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 17th 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 6th, 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 13th, 2018. The call playback can be accessed after 7:30 p.m. (ET) on Tuesday, February 6th, 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.
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Kate Gregory, Senior Manager, Public Relations, 416-364-4499 ext. 6659, [email protected]
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