Indigo Reports Full Year Results for Fiscal 2019

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Indigo Reports Full Year Results for Fiscal 2019

Canada NewsWire

TORONTO, May 28, 2019 /CNW/ - Indigo Books & Music Inc. (TSX: IDG), Canada's largest book, gift and specialty toy retailer reported revenue of $1.05 billion for its fiscal year ended March 30, 2019. Total revenue decreased by $32.8 million or 3.0% compared to the previous year. Total comparable sales, including both online sales and comparable store sales, decreased by 1.1%.

Indigo Books & Music Inc. (CNW Group/Indigo Books & Music Inc.)

Revenues were challenged by the operating stresses stemming from major store renovations, relocations, store closures, and the prolonged Canada Post strike, which significantly impacted performance throughout the period with lagging effects into the fourth quarter. Results were then further impacted by a pull back in consumer spending on nonessentials in the fourth quarter.

Commenting on the results, CEO Heather Reisman said: "This year we experienced a shift in our top line momentum of the last several years.  That said, we have every confidence in the investments we have made, in our customers' deep affection for our brand, and in our mission to enrich the lives of Canadians."  

Indigo reported a net loss of $36.8million ($1.35 net loss per common share) compared to net earnings of $22.0 million ($0.82 net earnings per common share) last year. This decline in profitability was largely attributed to the factors noted above and deeper discounting in response to these revenue fluctuations. A change in accounting estimates of $11.9 million for breakage which resulted in a benefit in fiscal 2018 also contributed to the unfavourable year-over-year variance. 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 in response to its growth in recent years.

Revenue for the fourth quarter was $199.2 million, down $16.2 million from the same quarter last year. Total comparable sales, including both online sales and comparable store sales, decreased by 8.7% in the fourth quarter. The Company believes that a broader slowing of consumer discretionary spending in the fourth quarter had a meaningful impact. Net loss for the quarter was $23.8 million compared to a net loss of $10.7 million last year. In addition to the broader economic conditions and assortment challenges that affected full-year results, the timing of Easter negatively impacted the quarter.

Despite the challenging year, the Company invested in its business in a meaningful way to drive long-term top and bottom-line returns. The Company delivered its new store concept to 17 more locations in fiscal 2019, including the opening of its first store in the U.S. Additionally, the Company operationalized its new distribution facility in Alberta to support growth and to provide faster, more efficient service to its customers in Western Canada.

During the fourth quarter, the Company launched a cost reduction and productivity initiative focussed on improving the Company's profitability in the coming fiscal year. In conjunction with the appointment of Nathan Williams as Chief Creative Officer, and subsequent to the fiscal year-end, the Company decided to repatriate its global sourcing and product development functions from New York to Toronto.

Also, in May 2019, 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 over $31 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, May 29th, 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 72103914.

A playback of the call will also be available by telephone until 11:59 p.m. (ET) on Wednesday, June 5th, 2019. The call playback can be accessed after 11:00 a.m. (ET) on Wednesday, May 29st, 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 103914#. 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 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, 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, 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



 March 30,

 March 31,

(thousands of Canadian dollars)


2019

2018 1





ASSETS




Current




Cash and cash equivalents


41,290

150,256

Short-term investments


87,150

60,000

Accounts receivable


10,543

6,747

Inventories


252,541

264,586

Prepaid expenses


5,802

4,124

Income taxes receivable


483

-

Derivative assets


1,070

1,439

Other assets


853

865

Total current assets


399,732

488,017

Property, plant, and equipment, net


125,906

82,314

Intangible assets, net


32,527

24,215

Equity investments


4,359

4,330

Deferred tax assets


47,940

35,087

Total assets


610,464

633,963

LIABILITIES AND EQUITY




Current




Accounts payable and accrued liabilities 


179,180

177,344

Unredeemed gift card liability


48,729

44,218

Provisions


60

166

Deferred revenue


7,636

7,029

Income taxes payable 


-

152

Derivative liabilities


-

327

Total current liabilities


235,605

229,236

Long-term accrued liabilities


4,698

2,283

Long-term provisions


45

45

Total liabilities


240,348

231,564

Equity




Share capital


225,531

221,854

Contributed surplus


12,716

11,621

Retained earnings 


131,311

168,109

Accumulated other comprehensive income 


558

815

Total equity


370,116

402,399

Total liabilities and equity


610,464

633,963





1 Certain prior period figures have been restated due to the adoption of IFRS 15. Refer to Note 4
of the consolidated financial statements for additional information.

 

Consolidated Statements of Earnings (Loss) and Comprehensive Earnings (Loss)












13-week

13-week

52-week

52-week


period ended

period ended

period ended

period ended


March 30,

March 31,

March 30,

March 31,

(thousands of Canadian dollars, except per share data)

2019

2018 1

2019

2018 1






Revenue 

199,164

215,363

1,046,824

1,079,618

Cost of sales 

(120,844)

(122,639)

(619,878)

(604,094)

Gross profit

78,320

92,724

426,946

475,524

Operating, selling, and administrative expenses

(111,113)

(108,668)

(480,662)

(448,909)

Operating profit (loss)

(32,793)

(15,944)

(53,716)

26,615

Net interest income 

938

999

3,220

3,010

Share of earnings (loss) from equity investments

(836)

(356)

858

1,049

Earnings (loss) before income taxes

(32,691)

(15,301)

(49,638)

30,674

Income tax recovery (expense)





Current


(399)


(489)

Deferred

8,929

4,970

12,840

(8,244)

Net earnings (loss)

(23,762)

(10,730)

(36,798)

21,941






Other comprehensive income (loss)





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





Net change in fair value of cash flow hedges
[net of taxes of 507 and (897) ; 2018 - (608) and 897]

(1,382)

1,470

2,439

(2,648)

Reclassification of net realized (gain) loss
[net of taxes of 330 and 908 ; 2018 - (302) and (1,194)]

(900)

828

(2,471)

3,268

Foreign currency translation adjustment [net of taxes of (6)]

(225)

-

(225)

-

Other comprehensive income (loss)

(2,507)

2,298

(257)

620






Total comprehensive earnings (loss)

(26,269)

(8,432)

(37,055)

22,561






Net earnings (loss) per common share





Basic

($0.86)

($0.40)

($1.35)

$0.82

Diluted 

($0.86)

($0.40)

($1.35)

$0.81






1 Certain prior period figures have been restated due to the adoption of IFRS 15. Refer to Note 4 of the consolidated financial statements for additional
information.

 

Consolidated Statements of Cash Flows





52-week 

52-week 


period ended

period ended


March 30,

March 31,

(thousands of Canadian dollars)

2019

2018 1




OPERATING ACTIVITIES 



Net earnings (loss) for the period

(36,798)

21,941

Adjustments to reconcile net earnings (loss) to cash flows from operating activities



Depreciation of property, plant, and equipment 

21,920

19,074

Amortization of intangible assets

10,650

7,922

Loss on disposal of capital assets

2,088

776

Share-based compensation 

1,514

1,588

Directors' compensation

350

341

Deferred income tax expense (recovery)

(12,840)

8,244

Disposal of assets held for sale

-

1,037

Other

(809)

1,042

Net change in non-cash working capital balances

15,211

(29,528)

Interest expense

6

10

Interest income

(3,226)

(3,020)

Share of earnings from equity investments

(858)

(1,049)

Cash flows from (used for) operating activities

(2,792)

28,378




INVESTING ACTIVITIES



Purchase of property, plant, and equipment

(67,505)

(37,080)

Addition of intangible assets 

(19,056)

(16,871)

Change in short-term investments

(27,150)

40,000

Distribution from equity investments

829

1,233

Interest received

3,225

2,872

Investment in associate

-

(2,714)

Cash flows used for investing activities

(109,657)

(12,560)




FINANCING ACTIVITIES



Proceeds from share issuances

2,908

4,904

Cash flows from financing activities

2,908

4,904




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

575

(904)




Net increase (decrease) in cash and cash equivalents during the period

(108,966)

19,818

Cash and cash equivalents, beginning of period

150,256

130,438

Cash and cash equivalents, end of period

41,290

150,256




1 Certain prior period figures have been restated due to the adoption of IFRS 15. Refer to Note 4 of the
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


52-week

52-week




period ended

period ended

% increase

(decrease)

period ended

period ended

% increase
(decrease)



March 30,

March 31,

March 30,

March 31,

(millions of Canadian dollars)

2019

2018 1

2019

2018 1

Revenue


199.2

215.4

(7.5)

1,046.8

1,079.6

(3.0)

Adjustments







Other revenue 2

(0.6)

(3.5)


(14.7)

(30.6)


Stores not in both fiscal periods

(21.5)

(17.9)


(85.8)

(92.1)


Total comparable sales

177.1

193.9

(8.7)

946.3

956.9

(1.1)

1 Certain prior period figures have been restated due to the adoption of IFRS 15. Refer to Note 4 of the consolidated financial statements for additional
information.

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



 

SOURCE Indigo Books & Music Inc.

View original content to download multimedia: http://www.newswire.ca/en/releases/archive/May2019/28/c5324.html

Copyright CNW Group 2019

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