TORONTO, Aug. 13, 2019 /CNW/ - Indigo Books & Music Inc. (TSX: IDG),
Canada's largest book, gift and
specialty toy retailer reported total comparable sales decline of
7.6% for the first quarter of its current 2020 fiscal year,
including both online sales and comparable store sales.
Revenue for the first quarter ended June
29, 2019 was $192.6 million compared to $205.4 million for the same period last year, a
decrease of $12.8 million. This
decline in sales was the result of a strategic shift to reduce
promotional activity to improve profitability and eliminate
unprofitable sales. Together with stronger inventory management,
this strategic shift led to margin rate improvements of 0.8% in the
first quarter. Additionally, the general merchandise business
continues to be affected by softer discretionary spending in
certain categories core to the Company, while the book business has
sustained historical trends.
Commenting on the results, CEO Heather
Reisman said: "This quarter's results were in line with our
expectations. While we continue to face many of the same headwinds
from last year, strategic steps to recharge growth, increase
productivity and improve profitability are well underway. We remain
confident in our investments over the long term and in the steps we
are taking."
Indigo reported a net loss of $19.1
million ($0.69 net loss per
common share) compared to a net loss of $15.4 million ($0.57 net loss per common share) last year. This
decline in profitability was attributed to the decline in sales and
restructuring costs, partially offset by lower selling,
administrative and other expenses as the Company continues its
cost-cutting initiatives. Additionally, the Company's loss position
was unfavourably impacted by higher amortization in the current
period, driven by an increase in the Company's capital asset base
from growth in recent years.
Adoption of IFRS 16, Leases
The Company adopted IFRS 16 Leases ("IFRS 16") in the
first quarter of fiscal 2020, replacing IAS17 Leases and
related interpretations. IFRS 16 introduced a single lessee
accounting model which required substantially all the Company's
operating leases to be recorded on balance sheet as a right-of-use
asset and a lease liability, representing the obligation to make
future lease payments. The Company implemented the standard on
March 31, 2019 using the modified
retrospective approach, therefore the Company's 2020 first quarter
results reflect lease accounting under IFRS 16. Prior year results
have not been restated and continue to be reported under IAS 17.
When compared to the previous accounting method, this resulted in a
material adjustment to the Company's financial statements.
Analyst/Investor Call
Indigo will host a conference call for analysts and investors to
review these results at 9:00 a.m. (Eastern
Time) tomorrow, August
14th, 2019. 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 63479256.
A playback of the call will also be available by telephone until
11:59 p.m. (ET) on Wednesday, August
21st, 2019. The call playback can be accessed after
11:00 a.m. (ET) on Wednesday, August
14th, 2019, 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 479256#. 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; 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 ("IFRS") 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 this press
release. 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 based on a 52-week fiscal year and defined as sales
generated by stores that have been open for more than 52 weeks.
These measures exclude sales fluctuations due to store openings and
closings, significant renovations, permanent relocation and
material changes in square footage.
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 and one territory under different banners
including Indigo, Chapters, Coles, Indigospirit, and The Book
Company. The Company also has retail operations in the United States through a wholly-owned
subsidiary, operating its first retail store in Short Hills, New Jersey. 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 provides grants to high-needs elementary schools so they
can transform their libraries with the purchase of new books and
educational resources. To date, the Indigo Love of Reading
Foundation has committed over $31
million to more than 3,000 elementary schools, benefitting
more than 1,000,000 students.
To learn more about Indigo, please visit the "Our Company"
section at indigo.ca.
Consolidated
Balance Sheets
|
|
|
|
|
|
|
|
|
|
As
at
|
As
at
|
As
at
|
|
June
29,
|
June
30,
|
March
30,
|
(thousands of
Canadian dollars)
|
2019
|
2018
|
2019
|
|
|
|
|
ASSETS
|
|
|
|
Current
|
|
|
|
Cash and cash
equivalents
|
52,344
|
94,907
|
41,290
|
Short-term
investments
|
38,000
|
60,000
|
87,150
|
Accounts
receivable
|
12,325
|
12,370
|
10,543
|
Inventories
|
241,868
|
257,718
|
252,541
|
Prepaid
expenses
|
7,652
|
6,845
|
5,802
|
Income taxes
receivable
|
573
|
-
|
483
|
Derivative
assets
|
-
|
3,216
|
1,070
|
Other
assets
|
871
|
922
|
853
|
Total current
assets
|
353,633
|
435,978
|
399,732
|
Property, plant, and
equipment, net
|
122,362
|
94,708
|
125,906
|
Right-of-use assets,
net1
|
411,752
|
-
|
-
|
Intangible assets,
net
|
31,743
|
27,184
|
32,527
|
Equity
investments
|
3,588
|
3,163
|
4,359
|
Deferred tax
assets1
|
94,243
|
40,431
|
47,940
|
Total
assets
|
1,017,321
|
601,464
|
610,464
|
LIABILITIES AND
EQUITY
|
|
|
|
Current
|
|
|
|
Accounts payable and
accrued liabilities1
|
154,886
|
159,111
|
179,180
|
Unredeemed gift card
liability
|
48,794
|
42,027
|
48,729
|
Provisions
|
200
|
160
|
60
|
Deferred
revenue
|
7,897
|
7,180
|
7,636
|
Income taxes
payable
|
-
|
152
|
-
|
Short-term lease
liabilities1
|
43,833
|
-
|
-
|
Derivative
liabilities
|
924
|
106
|
-
|
Total current
liabilities
|
256,534
|
208,736
|
235,605
|
Long-term accrued
liabilities1
|
1,877
|
2,472
|
4,698
|
Long-term
provisions
|
45
|
45
|
45
|
Long-term lease
liabilities1
|
518,028
|
-
|
-
|
Total
liabilities
|
776,484
|
211,253
|
240,348
|
Equity
|
|
|
|
Share
capital
|
225,531
|
222,699
|
225,531
|
Contributed
surplus
|
13,048
|
12,041
|
12,716
|
Retained
earnings1
|
3,159
|
153,196
|
131,311
|
Accumulated other
comprehensive income (loss)
|
(901)
|
2,275
|
558
|
Total
equity
|
240,837
|
390,211
|
370,116
|
Total liabilities
and equity
|
1,017,321
|
601,464
|
610,464
|
|
1 The
noted current period balances have been impacted by the adoption of
IFRS 16. Refer to note 3 of the unaudited
condensed interim consolidated financial statements for additional
information.
|
Consolidated
Statements of Loss and Comprehensive Loss
|
|
|
|
|
|
|
|
13-week
|
13-week
|
|
period
ended
|
period
ended
|
|
June
29,
|
June 30,
|
(thousands of
Canadian dollars, except per share data)
|
2019
|
2018
|
|
|
|
Revenue
|
192,556
|
205,376
|
Cost of
sales
|
(108,682)
|
(117,463)
|
Gross
profit
|
83,874
|
87,913
|
Operating, selling,
and administrative expenses1
|
(103,571)
|
(108,788)
|
Operating
loss1
|
(19,697)
|
(20,875)
|
Net interest income
(expense)1
|
(5,424)
|
810
|
Share of loss from
equity investments
|
(773)
|
(639)
|
Loss before income
taxes1
|
(25,894)
|
(20,704)
|
Income tax
recovery1
|
6,824
|
5,315
|
Net
loss1
|
(19,070)
|
(15,389)
|
|
|
|
Other
comprehensive income (loss)
|
|
|
Items that are or may
be reclassified subsequently to net loss:
|
|
|
Net change in fair
value of cash flow hedges
[net of taxes of 368; 2018 - (554)]
|
(1,004)
|
1,505
|
Reclassification of net
realized gain
[net of taxes of 167; 2018 - 16]
|
(455)
|
(45)
|
Other
comprehensive income (loss)
|
(1,459)
|
1,460
|
|
|
|
Total
comprehensive loss1
|
(20,529)
|
(13,929)
|
|
|
|
Net loss per
common share1
|
|
|
Basic
|
$
|
(0.69)
|
$
|
(0.57)
|
Diluted
|
$
|
(0.69)
|
$
|
(0.57)
|
|
1 The
noted current period balances have been impacted by the adoption of
IFRS 16. Refer to note 3 of the unaudited
condensed interim consolidated financial statements for additional
information.
|
Consolidated
Statements of Cash Flows
|
|
|
|
|
13-week
|
13-week
|
|
period
ended
|
period
ended
|
|
June
29,
|
June 30,
|
(thousands of
Canadian dollars)
|
2019
|
2018
|
|
|
|
OPERATING
ACTIVITIES
|
|
|
Net
loss1
|
(19,070)
|
(15,389)
|
Adjustments to
reconcile net loss to cash flows used for operating
activities
|
|
|
Depreciation of
property, plant, and equipment and right-of-use
assets1
|
15,765
|
5,127
|
Amortization of
intangible assets
|
3,266
|
2,192
|
Loss on disposal of
capital assets
|
461
|
240
|
Share-based
compensation
|
248
|
489
|
Directors'
compensation
|
84
|
89
|
Deferred income tax
recovery1
|
(6,824)
|
(5,406)
|
Other
|
256
|
(81)
|
Net change in
non-cash working capital balances related to
operations1
|
(17,453)
|
(21,623)
|
Interest
expense1
|
6,077
|
3
|
Interest
income
|
(653)
|
(813)
|
Share of loss from
equity investments
|
773
|
639
|
Cash flows used
for operating activities
|
(17,070)
|
(34,533)
|
|
|
|
INVESTING
ACTIVITIES
|
|
|
Purchase of property,
plant, and equipment
|
(2,849)
|
(17,757)
|
Addition of
intangible assets
|
(2,482)
|
(5,165)
|
Change in short-term
investments
|
49,150
|
-
|
Distribution from
equity investments
|
-
|
528
|
Interest
received
|
653
|
813
|
Cash flows from
(used for) investing activities
|
44,472
|
(21,581)
|
|
|
|
FINANCING
ACTIVITIES
|
|
|
Repayment of
principal on lease liabilities1
|
(10,013)
|
-
|
Interest
paid1
|
(6,078)
|
-
|
Proceeds from share
issuances
|
-
|
688
|
Cash flows from
(used for) financing activities
|
(16,091)
|
688
|
|
|
|
Effect of foreign
currency exchange rate changes on cash and cash
equivalents
|
(257)
|
77
|
|
|
|
Net increase
(decrease) in cash and cash equivalents during the
period
|
11,054
|
(55,349)
|
Cash and cash
equivalents, beginning of period
|
41,290
|
150,256
|
Cash and cash
equivalents, end of period
|
52,344
|
94,907
|
|
1The noted
current period balances have been impacted by the adoption of IFRS
16. Refer to note 3 of the
unaudited condensed interim consolidated financial statements for
additional information.
|
Non-IFRS Financial
Measures
|
|
The following table
reconciles total comparable sales to revenue, the most comparable
IFRS measure:
|
|
|
|
|
|
13-week
|
13-week
|
|
|
period
ended
|
period
ended
|
%
increase
|
|
June
29,
|
June 30,
|
(millions of Canadian
dollars)
|
2019
|
2018
|
(decrease)
|
Revenue
|
192.6
|
205.4
|
(6.2)
|
Adjustments
|
|
|
|
Other
revenue1
|
(3.2)
|
(5.4)
|
|
Stores not in both
fiscal periods
|
(21.8)
|
(18.6)
|
|
Total comparable
sales
|
167.6
|
181.4
|
(7.6)
|
1Includes
cafés, irewards, gift card breakage, plum breakage, corporate sales
and Kobo revenue share.
|
SOURCE Indigo Books & Music
Inc.