U.S. BOUND
INDIGO BOOKS IS PLANNING ITS FIRST INTERNATIONAL EXPANSION WITH STORE OPENING IN NEW JERSEY.
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 square- foot 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 In- digo. It is a well-known, topof-mind brand. In the States, nobody knows who they are.”
Indigo said revenue for the quarter climbed 3.5 per cent to $224.5 million in the period ended Sept. 30. The net loss in the second quarter was $ 4.7 million, or 18 cents per share, compared with a net loss of $ 1.2 million ( four cents) a year ago. Comparable superstore sales rose two per cent and small format comparable sales fell four per cent, while online sales surged 15 per cent.
In the same period that rival Toys “R” Us filed for bankruptcy protection in Canada and the U. S., Indigo had double- digit growth in the general merchandise business and particularly strong sales in its toy and lifestyle categories. General merchandise now accounts for about 38 per cent of the retailer’s annual sales. Excluding the boost from the book release of Harry Potter and the Cursed Child last year, Indigo said the company also increased book sales year-over-year.
Indigo operates 89 superstores and 123 small- format stores across Canada. Shares rose 28 cents Thursday to $18.82 in afternoon trading.