Indigo delivers strong omnichannel sales
meaningfully beating last year and pre-COVID 2nd quarter
results
TORONTO, Nov. 9, 2021 /CNW/ - Indigo Books & Music Inc. (TSX: IDG),
Canada's largest book and
lifestyle retailer reported financial results for the 13-week
period ended October 2, 2021 compared
to the 13-week period ended September 26,
2020.
Revenue for the quarter increased 16% to $238.8 million from $205.3
million, exceeding both last year and pre-pandemic levels.
It is worth noting that these results were achieved notwithstanding
occupancy constraints in several key jurisdictions and footfall
meaningfully below pre-pandemic levels in the central cores of most
major cities.
The revenue improvements were delivered by a strengthened
omnichannel business, with the online channel delivering 85% growth
over the same quarter in fiscal 2020. Retail does remain
traffic-challenged but customers who came to shop demonstrated a
strong commitment to books and a continuing positive response to
our lifestyle offering. The Company's proprietary brands OUI
(home) and Nóta (paper) delivered well
above expectations. These brands are a key pillar in our
efforts to drive profitable growth.
Commenting on the results, CEO Heather
Reisman said: "Our customers are clearly demonstrating a
positive response to all aspects of our omnichannel approach
delivering the second quarter revenues well above pre-pandemic
levels."
Adjusted EBITDA for the quarter was $10.6
million compared to a loss of $11.3
million for the same period last year, an improvement of
$21.9 million. It should be noted
that these results were achieved with lower external COVID-19
labour support for home office and field leadership, and a
corresponding increase in retail operating expenses, off-set by a
one-time payment of $17.0 million,
resulting from the renegotiation of the Company's partnership with
Starbucks. Moving forward, thirty-six cafés will continue to
operate as Starbucks within Indigo stores, while the remaining
cafés, which have been closed throughout the course of the COVID-19
pandemic, will be reimagined under the evolving Indigo brand retail
experience.
Indigo reported net earnings of $3.5
million ($0.13 net earnings
per basic common share) compared to a net loss of $17.5 million ($0.63 net loss per basic common share) last year,
for the reasons discussed.
The Company is pleased to announce the following organizational
changes. This quarter, the Company appointed Katharine Poulter as Chief Commercial Officer
and Martin Thibodeau as Chief
Technology and Information Officer. Each bring and will contribute
a wealth of experience to their respective areas. The Company
is also pleased to announce the promotion of Andrea Limbardi to Chief Digital Officer.
With no outstanding debt, an undrawn $25.0 million revolving credit facility, and a
cash balance of $71.9 million, the
Company continues to be well positioned to manage through any
further uncertainty stemming from COVID-19.
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, November 10th, 2021. The
call can be accessed by dialing 416-764-8659 from within the
Toronto area, or 1-888-664-6392
outside of Toronto. The
eight-digit participant code
is 23999151.
A playback of the call will also be available by telephone until
11:59 p.m. (ET) on November
17th, 2021. The call playback can be accessed after
12:00 p.m. (ET) on November
10th, 2021, 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 999151. 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 information" within the meaning of
applicable Canadian securities legislation. To the extent any
forward-looking information constitutes "financial outlooks" within
the meaning of applicable Canadian securities laws, such
information is being provided as preliminary financial and
operational results. Financial outlooks, as with forward-looking
information generally, are, without limitation, based on the
assumptions and subject to various risks and uncertainties that
could cause actual results to differ materially from those
expressed in or implied in this news release. Among the key factors
that could cause such differences are: general economic, market or
business conditions; the future impacts and government response to
the COVID-19 pandemic, including any impact to online and/or retail
operations of the Company; competitive actions by other companies;
changes in laws or regulations; and other factors, many of which
are beyond the control of the Company, as set out in the Company's
annual information form dated June 1,
2021 and available on the Company's issuer profile on SEDAR
at www.sedar.com.
Undue reliance should not be placed on such forward-looking
information and no assurance can be given that such events will
occur in the disclosed time frames or at all. Any forward-looking
information included in this news release is made as of the date of
this news release and the Company does not undertake an obligation
to publicly update such forward-looking information to reflect new
information, subsequent events or otherwise unless required by
applicable securities laws.
Non-IFRS Financial Measures
The Company prepares its consolidated financial statements in
accordance with International Financial Reporting Standards
("IFRS"). In order to provide additional insight into the business,
the Company has also provided non-IFRS data, specifically adjusted
EBITDA, in this press release. These measures do not have
standardized meanings prescribed by IFRS and are therefore specific
to Indigo and may not be comparable to similar measures presented
by other companies.
For additional context see "Results of Operations" and "Non-IFRS
Financial Measures" in the Management's Discussion and Analysis
(which can be found at www.indigo.ca/investor-relations or
www.sedar.com).
About Indigo Books &
Music Inc.
Indigo is a publicly traded Canadian company listed on the Toronto
Stock Exchange (IDG). Indigo is Canada's leading book and lifestyle retailer,
offering a curated assortment of books, gifts, baby, kids, wellness
and lifestyle products, that support their customers every day and
at key life stages by simplifying their journey to live with
intention. Indigo believes in real books, in living life fully and
generously, in being kind to each other and that stories – big and
little – connect us.
Indigo founded the Indigo Love of Reading Foundation in 2004 to
address the underfunding of public elementary school libraries
and the literacy challenges faced by children in high-needs
communities across Canada. The
Foundation provides grants to high-needs elementary schools so they
can transform their libraries with the purchase of new books and
educational resources. Most recently, in the wake of the COVID-19
pandemic and unprecedented nation-wide school closures, the
Foundation committed $1.0 million to
provide books to families in need. With the support of the Company,
its customers, employees, and suppliers, the Foundation has
committed over $33 million to more
than 3,000 high-needs elementary schools across Canada since 2004.
Consolidated
Balance Sheets
|
(Unaudited)
|
|
As
at
|
As
at
|
As
at
|
|
October
2,
|
September
26,
|
April
3,
|
(thousands of
Canadian dollars)
|
2021
|
2020
|
2021
|
|
|
|
|
ASSETS
|
|
|
|
Current
|
|
|
|
Cash and cash
equivalents
|
71,905
|
137,521
|
84,935
|
Accounts
receivable
|
19,239
|
12,022
|
22,976
|
Inventories
|
317,458
|
252,470
|
215,114
|
Prepaid
expenses
|
15,847
|
9,243
|
12,278
|
Income taxes
receivable
|
-
|
138
|
-
|
Derivative
assets
|
353
|
148
|
-
|
Other
assets
|
1,071
|
1,768
|
2,120
|
Total current
assets
|
425,873
|
413,310
|
337,423
|
Loan
receivable
|
-
|
446
|
-
|
Property, plant, and
equipment, net
|
69,999
|
84,195
|
77,131
|
Right-of-use assets,
net
|
332,954
|
363,846
|
361,864
|
Intangible assets,
net
|
20,079
|
22,277
|
20,916
|
Equity investment,
net
|
2,156
|
2,353
|
2,156
|
Total
assets
|
851,061
|
886,427
|
799,490
|
LIABILITIES AND
EQUITY
|
|
|
|
Current
|
|
|
|
Accounts payable and
accrued liabilities
|
247,932
|
239,337
|
145,193
|
Unredeemed gift card
liability
|
52,570
|
46,550
|
58,053
|
Provisions
|
2,206
|
2,170
|
2,365
|
Deferred
revenue
|
19,838
|
14,428
|
16,486
|
Short-term lease
liabilities
|
64,306
|
63,376
|
67,603
|
Derivative
liabilities
|
-
|
25
|
1,622
|
Total current
liabilities
|
386,852
|
365,886
|
291,322
|
Long-term accrued
liabilities
|
1,190
|
1,494
|
2,090
|
Long-term
provisions
|
633
|
724
|
827
|
Long-term lease
liabilities
|
455,629
|
486,089
|
482,671
|
Total
liabilities
|
844,304
|
854,193
|
776,910
|
Equity
|
|
|
|
Share
capital
|
227,026
|
226,986
|
226,986
|
Contributed
surplus
|
14,372
|
13,576
|
13,782
|
Retained
deficit
|
(235,074)
|
(207,924)
|
(216,668)
|
Accumulated other
comprehensive income (loss)
|
433
|
(404)
|
(1,520)
|
Total
equity
|
6,757
|
32,234
|
22,580
|
Total liabilities
and equity
|
851,061
|
886,427
|
799,490
|
Consolidated
Statements of Earnings (Loss) and Comprehensive Earnings
(Loss)
|
(Unaudited)
|
|
|
13-week
|
13-week
|
26-week
|
26-week
|
|
period
ended
|
period
ended
|
period
ended
|
period
ended
|
|
October
2,
|
September
26,
|
October
2,
|
September
26,
|
(thousands of
Canadian dollars, except per share data)
|
2021
|
2020
|
2021
|
2020
|
|
|
|
|
|
Revenue
|
238,814
|
205,279
|
410,894
|
340,360
|
Cost of
sales
|
(128,813)
|
(125,889)
|
(230,456)
|
(222,833)
|
Gross
profit
|
110,001
|
79,390
|
180,438
|
117,527
|
Operating, selling,
and other expenses
|
-
|
-
|
-
|
-
|
Operating profit
(loss)
|
110,001
|
79,390
|
180,438
|
117,527
|
Net interest
expense
|
(6,118)
|
(6,261)
|
(12,077)
|
(12,545)
|
Earnings (loss)
before income taxes
|
103,883
|
73,129
|
168,361
|
104,982
|
Income tax
recovery
|
94
|
-
|
94
|
-
|
Net earnings
(loss)
|
103,977
|
73,129
|
168,455
|
104,982
|
|
|
|
|
|
Other
comprehensive income (loss)
|
|
|
|
|
Items that are or may
be reclassified subsequently to net earnings (loss), net of
taxes:
|
|
|
|
|
Change in fair value
of cash flow hedges
|
1,504
|
(1,503)
|
226
|
(2,412)
|
Reclassification of
realized loss (gain)
|
326
|
5
|
1,654
|
(1,258)
|
Realized gain on
discontinued cash flow hedges
|
-
|
268
|
-
|
268
|
Foreign currency
translation adjustment
|
(35)
|
-
|
73
|
-
|
Other
comprehensive income (loss)
|
1,795
|
(1,230)
|
1,953
|
(3,402)
|
|
|
|
|
|
Total
comprehensive earnings (loss)
|
105,772
|
71,899
|
170,408
|
101,580
|
|
|
|
|
|
Net earnings
(loss) per common share
|
|
|
|
|
Basic
|
$
|
0.13
|
$
|
(0.63)
|
$
|
(0.66)
|
$
|
(1.78)
|
Diluted
|
$
|
0.13
|
$
|
(0.63)
|
$
|
(0.66)
|
$
|
(1.78)
|
Consolidated
Statements of Cash Flows
|
(Unaudited)
|
|
|
13-week
|
13-week
|
26-week
|
26-week
|
|
period
ended
|
period
ended
|
period
ended
|
period
ended
|
|
October
2,
|
September
26,
|
October
2,
|
September
26,
|
(thousands of
Canadian dollars)
|
2021
|
2020
|
2021
|
2020
|
|
|
|
|
|
OPERATING
ACTIVITIES
|
|
|
|
|
Net earnings
(loss)
|
3,540
|
(17,520)
|
(18,406)
|
(49,123)
|
Adjustments to
reconcile net earnings (loss) to cash flows from operating
activities
|
|
|
|
|
Depreciation of
property, plant, and equipment
|
4,012
|
4,300
|
8,051
|
8,891
|
Depreciation of
right-of-use assets
|
9,027
|
10,893
|
19,148
|
21,545
|
Amortization of
intangible assets
|
3,181
|
3,323
|
6,484
|
6,531
|
Loss on disposal of
capital assets
|
16
|
-
|
30
|
247
|
Share-based
compensation
|
313
|
306
|
601
|
606
|
Directors'
compensation recognized in contributed surplus
|
-
|
73
|
-
|
148
|
Deferred income tax
recovery
|
(94)
|
-
|
(94)
|
-
|
Rent
concessions
|
-
|
(1,268)
|
-
|
(3,679)
|
Other
|
149
|
(371)
|
(604)
|
(113)
|
Net change in
non-cash working capital balances related to operations
|
(15,965)
|
40,221
|
(1,772)
|
56,687
|
Interest
expense
|
6,237
|
6,455
|
12,494
|
12,953
|
Interest
income
|
(119)
|
(194)
|
(417)
|
(408)
|
Cash flows from
operating activities
|
10,297
|
46,218
|
25,515
|
54,285
|
|
|
|
|
|
INVESTING
ACTIVITIES
|
|
|
|
|
Net purchases of
property, plant, and equipment
|
(184)
|
(1,487)
|
(1,023)
|
(1,985)
|
Addition of
intangible assets
|
(3,657)
|
(2,545)
|
(5,648)
|
(4,250)
|
Proceeds from
disposal of equity investment
|
-
|
-
|
516
|
-
|
Interest
received
|
119
|
194
|
417
|
408
|
Cash flows used
for investing activities
|
(3,722)
|
(3,838)
|
(5,738)
|
(5,827)
|
|
|
|
|
|
FINANCING
ACTIVITIES
|
|
|
|
|
Repayment of
principal on lease liabilities
|
(10,338)
|
(9,606)
|
(21,043)
|
(18,838)
|
Interest
paid
|
(6,237)
|
(6,455)
|
(12,494)
|
(12,953)
|
Proceeds from share
issuances
|
20
|
-
|
29
|
-
|
Cash flows used
for financing activities
|
(16,555)
|
(16,061)
|
(33,508)
|
(31,791)
|
|
|
|
|
|
Effect of foreign
currency exchange rate changes on cash and cash
equivalents
|
473
|
639
|
701
|
381
|
|
|
|
|
|
Net increase
(decrease) in cash and cash equivalents during the
period
|
(9,507)
|
26,958
|
(13,030)
|
17,048
|
Cash and cash
equivalents, beginning of period
|
81,412
|
110,563
|
84,935
|
120,473
|
Cash and cash
equivalents, end of period
|
71,905
|
137,521
|
71,905
|
137,521
|
Non-IFRS Financial
Measures
|
|
|
|
|
|
The following table
reconciles adjusted EBITDA to net earnings (loss) before income
taxes, the most comparable IFRS measure:
|
|
|
|
|
|
|
13-week
|
13-week
|
26-week
|
26-week
|
|
period
ended
|
period
ended
|
period
ended
|
period
ended
|
|
October
2,
|
September
26,
|
October
2,
|
September
26,
|
(millions of Canadian
dollars)
|
2021
|
2020
|
2021
|
2020
|
Revenue
|
238.8
|
205.3
|
410.9
|
340.4
|
Cost of
sales
|
(128.8)
|
(125.9)
|
(230.5)
|
(222.8)
|
Cost of
operations
|
(59.6)
|
(52.6)
|
(106.6)
|
(84.8)
|
Selling, general and
administrative expenses
|
(24.6)
|
(20.7)
|
(46.6)
|
(33.3)
|
Depreciation of
right-of-use assets
|
(9.0)
|
(10.9)
|
(19.1)
|
(21.5)
|
Finance charges
related to leases
|
(6.2)
|
(6.5)
|
(12.5)
|
(13.0)
|
Adjusted
EBITDA1
|
10.6
|
(11.3)
|
(4.4)
|
(35.0)
|
Depreciation of
property, plant and equipment
|
(4.0)
|
(4.3)
|
(8.1)
|
(8.9)
|
Amortization of
intangible assets
|
(3.2)
|
(3.3)
|
(6.5)
|
(6.5)
|
Gain on disposal of
capital assets
|
-
|
1.2
|
-
|
0.9
|
Net interest
income
|
0.1
|
0.2
|
0.4
|
0.4
|
Earnings (loss)
before income taxes
|
3.5
|
(17.5)
|
(18.6)
|
(49.1)
|
1Earnings
before interest, taxes, depreciation, amortization, asset
disposals, and share of loss from equity investments, and includes
IFRS 16 right-of-use asset depreciation and associated finance
charges.
|
SOURCE Indigo Books & Music
Inc.