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Ransomware fallout, softer demand weigh on Indigo's first-quarter results

TORONTO — The aftereffects of a ransomware attack and challenging macroeconomic conditions weighed on Indigo Books & Music Inc.'s first-quarter results, said CEO Peter Ruis.
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An Indigo bookstore is seen Wednesday, November 4, 2020 in Laval, Que. THE CANADIAN PRESS/Ryan Remiorz

TORONTO — The aftereffects of a ransomware attack and challenging macroeconomic conditions weighed on Indigo Books & Music Inc.'s first-quarter results, said CEO Peter Ruis. 

Indigo's search engine optimization was heavily affected by the attack, which happened in February, affecting the company's online traffic from internet searches, he said on a call with analysts Friday.

"While we have made substantial progress to achieve almost full operational function by the end of the quarter, the ransomware attack did have a material impact on quarterly sales," he said. 

The company's ability to replenish inventory was also challenged, which impacted its retail and online assortment, while consumers were more sensitive to prices, he said. 

The remarks by Ruis came the day after Indigo reported a loss of $28.5 million in its first quarter, compared with a loss of $25.4 million in the same quarter last year.

Revenue for the Toronto-based retailer's quarter ended July 1 was $179.2 million, down from $204.6 million last year, while loss per diluted share was $1.02, compared with a loss of 91 cents a year ago.

Indigo remains focused on lowering expenses, said Ruis. The company has reduced labour as well as warehousing and distribution costs, he said, and benefited from lower international freight prices.

"These savings were achieved despite the current state of a challenging macroeconomic environment," said Ruis.  

These cost savings were partially offset by extra spending on the modernization of Indigo's e-commerce technology as well as higher occupancy costs, said chief financial officer Craig Loudon on the analyst call. 

During the first quarter, customers showed they're more sensitive to prices through an increased penetration of promotions and higher sales during promotional periods, said Ruis. 

"Inflation and interest rates are impacting customer behaviour, softening demand," he said. 

Indigo has also launched its new website, he said, and will soon open a new flagship store at The Well building in downtown Toronto. 

As previously announced on July 31, Indigo entered into a revolving line of credit facility with lender Trilogy Retail Holdings Inc. for an aggregate principal amount of up to $45 million, which can be increased by up to $10 million. This will be used to finance Indigo's seasonal working capital and operational needs, the company said. 

Shares in Indigo were flat at the end of the day Friday, at $1.61.

This report by The Canadian Press was first published August 11, 2023.

Companies in this story: (TSX:IDG)

The Canadian Press

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