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Feb 5, 2021

Forced store closures dampen Indigo's holiday sales period, but profits still climb

Retailers shouldered an 'enormous cost' while others benefitted from lockdowns: Indigo CEO

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TORONTO -- Indigo Books and Music Inc. started the lucrative holiday sales period with one of its strongest performances on record before new COVID-19 lockdowns dampened the chain's sales, CEO Heather Reisman said.

"Double-digit revenue growth in the first seven weeks of the quarter had set us on a trajectory for meaningful growth," Reisman said in pre-recorded comments shared during a call with analysts on Friday.

"Our retail stores were experiencing a steady recovery prior to the government-mandated closures and limitations, all of which impacted us during the most important six weeks of this quarter and in fact, of our year, including the two weeks before Christmas and the early part of the Boxing Week period."

Still, while the Toronto-based retailer's third-quarter revenue slipped to $365.4 million, down five per cent from $383.7 million, its net profit grew nearly 19 per cent.

The book and lifestyle chain reported $30.7 million profit for the three months ended Dec. 26, up from a profit of $25.8 million in the same quarter a year earlier.

Indigo said its profit for the quarter amounted to $1.09 per diluted share, up from a profit of 94 cents per diluted share a year earlier.

Revenue growth in the first seven weeks of the quarter provided some cushion, the company said, but not enough to fully compensate for government-mandated COVID-19 closures in Ontario, Quebec and Manitoba.

"We believe that our revenue, when we look at the impact of those closures, would have been above last year in the quarter had those closures not happened in the holiday (period)," Indigo chief financial officer Craig Loudon told analysts during the call.

Bright spots in the quarter included double-digit growth in the company's baby and wellness categories, Indigo said.

 Also, e-commerce revenue grew 92 per cent as Indigo enhanced so-called omnichannel capabilities, including click-and-collect, curbside pickup and Instacart, which blunted some of the effects of mandated reclosures, the company said.

"These results are a testament to the demonstrated resilience of our teams and a deep affinity for our brand, achieved against massive disruption from mandated shutdowns and store limitations during the most important six weeks of our year," Reisman said in a statement.

"These shutdowns created a particularly uneven playing field in Ontario with 'essential' retailers selling all non-essential items, a practice disallowed by other provinces."

Meanwhile, the appointment of former Anthropologie URBN Group executive Peter Ruis to the role of president will help Indigo "pivot to a living-with-intention company" with books at its core, Reisman said.

As part of its efforts to establish itself as a lifestyle company, the company also launched a podcast last month called Well Said, hosted by Reisman and journalist Shivani Persad.

It will feature "meaningful conversations about the art and science of living well."