Indigo plans U.S. expansion as rivals choose to retreat

TORONTO Indigo Books and Music is expanding into the competitive U.S. market while many retailers are scaling back on square footage.

The Toronto-based company, which has managed to mitigate the effects of Amazon on its core categories over the last decade, will open its first store next summer in New Jersey.

“We are going to open three to five stores over two years and test the market response to the concept,” chief executive officer Heather Reisman told a conference call with analysts and investors on Thursday. “We will definitely open a couple before making any commitments (to further growth plans).”

Indigo said it will open its first 30,000 square-foot outlet at the Mall at Short Hills, N.J., in a location that used to be a 100,000 squarefoot Saks Fifth Avenue store.

The news came as the company reported a higher net loss for the second quarter in increased expenses, and rising sales at stores open for more than a year.

While Canadian retailers such as Aldo and Lululemon have fared well in the robust U.S. market, venturing south has been a cautionary tale for many more who had to retreat, including Joe Fresh, West 49, Tristan, Grafton Fraser and Canadian Tire. But the bricks and mortar environment has changed so radically in recent years that a venture into that market, though still risky, might be easier for Canadian businesses wanting to take the plunge because retail malls have seen hundreds of department stores and specialty stores close in the last year.

“There is far more desirable real estate out there,” said Robert Gibson, retail analyst at PI Financial Corp. “Landlords want something like this. Now the options are fantastic.”

The biggest hurdle for Indigo will be raising awareness of its brand, Gibson said.

Though the market still has Barnes and Noble, Indigo’s format, as a “cultural department store” with a high proportion of gifts, baby and lifestyle items, has a different offering from that of a traditional large format book store. “I think initially the issue is going to be to get consumers into the store. In Canada everybody knows Indigo. It is a well-known, top-of-mind brand. In the States, nobody knows who they are.”