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.

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