Indigo Reports Q3 Results: Strong holiday season driving 8.2% revenue growth

TORONTO, Feb. 6, 2018 /CNW/ - For the third quarter ended December 30, 2017, Indigo Books & Music Inc. (TSX: IDG), Canada's largest book, gift and specialty toy retailer, delivered its highest ever quarterly revenues and a 17^th straight quarter of topline comparable growth.

Revenue for the quarter increased $33.0 million or 8.2% from last year to reach $433.3 million. Total comparable sales, which include both online sales and comparable store sales, increased by 7.9%, fueled by continued momentum in online operations and impressive in-store performance. Revenue growth was driven by double digit growth in all areas of the general merchandise business. The core book business remains healthy, showing growth over last year.  

Commenting on the results, CEO Heather Reisman said: "We are happy to report a strong third quarter – our biggest holiday to date. Our performance across all channels and categories is a clear reflection of the success of our "Every gift tells a story" seasonal message, the strength of our brand and the passion of our customers for our reimagined cultural department store concept. Our investments in digital, new store development and supply chain infrastructure were critical to our success, as was, of course, the outstanding engagement of our team."

The Company will be opening new stores, including a new flagship location in downtown Vancouver in the coming year, as well as a distribution facility in Calgary to support future growth and provide faster, more efficient service to its customers in the western provinces.  The Company will also accelerate the roll out of its new store concept, as these newly re-imagined stores, which reflect Indigo's transformation from a bookstore to a cultural department store for booklovers, continued to show outstanding growth during the critical holiday season.  

Net earnings for the third quarter was $42.6 million (net earnings per common share of $1.58) compared to net earnings of $40.0 million (net earnings per common share of $1.51) last year. This increase in net earnings is reflective of the top-line growth in the quarter, which was fueled by investments in digital, new store development, marketing and supply chain, plus certain changes in accounting estimates.

The Company ended the period with cash and short-term investments of $308 million and no debt, maintaining a very solid financial position.

Analyst/Investor Call

Indigo will host a conference call for analysts and investors to review these results at 5:30 p.m. (Eastern Time) today, February 6^th, 2018. The call can be accessed by dialing 416-764-8688 from within the Toronto area, or 1-888-390-0546 outside of Toronto. The eight digit participant code is 74160254.

A playback of the call will also be available by telephone until 11:59 p.m. (ET) on Tuesday, February 13^th, 2018. The call playback can be accessed after 7:30 p.m. (ET) on Tuesday, February 6^th, 2018, 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 160254#. 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 52-weeks.

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. This quarter, the Love of Reading Foundation provided an additional $1.5 million to over 500 high-needs elementary schools as part of it's annual Adopt a School program and in connection with Giving Tuesday, an annual global celebration of charitable giving. To date, the Love of Reading Foundation has committed over $26 million to 3,000 elementary schools, benefitting more than 900,000 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 30,		December 31,		April 1,
(thousands of Canadian dollars)		2017		2016		2017
ASSETS
Current
Cash and cash equivalents		247,895		316,255		130,438
Short-term investments		60,000		-		100,000
Accounts receivable		17,139		18,250		7,448
Inventories		270,839		243,439		231,576
Prepaid expenses		4,253		3,825		11,706
Derivative assets		500		1,060		266
Assets held for sale		-		-		1,037
Total current assets		600,626		582,829		482,471
Property, plant and equipment		79,215		65,779		65,078
Intangible assets		17,619		18,646		15,272
Equity investments		5,438		2,948		1,800
Deferred tax assets		31,673		40,381		43,981
Total assets		734,571		710,583		608,602
LIABILITIES AND EQUITY
Current
Accounts payable and accrued liabilities		254,873		248,547		170,611
Unredeemed gift card liability		58,777		66,002		50,396
Provisions		172		26		110
Deferred revenue		8,892		12,948		12,852
Income taxes payable		23		26		360
Current portion of long-term debt		-		9		-
Derivative liabilities		2,791		-		-
Total current liabilities		325,528		327,558		234,329
Long-term accrued liabilities		1,773		2,353		2,378
Long-term provisions		45		89		51
Total liabilities		327,346		330,000		236,758
Equity
Share capital		219,976		215,463		215,971
Contributed surplus		11,361		10,481		10,671
Retained earnings		177,566		153,863		145,007
Accumulated other comprehensive income		(1,678)		776		195
Total equity		407,225		380,583		371,844
Total liabilities and equity		734,571		710,583		608,602

Consolidated Statements of Earnings and Comprehensive Earnings
			13-week		13-week		39-week		39-week
			period ended		period ended		period ended		period ended
(thousands of Canadian dollars, except per share data)			December 30,		December 31,		December 30,		December 31,
			2017		2016		2017		2016
Revenue			433,274		400,296		864,102		810,340
Cost of sales			(244,230)		(223,175)		(481,455)		(449,608)
Gross profit			189,044		177,121		382,647		360,732
Operating, selling, and administrative expenses			(133,454)		(126,230)		(340,241)		(323,275)
Operating profit			55,590		50,891		42,406		37,457
Net interest income			753		639		2,011		1,527
Share of earnings from equity investments			2,444		2,886		1,405		1,964
Earnings before income taxes			58,787		54,416		45,822		40,948
Income tax expense
	Current		(90)		-		(90)		-
	Deferred		(16,147)		(14,462)		(13,173)		(11,174)
Net earnings			42,550		39,954		32,559		29,774
Other comprehensive income
Items that are or may be reclassified subsequently to net earnings (loss):
Net change in fair value of cash flow hedges			175		1,278		(4,118)		1,876
	(net of taxes of (64) and 1,505 ; 2016 - 467 and 686)
Reclassification of net realized (gain) loss			899		(789)		2,440		(1,100)
	(net of taxes of (329) and (892) ; 2016 - 288 and 402)
Other comprehensive income (loss)			1,074		489		(1,678)		776
Total comprehensive earnings			43,624		40,443		30,881		30,550
Net earnings per common share
Basic			$1.58		$1.51		$1.22		$1.13
Diluted			$1.56		$1.48		$1.20		$1.11

Consolidated Statements of Cash Flows
		13-week	13-week	39-week	39-week
		period ended	period ended	period ended	period ended
		December 30,	December 31,	December 30,	December 31,
(thousands of Canadian dollars)		2017	2016	2017	2016
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings		42,550	39,954	32,559	29,774
Adjustments to reconcile net earnings to cash flows from operating activities
	Depreciation of property, plant and equipment	4,840	4,281	13,738	12,040
	Amortization of intangible assets	2,020	2,254	5,717	6,530
	Net impairment (reversal) of capital assets	-	(963)	-	(963)
	Loss on disposal of capital assets	85	-	46	1
	Share-based compensation	321	454	1,103	1,210
	Directors' compensation	82	83	263	280
	Deferred tax assets	16,146	14,462	12,992	11,171
	Disposal of assets held for sale	-	-	1,037	-
	Collateral from derivative transactions	1,910	-	-	-
	Other	1,142	40	1,579	(335)
Net change in non-cash working capital balances		87,562	82,154	46,296	61,253
Interest expense		3	3	8	33
Interest income		(756)	(642)	(2,019)	(1,560)
Income taxes received		-	51	-	51
Share of earnings from equity investments		(2,444)	(2,886)	(1,405)	(1,964)
Cash flows from operating activities		153,461	139,245	111,914	117,521
CASH FLOWS USED FOR INVESTING ACTIVITIES
Purchase of property, plant and equipment		(13,932)	(6,860)	(27,921)	(15,884)
Addition of intangible assets		(3,345)	(3,620)	(8,066)	(8,670)
Change in short-term investments		(50,000)	-	40,000	-
Distribution from equity investments		(1)	-	433	437
Interest received		765	422	1,871	963
Investment in associate		-	-	(2,666)	-
Cash flows from (used for) investing activities		(66,513)	(10,058)	3,651	(23,154)
CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of long-term debt		-	(12)	-	(44)
Interest paid		-	(1)	-	(27)
Proceeds from share issuances		1,561	3,008	3,331	4,545
Cash flows from financing activities		1,561	2,995	3,331	4,474
Effect of foreign currency exchange rate changes on cash and cash equivalents		(1,154)	178	(1,439)	926
Net increase in cash and cash equivalents during the period		87,355	132,360	117,457	99,767
Cash and cash equivalents, beginning of period		160,540	183,895	130,438	216,488
Cash and cash equivalents, end of period		247,895	316,255	247,895	316,255

Non-IFRS Financial Measures

The following table reconciles total comparable sales to revenue, the most comparable IFRS measure.

Non-IFRS Financial Measures
Comparable revenue
		13-week	13-week
		period ended	period ended
		December 30,	December 31,
(millions of Canadian dollars)		2017	2016	% increase
Revenue		433.3	400.3	8.2
Adjustments
	Other revenue ^1	(10.0)	(8.2)
	Stores not in both fiscal periods	(4.4)	(3.9)
Total comparable sales		418.9	388.2	7.9
^1Includes cafés, irewards, gift card breakage, Kobo revenue share, Plum breakage, and corporate sales.

SOURCE Indigo Books & Music Inc.

Kate Gregory, Senior Manager, Public Relations, 416-364-4499 ext. 6659, [email protected]

Related Links

http://www.indigo.ca