Indigo Books and Music Inc., Canada’s largest bookstore chain, said fiscal third-quarter profit soared 60 per cent as the company’s shift to general merchandise begins to pay dividends.
Net income jumped to $52.8 million, or $2.02 a share, compared with $33 million, or $1.27, for the same period last year, the organization said in a statement. Revenue for that quarter ended Dec. 26 grew 13 percent to $383.2 million.
The highest quarterly profit in 3 years shows Indigo is starting to see the outcomes of the restructuring that transformed the embattled book peddler into what Ceo Heather Reisman calls a profitable “cultural mall.”
“It had been a good quarter soon after good quarters,” Reisman said. “It’s gaining some traction. So, it feels terrific.”
The Toronto-based retailer posted its second-straight quarter of double-digit same store sales gains. On the comparable basis, sales jumped 16 percent for its Indigo and Chapters superstores, while Coles and Indigospirit small-format stores rose 13 percent. Online sales grew almost 18 percent.
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Share Gains
The improved performance has caught the attention of investors. Indigo’s shares have gained 18 percent in the last Twelve months, in contrast to a 14 per cent decline within the Standard & Poor’s/TSX Index. It has also outperformed the S&P/TSX Consumer Discretionary Index, that has fallen 10 per cent.
Indigo’s closest United states comparable, U.S. book chain Barnes and Noble Inc., has witnessed its very own shares fall 46 per cent over the same period. Barnes and Noble’s same store sales last fiscal year fell 1.9 per cent while Indigo’s grew 5.7 percent, according to data compiled by Bloomberg.
Indigo began laying the groundwork for its transformation four years ago, Reisman said. The emerging threats of e- readers an internet-based booksellers like Amazon.com Inc. were beginning to eat into revenue, and Indigo needed to diversify its revenue to offset the declines, Reisman said.
Under Reisman, who founded the organization in 1996 and bought her biggest competitor, Chapters, in 2001, Indigo has were able to survive where its competitors, like Borders Group Inc., have failed.
Business Rout
“It wasn’t clear at the start: Was there likely to be this same move in books there was in music? Was it likely to be a rout from the business or not,” Reisman said.
Indigo launched its very own e-reader Kobo before it was bought from 2011. The new competitors were supposed to cut sales about 20 per cent based on some estimates, she said.
“The minute you are taking 20 per cent out of any business, you’re taking away your profit,” she said. “So, we said, how can we re-imagine this?”
The transformation plan called for Indigo Books to begin selling everything from toys to iPads, Fitbits and dinnerware alongside the children, tech, personal fitness, and cook books to drum up sales. Those work is starting to take hold.
General merchandise now makes up about about 40 per cent of sales, Reisman said.
Books Rebound
While the general merchandise grew at a double-digit rate in the past quarter, book sales are also steadily improving over the past year, and were up ‘single-digits’ during the last quarter because the popularity of e-readers began to decline and also the adult coloring books craze became popular.
Indigo’s shares continue to be trading at about $13 in Toronto, well below Reisman’s goal of returning to the $20 range. The stock has traded below $20 because the early 2000s, after an initial public offering at $15 in 1996.
Reisman asserted remains a goal. “We are certainly doing everything in our power,” she said.
Bloomberg News
