Although revenue was up slightly, Indigo Books & Musi, reported net profits that were down significantly from the third quarter in the previous year.
Net profit from continuing operations for the quarter ending on Dec. 31 dropped from C$27 million in 2010 to $23.7 million in 2011. According to Indigo CEO Heather Reisman, “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.” Indigo substantially changed its product mix this fall, reducing its book inventory to make room for more gift, home décor items and toys.
The third quarter also included a $4 million non-cash asset and impairment charge. Without that charge, net profit would have increased by C$700,000, and Reisman said, “We’re very pleased with our holiday results,” she said. “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."
Revenue was C$352.9 million, up 0.5% or C$1.7 million from the previous year. Online sales from chapters.indigo.ca showed the biggest jump, up 9.3% from last year. Indigo and Chapters superstores posted a 1.8% increase in revenue, and Coles and IndigoSpirit small format stores were up by 2.5%.
During the quarter, Indigo agreed to sell all of the outstanding shares of Kobo, its digital e-reading spinoff company, to Japanese Internet giant Rakuten 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 sale. Indigo said that it plans to keep the cash proceeds “to support its growth and transformation strategy.”
Indigo also announced that its president Ted Marlow, appointed almost a year ago, decided to return to the U.S. and has stepped down.
