TORONTO, Aug. 10,
2022 /CNW/ - Indigo Books & Music Inc. (TSX:
IDG), Canada's largest book and
lifestyle retailer, reported financial results for the 13-week
period ended July 2, 2022 compared to
the 13-week period ended July 3,
2021.
Revenue increased $32.5 million,
or 18.9%, to $204.6 million compared
to $172.1 million in the prior year,
exceeding the Company's top-line first quarter performance in the
preceding three fiscal years. The Company's total sales growth was
driven by the success of Indigo's omnichannel business; a strong
recovery in the retail channel where traffic levels continued to
normalize, and an ecommerce business that sustained incremental
growth of 80% of fiscal 2020 levels. Double-digit growth was
generated in both the print and general merchandise businesses. The
print business continued to benefit from a resurgence of reading,
which the Company has leveraged through the launch of a partnership
with TikTok Canada, to further capitalize on the popularity of
reading on the platform (#BookTok). The Company's top proprietary
brands, OUI, NÓTA™ and LOVE & LORE®, continued to gain
prominence in the general merchandise assortment, generating over
30% of the quarter's general merchandise revenue growth and
demonstrating the increasing value of the Company's exclusive brand
portfolio.
Commenting on the results, CEO Heather
Reisman said: "We are pleased to see the positive sales
growth, fueled by a steady improvement to store traffic and the
continued success of our online business. Our strong customer
commitment reinforces the decisions we are making to invest in
talent and technology for future profitability".
Adjusted EBITDA for the quarter was a loss of $19.2 million compared to a loss of $14.9 million for the same period last year. This
is inclusive of the impact of external COVID-19 support, which
totalled $1.0 million in the first
quarter, compared to $7.3 million in
the first quarter of the prior year. Unfortunately, current
macro-economic conditions had a negative impact on margins and
costs given supply chain disruptions, higher freight costs and
inflationary pressures. The Company also incurred additional costs
with investment in technology aimed at driving productivity and
growth. These factors impacted the net loss position, which changed
by $3.5 million to a net loss of
$25.4 million ($0.91 net loss per basic common share), compared
to a net loss of $21.9 million
($0.79 net loss per basic common
share) in the prior year, which is inclusive of the impact of the
above-noted COVID-19 support received.
Analyst/Investor
Call
Indigo will host a conference call for analysts and investors to
review these results at 10:00 a.m. (Eastern
Time) tomorrow, August
11th, 2022. 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 50738052.
A playback of the call will also be available by telephone until
11:59 p.m. (ET) on August 18th, 2022. The call playback
can be accessed after 12:00 p.m. (ET)
on August 11th, 2022, 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 738052 #. 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, which include geopolitical
events such as war, acts of terrorism, and civil disorder and the
adverse impacts of inflationary pressures; 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 2, 2022 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 news 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.
The Company supports a separate registered charity, called the
Indigo Love of Reading Foundation (the "Foundation"), which is
committed to addressing educational inequality, and more
specifically the literacy crisis in Canada. The Foundation runs two annual
national granting programs: the Literacy Fund Grant, which is a
multi-year grant provided to high-needs schools across the country;
and the Adopt a School program, a grassroots fundraising initiative
that unites Indigo, its retail stores, Indigo's staff, local
schools, and their communities. In the wake of the COVID-19
pandemic and the 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 $35.0 million to more
than 3,500 high-needs elementary schools across Canada since 2004. The Foundation is dedicated
to raising awareness about the critical importance of children's
literacy while providing essential literary support to high-needs
children across Canada.
To learn more about Indigo, please visit the "Our Company"
section at indigo.ca.
Consolidated Balance
Sheets
|
(Unaudited)
|
|
As at
|
As at
|
As at
|
|
July
2,
|
July 3,
|
April 2,
|
(thousands of Canadian
dollars)
|
2022
|
2021
|
2022
|
|
|
|
|
ASSETS
|
|
|
|
Current
|
|
|
|
Cash and cash
equivalents
|
43,168
|
81,412
|
86,469
|
Accounts
receivable
|
15,403
|
20,253
|
12,941
|
Inventories
|
288,184
|
221,389
|
273,849
|
Prepaid
expenses
|
7,971
|
10,005
|
13,508
|
Derivative
assets
|
1,431
|
—
|
—
|
Other assets
|
1,644
|
1,752
|
3,246
|
Total current
assets
|
357,801
|
334,811
|
390,013
|
Property, plant, and
equipment, net
|
62,613
|
73,925
|
64,319
|
Right-of-use assets,
net
|
322,450
|
350,207
|
333,767
|
Intangible assets,
net
|
24,459
|
19,604
|
21,171
|
Equity investment,
net
|
97
|
2,156
|
97
|
Total
assets
|
767,420
|
780,703
|
809,367
|
LIABILITIES AND
EQUITY
|
|
|
|
Current
|
|
|
|
Accounts payable and
accrued liabilities
|
170,102
|
159,931
|
178,138
|
Unredeemed gift card
liability
|
64,578
|
59,300
|
62,653
|
Provisions
|
531
|
2,455
|
472
|
Deferred
revenue
|
21,367
|
16,139
|
20,699
|
Short-term lease
liabilities
|
69,679
|
67,240
|
69,100
|
Derivative
liabilities
|
47
|
1,572
|
631
|
Total current
liabilities
|
326,304
|
306,637
|
331,693
|
Long-term accrued
liabilities
|
991
|
1,615
|
1,068
|
Long-term
provisions
|
744
|
678
|
702
|
Long-term lease
liabilities
|
435,211
|
470,684
|
448,084
|
Total
liabilities
|
763,250
|
779,614
|
781,547
|
Equity
|
|
|
|
Share
capital
|
227,090
|
226,999
|
227,090
|
Contributed
surplus
|
14,861
|
14,066
|
14,618
|
Retained
deficit
|
(238,810)
|
(238,614)
|
(213,403)
|
Accumulated other
comprehensive income (loss)
|
1,029
|
(1,362)
|
(485)
|
Total
equity
|
4,170
|
1,089
|
27,820
|
Total liabilities
and equity
|
767,420
|
780,703
|
809,367
|
Consolidated
Statements of Loss and Comprehensive Loss
|
(Unaudited)
|
|
|
|
|
13-week
|
13-week
|
|
period
ended
|
period ended
|
|
July
2,
|
July 3,
|
(thousands of Canadian
dollars, except per share data)
|
2022
|
2021
|
|
|
|
Revenue
|
204,556
|
172,080
|
Cost of
sales
|
(122,808)
|
(101,643)
|
Gross
profit
|
81,748
|
70,437
|
Operating, selling, and
other expenses
|
(101,343)
|
(86,424)
|
Operating
loss
|
(19,595)
|
(15,987)
|
Net interest
expense
|
(6,179)
|
(5,959)
|
Loss before income
taxes
|
(25,774)
|
(21,946)
|
Income tax
recovery
|
367
|
—
|
Net
loss
|
(25,407)
|
(21,946)
|
|
|
|
Other comprehensive
income
|
|
|
Items that are or may
be reclassified subsequently to net loss, net of taxes:
|
|
|
Change in
fair value of cash flow hedges
|
1,890
|
(1,278)
|
Reclassification of realized loss (gain)
|
(242)
|
1,328
|
Foreign
currency translation adjustment
|
(134)
|
108
|
Other comprehensive
income
|
1,514
|
158
|
Total comprehensive
loss
|
(23,893)
|
(21,788)
|
|
|
|
Net loss per common
share
|
|
|
Basic
|
$
(0.91)
|
$
(0.79)
|
Diluted
|
$
(0.91)
|
$
(0.79)
|
Consolidated
Statements of Cash Flows
|
(Unaudited)
|
|
|
|
|
13-week
|
13-week
|
|
period
ended
|
period ended
|
|
July
2,
|
July 3,
|
(thousands of Canadian
dollars)
|
2022
|
2021
|
|
|
|
OPERATING
ACTIVITIES
|
|
|
Net loss
|
(25,407)
|
(21,946)
|
Adjustments to
reconcile net loss to cash flows from operating
activities
|
|
|
Depreciation of
property, plant, and equipment
|
3,976
|
4,039
|
Depreciation of
right-of-use assets
|
10,479
|
10,121
|
Amortization of
intangible assets
|
2,736
|
3,303
|
Loss on disposal of
capital assets
|
6
|
14
|
Share-based
compensation
|
243
|
288
|
Deferred income tax
recovery
|
(367)
|
—
|
Other
|
(152)
|
(753)
|
Net change in non-cash
working capital balances related to operations
|
(15,077)
|
14,193
|
Interest
expense
|
6,357
|
6,257
|
Interest
income
|
(178)
|
(298)
|
Cash flows from
(used for) operating activities
|
(17,384)
|
15,218
|
|
|
|
INVESTING
ACTIVITIES
|
|
|
Net purchases of
property, plant, and equipment
|
(2,091)
|
(839)
|
Addition of intangible
assets
|
(6,024)
|
(1,991)
|
Proceeds from disposal
of equity investment
|
—
|
516
|
Interest
received
|
178
|
298
|
Cash flows used for
investing activities
|
(7,937)
|
(2,016)
|
|
|
|
FINANCING
ACTIVITIES
|
|
|
Repayment of principal
on lease liabilities
|
(11,636)
|
(10,705)
|
Interest
paid
|
(6,357)
|
(6,257)
|
Proceeds from share
issuances
|
—
|
9
|
Cash flows used for
financing activities
|
(17,993)
|
(16,953)
|
|
|
|
Effect of foreign
currency exchange rate changes on cash and cash
equivalents
|
13
|
228
|
|
|
|
Net decrease in cash
and cash equivalents during the period
|
(43,301)
|
(3,523)
|
Cash and cash
equivalents, beginning of period
|
86,469
|
84,935
|
Cash and cash
equivalents, end of period
|
43,168
|
81,412
|
|
|
|
Non-IFRS Financial
Measures
The following table reconciles adjusted EBITDA to net loss
before income taxes, the most comparable IFRS measure:
|
13-week
|
|
13-week
|
|
|
period
ended
|
%
Revenue
|
period ended
|
% Revenue
|
|
July
2,
|
July 3,
|
(millions of Canadian
dollars)
|
2022
|
2021
|
Revenue
|
204.6
|
100.0
|
172.1
|
100.0
|
Cost of
sales
|
(122.8)
|
60.0
|
(101.6)
|
59.0
|
Cost of
operations
|
(56.8)
|
27.8
|
(47.0)
|
27.3
|
Selling, general and
administrative expenses
|
(27.3)
|
13.3
|
(22.0)
|
12.8
|
Depreciation of
right-of-use assets
|
(10.5)
|
5.1
|
(10.1)
|
5.9
|
Finance charges related
to leases
|
(6.4)
|
3.1
|
(6.3)
|
3.7
|
Adjusted
EBITDA1
|
(19.2)
|
9.4
|
(14.9)
|
8.7
|
Depreciation of
property, plant and equipment
|
(4.0)
|
2.0
|
(4.0)
|
2.3
|
Amortization of
intangible assets
|
(2.7)
|
1.3
|
(3.3)
|
1.9
|
Net interest
income
|
0.2
|
0.1
|
0.3
|
0.2
|
Loss before income
taxes
|
(25.8)
|
12.6
|
(21.9)
|
12.7
|
1 Earnings
before interest, taxes, depreciation, amortization, asset
disposals, share of loss from equity investments, and impairment,
and includes IFRS 16 right-of-use asset depreciation and associated
finance charges.
|
SOURCE Indigo Books & Music
Inc.