Kobo Sale Propels Indigo to Record Earnings

Revenue was down 2.3% at Canada’s largest bricks-and-mortar bookseller for the fiscal year ending March 31, 2012, but earnings for the year were nearly $100 million due to the $165 million sale of Kobo to Japan’s Rakutan.


Indigo Reports Record Net Earnings

– $165 Million Gain on Kobo Sale –

TORONTO, May 29, 2012 /CNW/ – Indigo Books & Music Inc. (TSX: IDG), Canada’s largest book, gift and specialty toy retailer reported a 2.3% decline in revenue for its fiscal year ended March 31, 2012.  Revenue for the year was $934 million compared to $956 million last year.  The decline was primarily due to lower physical book sales which were partially offset by continued growth in Indigo’s digital, gift, lifestyle and toy businesses.  Additionally, the Company deferred $7 million in revenue during the year due to the free plum rewards loyalty program launched nationally in April of 2011.  The Company will recognize this revenue in future years as customers redeem the points earned on past purchases.

On a comparable store basis, Indigo and Chapters superstore revenue decreased 1.9%, while Coles and IndigoSpirit small format store revenue decreased 0.8%.  Sales from Indigo’s online channel,indigo.ca, were up 2.9% compared to last year.

Net earnings attributable to shareholders of the Company for the year were $93 million, up from a loss of $6 million last year. Net earnings attributable to shareholders of the Company do not include the portion of Kobo losses attributable to minority shareholders and as such, this earnings number is used to calculate the Company’s earnings per share.  The significant increase in net earnings was due to the recognition of a $165 million pre-tax gain on the sale of all outstanding shares of Kobo Inc. to Rakuten, Inc. on January 11, 2012.

Commenting on the results, CEO Heather Reisman said, “We are enormously proud of Kobo and pleased for Indigo and all Indigo shareholders that this sale represented such an attractive return on our investment.  We’ve accelerated our transformation from a bookstore to the world’s first cultural department store and are gratified that our efforts are being positively received by our customers.”

Revenue for the fourth quarter was $196 million, down $4 million from the previous year due to lower physical book sales which were partially offset by the growth in the digital, gift, lifestyle and toy businesses. Net earnings attributable to shareholders of the Company for the quarter were $132 million compared to a net loss of $19 million last year.  The increase in earnings was due to the gain realized from the Kobo sale.

During the fourth quarter, only one year after its launch, Indigo’s plum rewards loyalty program grew to over 4 million members.

Due to the sale of Kobo, the operating results of Kobo have been reported as discontinued operations and the prior period results have been restated accordingly.  As such, Indigo’s restated revenues and expenses no longer include Kobo’s revenues and expenses which are now reported as discontinued operations.  The restated quarterly statements for the Company’s first and second quarter of this fiscal year are available on the Company’s website at indigo.ca/investor-relations.

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). 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, offers a one stop online shop with a robust selection of books, toys, home décor, stationery and gifts.

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 $13 million, equating to more than a million books, to high needs elementary schools across Canada. Visit loveofreading.org for more information.


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