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Jennifer Wells: Indigo plans new merchandise to save itself — but will that be enough?

Jennifer Wells: Indigo plans new merchandise to save itself — but will that be enough?
Business
That was Indigo CEO Heather Reisman on a mid-August conference call with analysts following the release of the company’s first-quarter financial results. The numbers were grim, a roughly $13-million revenue drop from the same quarter the prior year.

There wasn’t much jolly news on offer this week either, as the company announced its second-quarter numbers, a $12.9-million revenue drop from the comparable period last year. Within the worrying eight per cent decline in comparable sales is the perhaps especially worrying disclosure that online revenue decreased by $4.1 million, or 12.2 per cent.

Reisman said little on Thursday, exiting the conference call after her opening remarks, leaving chief financial officer Craig Loudon to respond to the lone analyst who posed a question about the outlook for the crucially important holiday season. To which Loudon responded: “We’re feeling good about holiday…It’s a natural time for traffic and people to head to Indigo.”

Phrased another way: snow falls; the holidays are coming; buy a book. Add a scented candle, a pillow, a mug, some hot chocolate and if you’re feeling flush, a $200 sous vide circulator from Dash.

Way back when the Indigo story began — who remembers the takeover of Chapters, the bankruptcy of Lichtman’s, the closure of Pages and on and on — Reisman was fighting against the narrative that Indigo would be a bad-for-books behemoth. What seems surprising today is that a near quarter century has passed and Reisman, 71, is still in the trenches with yet another plan for how to win the war against the ceaseless crushing attack from Amazon.

The new strategy involves repatriating the Indigo design studio from New York to Toronto, cutting costs aggressively (the company is nearly halfway to its $20-million minimum cost reduction target by the end of the fiscal year), reshaping the merchandise mix away from heavily promoted low price, low margin goods to higher margin items, protecting the company’s cash position and launching Plum Plus, a rewards program that promises 10 per cent off most purchases and free shipping in exchange for a $39 annual fee.

I know, that doesn’t exactly sound like a grand vision. But it’s very telling. It means that the company’s merchandising was not working. Not all that long ago the CEO was counting on a $20 and up share price and further U.S. expansion beyond the Indigo store in the Short Hills mall in New Jersey where it keeps company with Hermès and Cartier. On Thursday, Indigo shares closed at $4.26 and a further push into the U.S. northeast is nowhere in sight.

The company’s current message to the investment community appears to be “hang tight.” New product development won’t roll out until the spring. This is interesting: in June the company announced that Nathan Williams had been appointed to the role of chief creative officer. Williams, a Canadian, grabbed the attention of the creative community when he co-founded Kinfolk, a “slow lifestyle” magazine based in Portland, Ore. aimed at 25- to 35-year-old creative professionals. In an interview with Dezeen, Williams described Kinfolk as “a calm, slow peaceful place for a reader to come.” Think of minimalist design and thoughtful lifestyles. The Guardian chirpily described it as “a bible for an alternative aspirationalism based around distressed furnishing, cable knits, blood oranges and ‘quiet’ breakfasts.”

It doesn’t look that way at all to me. Judging from its Instagram posts — Kinfolk magazine has 1.4 million followers — it looks very…Danish. And a welcome departure from some of the shiny tchotchkes shoppers have come to expect from Indigo.

But what about books, you might well ask.

There has been tumult elsewhere in the book world. In the spring of 2018 Elliott Advisers, a U.S. hedge fund, bought Waterstone’s in the U.K., a chain of 283 stores. Three months ago, Elliott closed the acquisition of Barnes & Noble, the largest bookseller in the U.S. B&N operated 726 stores at its peak in 2008, had been wobbling for subsequent years and had shed 100 stores by the time Elliott came along.

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The words “hedge fund” always sound a bit rattling. But the bookseller James Daunt, who really does sell books and has his own nine-store chain of bookstores in the U.K. with a tenth due to open in Oxford early next year, has run Waterstone’s since 2011, returned the U.K. chain to profitability in 2016 and is now trying to work the same turnaround at Barnes & Noble.

Heather Reisman hasn’t yet fixed the recipe for Indigo: that “curation” she refers to in staging books amid a studied lifestyle. The holiday season is upon us, a period that historically has brought in close to half the company’s full-year revenue — $426 million last year — and the profitability to offset money losing quarters. This week Reisman, who calls herself Indigo’s “CEO and Chief Booklover,” didn’t sound at all merry about the weeks ahead. Maybe we could all cheer her up by buying a book.
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