Indigo Books & Music's fiscal Q3 earnings slipped to C$23.7M from C$27M a year ago as revenue grew 0.5% to C$352.9M; comparable-store sales up 1.8% at Indigo and Chapters superstores

Cindy Allen

TORONTO , February 9, 2012 (CNW Group) – Indigo Books & Music Inc. (TSX: IDG), Canada's largest book, gift and specialty toy retailer reported a 0.5% growth in revenue for its third quarter ending December 31, 2011. Revenue for the quarter was $352.9 million, up $1.7 million from last year driven by growth in the gift, lifestyle, toy, and eReader businesses.

On a comparable store basis, Indigo and Chapters superstores posted a 1.8% increase in revenue, and Coles and IndigoSpirit small format stores were up by 2.5%. Sales from Indigo's online channel, chapters.indigo.ca were up 9.3% compared to last year.

Commenting on the results, CEO Heather Reisman said, "We were very pleased with our holiday results. We recorded the highest sales day in the history of our Company during December and experienced double digit growth in our gift, lifestyle, and toy businesses".

Net profit from continuing operations for the quarter was $23.7 million compared to a net profit from continuing operations of $27.0 million last year. Ms. Reisman noted, "The reduced profit was due to lower gross margins as a result of increased promotional discounts to drive print sales and increased sales of low margin eReaders. This margin impact has not yet been offset by expected growth in the gift, lifestyle and toy businesses. The Company also recorded a $4.0 million non-cash asset impairment charge during the quarter. Excluding this charge, net profit increased $0.7 million."

During the quarter, the Company entered into an agreement with Rakuten, Inc. to acquire all of the outstanding shares of Kobo Inc. on a fully diluted basis for an aggregate price of US$315 million. The sale was completed shortly after quarter end and Indigo received US$146.1 million from the proceeds of the sale. The Company noted that it intends to keep the cash proceeds to support its growth and transformation strategy.

The Company also announced that Ted Marlow decided to return to the U.S. and has stepped down from his role as President. "We thank Ted for his leadership over the past year," said Ms. Reisman.

The Board of Directors today approved a quarterly dividend of 11 cents per common share to be paid on March 12, 2012, to all shareholders of record as of February 24, 2012.

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 in Canada; 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. In order to provide additional insight into the business, the Company has also provided non-IFRS data, including comparative store sales growth, 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. Comparative store sales growth 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. Comparable store sales are defined as sales generated by stores that have been open for more than 12 months on a 52-week basis.

About Indigo Books & Music Inc.

Indigo is a publicly traded Canadian company listed on the Toronto Stock Exchange (IDG) and the majority shareholder of the global eReading service Kobo Inc. As the largest book, gift and specialty toy retailer in Canada, Indigo operates in all provinces under different banners including Indigo Books & Music; Indigo Books, Gifts, Kids; IndigoSpirit, Chapters, The World's Biggest Bookstore, and Coles. The online channel, indigo.ca, features books, eBooks, toys, gifts and, and hosts the award winning Indigo Online Community. In 2004, Indigo founded the Indigo Love of Reading Foundation, a registered charity that provides new books and education materials to high-needs Canadian elementary schools, to address the literacy crisis in Canada. To date the Foundation has contributed $10.5 million to schools in need. Visit loveofreading.org for more information.

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