Hudson's Bay Co. HBAYF

Feb 14th Article by Joey Frenette- Thefool.ca

[las5513]

Hudsons Bay Co. (TSX:HBC) is finally starting to see some upside after being in a house of pain for over a year. The company has been oversold and now has a dirt-cheap valuation, but is Hudsons Bay just another cigar butt stock, or is there a real possibility of rebounding to new highs? Shares of Hudsons Bay rallied following the news that the company has approached Macys Inc. (NYSE:M) regarding a potential takeover. Theres no question that the retail environment has become extremely difficult lately, and to say Hudsons Bay is struggling would be a vast understatement. The company reported a huge net loss in its last quarter, and the sales estimates were lowered by $1 billion. The management team needs to adapt to the digital age to drive sales going forward, but the company hasnt adapted fast enough. Its going to be tough to turn things around, but many investors are buying Hudsons Bay for the real estate assets alone. The company owns real estate assets worth $36 per share, and the retail operations are worth just $8 per share. Hudsons Bay seems to be more interested in its real estate assets than turning around its retail business. This is not encouraging news for anyone hoping the company could make its retail stores great again. Hudsons Bay is facing some serious headwinds, and it wont be simple to turn its retail business around. And acquiring Macys could turn out to be an extremely risky move. Macys is also struggling. The stock lost 55% of its value since the summer of 2015, and there looks to be no relief in sight. Hudsons Bay would be making an even bigger bet on the retail sector, which looks to be falling into the abyss. If Macys cant adapt to the changing retail environment either, then things could come crashing down in a hurry. Hudsons Bay currently trades at a 0.8 price-to-book multiple and offers a 1.8% dividend yield. It definitely appears cheap, but it appears that the company is turning into a real estate play, and there are much better options out there if youre looking to invest in a REIT. Hudsons Bay is essentially going all-in with this Macys deal, and the stakes have been raised. However, with high risk comes high reward, but as of right now, I think an investment in Hudsons Bay would be a shot in the dark. There could be more downside from here, so Id advise investors to be cautious. https://www.fool.ca/2017/02/14/where-does-hudsons-bay-co-go-from-here/