TORONTO, Nov. 9, 2022
/CNW/ - Indigo Books & Music Inc. (TSX: IDG), Canada's largest book and lifestyle retailer,
reported financial results for the 13-week period ended
October 1, 2022 compared to the
13-week period ended October 2,
2021.
The Company recognized total revenue of $236.2 million in the quarter. In the prior year,
the Company recognized total revenue of $238.8 million, which was inclusive of a one-time
payment of $17.0 million from the
renegotiation of its partnership with a café vendor. Merchandise
sales, the total of retail and online sales and excluding other
revenues, were a record high of any second quarter for the
Company.
Top-line performance was driven by the continued recovery of the
retail channel, which for the first time since the onset of the
COVID-19 pandemic, achieved sales that exceeded the last comparable
pre-pandemic quarter. This was accomplished despite reduced traffic
levels, which continued to normalize but still remain challenged.
The online channel maintained momentum, sustaining growth levels of
over 84% to the comparable pre-pandemic quarter.
Sales results reflect an evolved assortment strategy that is
resonating with customers. The Company's general merchandise
business achieved the highest ever revenue outside of a holiday
sales quarter, demonstrating the Company's success at scaling this
important business line. The baby and lifestyle product categories,
including home and wellness, achieved double-digit growth, buoyed
by the continued success of Indigo's proprietary brand portfolio.
Sales further benefited from the resilience of the print business,
which continued to see growth in fiction categories, fueled by a
younger demographic of readers.
Commenting on the results, CEO Peter
Ruis said: "We are pleased to achieve record merchandise
sales, demonstrating the strength of our assortment and customers'
affinity for the Indigo brand. We look to continue to scale our
top-line business moving forward, while managing the headwinds
created by the current macro-economic environment. I'd also like to
share that we recently publicly released our Climate Report, and
are proud of our progress towards sustainability and becoming a
net-zero company."
Adjusted EBITDA for the quarter was a loss of $10.6 million compared to earnings of
$10.6 million for the same period
last year. The prior year results benefited from the above
mentioned $17.0 million one-time
payment on the renegotiation with a café vendor and external
COVID-19 support of $2.0 million.
Current macro-economic conditions had a negative impact on costs,
including $1.8 million of incremental
international freight in the quarter, as well as other inflationary
pressures. The penetration of promotions had also increased since
peak pandemic, when the Company had elevated full-priced sell
through rates. Additional investments were also made in technology
and marketing initiatives in the quarter, aimed at furthering sales
momentum and driving productivity and growth. These factors
impacted the net loss position, which changed by $19.4 million to a loss of $15.9 million ($0.57 net loss per basic common share) compared
to net earnings of $3.5 million
($0.13 net earnings per basic common
share) in the prior year.
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, November
10th, 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 30095746.
A playback of the call will also be available by telephone until
11:59 p.m. (ET) on November 17th, 2022. The call playback
can be accessed after 12:00 p.m. (ET)
on November 10th, 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 095746 #. 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
|
|
October
1,
|
October 2,
|
April 2,
|
(thousands of Canadian
dollars)
|
2022
|
2021
|
2022
|
|
|
|
|
ASSETS
|
|
|
|
Current
|
|
|
|
Cash and cash
equivalents
|
22,635
|
71,905
|
86,469
|
Accounts
receivable
|
14,708
|
19,239
|
12,941
|
Inventories
|
379,713
|
317,458
|
273,849
|
Prepaid
expenses
|
7,891
|
15,847
|
13,508
|
Derivative
assets
|
7,041
|
353
|
—
|
Other assets
|
1,323
|
1,071
|
3,246
|
Total current
assets
|
433,311
|
425,873
|
390,013
|
Property, plant, and
equipment, net
|
59,068
|
69,999
|
64,319
|
Right-of-use assets,
net
|
317,850
|
332,954
|
333,767
|
Intangible assets,
net
|
28,601
|
20,079
|
21,171
|
Equity investment,
net
|
—
|
2,156
|
97
|
Total
assets
|
838,830
|
851,061
|
809,367
|
LIABILITIES AND
EQUITY (DEFICIT)
|
|
|
|
Current
|
|
|
|
Accounts payable and
accrued liabilities
|
246,452
|
247,932
|
178,138
|
Related party credit
facility
|
20,000
|
—
|
—
|
Unredeemed gift card
liability
|
57,021
|
52,570
|
62,653
|
Provisions
|
575
|
2,206
|
472
|
Deferred
revenue
|
21,056
|
19,838
|
20,699
|
Short-term lease
liabilities
|
69,583
|
64,306
|
69,100
|
Derivative
liabilities
|
—
|
—
|
631
|
Total current
liabilities
|
414,687
|
386,852
|
331,693
|
Long-term accrued
liabilities
|
840
|
1,190
|
1,068
|
Long-term
provisions
|
764
|
633
|
702
|
Long-term lease
liabilities
|
430,095
|
455,629
|
448,084
|
Total
liabilities
|
846,386
|
844,304
|
781,547
|
Equity
(deficit)
|
|
|
|
Share
capital
|
227,090
|
227,026
|
227,090
|
Contributed
surplus
|
15,033
|
14,372
|
14,618
|
Retained
deficit
|
(254,709)
|
(235,074)
|
(213,403)
|
Accumulated other
comprehensive income (loss)
|
5,030
|
433
|
(485)
|
Total equity
(deficit)
|
(7,556)
|
6,757
|
27,820
|
Total liabilities
and equity (deficit)
|
838,830
|
851,061
|
809,367
|
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
1,
|
October 2,
|
October
1,
|
October 2,
|
(thousands of Canadian
dollars, except per share data)
|
2022
|
2021
|
2022
|
2021
|
|
|
|
|
|
Revenue
|
236,247
|
238,814
|
440,803
|
410,894
|
Cost of
sales
|
(140,762)
|
(128,813)
|
(263,570)
|
(230,456)
|
Gross
profit
|
95,485
|
110,001
|
177,233
|
180,438
|
Operating, selling, and
other expenses
|
(106,666)
|
(100,437)
|
(208,009)
|
(186,861)
|
Operating profit
(loss)
|
(11,181)
|
9,564
|
(30,776)
|
(6,423)
|
Net interest
expense
|
(6,217)
|
(6,118)
|
(12,396)
|
(12,077)
|
Earnings (loss)
before income taxes
|
(17,398)
|
3,446
|
(43,172)
|
(18,500)
|
Income tax
recovery
|
1,499
|
94
|
1,866
|
94
|
Net earnings
(loss)
|
(15,899)
|
3,540
|
(41,306)
|
(18,406)
|
|
|
|
|
|
Other comprehensive
income
|
|
|
|
|
Items that are or may
be reclassified subsequently to net earnings (loss), net of
taxes:
|
|
|
|
|
Change in fair value of cash
flow hedges
|
4,848
|
1,504
|
6,738
|
226
|
Reclassification of realized
loss (gain)
|
(690)
|
326
|
(932)
|
1,654
|
Foreign currency translation
adjustment
|
(156)
|
(35)
|
(291)
|
73
|
Other comprehensive
income
|
4,002
|
1,795
|
5,515
|
1,953
|
|
|
|
|
|
Total comprehensive
earnings (loss)
|
(11,897)
|
5,335
|
(35,791)
|
(16,453)
|
|
|
|
|
|
Net earnings (loss)
per common share
|
|
|
|
|
Basic
|
$(0.57)
|
$0.13
|
$(1.49)
|
$(0.66)
|
Diluted
|
$(0.57)
|
$0.13
|
$(1.49)
|
$(0.66)
|
Consolidated
Statements of Cash Flows
|
(Unaudited)
|
|
13-week
|
13-week
|
26-week
|
26-week
|
|
period
ended
|
period ended
|
period
ended
|
period ended
|
|
October
1,
|
October 2,
|
October
1,
|
October 2,
|
(thousands of Canadian
dollars)
|
2022
|
2021
|
2022
|
2021
|
|
|
|
|
|
OPERATING
ACTIVITIES
|
|
|
|
|
Net earnings
(loss)
|
(15,899)
|
3,540
|
(41,306)
|
(18,406)
|
Adjustments to
reconcile net earnings (loss) to cash flows from (used for)
operating activities
|
|
|
|
|
Depreciation of property,
plant and equipment
|
3,967
|
4,012
|
7,943
|
8,051
|
Depreciation of right-of-use
assets
|
10,586
|
9,027
|
21,065
|
19,148
|
Amortization of intangible
assets
|
3,091
|
3,181
|
5,827
|
6,484
|
Loss on disposal of capital
assets
|
68
|
16
|
74
|
30
|
Gain on disposal of equity
investment
|
(186)
|
—
|
(186)
|
—
|
Share-based
compensation
|
172
|
313
|
415
|
601
|
Deferred income tax
recovery
|
(1,499)
|
(94)
|
(1,866)
|
(94)
|
Other
|
(248)
|
149
|
(400)
|
(604)
|
Net change in non-cash
working capital balances related to operations
|
(22,038)
|
(15,965)
|
(37,115)
|
(1,772)
|
Interest
expense
|
6,371
|
6,237
|
12,728
|
12,494
|
Interest
income
|
(154)
|
(119)
|
(332)
|
(417)
|
Cash flows from
(used for) operating activities
|
(15,769)
|
10,297
|
(33,153)
|
25,515
|
|
|
|
|
|
INVESTING
ACTIVITIES
|
|
|
|
|
Net purchases of
property, plant, and equipment
|
(71)
|
(184)
|
(2,162)
|
(1,023)
|
Addition of intangible
assets
|
(7,234)
|
(3,657)
|
(13,258)
|
(5,648)
|
Proceeds from disposal
of equity investments
|
283
|
—
|
283
|
516
|
Interest
received
|
154
|
119
|
332
|
417
|
Cash flows used for
investing activities
|
(6,868)
|
(3,722)
|
(14,805)
|
(5,738)
|
|
|
|
|
|
FINANCING
ACTIVITIES
|
|
|
|
|
Repayment of principal
on lease liabilities
|
(11,617)
|
(10,338)
|
(23,253)
|
(21,043)
|
Interest
paid
|
(6,371)
|
(6,237)
|
(12,728)
|
(12,494)
|
Related party credit
facility
|
20,000
|
—
|
20,000
|
—
|
Proceeds from share
issuances
|
—
|
20
|
—
|
29
|
Cash flows from
(used for) financing activities
|
2,012
|
(16,555)
|
(15,981)
|
(33,508)
|
|
|
|
|
|
Effect of foreign
currency exchange rate changes on cash and cash
equivalents
|
92
|
473
|
105
|
701
|
|
|
|
|
|
Net decrease in cash
and cash equivalents during the period
|
(20,533)
|
(9,507)
|
(63,834)
|
(13,030)
|
Cash and cash
equivalents, beginning of period
|
43,168
|
81,412
|
86,469
|
84,935
|
Cash and cash
equivalents, end of period
|
22,635
|
71,905
|
22,635
|
71,905
|
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
1,
|
October 2,
|
October
1,
|
October 2,
|
(millions of Canadian
dollars)
|
2022
|
2021
|
2022
|
2021
|
Revenue
|
236.2
|
238.8
|
440.8
|
410.9
|
Cost of
sales
|
(140.8)
|
(128.8)
|
(263.6)
|
(230.5)
|
Cost of
operations
|
(63.7)
|
(59.6)
|
(120.5)
|
(106.6)
|
Selling, general and
administrative expenses
|
(25.4)
|
(24.6)
|
(52.8)
|
(46.6)
|
Depreciation of
right-of-use assets
|
(10.6)
|
(9.0)
|
(21.1)
|
(19.1)
|
Finance charges related
to leases
|
(6.4)
|
(6.2)
|
(12.7)
|
(12.5)
|
Adjusted
EBITDA1
|
(10.6)
|
10.6
|
(29.8)
|
(4.4)
|
Depreciation of
property, plant and equipment
|
(4.0)
|
(4.0)
|
(7.9)
|
(8.1)
|
Amortization of
intangible assets
|
(3.1)
|
(3.2)
|
(5.8)
|
(6.5)
|
Loss on disposal of
capital assets
|
(0.1)
|
—
|
(0.1)
|
—
|
Gain on disposal of
equity investment
|
0.2
|
—
|
0.2
|
—
|
Net interest
income
|
0.2
|
0.1
|
0.3
|
0.4
|
Earnings (loss)
before income taxes
|
(17.4)
|
3.5
|
(43.2)
|
(18.6)
|
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.