Indigo warns of waning consumer demand heading into critical holiday season

In Heather Reisman’s first quarterly conference call with analysts since her return to Indigo Books & Music Inc. in September, she introduced herself as both the company’s CEO and “chief book lover.”

It’s on the back of those books that Reisman says she’s “confident” the Toronto-based company will return to profitability, even as the retailer warns of waning consumer demand heading into the critical holiday shopping season.

The returning founder pitched a vision for “Indigo 4.0” to analysts on the second-quarter conference call Wednesday. She conceded that the retailer has a “journey” ahead of it, but added she’s “confident that we will return Indigo to both growth and profitability.”

“As is always the case, it will take a bit of time before we begin seeing, in the numbers, what we want to see. But we are definitely headed in the right direction,” Reisman said.

That direction has been a point of contention in recent years for Indigo, which has broadened its offerings from books to lifestyle and general merchandise that ranged from reading socks to sex toys.

On Wednesday, Reisman pointed to the recent launch of the company’s new concept store at The Well in Toronto as a blueprint for the company’s “brand mission” going forward.

“The store puts books at the forefront while offering a curated and complementary assortment of general merchandise for book lovers,” she said.

Reisman originally retired from Indigo in August but returned to the helm just a few weeks later after the departures of CEO Peter Ruis and president Andrea Limbardi, as well as a number of directors from the board.

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Reisman’s return comes as the company has struggled in sales — particularly online — as it attempts to recover from a ransomware attack in February that downed its e-commerce channels for weeks.

Revenue for Indigo totalled $206.9 million in the company’s second quarter, down from $236.2 million a year earlier. Online sales revenues were down 13 per cent year over year to $42 million for the three months ending Sept. 30, Indigo said.

But on Wednesday Reisman chalked up slowdowns in online sales to challenges that come with “all major technology changes” as the company transitions to a new e-commerce platform. She said that “most critical disruptions are fully resolved” and Indigo is seeing a “meaningful improvement” in online sales conversions.

Chief financial officer Craig Loudon noted Wednesday that Indigo is heading into the critical holiday quarter, which the company is “highly dependent on” for a “disproportionate” amount of sales.

But he said the struggling retailer is coming up against expectations for weak consumer demand this year — a sentiment backed up by recent Ipsos polling conducted exclusively for Global News.

Nearly 80 per cent of Canadians said in the poll released Wednesday that inflation and rising interest rates have had a “significant” impact on their holiday budgets for gifts and travel.

While three in 10 Canadians (29 per cent) said they intend to spend less on gifts this coming holiday season than they did last year, roughly half (49 per cent) said they’ll spend about the same, the poll found.

“Like the wider retail industry, Indigo continued to be negatively impacted by the current macroeconomic environment, which has put downward pressure on consumer buying behaviour and led to reduced overall demand,” Loudon said Wednesday.

Indigo reported a net loss of $22.4 million in its second quarter, compared with a net loss of $15.9 million a year earlier. The company says it lost 80 cents per diluted share for the quarter, compared with a loss of 57 cents during the same quarter last year.

Indigo shares were down two cents to $2.13 in trading Wednesday morning on the Toronto Stock Exchange.

The retailer’s stock has plummeted in the past five years but has jumped nearly 80 cents in value since the announcement of Reisman’s return on Sept. 18.

— with files from Global News’ Saba Aziz, The Canadian Press