(Adds details on results, closing stock price, analyst comment)
By Solarina Ho
TORONTO, Sept 5 (Reuters) - Department store operator Hudson's Bay Co reported on Tuesday a steeper-than-forecast quarterly loss but retail sales slightly topped expectations as new store openings and a favorable foreign exchange impact offset fewer shoppers and more sales promotions.
HBC's Saks Fifth Avenue luxury brand had its best quarterly comparable sales increase in more than two years, but the company's European operations had the biggest fall since HBC entered the market in 2015 with its acquisition of Galeria Kaufhof.
Shares fell 6.8 percent to C$11.27 in anticipation of the results, which came after markets closed.
Department stores have been struggling with flagging sales as more shoppers favor online shopping and other types of retail stores. HBC is hoping to "reinvent" the department store experience with its first Hudson's Bay in the Netherlands, which opened on Tuesday.
HBC's expansion comes as an activist shareholder is pressuring to focus on finding better uses for the company's lucrative real estate. Reuters reported last week that the company plans to review its strategic options.
HBC said it expects to see "significant" cost savings from the restructuring announced last quarter to come in the second half of the year.
Derek Dley, an analyst with Canaccord Genuity, expressed some skepticism, saying in a client note that "this may be easier said than done given the challenging department store retail backdrop."
For the second quarter, HBC's total sales rose 1.2 percent to C$3.29 billion ($2.66 billion), compared with analysts' expectations of C$3.26 billion, according to Thomson Reuters I/B/E/S.
Total comparable sales fell 1.3 percent on a constant currency basis. Among HBC's different segments, comparable sales at Saks Fifth Avenue rose 1.7 percent.
Despite higher comparable sales at Hudson's Bay, the overall department store group fell 1.6 percent as fewer customers shopped at Lord & Taylor in the United States.
Comparable sales for its OFF 5th and Gilt brands were down 2.3 percent, while Europe fell 2.8 percent, both hurt by lower traffic.
While online sales were outperforming the company's physical stores, Dley noted the lower margins from online sales that were eating into the sales from its higher-margin stores.
HBC posted a net loss of C$201 million, or C$1.10 a share, more than the net loss of C$142 million, or 78 Canadian cents a share, reported a year ago, due to lower gross margin dollars and higher expenses.
Analysts had expected a net loss of C$116.1 million, or 60 Canadian cents a share.
$1 = 1.2365 Canadian dollars Reporting by Solarina Ho; Editing by Peter Cooney and Leslie Adler