Indigo Reports Q1 Results - Strong revenue growth continues

Same Store Sales grow by 7.7%

TORONTO, Aug. 9, 2016 /CNW/ - Indigo Books & Music Inc. (TSX: IDG), Canada's largest book, gift and specialty toy retailer reported 4.4% growth in revenue for its first quarter ended July 2, 2016.

Revenue for the quarter was $193.1 million, up $8.2 million from last year, despite operating one less superstore and three fewer small format stores.  On a comparable store basis, Indigo and Chapters superstores posted 7.7% growth, while Coles and Indigospirit small format stores increased by 7.8%.  Sales from Indigo's online channel, indigo.ca, grew by 3.8%, despite cycling over a significant vendor-funded promotion in the same period last year.

Revenue growth was driven mainly by the continued double digit growth of key general merchandise categories. On a comparable store basis, the Print business also experienced growth.

Margin rate improved by 50 basis points compared to the same period last year despite continued pressure from a weaker Canadian dollar.

Commenting on the results, CEO Heather Reisman said, "We are pleased that the strong revenue momentum we experienced last year has continued into the new fiscal.  All key metrics remain positive which allows us to feel confident about our ability to drive continued revenue growth, improved profitability and further customer affection for our brand."

The net loss for the 13-week period ended July 2, 2016 was $9.0 million (net loss per common share of $0.34), compared to a loss of $9.0 million (net loss per common share of $0.35) for the period ended June 27, 2015.  However, on a comparable basis, when excluding the impact of a one-time benefit from a lease disposition, net loss reduced by $4.5 million. The improvement in underlying earnings relates to higher revenues at improved margin rates and improved tax recovery, partially off-set by higher operating costs.

During the quarter, Indigo opened its first cultural department store at CF Sherway Gardens in Toronto.  The Sherway store is a 30,000 square foot haven for booklovers as well as providing inspiration for the best gifts and an enhanced IndigoKids experience.  Sherway is the first Indigo store designed and built to reflect the extended product assortment and incredible customer experience.  The new store is performing very well and above expectations.  The Company plans to roll out the cultural department store concept to more stores across the portfolio in the near future.

Also during the quarter, the Indigo Love of Reading Foundation granted an additional $1.5 million to 25 high-need elementary schools across the country, bringing the total committed by the Foundation, since its inception in 2004, to $23.5 million.

Forward-Looking Statements

Statements contained in this news release that are not historical facts are forward-looking statements which involve risk and uncertainties that could cause results to differ materially from those expressed in the forward-looking statements. Among the key factors that could cause such differences are: general economic, market or business conditions in Canada; competitive actions by other companies; changes in laws or regulations; and other factors, many of which are beyond the control of the Company.

Non-IFRS Financial Measures

The Company prepares its unaudited interim condensed consolidated financial statements in accordance with International Financial Reporting Standards and International Accounting Standards 34, "Interim Financial Reporting."  In order to provide additional insight into the business, the Company has also provided non-IFRS data, including comparative store sales growth, in the press release above. This measure does not have a standardized meaning prescribed by IFRS and is therefore specific to Indigo and may not be comparable to similar measures presented by other companies. Comparative store sales growth is a key indicator used by the Company to measure performance against internal targets and prior period results. This measure is commonly used by financial analysts and investors to compare Indigo to other retailers. Comparable store sales are defined as sales generated by stores that have been open for more than 12 months on a 52-week basis.

About Indigo Books & Music Inc.

Indigo is a publicly traded Canadian company listed on the Toronto Stock Exchange (IDG). As the largest book, gift and specialty toy retailer in Canada, Indigo operates in all provinces under different banners including Indigo Books & Music; Indigo Books, Gifts, Kids; Indigospirit; Chapters; and Coles. The online channel, indigo.ca, offers a one-stop online shop with a robust selection of books, toys, home décor, stationery, and gifts.

Indigo founded the Indigo Love of Reading Foundation in 2004 to address the underfunding of public elementary school libraries.   Every year the Love of Reading Foundation makes grants to high-needs elementary schools so they can transform their libraries with the purchase of new books and educational resources.  To date, the Love of Reading Foundation has committed over $23.5 million to 2,600 elementary schools, benefitting more than 750,000 students.

To learn more about Indigo, please visit the Our Company section at indigo.ca.

Consolidated Balance Sheets








 As at 

 July 2,

2016

 As at 

 June 27,

2015

 As at 

April 2,

2016



(thousands of Canadian dollars)



ASSETS





Current





Cash and cash equivalents


176,790

176,711

216,488

Accounts receivable


11,800

13,370

7,663

Inventories


217,232

205,528

217,788

Income taxes recoverable


25

25

25

Prepaid expenses


12,429

5,627

11,290

Derivative financial instruments 


245

-

-

Total current assets


418,521

401,261

453,254

Property, plant and equipment


62,526

52,897

60,973

Intangible assets


16,344

15,536

16,506

Equity investment


473

219

1,421

Deferred tax assets


54,829

44,241

51,836

Total assets


552,693

514,154

583,990

LIABILITIES AND EQUITY





Current





Accounts payable and accrued liabilities 


147,703

145,599

171,112

Unredeemed gift card liability


51,545

48,470

50,969

Provisions


30

745

34

Deferred revenue


13,674

13,560

13,232

Current portion of long-term debt


33

144

53

Total current liabilities


212,985

208,518

235,400

Long-term accrued liabilities


2,919

2,661

4,483

Long-term provisions


102

99

109

Long-term debt


-

33

-

Total liabilities


216,006

211,311

239,992

Equity





Share capital


210,545

206,118

209,318

Contributed surplus


10,874

10,170

10,591

Retained earnings 


115,089

86,555

124,089

Accumulated other comprehensive income


179

-

-

Total equity


336,687

302,843

343,998

Total liabilities and equity


552,693

514,154

583,990

 

Consolidated Statements of Loss and Comprehensive Loss





13-week

period ended

July 2,

2016

13-week

period ended

June 27,

2015



(thousands of Canadian dollars, except per share data)




Revenue 

193,099

184,894

Cost of sales 

(107,226)

(103,510)

Gross profit

85,873

81,384

Operating, selling, and administrative expenses

(97,898)

(90,219)

Operating loss

(12,025)

(8,835)

Interest expense

(17)

(2)

Interest income

497

391

Share of loss from equity investment

(511)

(507)

Loss before income taxes

(12,056)

(8,953)

Income tax recovery

3,056

-

Net loss

(9,000)

(8,953)




Other comprehensive income



Items that are or may be reclassified subsequently to net earnings (loss):



Net change in fair value of cash flow hedges
(net of tax of $35; 2016 -$0)

95

-

Reclassification of net realized loss to inventory
(net of tax of $31; 2016 - $0)

84

-

Other comprehensive income

179

-




Total comprehensive loss

(8,821)

(8,953)




Net loss per common share



Basic

$                 (0.34)

$                 (0.35)

Diluted 

$                 (0.34)

$                 (0.35)

 

Consolidated Statements of Cash Flows



13-week

period ended

July 2,

2016

13-week

period ended

June 27,

2015



(thousands of Canadian dollars)




CASH FLOWS FROM OPERATING ACTIVITIES



Net loss

(9,000)

(8,953)

Add (deduct) items not affecting cash




Depreciation of property, plant and equipment

3,863

3,584


Amortization of intangible assets

2,131

2,454


Loss on disposal of capital assets

1

659


Share-based compensation

402

332


Directors' compensation

108

111


Deferred tax assets

(3,059)

-


Other

295

439

Net change in non-cash working capital balances

(28,686)

(21,641)

Interest expense

17

2

Interest income

(497)

(391)

Income taxes received

-

-

Share of loss from equity investment

511

507

Cash flows used for operating activities

(33,914)

(22,897)




CASH FLOWS FROM INVESTING ACTIVITIES



Purchase of property, plant and equipment

(5,417)

(2,253)

Addition of intangible assets 

(1,969)

(1,404)

Distributions from equity investment

437

-

Interest received

127

227

Cash flows used for investing activities

(6,822)

(3,430)




CASH FLOWS FROM FINANCING ACTIVITIES



Repayment of long-term debt

(20)

(51)

Interest paid

(15)

(17)

Proceeds from share issuances

1,000

204

Cash flows from financing activities

965

136




Effect of foreign currency exchange rate changes on cash and cash equivalents

73

(260)




Net decrease in cash and cash equivalents during the period

(39,698)

(26,451)

Cash and cash equivalents, beginning of period

216,488

203,162

Cash and cash equivalents, end of period

176,790

176,711


 

SOURCE Indigo Books & Music Inc.

For further information: Janet Eger, Vice President, Public Affairs, 416 342 8561, jeger@indigo.ca

RELATED LINKS
http://www.indigo.ca

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