Indigo Books & Music Inc. has reported a nearly $50-million annual loss, after a “turbulent year” that included a debilitating cyberattack and inflationary pressures. The earnings report follows the sudden exodus earlier this month of nearly half of the company’s board of directors, as well as allegations of mistreatment by one director.
The Toronto-based retailer – which also recently announced the impending retirement of founder and executive chair Heather Reisman – has now appointed three new directors to the board.
The new board members are former Penguin Random House chief executive Markus Dohle; Joel Silver, former Indigo president who has also served as president and CEO of DavidsTea Inc.; and Donald Lewtas, a former executive with Onex Corp. – which Indigo controlling shareholder (and Ms. Reisman’s husband) Gerry Schwartz led as CEO for 40 years until his recent retirement.
Indigo announced on June 7 that four of its 10 directors – Frank Clegg, Howard Grosfield, Anne Marie O’Donovan and Dr. Chika Stacy Oriuwa – had stepped down. The company wrote in a release at the time that Dr. Oriuwa resigned “because of her loss of confidence in board leadership and because of mistreatment.” In the same release, the company announced that Ms. Reisman, who stepped back as CEO last September, would retire as executive chair of the board on Aug. 22.
Indigo has also once again secured a credit line from Mr. Schwartz to finance the company’s “seasonal working capital and operational needs,” according to a news release. The company received a commitment for the $45-million credit facility on Tuesday from Trilogy Retail Holdings Inc., which is controlled by Mr. Schwartz, an amount that could be increased by as much as $10-million. (Mr. Schwartz previously extended a credit line to Indigo in 2020 to secure its “financial flexibility” as it struggled to cope with the effects of the COVID-19 pandemic.)
The majority of the losses occurred in the fourth quarter, when a ransomware attack took down Indigo’s e-commerce website and compromised sensitive employee data.
On Tuesday, Indigo reported that the attack drove a $26.5-million decrease in sales in the fourth quarter, to $194.2-million compared with $220.7-million during the same period the prior year. Although executives said the total financial impact of the attack “cannot be reasonably estimated at this time,” the company reported $5.2-million in expenses related to the incident as of April 1.
Indigo is currently making claims under its cyber insurance policy, and is working with experts to determine the total scope of its financial impact, chief financial officer Craig Loudon said on a conference call to discuss the results Wednesday morning. Mr. Loudon added that the majority of the roughly $19-million change to the company’s fourth-quarter net loss was owing to the attack.
Inflationary pressures such as higher costs for shipping and inventories also contributed to the losses.
“This has been a turbulent year for Indigo, as the progress gained from our post-pandemic re-emergence was negatively impacted by adverse macro-economic factors,” CEO Peter Ruis wrote in a statement on Tuesday, adding that he looks forward to “injecting momentum back into the business” this year.
Indigo has also begun cutting costs by changing the “operating model” in its stores, which is expected to take expenses down by $15-million this year, Mr. Loudon said Wednesday.
Indigo’s revenue for the full year ended April 1, 2023, was $1.058-billion, down 0.4 per cent compared with the previous year. However, excluding a one-time payment in fiscal 2022 related to the company’s relationship with one of its café vendors, Indigo’s merchandise sales (which make up the bulk of revenues) grew by 0.5 per cent. That was driven by growth in the company’s general merchandise categories – including baby products and wellness items – while sales of books and other print products declined. That sales drop was also affected by the ransomware attack, which hurt Indigo’s ability to replenish its book inventories and drove print sales down by 4 per cent.