Indigo Reports FY20 Full Year Results: Progress on repositioning disrupted by COVID-19

TORONTO, June 23, 2020 /CNW/ - Indigo Books & Music Inc. (TSX: IDG), Canada's largest book, gift and specialty toy retailer, today announced financial results for the year ended March 28, 2020. In addition, the Company provided an update on recent developments related to the COVID-19 global pandemic.

The Company reported revenue of $957.7 million for its fiscal year ended March 28, 2020. This compares with revenue of $1,046.8 million for the same period last year, a decline of 8.5%. Total comparable sales, including both online sales and comparable retail store sales, decreased by 7.9%.

Revenues declined primarily in response to the Company's strategic direction to be less promotional and the absence of a hit print title or toy item. COVID-19 disruptions also had a material negative impact on annual revenue as store closures coincided with the March Break school holidays, a period that historically drove meaningful fourth quarter store-based sales.

Commenting on the results, CEO Heather Reisman said: "Fiscal 2020 has been a critical year of restructuring, including repatriating our entire design studio from New York, and other efforts designed to lower our overall cost structure. This activity will continue and gain further traction right through Fiscal 2021."

Excluding the impact of IFRS 16, the Company reported an increase of $9.6 million in adjusted EBITDA for the year. This improvement in earnings was tempered by the adverse financial impact of COVID-19, determined as of the date of temporary store closures on March 17, 2020, which resulted in downward pressure of $9.1 million to the Company's adjusted EBITDA.

Predominantly a function of non-cash impairment charges, Indigo reported a net loss of $185.0 million ($6.72 basic net loss per common share) compared to a net loss of $36.8 million ($1.35 basic net loss per common share) last year. The loss incurred was primarily a result of non-cash impairment losses of $56.6 million, as well as a non-cash deferred income tax expense of $84.7 million associated with the write-down of the Company's deferred tax assets. These charges reflect the broader economic challenges and material uncertainty introduced by COVID-19, as well as the Company's recent operating losses.

Revenue for the fourth quarter was $178.1 million compared to revenue of $199.2 million for the same quarter last year, a decline of 10.6%. Retail sales were impacted by a fully closed retail network for two key weeks in the quarter. Net loss for the quarter was $171.3 million compared to a net loss of $23.8 million last year due primarily to the impairment and deferred tax charges noted above. In addition to the impairment charges the decision to pay retail labour wages for all scheduled shifts up until the end of March, even though stores were closed, had a material negative impact on earnings in the fourth quarter.

Adoption of IFRS 16, Leases

The Company adopted IFRS 16 Leases ("IFRS 16") in the first quarter of fiscal 2020, replacing IAS 17 Leases and related interpretations. IFRS 16 introduced a single lessee accounting model which required substantially all the Company's operating leases to be recorded on the balance sheet as a right-of-use asset and a lease liability, representing the obligation to make future lease payments. The Company implemented the standard on March 31, 2019 using the modified retrospective approach, therefore the Company's fiscal 2020 results reflect lease accounting under IFRS 16. Prior year results have not been restated and continue to be reported under IAS 17. When compared to the previous accounting method, this resulted in a material adjustment to the Company's financial statements.

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, June 24^th, 2020. 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 06414955.

A playback of the call will also be available by telephone until 11:59 p.m. (ET) on Wednesday, July 1^st, 2020. The call playback can be accessed after 11:00 a.m. (ET) on Wednesday, June 24^th, 2020, 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 414955 #. 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 information" within the meaning of applicable Canadian securities legislation. To the extent any forward-looking information constitutes "financial outlooks" within the meaning of applicable Canadian securities laws, such information is being provided as preliminary financial and operational results. Financial outlooks, as with forward-looking information generally, are, without limitation, based on the assumptions and subject to various risks and uncertainties that could cause actual results to differ materially from those expressed in or implied in this news release. Among the key factors that could cause such differences are: general economic, market or business conditions; the future impacts and government response to the COVID-19 pandemic, including any impact to online and/or retail operations of the Company; competitive actions by other companies; changes in laws or regulations; and other factors, many of which are beyond the control of the Company, as set out in the Company's annual information form dated June 23, 2020 and available on the Company's issuer profile on SEDAR at www.sedar.com.

Undue reliance should not be placed on such forward-looking information and no assurance can be given that such events will occur in the disclosed time frames or at all. Any forward-looking information included in this news release is made as of the date of this news release and the Company does not undertake an obligation to publicly update such forward-looking information to reflect new information, subsequent events or otherwise unless required by applicable securities laws.

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 and adjusted EBITDA, in this press release. These measures do not have standardized meanings prescribed by IFRS and are therefore specific to Indigo and may not be comparable to similar measures presented by other companies. Total comparable sales and adjusted EBITDA are key indicators used by the Company to measure performance against internal targets and prior period results. These measures are 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. In fiscal 2020, these measures also exclude retail sales fluctuations from the temporary store closures associated with COVID-19. Adjusted EBITDA is defined as earnings before interest, taxes, depreciation, amortization, impairment, asset disposals, and share of earnings (loss) from equity investments. The method of calculating adjusted EBITDA is consistent with that used in prior periods.

About Indigo Books & Music Inc.

Indigo is a publicly traded Canadian company listed on the Toronto Stock Exchange (IDG). Indigo is the world's first Cultural Department Store – a physical and digital meeting place inspired by and filled with books, music, art, ideas, beautifully designed lifestyle products. Indigo believes in real books, in living life fully and generously, in being kind to each other and that stories – big and little – connect us.

Indigo founded the Indigo Love of Reading Foundation in 2004 to address the underfunding of public elementary school libraries. Every year the 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 Foundation has committed over $32 million to more than 3,000 elementary schools, benefitting more than 1,000,000 students. Most recently in April 2020, in the wake of the COVID-19 pandemic and unprecedented nation-wide school closures, the Foundation committed $1.0 million to provide books to families in need.

To learn more about Indigo, please visit the "Our Company" section at indigo.ca.

SOURCE Indigo Books & Music Inc.