Losses at Indigo Books & Music Inc. widened significantly in the fiscal year ended March 28, primarily because of impairment losses and a tax charge.
The results reflect two weeks of store closings because of COVID-19. The company temporarily closed all of its locations on March 17, and temporarily laid off 5,200 retail staff, the majority of its roughly 6,000 employees. Indigo had already been struggling before the pandemic hit, cutting costs in an effort to return to profitability.
This is the second full-year loss in a row for the Toronto-based company, which has been pushing for government support for larger retailers affected by the coronavirus.
Even as stores reopen across the country, chief executive officer Heather Reisman told The Globe and Mail last month that she expects traffic at “maybe 40 per cent of normal levels.”
On Tuesday, Indigo reported that its full-year revenue fell 8.5 per cent to $957.7-million. In the 52 weeks ended March 28, the company reported a net loss of $185-million or $6.72 a share, compared with a net loss of $36.8-million or $1.35 in the same period last year.
Included in the losses were $56.6-million in non-cash impairment losses, and a non-cash deferred income tax expense of $84.7-million resulting from a write-down of deferred tax assets.
Comparable store sales – a metric that does not count the impact of store openings or closings on sales – fell by 7.9 per cent in fiscal 2020. While online sales got a boost during store closings, Indigo’s digital revenue for the full year fell by 7.5 per cent to $162.7-million.
“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,” Ms. Reisman said in a statement on Tuesday. “This activity will continue and gain further traction right through fiscal 2021.”
Like many retailers, however, its plans have been disrupted by COVID-19. In response to the crisis, the company deepened its cost-cutting, including scaling back marketing spending through the spring and summer, reducing inventory levels, delaying rent payments and payments to suppliers, “restructuring” some head office roles, cancelling 2020 bonuses and freezing salary increases.
Indigo’s fourth-quarter revenue fell 10.6 per cent to $178.1-million. Its net loss in the 13 weeks ended March 28 was $171.3-million or $6.22 a share, compared with $23.8-million or 86 cents in the same period last year. Online revenue grew 16.4 per cent to $39-million in the quarter.
The store closings overlapped with March break school holidays, usually an important sales period in the fourth quarter, according to the company. During the closings, Indigo also continued paying employees for all shifts scheduled until the end of March.
Stores began reopening on May 19 and 172 Indigo locations are now open. While that represents the majority of the store footprint, just 2,878 of 5,200 staff have been rehired.
Even as retailers have opened their doors again, the industry is facing a great deal of uncertainty as the pandemic’s effects on the economy could dampen consumer spending.
As of the end of March, the company had 88 large stores under the Chapters and Indigo banners, and 108 smaller stores under the Coles, Indigospirit and The Book Company banners. In May, the company also decided to permanently close 15 small-format stores.
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