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Indigo Reports First Quarter Financial Results: Aggressive Investment Program and Comparable Sales Growth of 2.4%

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Indigo Reports First Quarter Financial Results: Aggressive Investment Program and Comparable Sales Growth of 2.4%

Canada NewsWire

TORONTO, Aug. 7, 2018 /CNW/ - Indigo Books & Music Inc. (TSX:IDG), Canada's largest book, gift and specialty toy retailer reported total comparable sales growth of 2.4% for the first quarter of its current 2019 fiscal year, including both online sales and comparable store sales.

Revenue for the first quarter ended June 30, 2018 was $205.4 million compared to $206.4 million in the same period last year. Online sales continued to grow across all categories, in books and general merchandise, with highly successful promotional campaigns driving a meaningful increase in e-commerce traffic and average order value. The retail channel experienced expected downward pressure due to a number of stores undergoing renovations and the closure of a few low performing stores as part of the Company's retail transformation, while renovated stores continued to deliver double-digit growth. Lower revenue was also driven by a one-time gift card breakage revenue adjustment of $3.8 million in the prior period, due to a change in accounting estimates.

Commenting on the results, CEO Heather Reisman said: "This quarter marks the beginning of the most aggressive investment period in our history. We are making major investments in our Canadian retail network, we've just opened our new Calgary distribution centre, we continue to make meaningful investments in our digital platform and we are poised to open our first US store. As with any period of major investment, this has put temporary pressure on our profitability. Based on the tremendous response to our new concept stores and the growth we are seeing online, we are confident this period of investment will solidify our position as a valued retailer."

Net loss for the first quarter was $15.4 million ($0.57 net loss per common share) compared to a net loss of $5.3 million ($0.20 net loss per common share) last year. This decline in profitability was primarily driven by the impact of the Company's investment in strategic initiatives, including store renovations and the expansion of its distribution facilities, as well as a change in accounting estimates for breakage in the prior year. Indigo ended the quarter in a very strong financial position with cash and short-term investments of $154.9 million and no debt.

As the Company is rolling out its new store concept, renovated stores continue to perform exceptionally well, justifying the plan to accelerate this major retail transformation in the coming quarters, including the opening of a first location in the U.S. Additionally, the Company is launching operations in its new Alberta distribution centre, allowing it to provide faster and more efficient service to its customers across Canada.

In May 2018, the Indigo Love of Reading Foundation granted an additional $1.5 million to 30 high-needs elementary schools across Canada, bringing the total committed by the Foundation to $28 million since its inception in 2004.

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 8th, 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 11032355.

A playback of the call will also be available by telephone until 11:59 p.m. (ET) on Wednesday, August 15th, 2018. The call playback can be accessed after 11:00 a.m. (ET) on Wednesday, August 8th, 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 032355#. 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 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 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 under different banners including Indigo Books & Music; 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 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 $28 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



 June 30,

 July 1,

 March 31,

(thousands of Canadian dollars)


2018

2017 1

2018 1






ASSETS





Current





Cash and cash equivalents


94,907

96,661

150,256

Short-term investments


60,000

100,000

60,000

Accounts receivable


12,370

9,645

6,747

Inventories


257,718

242,287

264,586

Prepaid expenses


6,845

13,686

4,124

Derivative assets


3,216

-

1,439

Other assets


922

794

865

Total current assets


435,978

463,073

488,017

Property, plant, and equipment


94,708

66,592

82,314

Intangible assets


27,184

15,110

24,215

Equity investments


3,163

3,459

4,330

Deferred tax assets


40,431

46,372

35,563

Total assets


601,464

594,606

634,439

LIABILITIES AND EQUITY





Current





Accounts payable and accrued liabilities


159,111

164,769

177,344

Unredeemed gift card liability


42,027

46,584

44,218

Provisions


160

110

166

Deferred revenue


7,180

11,577

7,029

Income taxes payable


152

360

152

Derivative liabilities


106

2,292

327

Total current liabilities


208,736

225,692

229,236

Long-term accrued liabilities


2,472

1,719

2,283

Long-term provisions


45

44

45

Total liabilities


211,253

227,455

231,564

Equity





Share capital


222,699

216,359

221,854

Contributed surplus


12,041

11,141

11,621

Retained earnings


153,196

141,330

168,585

Accumulated other comprehensive income (loss)

2,275

(1,679)

815

Total equity


390,211

367,151

402,875

Total liabilities and equity


601,464

594,606

634,439






1 Certain prior period figures have been restated due to the adoption of IFRS 15. Refer to Note 3 of the condensed
interim consolidated financial statements for additional information.

 

Consolidated Statements of Loss and Comprehensive Loss








13-week

13-week


period ended

period ended


June 30,

July 1,

(thousands of Canadian dollars, except per share data)

2018

2017 1




Revenue

205,376

206,357

Cost of sales

(117,463)

(112,449)

Gross profit

87,913

93,908

Operating, selling, and administrative expenses

(108,788)

(100,901)

Operating loss

(20,875)

(6,993)

Net interest income

810

597

Share of loss from equity investments

(639)

(573)

Loss before income taxes

(20,704)

(6,969)

Income tax recovery

5,315

1,707

Net loss

(15,389)

(5,262)




Other comprehensive income (loss)



Items that are or may be reclassified subsequently to net earnings:



Net change in fair value of cash flow hedges




[net of taxes of (554); 2017 - 667]

1,505

(1,826)

Reclassification of net realized loss




[net of taxes of 16; 2017 - 17]

(45)

(48)

Other comprehensive income (loss)

1,460

(1,874)




Total comprehensive loss

(13,929)

(7,136)




Net loss per common share



Basic

$

(0.57)

$

(0.20)

Diluted

$

(0.57)

$

(0.20)




1 Certain prior period figures have been restated due to the adoption of IFRS 15. Refer to Note 3 of the condensed interim
consolidated financial statements for additional information.

 


Consolidated Statements of Cash Flows





13-week

13-week


period ended

period ended


June 30,

July 1,

(thousands of Canadian dollars)

2018

2017 1




CASH FLOWS USED FOR OPERATING ACTIVITIES



Net loss

(15,389)

(5,262)

Adjustments to reconcile net losses to cash flows from operating activities




Depreciation of property, plant, and equipment 

5,127

4,368


Amortization of intangible assets

2,192

1,907


Loss on disposal of capital assets

240

-


Share-based compensation 

489

434


Directors' compensation

89

99


Deferred tax assets

(5,406)

(1,707)


Disposal of assets held for sale

-

1,037


Other

(81)

674

Net change in non-cash working capital balances

(21,623)

(25,692)

Interest expense

3

2

Interest income

(813)

(599)

Share of earnings from equity investments

639

573

Cash flows used for operating activities

(34,533)

(24,166)




CASH FLOWS USED FOR INVESTING ACTIVITIES



Purchase of property, plant, and equipment

(17,757)

(5,882)

Addition of intangible assets 

(5,165)

(1,745)

Distribution from equity investments

528

434

Interest received

813

443

Investment in associate

-

(2,666)

Cash flows used for investing activities

(21,581)

(9,416)




CASH FLOWS FROM FINANCING ACTIVITIES



Proceeds from share issuances

688

325

Cash flows from financing activities

688

325




Effect of foreign currency exchange rate changes on cash and cash equivalents

77

(520)




Net decrease in cash and cash equivalents during the period

(55,349)

(33,777)

Cash and cash equivalents, beginning of period

150,256

130,438

Cash and cash equivalents, end of period

94,907

96,661




1Certain prior period figures have been restated due to the adoption of IFRS 15. Refer to Note 3
of the 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.

 

Non-IFRS Financial Measures








13-week

13-week



period ended

period ended



June 30,

 July 1, 


(millions of Canadian dollars)

2018

2017 1

% increase 

Revenue

205.4

206.4

(0.5)

Adjustments





Other revenue 2

(5.4)

(7.6)



Stores not in both fiscal periods

(16.3)

(19.4)


Total comparable sales

183.7

179.4

2.4


1Certain prior period figures have been restated due to the adoption of IFRS 15. Refer to Note 3 of the
condensed interim consolidated financial statements for additional information.

2Includes cafés, irewards, gift card breakage, Plum breakage, corporate sales and corporate revenue share.

 

SOURCE Indigo Books & Music Inc.

View original content: http://www.newswire.ca/en/releases/archive/August2018/07/c7959.html

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