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.

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

Related Links

http://www.indigo.ca