In the latest edition of the SHuSH newsletter, Ken Whyte looks at the dismal financial (and technological) picture for Indigo in the Canadian market:
“Indigo Books and Music” by Open Grid Scheduler / Grid Engine is licensed under CC0 1.0
As you’ve heard, the bookselling chain was hacked, its employment records held for ransom. Indigo (rightly) refused to pay and the hackers are now expected to release the employees’ personal data on the dark web.
This all started a month ago. The company’s website went down along with its in-store credit and debit systems. The payment systems came back after about ten days. A new website was built and launched at the beginning of March. It is a much-reduced site with a much reduced catalog of books.
The repercussions will be enormous for both Indigo and the publishing community.
One of the things overshadowed by the hacks was the release of Indigo’s third-quarter results, covering the crucial holiday season. As we’ve noted before, the company’s finances are unsettling. It lost $37 million in 2019, $185 million in 2020, and $57 million in 2021. Things looked somewhat better in 2022 with a $3 million profit, but the first two quarters of 2023 (Indigo has a March 28 year-end) showed a loss of $41.3 million, about $10 million worse than in the first two quarters of the previous year.
The hope was that a blockbuster holiday season would get Indigo’s year back on track.
It didn’t happen. Revenue for Q3 2022 came in at $423 million, down $8 million from last year, with pre-tax profits of $36 million, down from $45 million last year.
After three quarters, Indigo now stands at an $8 million loss. The company’s fourth quarter, covering the first three months of the calendar year, is usually terrible (all retail suffers in the deep of winter). If this fourth quarter goes like the last, Indigo will be looking at a $30 million loss for its full year. But this fourth won’t go like the last because of the hack. I have no idea what it will cost in terms of lost sales and unexpected expenditures (or what will be covered by insurance). It’s hard to imagine the company not doing worse than $30 million after such a catastrophic event.
Most of Canada’s mid-size to large publishers sell somewhere between 25 percent and 60 percent of their books through the chain. The outage will hurt revenue for both publishers and authors. If there’s a silver lining here, it’s that it occurred in a dead season. But the knock-on effects will be substantial. I’m told Indigo has no visibility into its store sales or current stock levels across the chain. It’s being very cautious about bringing in new books apart from the most in-demand titles. Publishers I’ve spoken to say sales to Indigo are down and they expect returns to be large and late. (Booksellers send unsold inventory back to publishers for full refunds and the bulk of these come in the months after the holidays).
By the way, the latest results showed that Indigo is no longer a bookseller but a general merchandiser with a sideline in books. Blankets and cheeseboards accounted for more than 50 percent of the company’s total revenue over the holidays. Print was 46 percent, down from 54 percent earlier in 2022 and 67.4 percent eight years ago. The movement away from bookselling is picking up steam. I hope you like Amazon because it and the few independent bookstores Chapters/Indigo hasn’t manage to kill will be all that’s left of Canadian bookselling before very long.
