Indigo Reports Q2 Results

Early Success in Transformation Strategy Drives Change in Dividend Policy

TORONTO, Nov. 5, 2013 /CNW/ - Indigo Books & Music Inc. (TSX: IDG), Canada's largest book, gift and specialty toy retailer reported revenue of $179.4 million for its second quarter ending September 28, 2013.  Revenue declined 3.3% from the previous year due primarily to the phenomenal success last year of the Fifty Shades and Hunger Games trilogies, the much slowed but continuing growth of eReading, and the Company operating nine fewer stores.  Excluding revenue from the hit trilogies, revenue increased 0.3% from the same quarter last year as the Company continued to experience double-digit growth in lifestyle, paper, and toy sales.

On a comparable store basis, Indigo and Chapters superstores posted a 2.8% decrease in revenue, while Coles and IndigoSpirit small format stores were down 8.2%.  Excluding the blockbuster titles, comparable store sales increased 0.1% in superstores and 0.6% in small format stores. Online sales increased 3.3% to $18.7 million from $18.1 million for the same period last year.

Just after the close of the quarter, the Company launched the Indigo Mobile App with extremely positive feedback from both the tech press and from users.  The Indigo App was also featured in the Apple^® App Store^® as one of the best new apps.

In addition, just following the close of the quarter, Indigo finalized an agreement with American Girl to open American Girl "shop in shops" in selected Indigo retail locations.

By the end of Q2, the Company had opened its first 12 !ndigotech™ shops.  These shop within shops feature design-inspired lifestyle electronics and accessories.  The Company will open 20 more !ndigotech™ shops across Canada before the holiday season.

The Company recognized a net loss of $10.1 million for the 13-week period ended September 28, 2013 ($0.39 net loss per common share), compared to a net loss of $4.0 million ($0.16 net loss per common share) in the same period last year. The increased loss was partially the result of lower book sales but more significantly the intentionally higher operating, selling and administrative expenses, compared to last year, associated with its transformational initiatives.  Specifically, Indigo invested additional funds in marketing to engage Canadian customers with its new categories, in advancing its digital capabilities, in creating merchandising within its existing superstores to highlight the expanded product mix, and in improving several aspects of its general merchandise capabilities.

The Board of Directors today approved a quarterly dividend of 11 cents per common share to be paid on December 3, 2013, to all shareholders of record as of November 19, 2013.

Based on early success with new initiatives, the Company anticipates entering a period of major store renovations, increased investment in its proprietary product development capability, and increased digital investment to fully bring to life its booklovers lifestyle store concept.   In light of these planned increased expenditures to support the Company's strategic development and growth, the Board of Directors today approved the suspension of the Company's quarterly dividend beyond December 3, 2013.  The current dividend program was initiated at a time of significant earnings and very much prior to the advent and impact of the digital reading revolution.

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 unaudited interim condensed consolidated financial statements in accordance with International Financial Reporting Standards and International Accounting Standards 34, "Interim Financial Reporting."  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, as well as its "Adopt A School" program, have contributed more than $15.6 million—equating to over 1.4 million books— to high-needs elementary schools across Canada.  Visit loveofreading.org for more information.

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

SOURCE: Indigo Books & Music Inc.