Canadian retailer Indigo Books and Music Inc. said cooling consumer spending compounded the effects of a ransomware attack against the company in February, dragging down its earnings amid a board of directors shakeup.
The Toronto-based bookseller reported a loss of $49.6 million its latest financial year, which saw a cyberattack take down its website and payment systems and compromise the personal information of some current and former employees.
The loss amounted to $1.78 per diluted share for the 52-week period ended April 1 compared with a profit of $3.3 million or 12 cents per diluted share in the same period a year earlier.
Revenue totalled $1.058 billion, down from $1.062 billion in the prior year.
“Like the broader retail market, Indigo continues to feel the impacts of the macroeconomic environment on consumer behaviour and costs, which compounded the headwinds from the ransomware attack,” CEO Peter Ruis said Wednesday during a call with analysts. “People are being more cautious.”
Shoppers are increasingly seeking out deals and promotions, he said.
Indigo achieved record-breaking online sales during Black Friday while Boxing Day week sales were “off the charts,” Ruis said.
But sales in between these bigger retail events have been quieter, creating a rollercoaster effect, he said.
Indigo is continuing to assess the full financial affect of the cyberattack.
“The complete and long-term financial impact of the ransomware attack cannot be reasonably estimated at this time,” Craig Loudon, Indigo’s chief financial officer, said during the call.
“However, it has had a material detrimental impact on the company’s fiscal 2023 financial results,” he said. “The company maintains cyber insurance coverage and is in the process of working with its insurer to make claims under the policy for both the business interruption losses and the incremental costs associated with the attack.”
The bookstore’s fourth-quarter results were “heavily impacted” by the ransomware attack, the company said.
Revenue for the period ended April 1 was $194.2 million, compared with $220.7 million during the same period the year before.
The cyberattack “accounted for the majority of the $19.1 million change in net loss position, which was a loss of $42.5 million compared to a loss of $23.4 million in the same period last year,” Indigo said.
Meanwhile, the retail chain also announced the appointment of Donald Lewtas, Joel Silver and Markus Dohle to its board of directors.
Earlier this month, four directors quit the company’s board including Chika Stacy Oriuw, who stepped down “because of her loss of confidence in board leadership and because of mistreatment.”
Indigo also said in the same statement on June 7 that founder and executive chair Heather Reisman, who stepped down as chief executive last year, will retire from the board on Aug. 22.
Looking ahead, Indigo said it plans to launch a new digital platform this summer and open a new flagship store in Toronto in September.
The company also expects its margins going forward will benefit from lower international freight costs, with inventory also expected to arrive more quickly.
“We’re being very cautious with inventory purchases this year,” Loudon said. “With the global supply chain improving, it is possible to get inventory more quickly like it was historically, versus the last few years where we had to take early bets, so we want to ensure that we don’t get mark-down pressure on margins.”
This report by The Canadian Press was first published June 28, 2023.
Companies in this story: (TSX:IDG)
Brett Bundale, The Canadian Press