Indigo Reports Q3 Results: Continued strong revenue growth of 4.5%

TORONTO, Feb. 7, 2017 /CNW/ - Indigo Books & Music Inc. (TSX: IDG), Canada's largest book, gift and specialty toy retailer reported 4.5% growth in revenue for its third quarter ended December 31, 2016.

Revenue for the quarter was $400.3 million, up $17.1 million from last year, despite operating three fewer stores.  Total comparable sales, which includes both online sales and comparable store sales, increased by 3.8% in the third quarter.

The increase in revenue was driven by continued double digit growth in the general merchandise business, with exceptional growth in the Lifestyle categories.  The core trade book business remained essentially flat as the business cycled over the trend for adult colouring books in the prior year.

Commenting on the results, CEO Heather Reisman said, "We are pleased to report 4.5% revenue growth in what was a tough season for many retailers.  On top of an exceptional 13% revenue growth last year, these results show Indigo has been doing the right things to engage our customers."

Indigo recognized net earnings of $40.0 million ($1.51 net earnings per common share for the quarter), compared to net earnings of $52.8 million, ($2.03 net earnings per common share for the same period last year).  The Company recognized an income tax expense of $14.5 million in the current period compared to a net income tax recovery of $2.1 million in the same period last year, due to the release of a deferred tax provision.

Excluding the impact of income taxes, the Company recognized net earnings before tax of $54.4 million in the current period compared to net earnings before tax of $50.7 million in the same period last year. Higher net earnings before taxes were driven by improved revenues and margins.

The Company ended the period with cash of $316.3 million and no debt, which demonstrates the strength of its financial position.

Indigo has recently started construction on the remodeling of four of its large format superstores, which will include a rebranding from Chapters to Indigo as part of the ongoing strategy to transform its store portfolio and enhance its customer experience.

Analyst/Investor Call

Indigo will host a conference call for analysts and investors to review these results at 9:00 a.m. (ET), February 8, 2017.  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 84286754. 

A playback of the call will also be available by telephone until 11:59 p.m. (ET) on February 15, 2017.  The call playback can be accessed after 11:00 a.m. (ET) on February 8, 2017, 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 286754#.  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 total comparable sales, 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. Total comparable sales 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. Total comparable sales is based on comparable retail store sales and includes online sales for the same period. Comparable retail 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 

 As at 

 As at 



 December 31, 

 December 26, 

April 2,

(thousands of Canadian dollars)


2016

2015

2016






ASSETS





Current





Cash and cash equivalents


316,255

312,254

216,488

Accounts receivable


18,250

22,354

7,663

Inventories


243,439

220,507

217,788

Income taxes recoverable


-

-

25

Prepaid expenses


3,825

4,576

11,290

Derivative financial instruments 


1,060

-

-

Total current assets


582,829

559,691

453,254

Property, plant and equipment


65,779

58,340

60,973

Intangible assets


18,646

15,593

16,506

Equity investment


2,948

2,426

1,421

Deferred tax assets


40,381

46,332

51,836

Total assets


710,583

682,382

583,990

LIABILITIES AND EQUITY





Current





Accounts payable and accrued liabilities 


248,547

241,539

171,112

Unredeemed gift card liability


66,002

68,735

50,969

Provisions


26

43

34

Deferred revenue


12,948

13,414

13,232

Income taxes payable 


26

25

-

Current portion of long-term debt


9

84

53

Total current liabilities


327,558

323,840

235,400

Long-term accrued liabilities


2,353

2,596

4,483

Long-term provisions


89

83

109

Long-term debt


-

9

-

Total liabilities


330,000

326,528

239,992

Equity





Share capital


215,463

207,897

209,318

Contributed surplus


10,481

10,455

10,591

Retained earnings 


153,863

137,502

124,089

Accumulated other comprehensive income


776

-

-

Total equity


380,583

355,854

343,998

Total liabilities and equity


710,583

682,382

583,990

 

 

Consolidated Statements of Earnings and Comprehensive Earnings












13-week

13-week

39-week

39-week


period ended

period ended

period ended

period ended


December 31,

December 26,

December 31,

December 26,

(thousands of Canadian dollars, except per share data)

2016

2015

2016

2015






Revenue 

400,296

383,171

810,340

773,787

Cost of sales 

(223,175)

(214,057)

(449,608)

(429,669)

Gross profit

177,121

169,114

360,732

344,118

Operating, selling, and administrative expenses

(126,230)

(121,162)

(323,275)

(306,963)

Operating profit

50,891

47,952

37,457

37,155

Net interest income

639

326

1,527

1,048

Share of earnings from equity investment

2,886

2,426

1,964

1,700

Earnings before income taxes

54,416

50,704

40,948

39,903

Income tax recovery (expense)

(14,462)

2,091

(11,174)

2,091

Net earnings

39,954

52,795

29,774

41,994






Other comprehensive income





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





Net change in fair value of cash flow hedges
   (net of tax of $467 and $686; 2015 -$0 and $0)

1,278

-

1,876

-

Reclassification of net realized gain
   (net of tax of $288 and $402; 2015 - $0 and $0)

(789)

-

(1,100)

-

Other comprehensive income

489


776

-






Total comprehensive earnings

40,443

52,795

30,550

41,994






Net earnings per common share





Basic

$1.51

$2.03

$1.13

$1.62

Diluted 

$1.48

$2.02

$1.11

$1.61

 

 

Consolidated Statements of Cash Flows







13-week

13-week

39-week

39-week


period ended

period ended

period ended

period ended


December 31,

December 26,

December 31,

December 26,

(thousands of Canadian dollars)

2016

2015

2016

2015






CASH FLOWS FROM OPERATING ACTIVITIES





Net earnings

39,954

52,795

29,774

41,994

Add (deduct) items not affecting cash






Depreciation of property, plant and equipment

4,281

3,666

12,040

10,830


Amortization of intangible assets

2,254

2,210

6,530

6,870


Net reversal of capital asset impairments

(963)

(1,619)

(963)

(1,619)


Loss on disposal of capital assets

-

236

1

896


Share-based compensation

454

341

1,210

951


Directors' compensation

83

98

280

294


Deferred tax assets

14,462

(2,091)

11,171

(2,091)


Other

40

(665)

(335)

(3,316)

Net change in non-cash working capital balances

82,154

91,397

61,253

70,723

Interest expense

3

4

33

9

Interest income

(642)

(330)

(1,560)

(1,057)

Income taxes received

51

50

51

50

Share of earnings from equity investment

(2,886)

(2,426)

(1,964)

(1,700)

Cash flows from operating activities

139,245

143,666

117,521

122,834






CASH FLOWS FROM INVESTING ACTIVITIES





Purchase of property, plant and equipment

(6,860)

(7,665)

(15,884)

(13,562)

Addition of intangible assets 

(3,620)

(2,106)

(8,670)

(5,880)

Proceeds from disposal of capital assets

-

-

-

5

Distributions from equity investment

-

-

437

-

Interest received

422

284

963

770

Cash flows used for investing activities

(10,058)

(9,487)

(23,154)

(18,667)






CASH FLOWS FROM FINANCING ACTIVITIES





Repayment of long-term debt

(12)

(40)

(44)

(135)

Interest paid

(1)

(17)

(27)

(51)

Proceeds from share issuances

3,008

1,209

4,545

1,466

Cash flows from financing activities

2,995

1,152

4,474

1,280






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

178

724

926

3,645






Net increase in cash and cash equivalents during the period

132,360

136,055

99,767

109,092

Cash and cash equivalents, beginning of period

183,895

176,199

216,488

203,162

Cash and cash equivalents, end of period

316,255

312,254

316,255

312,254

 

 

SOURCE Indigo Books & Music Inc.

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

RELATED LINKS
http://www.indigo.ca

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