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Indigo CEO Heather Reisman addresses shareholders during the annual general meeting of the company in Toronto on June, 25 2013.

Fernando Morales/The Globe and Mail

Despite closing three of its largest Toronto stores the year, the CEO of Indigo Books and Music Inc. says the company is scouting new locations.

"We are actively looking in a couple of markets," chief executive Heather Reisman told analysts during a conference call Wednesday.

The company now has four fewer superstores and two fewer smaller format stores in its latest quarter, compared to a year ago.

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It once operated 95 superstores under the banner Chapters and Indigo, and 131 small format stores under Coles, Indigospirit, SmithBooks and The Book Company.

Ms. Reisman didn't divulge where it may be looking to expand, saying only that the country's largest book, gift and specialty toy retailer is encouraged by results from the second quarter, which recorded double-digit growth across its lifestyle, paper, toys and electronics divisions, as well as its core trade book business.

The Toronto-based company isn't forecasting any bestselling book titles that will boost sales dramatically during the Christmas holiday period, but said its lineup of toys, like those from the popular Disney movie Frozen, have helped increase revenues.

Sales at its two American Girl doll speciality boutiques that opened in the second quarter also boosted revenue, while sales at a third store location launched recently in Ottawa has exceeded targets, said Reisman.

Indigo reported after markets closed Tuesday that it has narrowed its second-quarter loss to $8.5 million, boosted by higher revenues and improved margins.

The loss amounted to 33 cents per diluted share, compared with a loss of $10.1 million, or 39 cents, in the same period a year earlier.

Strong sales helped push revenues to $189-million for the 13-week period ended Sept. 27. That's up about five per cent from $179.4-million year over year.

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Sales at Indigo and Chapters rose 9.6 per cent in the period, while sales at Coles and Indigospirit climbed by 2.4 per cent. Online sales grew by 13.4 per cent.

"I think this is clear indication that the investments we've been making in the stores and online are starting to pay off," said Ms. Reisman. "(But) as I've said in every one of my meetings, we still have a long way to go to fully achieve what we think the potential is of the business."

Indigo is nearing the end of a five-year transformation plan to become what it calls the "world's first cultural department store" by 2015.

Indigo first began making changes to its business model in 2010 as the popularity of ebooks and e-readers, like Amazon's Kindle and its own Kobo, grew. Indigo sold its remaining share in Kobo Inc. in 2012 to Japan's Rakuten Inc. in a deal worth US$315 million.

Since then, the bookseller has been struggling against intense competition from the likes of Wal-Mart Canada Corp. and Target Corp. and online giant Amazon.com Inc..

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