Indigo Reports Impressive Third Quarter: Same Store Sales grow by 15.1%

Online Sales grow by 17.9%
Earnings improve by $19.8M

TORONTO, Feb. 2, 2016 /CNW/ - Indigo Books & Music Inc. (TSX: IDG), Canada's largest book, gift and specialty toy retailer reported 12.9% growth in revenue for its third quarter ended December 26, 2015, marking Indigo's ninth consecutive quarter of growth.

Revenue for the quarter was $383.2 million, up $43.8 million from last year, despite operating one less superstore and four fewer small format stores.  On a comparable store basis, Indigo and Chapters superstores posted 15.5% growth, while Coles and Indigospirit small format stores increased by 13.4%.  Sales from Indigo's online channel, indigo.ca, grew by 17.9%.

Revenue growth was driven by continued double digit growth in the general merchandise business and high single digit growth in the core book business.

Commenting on the results, CEO Heather Reisman said, "We're delighted to be reporting such a meaningful improvement in our financial results for Q3.  As with every retailer, our third quarter is critical to the business and Indigo performed strongly across all categories and in all channels.  We're incredibly proud of the Indigo team for delivering an outstanding assortment of books, gifts and toys, coupled with amazing service to our customers for the holidays."

Indigo recognized net earnings of $52.8 million which is $2.03 net earnings per common share for the quarter, compared to net earnings of $33.0 million, or $1.28 net earnings per common share for the same period last year.  The improvement of $19.8 million was primarily driven by increased revenues at a higher margin rate and a lower tax expense.    

During the quarter, Indigo launched two expanded IndigoKids locations, at Chapters Chinook Centre in Calgary and Chapters West Edmonton Mall in Edmonton, bringing the best kids' books and toys, as well as the highly popular American Girl® Specialty Boutique to both locations in time for holiday gift giving.

Also in the quarter, the Indigo Love of Reading Foundation celebrated the global movement of Giving Tuesday by distributing over $1 million in Indigo e-gift cards to over 400 high needs elementary schools.  Our Indigo, Chapters and Coles store teams across the country were delighted to deliver this incredible surprise to some of their local schools, who will use the money to bolster their libraries with books, learning tools and educational resources. These gifts would not have been possible without the generous donations and support from Indigo customers.

Analyst/Investor Call

Indigo will host a conference call for analysts and investors to review these results at 9:00 a.m. (ET) tomorrow, February 3, 2016.  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 53408737#. 

A playback of the call will also be available by telephone until 10:00 a.m. (ET) on Wednesday February 10, 2016.  The call playback can be accessed after 11:00 a.m. (ET) on February 3, 2016, 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 408737#.  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 $22.9 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
		December 26,	December 27,	March 28,
(thousands of Canadian dollars)		2015	2014	2015
ASSETS
Current
Cash and cash equivalents		312,254	287,227	203,162
Accounts receivable		22,354	20,784	4,896
Inventories		220,507	223,260	208,395
Income taxes recoverable		-	-	25
Prepaid expenses		4,576	5,864	5,477
Total current assets		559,691	537,135	421,955
Property, plant, and equipment		58,340	56,771	54,886
Intangible assets		15,593	17,902	16,587
Equity investment		2,426	1,684	726
Deferred tax assets		46,332	40,766	44,241
Total assets		682,382	654,258	538,395
LIABILITIES AND EQUITY
Current
Accounts payable and accrued liabilities		241,539	248,881	160,645
Unredeemed gift card liability		68,735	64,232	48,211
Provisions		43	885	913
Deferred revenue		13,414	13,380	13,298
Income taxes payable		25	26	-
Current portion of long-term debt		84	187	172
Total current liabilities		323,840	327,591	223,239
Long-term accrued liabilities		2,596	2,335	3,841
Long-term provisions		83	99	110
Long-term debt		9	94	56
Total liabilities		326,528	330,119	227,246
Equity
Share capital		207,897	204,970	205,871
Contributed surplus		10,455	9,715	9,770
Retained earnings		137,502	109,454	95,508
Total equity		355,854	324,139	311,149
Total liabilities and equity		682,382	654,258	538,395

Consolidated Statements of Earnings and Comprehensive Earnings
(Unaudited)
	13-week		13-week		39-week		39-week
	period ended		period ended		period ended		period ended
	December 26,		December 27,		December 26,		December 27,
(thousands of Canadian dollars, except per share data)	2015		2014		2015		2014
Revenue	383,171		339,389		773,787		709,221
Cost of sales	(214,057)		(191,709)		(429,669)		(398,265)
Gross profit	169,114		147,680		344,118		310,956
Operating, selling, and administrative expenses	(121,162)		(113,012)		(306,963)		(298,997)
Operating profit	47,952		34,668		37,155		11,959
Interest on long-term debt and financing charges	(4)		(19)		(9)		(48)
Interest income on cash and cash equivalents	330		465		1,057		1,253
Share of earnings from equity investment	2,426		1,684		1,700		1,086
Earnings before income taxes	50,704		36,798		39,903		14,250
Income tax recovery (expense)	2,091		(3,838)		2,091		(3,838)
Net earnings and comprehensive earnings for the period	52,795		32,960		41,994		10,412
Net earnings per common share
Basic	$	2.03	$	1.28	$	1.62	$	0.41
Diluted	$	2.02	$	1.27	$	1.61	$	0.40

Consolidated Statements of Cash Flows
(Unaudited)
		13-week	13-week	39-week	39-week
		period ended	period ended	period ended	period ended
		December 26,	December 27,	December 26,	December 27,
(thousands of Canadian dollars)		2015	2014	2015	2014
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings for the period		52,795	32,960	41,994	10,412
Add (deduct) items not affecting cash
	Depreciation of property, plant, and equipment	3,666	3,703	10,830	11,036
	Amortization of intangible assets	2,210	3,032	6,870	8,881
	Net reversal of capital assets	(1,619)	(458)	(1,619)	(458)
	Loss on disposal of capital assets	236	25	896	34
	Share-based compensation	341	315	951	813
	Directors' compensation	98	86	294	252
	Deferred tax assets	(2,091)	3,838	(2,091)	3,838
	Other	(665)	(175)	(3,316)	(716)
Net change in non-cash working capital balances		91,397	101,386	70,723	109,546
Interest on long-term debt and financing charges		4	19	9	48
Interest income on cash and cash equivalents		(330)	(465)	(1,057)	(1,253)
Income taxes received		50	26	50	26
Share of earnings from equity investment		(2,426)	(1,684)	(1,700)	(1,086)
Cash flows from operating activities		143,666	142,608	122,834	141,373
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property, plant, and equipment		(7,665)	(4,196)	(13,562)	(8,907)
Addition of intangible assets		(2,106)	(1,384)	(5,880)	(5,196)
Proceeds from disposal of capital assets		-	-	5	-
Interest received		284	207	770	995
Cash flows used in investing activities		(9,487)	(5,373)	(18,667)	(13,108)
CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of long-term debt		(40)	(170)	(135)	(536)
Interest paid		(17)	(19)	(51)	(50)
Proceeds from share issuances		1,209	317	1,466	988
Cash flows from financing activities		1,152	128	1,280	402
Effect of foreign currency exchange rate changes on cash and cash equivalents		724	435	3,645	982
Net increase in cash and cash equivalents during the period		136,055	137,798	109,092	129,649
Cash and cash equivalents, beginning of period		176,199	149,429	203,162	157,578
Cash and cash equivalents, end of period		312,254	287,227	312,254	287,227

SOURCE Indigo Books & Music Inc.

Janet Eger, Vice President, Public Affairs, 416 342 8561, [email protected]