In the latest edition of his SHuSH newsletter, Kenneth Whyte looks at the dire financial situation of Canada’s big box bookstore chain:
“Indigo Books and Music” by Open Grid Scheduler / Grid Engine is licensed under CC0 1.0
Indigo just released its first-quarter financial results, covering the period April-June 2021, which can be compared to its pre-pandemic results from the same quarter in 2019.
Back then, Indigo had revenues of $193 million and no profit. Seventy percent of its revenue, or $136 million, came from the firm’s eighty-nine Chapters and Indigo superstores. Only $25 million came from its 115 smaller stores (Coles and Indigo Spirit), and another $29 million from online sales at chapters.indigo.ca. Not only did the company book no profit, but all three of those revenue channels were down from the previous year, with online sales falling the most (15%).
This is to say that Indigo, in financial terms, was immunocompromised before COVID-19 hit.
The decline in digital sales was especially alarming. It seemed that CEO Heather Reisman was giving up on the web, an impression reinforced by her frequent renovations of in-store environments and her not terribly successful launch of a so-called cultural department store […] in New Jersey, Indigo’s first international gambit. She was all about bricks and mortar.
One also got the sense that Heather was giving up on books. She was building up the candles and blankets side of the business — it represented almost 40% of 2019’s total revenue. She also launched Thoughtfull.co, an effort to graze on Hallmark grass, and another step away from the book business.
I’d certainly despaired of finding much in the way of actual books at Chapters or Indigo stores … more and more of the floorspace that used to be devoted to books had been given over to housewares, candles, hostess gift items, decorative throw cushions and other such non-book items. Even before the Wuhan Coronavirus shut down the western world, it had been at least a year since the last time I’d found anything worth buying in one of their stores.
Two years and several pandemic waves later, Indigo is down to 88 superstores and 88 small-format stores, a net reduction of twenty-eight. I don’t know the significance of 88. Maybe the company’s new retail guru — Indigo always has a new retail guru — is a pianist, or Chinese, or a white supremacist.
The remaining stores are now open to foot traffic, and the company is wrangling with its various landlords over how much rent it should pay for the pandemic months when most of its outlets were closed. Indigo received almost $3 million in federal emergency rent subsidies, and almost $4 million in payroll subsidies, which seems like a lot but isn’t for a company as big as Indigo. As we noted in an earlier post, Heather also received a $25 million “liquidity enhancement”, or bailout, from billionaire husband Gerry Schwartz.
Which brings us to the present. Revenues for Indigo’s most recent quarter are $172 million (down $21 million from two years ago), and it lost $15 million (before depreciation, amortization, etc.).
Indigo doesn’t release enough detail on its operations to give us a clear idea of how the company lost only $15 million when its revenue fell $21 million, but costs were down across the board, probably reflecting the closed stores, reduced staffing levels, and fewer books on the shelves, among other savings.
