having relatively large handbag departments at its flagship stores, Hudson's Bay lacks many of the upscale handbag labels and concessions found internationally at similar successful department stores. Hudson's Bay has introduced Coach shops at selected locations and a Burberry shop at its Toronto flagship. As a whole, though, Hudson's Bay lacks exciting handbag concessions like those found at House of Fraser in Britain, Karstadt's flagships in Germany and El Corte Inglés in Spain, for example.

Next week we'll have a look at how handbags create excitement at these and other European department stores, and how Hudson's Bay could benefit. We'll also look at how Bloomingdale's has built substantial sales in their handbag departments through various designer shops-in-store at selected locations. Despite Hudson's Bay's rosy revenue report, it could make substantially more money by selling more upscale and unique handbags, while elevating the image of its stores as well.

Lastly, we'll examine the touchy subject of Hudson's Bay's customer service. We've questioned readers and the public in several Canadian communities, asking for their perceptions on Hudson's Bay's customer service. Given the feedback that we received, Nordstrom's Canadian arrival should be of considerable concern to Hudson's Bay.

Be sure to check back to read our analysis of how handbags could save Hudson's Bay.

[Hudson's Bay website]