Indigo Reports Q2 Results: Exceptional revenue growth and improved profitability

Comp Superstore Sales grow by 13.6%
Online Sales grow by 14.2%

TORONTO, Nov. 3, 2015 /CNW/ - Indigo Books & Music Inc. (TSX: IDG), Canada's largest book, gift and specialty toy retailer reported 8.8% growth in revenue for its second quarter ended September 26, 2015.

Revenue for the quarter was $205.7 million, up $16.7 million from last year, despite operating two fewer superstores and four fewer small format stores.  On a comparable store basis, Indigo and Chapters superstores posted 13.6% growth, while Coles and IndigoSpirit small format stores increased by 12.9%. Sales from Indigo's online channel, indigo.ca, grew by 14.2%.

Revenue growth was driven by continued double digit growth in the general merchandise business, mainly in Paper and Toys, and strong growth in the core book business, boosted by the trend for adult colouring books.

Commenting on the results, CEO Heather Reisman said, "We are pleased with this quarter's results.  Up against a tough comp from last year, we have demonstrated that we are consistently growing the business and improving profitability."

The net loss for the 13-week period ended September 26, 2015 was $1.8 million (net loss per common share of $0.07), compared to a loss of $8.5 million (net loss per common share of $0.33) for the period ended September 27, 2014.  The improvement of $6.7 million was driven by increased revenue performance and a higher margin rate.

During the quarter Indigo launched a new American Girl® Specialty Boutique at the Toronto Eaton Centre store, alongside a complete renovation of the Books and Indigo Kids sections.  Additionally, the Company revitalized their plum® rewards loyalty program to now include online collection and redemption of plum® points and an enhanced suite of member benefits based on customer feedback.

Analyst/Investor Call

Indigo will host a conference call for analysts and investors to review these results at 10:00 a.m. (ET) tomorrow, November 4th, 2015.  The call can be accessed by dialling 416-764-8688 from within the Toronto area, or 1-888-390-0546 outside of Toronto.  The eight digit participant code is 34060006.

A playback of the call will also be available by telephone until 11:59 p.m. (ET) on Wednesday November 11th, 2015.  The call playback can be accessed after 12:00 p.m. (ET) on November 4th, 2015, by dialing 416-764-8677 from within the Toronto area, or 1-888-390-0541 outside of Toronto.  The six-digit replay passcode number is 060006#.  The conference call transcript will be archived in the Investor Relations section of the Indigo website, www.indigo.ca.

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 Indigo Love of Reading Foundation grants $1.5 million to 20 high-needs elementary schools so they can transform their libraries with the purchase of new books and education resources. To date, the Indigo Love of Reading Foundation has committed over $20.5 million to over 2,000 schools through our signature programs.

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

Consolidated Balance Sheets
(Unaudited)
                               
            As at     As at           As at
            September 26,     September 27,           March 28,
(thousands of Canadian dollars)           2015     2014           2015
                               
ASSETS                              
Current                              
Cash and cash equivalents           176,199     149,429           203,162
Accounts receivable           18,616     12,778           4,896
Inventories           256,952     235,053           208,395
Income taxes recoverable           25     -           25
Prepaid expenses           4,843     6,406           5,477
Total current assets           456,635     403,666           421,955
Property, plant, and equipment           52,955     55,845           54,886
Intangible assets           15,700     19,550           16,587
Equity investment           -     -           726
Deferred tax assets           44,241     44,604           44,241
Total assets           569,531     523,665           538,395
LIABILITIES AND EQUITY                              
Current                              
Accounts payable and accrued liabilities           208,805     175,396           160,645
Unredeemed gift card liability           42,249     40,773           48,211
Provisions           52     913           913
Deferred revenue           14,172     13,178           13,298
Current portion of long-term debt           112     316           172
Total current liabilities           265,390     230,576           223,239
Long-term accrued liabilities           2,618     2,398           3,841
Long-term provisions           91     97           110
Long-term debt           21     133           56
Total liabilities           268,120     233,204           227,246
Equity                              
Share capital           206,472     204,601           205,871
Contributed surplus           10,232     9,366           9,770
Retained earnings           84,707     76,494           95,508
Total equity           301,411     290,461           311,149
Total liabilities and equity           569,531     523,665           538,395
                               

 
Consolidated Statements of Loss and Comprehensive Loss
(Unaudited)
                         
      13-week     13-week     26-week     26-week
      period ended     period ended     period ended     period ended
      September 26,     September 27,     September 26,     September 27,
(thousands of Canadian dollars, except per share data)     2015     2014     2015     2014
                         
Revenue     205,722     189,030     390,616     369,832
Cost of sales     (112,102)     (105,707)     (215,612)     (206,556)
Gross profit     93,620     83,323     175,004     163,276
Operating, selling, and administrative expenses     (95,582)     (92,175)     (185,801)     (185,985)
Operating loss     (1,962)     (8,852)     (10,797)     (22,709)
Interest on long-term debt and financing charges     (3)     (20)     (5)     (29)
Interest income on cash and cash equivalents     336     411     727     788
Share of loss from equity investment     (219)     (79)     (726)     (598)
Net loss and comprehensive loss for the period     (1,848)     (8,540)     (10,801)     (22,548)
                         
Net loss per common share                        
Basic   $ (0.07)   $ (0.33)   $ (0.42)   $ (0.88)
Diluted   $ (0.07)   $ (0.33)   $ (0.42)   $ (0.88)
                         

                               
Consolidated Statements of Cash Flows
(Unaudited)
                               
            13-week     13-week     26-week     26-week
            period ended     period ended     period ended     period ended
            September 26,     September 27,     September 26,     September 27,
(thousands of Canadian dollars)           2015     2014     2015     2014
                               
CASH FLOWS FROM OPERATING ACTIVITIES                              
Net loss for the period           (1,848)     (8,540)     (10,801)     (22,548)
Add (deduct) items not affecting cash                              
  Depreciation of property, plant, and equipment           3,580     3,635     7,164     7,333
  Amortization of intangible assets           2,206     2,981     4,660     5,849
  Loss on disposal of capital assets           1     2     660     9
  Share-based compensation           278     163     610     498
  Directors' compensation           85     62     196     166
  Other           (3,090)     (1,686)     (2,651)     (541)
Net change in non-cash working capital balances           967     4,573     (20,674)     8,160
Interest on long-term debt and financing charges           3     20     5     29
Interest income on cash and cash equivalents           (336)     (411)     (727)     (788)
Share of loss from equity investment           219     79     726     598
Cash flows from (used in) operating activities           2,065     878     (20,832)     (1,235)
                               
CASH FLOWS FROM INVESTING ACTIVITIES                              
Purchase of property, plant, and equipment           (3,644)     (2,551)     (5,897)     (4,711)
Addition of intangible assets           (2,370)     (1,808)     (3,774)     (3,812)
Proceeds from disposal of capital assets           5     -     5     -
Interest received           259     411     486     788
Cash flows used in investing activities           (5,750)     (3,948)     (9,180)     (7,735)
                               
CASH FLOWS FROM FINANCING ACTIVITIES                              
Repayment of long-term debt           (44)     (180)     (95)     (366)
Interest paid           (17)     (21)     (34)     (31)
Proceeds from share issuances           53     340     257     671
Cash flows from (used in) financing activities           (8)     139     128     274
                               
Effect of foreign currency exchange rate changes
on cash and cash equivalents
          3,181     1,693     2,921     547
                               
Net decrease in cash and cash equivalents
during the period
          (512)     (1,238)     (26,963)     (8,149)
Cash and cash equivalents, beginning of period           176,711     150,667     203,162     157,578
Cash and cash equivalents, end of period           176,199     149,429     176,199     149,429
                               

 

SOURCE Indigo Books & Music Inc.

For further information:

Janet Eger
Vice President, Public Affairs
416 342 8561
jeger@indigo.ca


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