A wave of top executive departures marks the latest worrying chapter in the story of Indigo Books & Music Inc., which analysts say faces a cooling economy — and a bit of an identity crisis — heading into the fall.
Indigo announced the sudden departure of CEO Peter Ruis last week after just a year in the role. That was a day after Andrea Limbardi, the company’s president and a two-decade veteran of the firm, announced on LinkedIn that she was leaving to head up Reitmans Canada.
Both executive exits come shortly after the retirement of Indigo founder and chairperson Heather Reisman from the company in August and the departure of four board members in June. When the board moves were announced, Indigo said in a statement that director Chika Stacy Oriuwa’s departure was due to a “loss of confidence in board leadership” and “mistreatment.”
Retail analyst Bruce Winder tells Global News that while it’s not clear what conversations are happening behind the scenes at Indigo, the flurry of departures with a lack of explanation “sends signals that the company is sort of in a bit of a chaotic state right now.”
“They probably are in a little bit of a panic,” he says.
The leadership shuffles followed a difficult few months for the Canadian retailer, which saw its sales take a significant hit following a ransomware attack in the spring that took its digital and in-store shopping offline for weeks.
Indigo said in regulatory filings in August that the attack affected not just the company’s immediate online sales, but its ability to replenish inventory in the aftermath. That translated to lower revenues and a deeper net loss for the company’s first fiscal quarter ending July 1.
Indigo’s stock price has also plummeted in the past five years, down from roughly $14 a share in September of 2018 to $1.23 at market close on Wednesday.
Struggles on the operations side are likely magnified by the executive and board shakeups, Winder says. Stakeholders in the company, including investors, suppliers and employees, look to senior leadership as the steady hand to guide them through the turbulence, he says.
“This sends the signal that the company is in turmoil right now. And I think someone has to take control of it and sort of settle everyone down,” Winder says.
Indigo caught in the ‘middle spot’ of retail crunch
The ransomware attack isn’t the only drag on Indigo’s sales as of late — a slowdown in consumer spending amid higher interest rates and rumblings of an economic downturn on the horizon are also threats to the company’s bottom line.
Indigo said itself in its filings last month that its general merchandise business declined by 16.4 per cent in the last quarter amid “softer discretionary spending” in the market. Print sales declined 12.3 per cent as well, but Indigo said it saw an uptick in interest for bargain books — “demonstrating customers’ price sensitivity in the current macro-economic environment.”
Winder says that consumers are “not in good shape right now” as they grapple with debt obligations like rising mortgage payments and still-stubborn inflation at the grocery store. Others are perhaps worried about job losses in the near future as some economists call for a mild recession in late 2023 or early 2024, he says.
“So it’s not a good time for discretionary purchases,” Winder says. “One can argue that most of what Indigo would sell is discretionary.”
Joanne McNeish, associate professor with the Ted Rogers School of Management at Toronto Metropolitan University, says Indigo is in a difficult position heading into a slower economy.
While luxury retailers can continue to cater to clientele who still have plenty of disposable income, and discount stores become a go-to destination for struggling consumers, Indigo might well find itself skipped over, McNeish argues.
“Indigo is in the middle spot of the market, and being in the middle is always a more stressful place to be,” she says.
Indigo will have tough choices to make heading into the critical holiday season, Winder notes.
With a slowdown in spending, the company might have to offer steep discounts to lure shoppers into the store, he ventures. But that will put even more pressure on the company’s margins, which could lead to layoffs and other cost-saving strategies as it tries to maximize sales, he says.
Global News reached out to Indigo to ask how it plans to adjust its retail strategy heading into a projected economic downturn, if at all.
“As we enter the busy holiday season, our Indigo team will remain focused on delighting our customers and delivering positive results for the company,” Melissa Perri, Indigo’s senior manager of public relations, said in a statement.
“The board has reiterated its strong commitment to seeing Indigo reemerge as a strong force in Canadian culture and business.”
What is Indigo, anyways?
But what will that Indigo look like?
Hints for Indigos’s future might be found in the company’s plans for a new urban store concept in The Well building in Toronto, which it plans to open up this fall. The retailer would serve beer and wine alongside coffee and pastries, and let shoppers mill about playing arcade machines and sampling music on a jukebox.
Before his exit from the CEO role, Ruis pitched the new Indigo store as a “cultural emporium” in an interview with The Canadian Press. He acknowledged that stressed consumers have to be particular about where they spend their money, and said he was looking to give shoppers an “attractive reason” to come to the stores.
Winder says that he’s “very interested” to see how the retailer’s experiments with the urban concept store go, and notes that Indigo is still trying to find its “reason for existing.”
He says the company could find new purpose as a “Starbucks-plus,” settling into a spot at the bottom of condominiums where a built-in stream of traffic spends time browsing the shelves before or after heading to the office.
Ruis told The Canadian Press in August that even as Indigo diversifies into lifestyle products and experiential services, the company is not looking to leave books behind.
While the publishing industry was upended when Amazon took the sector by storm, both McNeish and Winder say independent bookstores have had a resurgence as of late. Winder points to the one-on-one relationships with customers that indie booksellers can cultivate as an advantage these stores can wield over the Indigos and Amazons of the world.
But Indigo, too, has long had a soft spot in the heart of bookworms, McNeish argues.
Books and other print-related goods remain around 57 per cent of Indigo’s business, according to the most recent quarterly earnings, with general merchandise accounting for around 37 per cent of sales. Book sales declined less than general merch in the past quarter, with both verticals hit by the ransomware attack.
McNeish says the identity of the Canadian retailer as a bookstore-turned-lifestyle brand over the past decade has been a source of consternation for some shoppers.
“As Indigo began to transform their retail space, splitting it up between books and lifestyle products, there was an underlying grumbling,” she recalls: “‘Is this a bookstore or is it something else?’”
She says that the transition to embrace the lifestyle business seemed to be continuing under Ruis’ leadership, noting that the executive came from stints at womenswear store Anthropologie and U.K. department store John Lewis.
The urban concept store ideas of having a glass of wine with a good read are in keeping with Indigo’s book-loving target demographic, McNeish argues.
But she also says that the recent executive departures might hint at an Indigo that had “two visions at play.” It’s unclear at this point, she continues, which vision for the future has left the company, and which direction remaining executives and an eventual CEO replacement have in mind.
The fate of the urban concept pilot store and whether it’s rolled out more widely in the coming months could be a hint at which ideas won out at Indigo, McNeish says.
“They have, in this retail space, the chance to do something exciting and interesting.”
— with files from The Canadian Press