A N N UA L RE P O RT FO R TH E 53-W E E K PE RI O D E N D E D AP RIL 3, 2021
The Indigo Mission
To inspire reading and simplify our customers’
journeys to live with intention.
Indigo operates under the following banners: Indigo Books & Music,
Chapters, Coles, Indigospirit, The Book Company, and indigo.ca.
The Company employs approximately 5,000 people across the country.
!ndigo Enrich Your Life, Chapters, !ndigo, Coles and indigo.ca are registered trade marks of Indigo Books & Music Inc.
Table of Contents
3. Report of the CEO
6. Management’s Responsibility for Financial Reporting
7. Management’s Discussion and Analysis
36. Independent Auditor’s Report
39. Consolidated Financial Statements and Notes
71. Corporate Governance Policies
72. Executive Management and Board of Directors
73. Five-Year Summary of Financial Information
74. Investor Information
75. Indigo’s Commitment to Communities Across Canada
Report of the CEO
Dear Shareholder,
It is my pleasure to be writing to you to with a review of the year just passed, to share the results, and to
provide some perspective on the year ahead.
It is almost redundant to note that 2020 will go down in history as a watershed year. A year to remember
and a year which will serve to transform so much of who we are. Each of us will long remember where
we were and how we navigated the year the COVID-19 pandemic stopped the world.
For Indigo, as with any customer-facing businesses, the challenges began the first day we were asked to
close and continued to come at us, month after month. As I write this note for our Fiscal 2021 Annual
Report, we are well into the first quarter of our new year. At this moment we remain in retail lockdown
in several areas of Canada and with business constrained in most areas where our retail stores are open.
To put this in clearer context – for almost half the year being addressed in this report and including the
all-important holiday period, many of our stores were closed or highly limited.
The most important thing I want to share is this. Notwithstanding the relentless onslaught of challenges,
the Indigo team demonstrated incredible resilience and resourcefulness. People make a business – and the
ability to adapt and be ready for the recovery is totally dependent on dedication and passion to succeed.
On this key metric, Indigo has much to be proud of.
Equally worth noting – our customers, for the most part, adapted with us and with the demands of the
times, interacting with us as much as possible through indigo.ca. While we could not fully make up the
lost sales created by the enormous impact of closures and limitations across all our 177 stores, we were
able to significantly blunt the impact.
Less satisfying, in a year when we fully expected to return to profitability, the combined cost of the sales
losses and the costs associated with many elements of operating in this environment resulted, as it has for
so many companies, in a loss for this year.
Annual Report 2021 3
Some key operating metrics of the year:
Retail Revenue
($ millions)
Online Revenue
($ millions)
Adjusted EBITDA
($ millions)
778
370
512
163
FY20
FY21
-7
FY20
FY21
FY20
FY21
-28
On adjusting to pandemic requirements
Over the course of the year, we implemented a very well received Express Pick-Up experience to allow
customers to shop online and pick up at the store door or curbside. This capability will remain valuable
to our business long into the future.
Anticipating government-mandated occupancy restrictions, we successfully pulled forward a good portion
of holiday sales. Originally these events were planned to take pressure off our stores in the last weeks leading
to holiday when our shops are typically chock-a-block. As it turned out, due to actual shut-downs, this
strategy was hugely helpful.
In addition, we did a number of things to quickly adapt to unprecedented spikes in online volumes, and
implemented highly effective protocols in all stores and warehouses to ensure full safety of our employees and
our customers. It is worth noting that our efforts in this regard resulted in our receiving the highest ratings
on our environments from public health officials and having no outbreaks originate in any of our premises.
Other significant items in the year
During the year we created an expanded President role in anticipation of the growth ambitions we have
for Indigo. After an intensive search we were successful in recruiting Peter Ruis to fill the position. Peter
brings to Indigo deep executive retail and e-commerce experience gained at John Lewis, Jigsaw Group
and Anthropologie where he led periods of exceptional growth.
We also launched a fulsome Diversity and Inclusion Strategy in partnership with the Canadian Centre for
Diversity and Inclusion (“CCDI”) and committed to The 15% Pledge.
Of particular note – Early in the year we kicked off a multi-year sustainability initiative titled Write The
Future, and committed to be a net zero enterprise by 2035. An early and important element of this work
relates to our own branded product. By the end of 2024 we expect all products under our nóta™ paper
brand, our OUI home brand, and our LOVE & LORE® fashion brand to be fully sustainable.
A more detailed discussion of Write The Future can be found on www.indigo.ca.
4
Report of the CEO
Looking forward
While it has without doubt been a very difficult year – for those leading and working in our stores, for
everyone in the Home Office and in our warehouses, and of course in terms of bottom line – I want to
confirm that we have the strongest confidence in our future.
Indigo remains our customers’ “happy place”, a cherished Canadian brand uniquely positioned to meet the
customer exactly where he/she/they are. That our aggregate sales only dropped by 5.5% notwithstanding
all the store closures and constraints is confirmation of this fact.
We have a clear vision for the business and a thoughtfully developed strategic roadmap. We are poised to
ignite growth, profitability and shareholder value. This is our commitment to you, our shareholders, and
to all those within Indigo.
In closing I want to take this public opportunity to call out the incredible people who make up the Indigo
organization. The passion, resilience, energy and the caring which each and every person brought to work
every day is the very heart of Indigo. As I shared often in my calls and letters to our employees over the past
15 months – I am the luckiest CEO in the world to get to work with this group of people.
As a shareholder, alongside all of you, I want to take this moment to express our deepest gratitude to the
Indigo team.
Here is to COVID-19 being fully behind us all very soon and to experiencing within Canada the kind of
rebound we are seeing in those countries now fully open.
Stay well and I look forward to writing to you in this Report next year.
Heather Reisman
Chair and Chief Executive Officer
Annual Report 2021 5
Management’s Responsibility for
Financial Reporting
Management of Indigo Books & Music Inc. (the “Company”) is responsible for the preparation and integrity of the consoli-
dated financial statements as well as the information contained in this report. The following consolidated financial statements
of the Company have been prepared in accordance with International Financial Reporting Standards, which involve manage-
ment’s best judgments and estimates based on available information.
The Company’s accounting procedures and related systems of internal control are designed to provide reasonable assur-
ance that its assets are safeguarded and its financial records are reliable. In recognizing that the Company is responsible for
both the integrity and objectivity of the consolidated financial statements, management is satisfied that the consolidated finan-
cial statements have been prepared according to and within reasonable limits of materiality and that the financial information
throughout this report is consistent. The Board of Directors, along with the Company’s management team, have reviewed and
approved the consolidated financial statements and information contained within this report.
The Board of Directors monitors management’s internal control and financial reporting responsibilities through an Audit
Committee composed entirely of independent directors. This Committee meets regularly with senior management and the
Company’s internal and independent external auditors to discuss internal control, financial reporting, and audit matters. The
Audit Committee also meets with the external auditors without the presence of management to discuss audit results.
Ernst & Young LLP, whose report follows, were appointed as independent auditors by a vote of the Company’s shareholders
to audit the consolidated financial statements.
Heather Reisman Craig Loudon
Chair and Chief Executive Officer Chief Financial Officer and
Executive Vice President, Supply Chain
6
Management ’s Responsibility for Financial Reporting
Management’s Discussion and Analysis
The following Management’s Discussion and Analysis (“MD&A”) is prepared as at June 1, 2021 and is based primarily on the
consolidated financial statements of Indigo Books & Music Inc. (the “Company” or “Indigo”) for the 53-week period ended
April 3, 2021 and 52-week period ended March 28, 2020. The Company’s consolidated financial statements and accompany-
ing notes are reported in Canadian dollars and have been prepared in accordance with International Financial Reporting
Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) using the accounting policies described
therein. These statements reflect the adoption of IFRS 16 Leases on March 31, 2019, using the modified retrospective method,
with the cumulative effect initially recognized in retained earnings, and no restatement of the prior comparative period.
This MD&A should be read in conjunction with the consolidated financial statements and accompanying notes contained
in the attached Annual Report. The Annual Report and additional information about the Company, including the Annual
Information Form, can be found on SEDAR at www.sedar.com.
Overview
Indigo is Canada’s leading book and lifestyle retailer and was formed as a result of the August 2001 amalgamation of Chapters
Inc. and Indigo Books & Music Inc. The Company offers a curated assortment of books, gifts, baby, kids, wellness, and lifestyle
products that support customers by simplifying their journey to Living with Intention™. The Company operates retail stores in
all ten provinces and one territory in Canada, and also has retail operations in the United States through a wholly-owned
subsidiary, operating one retail store in Short Hills, New Jersey. The retail network includes 88 superstores (2020 – 88) under
the Indigo and Chapters names, as well as 89 small format stores (2020 – 108) under the banners Coles, Indigospirit, and The
Book Company. Retail operations are seamlessly integrated with the Company’s digital channels, including the www.indigo.ca
website and the mobile applications, which are extensions of the physical stores and offer customers an expanded assortment
of book titles, along with a meaningfully curated assortment of general merchandise. The Company also offers a marketplace
assortment of giftable products, experiences, services, and subscriptions on www.thoughtfull.co.
Throughout fiscal 2021, the Company employed an average of approximately 5,000 people (on a full-time, part-time,
and casual basis) and generated annual revenue of $904.7 million. The Company is inclusive of its wholly-owned subsidiaries;
Indigo Design Studio, Inc., Indigo Cultural Department Store Inc. (“Indigo U.S.”), and YYZ Holdings Inc. (“YYZ”), along with
its 20% equity investment in Unplug Meditation, LLC (“Unplug”).
The Company supports a separate registered charity called the Indigo Love of Reading Foundation (the “Foundation”).
The Foundation provides new books and learning material to high-needs elementary schools and children across the country
through donations from Indigo, its customers, its suppliers, and its employees.
Statement on COVID-19
In December 2019, COVID-19 surfaced in Wuhan, China. The World Health Organization declared a global emergency on
January 30, 2020, and then characterized the outbreak as a pandemic on March 11, 2020. Shortly thereafter, numerous juris-
dictions declared states of emergency and imposed restrictions such as closures, quarantine policies and social distancing
measures, negatively impacting the Company’s retail operations, distribution centres, and head office operations. During this
period, the communicable disease spread globally, with active outbreaks continuing in communities across Canada and the
United States.
Annual Report 2021 7
The Company undertook the following actions in fiscal 2021:
• Participated in rolling closures of its retail network, as directed by local governments and public health authorities,
commencing on March 17, 2020 and continuing throughout fiscal 2021. This included extensive closures during
the peak holiday sales season, with province wide closures in Ontario, Quebec and Manitoba by the end of the
Company’s third quarter.
• Recognized $15.5 million of COVID-19 occupancy expense abatement as a direct response to the economic impact
of the COVID-19 pandemic, including amounts recognized in accordance with the IFRS 16 Leases (“IFRS 16”) prac-
tical expedient for COVID-19 rent concessions. The Company continues to negotiate with landlords regarding
abatement to share the financial burden of COVID-19.
• Applied for the Canada Emergency Rent Subsidy (“CERS”) program and recognized rent subsidies of $1.1 million.
• Applied for the Canada Emergency Wage Subsidy (“CEWS”) program and recognized payroll subsidies of $27.4 million.
• Reduced forward inventory purchases and processed returns on unproductive book purchases to suppliers at full
credit, while maintaining an optimized assortment.
• Accelerated its digital road map and launched curbside pick-up and a partnership with Instacart to alleviate demand
on the Company’s distribution centres, and to protect the health and safety of the Company’s customers, employ-
ees and communities.
• In response to capacity constraints at national carriers due to sustained e-commerce delivery volumes, in particular
throughout the holiday period, the Company significantly increased the number and network of parcel carriers it
employs to deliver e-commerce orders.
• Entered into a $25 million related party revolving line of credit to enhance the Company’s liquidity. No advances
were made on the non-interest bearing facility, which matured on February 1, 2021.
• Regularly reviewed the Company’s COVID-19 protocols, at times implementing practices above the standards set
out by public health authorities, in response to the rising COVID-19 cases across several regions and the beginning
of our critical holiday period. These include enhanced cleaning and social distancing protocols, mandatory masks
for all employees and customers, the closure of washrooms in stores, and temperature checks across all the
Company’s distribution centres, among others.
The Company’s top priority remains the health and safety of its customers, employees and communities, and extensive
health and safety measures have been employed that meet or exceed the guidance and direction from public health authorities.
Future Developments
The COVID-19 pandemic has negatively impacted the economy and consumer spending, disrupted supply chains, and created
significant volatility in financial markets on a global scale, the extent of which will depend on future developments that are
highly uncertain and cannot be reliably forecasted.
These future developments include new information regarding vaccination, disease immunity, emerging actions taken to
contain the virus, the recurrence of waves of significant infections, as well as ongoing consumer fears about the disease that
could adversely affect traffic to Indigo’s stores and demand for its products, among others.
The foregoing statement on COVID-19 is not an exhaustive description of the actual or potential impact of the COVID-19
outbreak on the Company. Given this unprecedented period of uncertainty, there can be no assurances regarding: the closure
status of retail locations as a result of COVID-19; the COVID-19-related impacts on the Company’s business, operations and
performance; credit, foreign currency, and liquidity risks generally; and other risks inherent to the Company’s business
and/or factors beyond its control which could have a material adverse effect on the Company. Investors should also refer to
the risks described below under “Risks and Uncertainties”.
8
Management ’s Discussion and Analysis
General Development of the Business
Since 1997, Indigo has been its customers’ self-declared “Happy Place” – today, it is a rich environment filled with books,
toys, gifts, wellness and lifestyle products, and the creative, service obsessed people who help make it all happen. Indigo has
always believed in living life fully and generously, in being kind to each other and to the environment, and that stories – big
and little – really do connect us all to each other.
Indigo is on a mission to support their customers and employees, every day and at key life stages by simplifying their jour-
ney to live with intention. With a meaningfully curated assortment and expert advice from the Indigo team, the Company’s
operating principles endeavour to empower customers to actively identify what they value the most and supporting them to
live in alignment to those values. As the retail landscape has shifted over the past two decades, Indigo’s leading in-store and
digital experience has evolved to align to the changing needs of its employees, customers, and the communities we serve.
The Company’s priorities over the past three years and key strategies moving forward include offering a meaningful and
curated assortment of products, driving a customer inspired retail transformation, redefining Indigo’s digital presence and
developing a high performing and engaged organization.
Offer a Meaningful and Curated Assortment
Indigo celebrates culture-makers and creators including authors, artists, designers, chefs, musicians, and thought leaders. For
consumers looking to invest in the well-being and betterment of themselves and their loved ones, Indigo is a retailer that pro-
vides access to the books, products, and community that support them in their journey. With books at the core, Indigo lever-
ages a global network of authors and industry experts to provide a trusted one-stop shopping experience as a partner through
all of life’s key moments – from baby’s first steps to graduation, first home to the empty nest. All provided with a combination
of thoughtful curation, extraordinary convenience, and world class service.
Indigo’s meaningfully curated assortment is supported by the Company’s design and global sourcing teams that lead the
creative development of Indigo’s proprietary merchandise. In fiscal 2020, to further integrate the design and global sourcing
teams and enhance its proprietary offerings, the Company closed its New York design studio and relocated the design and
global sourcing functions to Indigo’s head office in Toronto. In fiscal 2021, the Company successfully expanded its proprietary
brands, which now include OUI STUDIO™ and OUI Design (collectively “OUI”), Auria™, LOVE & LORE ®, nóta™,
Wonder Co.™, Mini Maison™, and The Littlest™. These brands extend across the Living, Wellness, Fashion, Paper, Kids and
Baby categories. The Company is committed to adapting and improving its proprietary product development capability, as
well as expanding its curated assortment of coveted third-party brands.
Drive a Customer Inspired Retail Transformation
Commencing in 2017, the Company began transforming its physical stores as part of the rollout of a new store concept, with
a focus on being a truly inspirational destination. Indigo’s stores reflect its transformation from a bookstore to a Living with
Intention™ hub; a physical and digital meeting place inspired by and filled with books, music, art, ideas, and beautifully
designed lifestyle products.
The distinction between physical retail and digital retail has evolved and customers expect to have a seamless experience
with the Indigo brand, regardless of channel. Recognizing this, the Company is continuing to focus on digital innovation and
an exceptional customer experience, that meets them where they are. In fiscal 2020, the Company launched an express pick-up
checkout solution, which allows customers to order online and pick up their order in store within the same day. Fiscal 2021
saw meaningful investment in this express pick-up solution to broaden its functionality and provide a more intuitive check-
out experience, and it has become a critical delivery solution through the COVID-19 pandemic. In the past year, the Company
also launched curbside pick-up to allow for contactless sales transactions and commenced a partnership with Instacart where
customers can have their orders delivered in less than two hours in the markets that Instacart services.
Annual Report 2021 9
In fiscal 2019 and 2020, the Company opened four new stores and renovated or rebranded 16 stores in order to improve
the customer experience and product offerings across key categories. This included the opening of a store in Short Hills, New
Jersey, to gather learnings regarding American customers’ engagement with the Indigo brand. In fiscal 2021, in light of
COVID-19, the Company accelerated its review of its real estate portfolio and closed 20 small format stores. The Company
will continue to assess how the impacts of COVID-19 will reshape the physical retail landscape to reimagine the Indigo store
of the future.
Redefine Indigo’s Digital Presence
In addition to reshaping Indigo’s physical store offerings, the Company continues to invest heavily in its digital platforms and
digital presence, to bring inspirational content and product to customers with a best-in-class shopping experience.
Over the past three years, the Company’s digital sales platforms have advanced dramatically, offering customers an improved
and simplified shopping experience. The digital channels offer customers access to over 15 million book titles, along with a
meaningful curated assortment of general merchandise, all to simplify the customers’ journey to Living with Intention™. To
achieve this, the Company expanded the Calgary distribution centre in 2020 to better serve online customers in Western
Canada and launched a new product information management system to provide the foundation for an enhanced digital expe-
rience. The COVID-19 pandemic has placed limitations on the Company’s ability to conduct business as normal and has accel-
erated existing plans for digital modernization. The abrupt pivot to digital across the entire organization included optimizing
the website experience, customer service automation, enhancing an express pick-up offering, and expanding the Ontario dis-
tribution centre to manage increased online order volume, among others. Ultimately, the Company has focused on providing
customers safe and efficient access to the products that bring them joy during these difficult times.
Optimizing the Company’s plum® loyalty program continues to be a key focus of the business. The Company has a two-
tiered loyalty program: plum®, a free points-based tier; and plum® PLUS, an annual fee-based tier which was launched on a
national scale in fiscal 2020, replacing the Company’s irewards ® program. As an annual fee-based program, plum® PLUS offers
free shipping, member discounts, and exclusive offers as incremental benefits to the redeemable points offered on almost all
products purchased.This membership tier has delivered on engaging Indigo’s best customers, in addition to driving frequency
and a meaningful lift in average transaction values. The success of this program continues to deepen the Company’s under-
standing of its customers, as well as offers direct marketing and other compelling communication opportunities. Going for-
ward, the Company will continue to strengthen its capabilities to personalize each member touch point, providing a rich
omni-channel shopping experience.
In the third quarter of fiscal 2020, Indigo launched www.thoughtfull.co, a gifting site dedicated to helping customers find
unique and meaningful gifts. Thoughtfull™ provides a last-minute gifting solution with digitally fulfilled delivery for its assort-
ment of giftable experiences, services, and subscriptions. In fiscal 2021,Thoughtfull™ has continued to be a platform to virtually
service customers, while providing further insight to the Company about customers’ experiential purchasing patterns.
With a focus on inspiring and attracting customers, the Company has built a strong social media presence across
Facebook, Instagram, LinkedIn, Pinterest, Twitter, and TikTok, with over half a million followers on Facebook and over
400,000 on Instagram. Some of the locations in the Company’s retail network have their own community social profiles,
which further enhances customer engagement. In fiscal 2021, the Company launched a podcast titled Well Said, connecting
customers to the trusted voices in well-being to hear meaningful conversations about the art and science of living well to help
them live with purpose and intention.
Develop a High Performing, Engaged Organization
While a key focus of the Company’s business is evolving to meet the emerging needs of customers, Indigo is also focused on
becoming the best rewarding retail employer in Canada. The Company’s continued evolution and new business strategies are
supported by driving a high-performance growth culture and aspiring for operational excellence.
10
Management ’s Discussion and Analysis
The Company’s ambition is to be the best rewarding retail employer, not only in pay, but in a holistic view of the employ-
ment relationship that includes a sense of purpose, meaningful relationships, benefits, and flexible work opportunities. This
Company-wide initiative focuses on driving engagement, high performance, and operational excellence, while removing inef-
ficiency from the Company’s work processes. The Company is focusing on the development of high-performing teams where
individuals are encouraged to chart their own career paths and apply their strengths to meaningful work, allowing them to
bring their best selves to work. This work involves partnerships across all areas of the Company and is expected to continue
to evolve over the next several years.
In fiscal 2021, Indigo continued to attain a record-high employee engagement score of 87%, as well as receiving external
acknowledgment of its positive employee and customer experience. Indigo received a Diversity and Inclusion award in 2019
from Universum, an organization that annually surveys over 1,700,000 students and professionals worldwide. For the 2019
Canada edition of the award, 23,000 students from more than 150 Canadian colleges and universities were asked to rank
employers on Universum’s Diversity & Inclusion Index. Indigo ranked in the top 25 out of 140 employers from different
industries in both the Business and Liberal Arts/Humanities categories. This award recognizes companies perceived by stu-
dents across Canada to be the most diverse and inclusive employers in the country.
Indigo’s high performing teams’ resilience and strong embodiment of the Company’s values allowed the business to suc-
cessfully respond to the ever-evolving challenges introduced by COVID-19 in fiscal 2021.
Results of Operations
The following three tables summarize selected financial and operational information for the Company. The classification of
financial information presented below is specific to Indigo and may not be comparable to that of other retailers. The selected
financial information is derived from the consolidated financial statements for the 53-week period ended April 3, 2021 and
52-week periods ended March 28, 2020 and March 30, 2019.
Key elements of the consolidated statements of loss and comprehensive loss for the periods indicated are shown in the
following table:
53-week 52-week
period ended period ended
April 3, % March 28, %
(millions of Canadian dollars) 2021 Revenue 2020 Revenue
Revenue 904.7 100.0 957.7 100.0
Cost of sales (567.9) 62.8 (553.6) 57.8
Cost of operations (212.8) 23.5 (255.6) 26.7
Selling, general and administrative expenses (83.6) 9.2 (90.1) 9.4
Depreciation of right-of-use assets (43.0) 4.8 (40.1) 4.2
Finance charges related to leases (25.7) 2.8 (25.6) 2.7
Adjusted EBITDA1 (28.3) 3.1 (7.3) 0.8
Depreciation of property, plant
and equipment (17.2) 1.9 (23.0) 2.4
Amortization of intangible assets (12.9) 1.4 (13.4) 1.4
Gain (loss) on disposal of capital assets
and equity investments 0.8 0.1 (0.4) –
Impairment losses – – (56.6) 5.9
Net interest income 0.9 0.1 2.1 0.2
Share of loss from equity investments (0.2) – (1.7) 0.2
Loss before income taxes (56.9) 6.3 (100.3) 10.5
1 Earnings before interest, taxes, depreciation, amortization, impairment, asset disposals, and share of loss from equity investments, and includes IFRS 16 right-of-use
asset depreciation and associated finance charges. For further information on the key metric and its computation, see “Non-IFRS Financial Measures”.
Annual Report 2021 11
Adjusted EBITDA is a key indicator used by the Company to measure performance against internal targets and prior
period results and is commonly used by financial analysts and investors to assess performance. This measure is specific to
Indigo and has no standardized meaning prescribed by IFRS. Therefore, adjusted EBITDA may not be comparable to similar
measures presented by other companies.
Adjusted EBITDA includes certain impacts of IFRS 16, which represents a change in calculation methodology from fiscal
2020. Fiscal 2020 numbers have been consistently stated. For further information regarding this metric refer to “Non-IFRS
Financial Measures”.
A reconciliation of adjusted EBITDA to loss before income taxes, the most directly comparable measure determined
under IFRS, is presented above for informational purposes.
Selected financial information of the Company for the last three fiscal years is shown in the following table:
53-week 52-week 52-week
period ended period ended period ended
April 3, March 28, March 30,
(millions of Canadian dollars, except per share data) 2021 2020 20191
Revenue
Superstores 439.8 655.8 711.4
Small format stores 72.6 122.1 144.8
Online 370.0 162.7 175.9
Other 22.3 17.1 14.7
904.7 957.7 1,046.8
Loss before income taxes (56.9) (100.3) (49.6)
Income tax recovery (expense) (1.0) (84.7) 12.8
Net loss (57.9) (185.0) (36.8)
Total assets 799.5 883.0 610.5
Lease liabilities (including current portion) 550.3 568.6 –
Working capital 46.1 85.2 164.1
Basic loss per common share $(2.09) $(6.72) $(1.35)
Diluted loss per common share $(2.09) $(6.72) $(1.35)
1 The Company implemented IFRS 16 Leases on March 31, 2019 using the modified retrospective approach. As a result, the Company’s fiscal 2020 and 2021
results reflect lease accounting under IFRS 16, while fiscal 2019 has not been restated.
12
Management ’s Discussion and Analysis
Selected operating information of the Company for the last three fiscal years is shown in the following table:
53-week 52-week 52-week
period ended period ended period ended
April 3, March 28, March 30,
2021 2020 2019
Stores Opened
Superstores – – 4
Small format stores 1 – –
1 – 4
Stores Rebranded, Relocated, or Renovated
Superstores – 3 13
Small format stores – – –
– 3 13
Stores Closed
Superstores – 1 1
Small format stores 20 7 8
20 8 9
Number of Stores Open at Year-End
Superstores 88 88 89
Small format stores 89 108 115
177 196 204
Selling Square Footage at Year-End (in thousands)
Superstores 1,941 1,941 1,962
Small format stores 231 279 287
2,172 2,220 2,249
Revenue
Total consolidated revenue for the 53-week period ended April 3, 2021 decreased $53.0 million or 5.5% to $904.7 million
from $957.7 million for the 52-week period ended March 28, 2020. This includes the impact of one additional week of rev-
enue for the 53-week period in fiscal 2021, which amounted to $15.3 million. On a normalized 52-week basis, total revenue
decreased 7.1% compared to the same period last year. The decrease in revenue was contained to a single-digit percentage
decline, reflecting the Company’s successful efforts to mitigate the adverse impact of COVID-19. Exceptional growth in the
online channel softened the impact of the COVID-19 disruption, as temporary store closures and severe capacity restrictions
drove a decline in the retail channel. Strong demand for the core categories of reading, wellness, and at-home learning and
entertainment stabilized the Company’s base business, while the successful launch of its new proprietary OUI Design lifestyle
brand demonstrated customers’ receptiveness to an expanded assortment.
Online revenue increased by $207.3 million or 127.4% to $370.0 million for the 53-week period ended April 3, 2021
compared to $162.7 million in the prior year. On a normalized 52-week basis, online revenue increased 124.5%. Due to the
noted government closures and capacity restrictions, the Company converted a significant number of existing retail cus-
tomers to its digital platforms, as well as acquired a new online customer base, earning a total of over one million customers
new to the online channel in fiscal 2021. Together with improvements in average order values, this growth well-positions the
Company to capitalize on tailwinds from the e-commerce momentum initiated by the global pandemic. The Company also
notably managed peak online order volumes throughout the year, while implementing COVID-19 social distancing and other
leading safety measures.
Annual Report 2021 13
Retail revenue, which is inclusive of orders fulfilled through omnichannel express pick-up, decreased by $265.5 million
or 34.1% to $512.4 million for the 53-week period ended April 3, 2021 compared to $777.9 million in the prior year. On a
normalized 52-week basis, retail revenue decreased 35.5%. The decline in retail revenue was a result of rolling store closures
in key geographic regions and the other ongoing impacts of COVID-19, which drove a significant decline in traffic. To provide
further context on the severity of these disruptions, most stores in the Greater Toronto Area faced COVID-19 closures for
approximately six months, inclusive of the traditional holiday sales period. Promotional events were successfully pulled for-
ward and the Company’s omnichannel express pick-up capabilities reached a peak of over 35% of e-commerce demand in
late December, absorbing some of the impact of closures during these critical holiday sales weeks. As anticipated, opened
stores saw softer traffic than pre-pandemic levels, with COVID-19 continuing to have effects on shopping behaviour.
The Company has historically reported on comparable sales, a key performance indicator in prior years. Due to the rolling
store closures from COVID-19 and strict social distancing requirements limiting capacity in stores upon reopening, the
Company believes that comparable sales are not currently representative of the underlying trends of its business. Due to the
diminished relevance of this key performance indicator, comparable sales is not further discussed in this report.
Revenue from other sources includes Indigo café revenue, revenue from unredeemed gift cards (“gift card breakage”),
revenue from unredeemed plum® points (“plum breakage”), plum® PLUS membership fees (“plum PLUS revenue”), irewards
card sales, corporate sales, and revenue-sharing with Rakuten Kobo Inc. (“Kobo”). Revenue from other sources increased
$5.2 million or 30.4% to $22.3 million for the 53-week period ended April 3, 2021 compared to $17.1 million in the prior
year. On a normalized 52-week basis, revenue from other sources increased 29.2%, driven by plum® PLUS revenue as more
customers joined the paid loyalty tier.
Revenue by channel is highlighted below:
53-week 52-week
period ended period ended
April 3, March 28, % increase/
(millions of Canadian dollars) 2021 2020 (decrease)
Superstores1 439.8 655.8 (32.9)
Small format stores1 72.6 122.1 (40.5)
Online (including store kiosks) 370.0 162.7 127.4
Other 2 22.3 17.1 30.4
Total 904.7 957.7 (5.5)
1 Includes sales on orders placed on indigo.ca and fulfilled through express pick-up.
2 Includes Indigo cafés, irewards, gift card breakage, plum® breakage, plum® PLUS revenue, corporate sales, and Kobo revenue share.
Revenue by channel normalized for a 52-week basis is highlighted below:
53-week 52-week 52-week
period ended period ended period ended
April 3, Week 53 April 3, March 28, % increase/
(millions of Canadian dollars) 2021 Revenue 2021 2020 (decrease)
Superstores1 439.8 8.9 430.9 655.8 (34.3)
Small format stores1 72.6 1.5 71.1 122.1 (41.8)
Online (including store kiosks) 370.0 4.7 365.3 162.7 124.5
Other 2 22.3 0.2 22.1 17.1 29.2
Total 904.7 15.3 889.4 957.7 (7.1)
1 Includes sales on orders placed on indigo.ca and fulfilled through express pick-up.
2 Includes Indigo cafés, irewards, gift card breakage, plum® breakage, plum® PLUS revenue, corporate sales, and Kobo revenue share.
14
Management ’s Discussion and Analysis
Revenue by product line is as follows:
53-week 52-week
period ended period ended
April 3, March 28,
2021 2020
Print 1,4 58.4% 56.3%
General merchandise 2,4 39.2% 41.9%
Other 3 2.4% 1.8%
Total 100.0% 100.0%
1 Includes books, magazines, newspapers, eReaders, and related shipping revenue.
2 Includes lifestyle, paper, toys, electronics, and related shipping revenue.
3 Includes Indigo cafés, irewards, gift card breakage, plum® breakage, plum PLUS revenue, corporate sales, and Kobo revenue share.
4 Certain comparative information relating to eReaders has been reclassified to conform to the current year’s presentation.
Cost of Sales
Cost of sales includes the landed cost of goods sold, online shipping costs, inventory shrink and damage reserve, less all vendor
support programs. Cost of sales increased by $14.3 million to $567.9 million for the 53-week period ended April 3, 2021,
compared to $553.6 million for the 52-week period ended March 28, 2020. As a percentage of total revenue, cost of sales
increased 5.0% to 62.8% compared to 57.8% in the prior year.
Excluding the impact of online shipping costs, cost of sales decreased by $22.1 million to $505.8 million for the 53-week
period ended April 3, 2021, compared to $527.9 million for the 52-week period ended March 28, 2020. As a percentage of
total revenue, this represents an increase of only 0.8% to 55.9% compared to 55.1% in the prior year. This change reflects
the substantial shift to the online channel, which saw sales penetration more than double in light of rolling store closures and
overall reduced store traffic in response to COVID-19.While the online channel provides a lower margin than retail, efficien-
cies realized to the Company’s online fulfillment process, stronger inventory management, and lower online promotional
activity led to the strongest merchandise margin rate performance (excluding the impact of shipping costs) in the channel’s
history. Retail margin rate performance remained flat to last year, highlighting the Company’s ability to generate full-price
sell-through in this challenging retail climate.
Online shipping costs increased by $36.4 million to $62.1 million for the 53-week period ended April 3, 2021, compared
to $25.7 million for the 52-week period ended March 28, 2020, reflecting the substantial growth in the Company’s online
channel.
The Company remains focused on long-term strategies to optimize margin, efforts which were furthered by the accel-
erated shift toward e-commerce across the retail industry.
Cost of Operations
Cost of operations includes all store, store support, online, and distribution centre costs. Cost of operations decreased by
$42.8 million to $212.8 million for the 53-week period ended April 3, 2021, compared to $255.6 million in the prior year.
As a percent of total revenue, cost of operations decreased 3.2% to 23.5% compared to 26.7% in the prior year. The
Company realized $15.5 million in reductions to its cost of operations relating to COVID-19 occupancy expense abatement,
which is inclusive of amounts recognized in accordance with IFRS 16, and $1.1 million of reductions from rent subsidies from
the CERS program. The Company also realized $15.4 million of benefit from the CEWS (partial benefit attributed to oper-
ating costs), which offset labour charges in the retail and online networks. Savings were furthered from labour efficiencies
associated with store closures and volume declines throughout the Company’s retail network and retail distribution centres.
These cost containment efforts were partially offset by increased variable costs in the Company’s online distribution network.
Annual Report 2021 15
Selling, General and Administrative Expenses
Selling, general and administrative expenses include marketing, head office costs, and operating expenses associated with the
Company’s strategic initiatives. These expenses decreased $6.5 million to $83.6 million for the 53-week period ended April 3,
2021, compared to $90.1 million in the prior year. As a percent of total revenue, selling, general and administrative expenses
decreased 0.2% to 9.2% compared to 9.4% in the prior year. The Company also recognized $12.0 million of benefit from
the CEWS (partial benefit attributed to selling, general and administrative expenses), which offset head office labour charges.
Through an increased focus on cost containment during this COVID-19 economic climate, the Company also realized savings
of $11.8 million in selling, general and administrative expenses. Specifically, this was achieved through the temporary reduc-
tion to paid marketing with an emphasis on bringing marketing costs in-house, a reduction in travel expenses, a rationalization
to the head office workforce and more focused spend on strategic projects. These savings were partially offset by incentive
compensation, which was not recognized in the prior year.
Lease Charges
Lease charges associated with IFRS 16 include the depreciation of the right-of-use assets, and finance charges associated with
the lease liabilities. Lease charges increased by $3.0 million to $68.7 million for the 53-week period ended April 3, 2021,
compared to $65.7 million in the prior year. The increase was primarily a result of the lease renewals recognized during the
year, partially offset by negotiated IFRS 16 rent concessions and the impact of fiscal 2020 impairment charges.
Adjusted EBITDA
Adjusted EBITDA is defined as earnings before interest, taxes, depreciation, amortization, impairment, asset disposals, and
share of loss from equity investments, and includes IFRS 16 right-of-use asset depreciation and associated finance charges.
Adjusted EBITDA decreased by $21.0 million to a loss of $28.3 million for the 53-week period ended April 3, 2021, com-
pared to a loss of $7.3 million in the prior year. Adjusted EBITDA, as a percent of total revenue, declined by 2.3% to a loss
of 3.1% this year, compared to a loss 0.8% in the prior year.
Lower Adjusted EBITDA was driven by the top-line decline resulting from the impacts of COVID-19, including the
rolling store closures experienced throughout fiscal 2021. However, the Company demonstrated its ability to pivot in
response to the evolving pandemic conditions, evidenced by scaling operations in its online distribution centres to fulfill
unprecedented demand, quickly launching an enhanced express pick-up experience with a contactless curbside offering and
effectively pulling forward holiday sales in anticipation of retail business disruption. These executed efforts limited the poten-
tial COVID-19 impact to sales, and were delivered while maintaining a focus on improving core assortments and driving the
Company’s long-term strategy. The above noted impact on revenue to EBITDA was partially mitigated by a focus on optimiz-
ing margin and cost containment, the negotiated occupancy expense abatement recognized, and government support pro-
grams leveraged during the year.
A reconciliation of adjusted EBITDA to losses before income taxes has been included in the “Results of Operations” sec-
tion of this MD&A.
Capital Assets
Depreciation and amortization of capital assets for the 53-week period ended April 3, 2021 decreased $6.4 million – to
$30.0 million compared to $36.4 million in the prior year. The decrease in depreciation and amortization was driven by the
impairment charge taken on capital assets in the prior year, which reduced the Company’s capital asset base.
Capital expenditures in fiscal 2021 totaled $13.3 million compared to $10.6 million in the prior year. Capital investment
made in the year was primarily to support the increased demand on the online channel. Capital expenditures for the current
year included $9.2 million primarily for digital application software and internal development costs, $2.3 million for technology
equipment and $1.8 million for furniture, fixtures, equipment, and leasehold improvements. None of the capital expen ditures
were financed through leases.
16
Management ’s Discussion and Analysis
Net Interest Income
Net interest income, excluding finance charges related to leases, decreased $1.2 million to $0.9 million for the 53-week period
ended April 3, 2021, compared to $2.1 million in the prior year. The Company nets interest income against interest expense.
Compared to the prior year, the Company earned lower interest income as a result of decreased interest rates, as well as the
temporary discontinuation of its use of short-term investments to enhance liquidity during the ongoing COVID-19 pandemic.
Equity Investments
The Company uses the equity method to account for its investment in Unplug, and its previous investment in Calendar Club
of Canada Limited Partnership (“Calendar Club”). The Company recognizes its share of equity investment earnings and losses
as part of consolidated net earnings and losses.
The Company recognized a loss of $0.2 million from Unplug for the 53-week period ended April 3, 2021 compared to
a loss of under $0.1 million in the prior year.
During fiscal 2020, the Company sold its equity investments in Calendar Club to Paris Southern Lights Inc. (a minority
partner in the partnership). The financial impact of the transaction consisted of proceeds of $1.8 million, which generated a
gain on the sale of $1.5 million. Prior to the sale, the Company recognized a net loss from Calendar Club of $1.6 million.
Income Taxes
The Company recognized a non-cash deferred income tax expense of $1.0 million for the 53-week period ended April 3,
2021, compared to recognizing a non-cash deferred income tax expense of $84.7 million in the prior year. Income taxes in
the current year were impacted by the movement in cash flow hedges. In the prior year, the Company de-recognized the
deferred tax asset balance, driving the material year-over-year change.
The decision to not recognize deferred tax assets was influenced by the Company’s operating losses, and uncertainty
surrounding future profitability as a result of the COVID-19 pandemic, among other factors. As such, uncertainty exists sur-
rounding the probability of sufficient taxable income being available to utilize all deferred tax assets within the time-line of
management’s forecasts. The time period of future projected taxable profits used to assess the recognition of deferred tax
assets was shorter than the expiration period of the non-capital tax loss carryforward, and other deferred tax assets which do
not expire.
The Company’s effective tax rate was (1.8)%, compared to (84.5)% in the prior year.
Net Loss
The Company recognized a net loss of $57.9 million for the 53-week period ended April 3, 2021 ($2.09 net loss per common
share), compared to a net loss of $185.0 million ($6.72 net loss per common share) in the prior year.
In fiscal 2020, the Company recognized $56.6 million of impairment losses and a deferred tax expense of $84.7 million
related to derecognizing the Company’s deferred tax asset balance. Cycling over these items generated an increase in prof-
itability in the current year. Excluding the impact of these items, the Company saw a decline in profitability in fiscal 2021
related to the top-line impact of COVID-19, partially offset by the previously discussed external COVID relief and cost saving
measures implemented throughout the year.
Other Comprehensive Income
Other comprehensive income (loss) consists primarily of gains and losses related to hedge accounting and the Company’s for-
eign currency translation adjustments. The Company has a formal hedging policy to mitigate foreign exchange risk, entering
into contracts to manage the currency fluctuation risk associated with forecasted U.S. dollar expenses, primarily for general
merchandise inventory purchases. Financial instruments used to mitigate risk include foreign exchange forward contracts. All
contracts entered into during the year have been designated as cash flow hedges for accounting purposes and extend over a
period not exceeding 12 months.
Annual Report 2021 17
During the 53-week period ended April 3, 2021, the Company entered into contracts with total notional amounts
of C$69.7 million to buy U.S. dollars and sell Canadian dollars, compared to entering into contracts with total notional
amounts of C$118.8 million in the prior year. As at April 3, 2021, the Company had remaining contracts in place representing
total notional amounts of C$34.6 million and an unrealized net loss of $1.6 million, compared to total notional amounts of
C$66.2 million and an unrealized net gain of $3.8 million as at March 28, 2020.
During the 53-week period ended April 3, 2021, the Company had net losses (net of taxes) from the change in fair value
of outstanding cash flow hedges of $4.5 million, compared to net gains (net of taxes) of $2.5 million in the prior year. During
the same respective periods, the Company reclassified net losses (net of taxes) from settled contracts of $0.1 million from
other comprehensive loss to inventory and expenses, and net gains (net of taxes) of $0.5 million in the prior year.
The Company also recognized an other comprehensive loss of $0.1 million from foreign currency translation adjustments
on consolidation of its foreign subsidiaries for the fiscal year ended April 3, 2021, compared to other comprehensive income
of $0.4 million in the prior year.
These resulted in a total other comprehensive loss of $4.5 million for the 53-week period ended April 3, 2021, compared
to other comprehensive income of $2.4 million in the prior year.
Seasonality and Fourth Quarter Results
Indigo’s business is highly seasonal and follows quarterly sales and earnings (loss) fluctuation patterns, which are similar to
those of other retailers that are highly dependent on the holiday sales season. A disproportionate amount of revenues and earn-
ings are earned in the third quarter. As a result, quarterly performance is not necessarily indicative of the Company’s per-
formance for the rest of the year. The impact of certain risks, as discussed in the “Risks and Uncertainties” section of this
MD&A, would have a disproportionate impact to the Company’s financial performance should any such events occur during
the holiday sales season. For fiscal 2022, revenue and earnings (loss) may not follow historic patterns of seasonality due to the
impact of the COVID-19 pandemic.
The following table sets out revenue, net earnings (loss), basic and diluted earnings (loss) per common share for the pre-
ceding eight fiscal quarters.
Fiscal quarters
Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1
(millions of Canadian dollars, Fiscal Fiscal Fiscal Fiscal Fiscal Fiscal Fiscal Fiscal
except per share data) 2021 2021 2021 2021 2020 2020 2020 2020
Revenue 199.0 365.4 205.3 135.1 178.1 383.7 203.4 192.6
Net earnings (loss) (39.5) 30.7 (17.5) (31.6) (171.3) 25.8 (20.5) (19.1)
Basic earnings (loss) per common share $(1.42) $1.11 $(0.63) $(1.15) $(6.22) $0.94 $(0.74) $(0.69)
Diluted earnings (loss) per
common share $(1.42) $1.09 $(0.63) $(1.15) $(6.22) $0.94 $(0.74) $(0.69)
For the 14-week period ended April 3, 2021, total consolidated revenue increased by $20.9 million or 11.7% to $199.0 mil-
lion compared to $178.1 million for the 13-week period ended March 28, 2020. This increase was primarily a result of the
additional week in the period, compared to fiscal 2020, which resulted in an additional $15.3 million of revenue. Revenue
was also lifted by the sustained growth to the online channel in fiscal 2021, which had yet to meaningfully accelerate at the
commencement of the first wave of store closures in the period ended March 28, 2020.
The Company recognized a net loss of $39.5 million for the 14-week period ended April 3, 2021, ($1.42 basic net loss
per common share), compared to a net loss of $171.3 million ($6.22 basic net loss per common share) in the prior year. This
improvement was a result of cycling over the impairment losses and de-recognition of deferred tax assets in the prior year,
which both had a material negative impact in fiscal 2020. This impact was partially offset in the fourth quarter by incentive
compensation, which was not recognized in the prior year.
18
Management ’s Discussion and Analysis
Overview of Consolidated Balance Sheets
Assets
As at April 3, 2021, total assets decreased $83.5 million to $799.5 million, compared to $883.0 million as at March 28, 2020.
The decrease was primarily driven by decreases in capital assets, cash and cash equivalents, and inventories, partially offset by
an increase in accounts receivables and prepaid expenses. Capital assets decreased by $38.0 million, which relates to the
impact of depreciation in the year and a more disciplined capital asset investment program in response to COVID-19 and the
Company’s measures taken to preserve its cash. Cash and cash equivalents decreased by $35.5 million as a result of the oper-
ating loss sustained in the year, and furthered by the impact of the 53rd week on the timing of material payments. Inventories
decreased by $26.7 million, a result of deliberate efforts by the Company to maximize its liquidity during the initial stages of
the COVID-19 pandemic and the decision to strategically reduce unproductive inventory. These decreases were partially
offset by an increase in accounts receivables of $15.3 million, primarily driven by amounts for the CEWS not yet collected
by the end of the year and an increase in prepaid expenses of $6.2 million, due to the timing of rent payments.
Liabilities
As at April 3, 2021, total liabilities decreased $22.1 million to $776.9 million, compared to $799.0 million as at March 28,
2020. This was driven primarily by a decrease in lease liabilities, and accounts payables and accrued liabilities. The decrease
in lease liabilities of $18.3 million primarily reflects the impact of repayments of interest and principal on lease liabilities out-
pacing lease renewals in the period, complemented by negotiated rent concessions which met the IFRS 16 COVID-19 prac-
tical expedient for recognition. Net accounts payable and accrued liabilities decreased $18.2 million, which is consistent with
the year-over-year decline in inventories. These decreases were partially offset by an increase of $6.4 million in unredeemed
gift card liabilities, primarily driven by lower redemption activity in fiscal 2021 due to COVID-19 disruptions in the retail
network, and an increase of $5.8 million of deferred revenue driven by plum® PLUS membership sign-ups since the national
launch in fiscal 2020.
Equity
Total equity at April 3, 2021 decreased $61.4 million to $22.6 million, compared to $84.0 million as at March 28, 2020,
driven primarily by the net loss of $57.9 million recognized over the year. This was furthered by the recognized other com-
prehensive loss of $4.5 million, primarily due to the change in fair value of outstanding cash flow hedges.
The weighted average number of common shares outstanding for fiscal 2021 was 27,664,268 compared to 27,515,109 in
the prior year. As at June1, 2021, the number of outstanding common shares was 27,273,961 with a book value of $227.0 million.
Working Capital and Leverage
The Company reported working capital of $46.1 million as at April 3, 2021, compared to $85.2 million as at March 28, 2020.
The decrease in working capital compared to the same period last year was driven by the discussed decreases in cash and cash
equivalents and inventories, partially offset by the decrease in accounts payable and accrued liabilities and increase in accounts
receivable.
Overview of Consolidated Statements of Cash Flows
Cash and cash equivalents decreased $35.5 million for the 53-week period ended April 3, 2021 compared to an increase of
$79.2 million in the prior year. The decrease in cash flows in the period was driven by cash flows used in financing activities
and investing activities of $62.2 million and $12.4 million, respectively. This was partially offset by cash flows generated from
operating activities of $37.7 million.
Annual Report 2021 19
Cash Flows From Operating Activities
The Company generated cash flows of $37.7 million from operating activities in the 53-week period ended April 3, 2021 com-
pared to generating cash flows of $65.2 million in the prior year, a change of $27.5 million. This was primarily a result of the
decrease of $21.0 million in adjusted EBITDA compared to the prior year. The decrease was furthered by a reduction in cash
generated from working capital of $4.4 million from the noted increase in accounts receivables, which primarily relates to
government subsidies, and the reduction in inventory.
Cash Flows From (Used for) Investing Activities
The Company used cash flows of $12.4 million for investing activities in the 53-week period ended April 3, 2021 compared
to generating $79.3 million of cash flows in the prior year, a change of $91.7 million. This was primarily driven by the maturity
of $87.2 million of short-term investments in the prior year. The Company employed a protectionist treasury strategy in res -
ponse to the global COVID-19 pandemic, which resulted in the temporary discontinuation of its use of short-term investments.
Cash was used for capital projects as follows:
53-week 52-week
period ended period ended
April 3, March 28,
(millions of Canadian dollars) 2021 2020
Construction, renovations, and equipment, net 1.8 1.0
Intangible assets (primarily application software and internal development costs) 9.2 8.4
Technology equipment 2.3 1.2
Total 13.3 10.6
Cash Flows Used for Financing Activities
The Company used cash flows of $62.2 million for financing activities in the 53-week period ended April 3, 2021 compared
to using cash flows of $66.0 million in the prior year, a change of $3.8 million. This was driven by lower repayments on the
Company’s IFRS 16 lease obligations, a direct impact of rent concessions.
Liquidity and Capital Resources
The Company has a highly seasonal business that generates a significant portion of its revenue and cash flows during the hol-
iday season. The Company has minimal accounts receivables and the majority of book products are purchased on trade terms
with the right to return to suppliers at full credit. The Company’s main sources of capital are cash flows generated from oper-
ations, cash and cash equivalents, and short-term investments. Cash flows from operating activities could continue to be neg-
atively impacted by decreased demand for the Company’s product offerings, which could result from factors such as, but not
limited to, adverse economic conditions resulting from the COVID-19 pandemic and associated changes in consumer prefer-
ences, by the impact of social distancing policies and general public health sentiment on retail store traffic, and the Company’s
ability to safely fulfill orders through its online distribution network.
The contractual maturities of the Company’s current and long-term liabilities as at April 3, 2021 are as follows:
(millions of Canadian dollars) Less than 1 year 2-3 years 4-5 years After 5 years Total
Total obligations 215.2 121.5 96.7 267.4 700.7
20
Management ’s Discussion and Analysis
Based on the Company’s current business plan, liquidity position, cash flow forecast, and factors known to date, including
the currently known impacts of COVID-19, it is expected that the Company’s current cash position and future cash flows gen-
erated from operations will be sufficient to meet its working capital requirements for fiscal 2022. However, the Company’s
ability to fund future operations will depend on its operating performance, which could be affected by risks associated with
the COVID-19 pandemic, as discussed.
During the year, the Company entered into a $25 million related party revolving line of credit to enhance its liquidity.
As at April 3, 2021, this facility had expired without any amounts withdrawn by the Company. Subsequent to April 3, 2021,
the Company entered into a new $25 million related party revolving line of credit with similar commercial terms.The Company
can seek to raise additional funding should a significant risk to liquidity arise, as it currently has no outstanding debt financing,
and can reduce capital spending if necessary. However, the COVID-19 pandemic may create a number of additional risks to
obtaining such funding, such as the ability to access capital at a reasonable cost. Also, a long-term decline in capital expendi-
tures may negatively impact the Company’s revenue and profit growth.
For additional discussion surrounding risks and uncertainties related to COVID-19, refer to the “Risks and Uncertainties”
section in this MD&A.
Accounting Policies
Critical Accounting Judgments and Estimates
The discussion and analysis of Indigo’s operations and financial condition are based upon the consolidated financial statements,
which have been prepared in accordance with IFRS. The preparation of these consolidated financial statements in conformity
with IFRS requires management to undertake a number of judgments and estimates about the recognition and measurement
of assets, liabilities, revenues, and expenses. These judgments and estimates are based on management’s historical experience
and other assumptions which the Company believes to be reasonable under the circumstances. The Company also evaluates
its judgments and estimates on an ongoing basis. Methods for determining all material judgments and estimates are consistent
with those used in prior periods, except as noted. Actual results may differ from the judgments and estimates made by man-
agement, and actual results will seldom equal estimates. The critical accounting judgments and estimates and significant
accounting policies of the Company are described in notes 3 and 4 of the consolidated financial statements.
The following items in the consolidated financial statements involve significant judgment or estimation.
Use of judgments
The preparation of the consolidated financial statements in conformity with IFRS requires the Company to make judgments,
apart from those involving estimation, in applying accounting policies that affect the recognition and measurement of assets,
liabilities, revenues, and expenses. Actual results may differ from the judgments made by the Company. Information about
judgments that have the most significant effect on recognition and measurement of assets, liabilities, revenues, and expenses
is discussed below. Information about significant estimates is discussed in the following section.
Impairment
An impairment loss is recognized for the amount by which the carrying amount of an asset or a cash-generating unit (“CGU”)
exceeds its recoverable amount. Impairment losses are reversed if the recoverable amount of the capital asset, CGU, or group
of CGUs exceeds its carrying amount, but only to the extent that the carrying amount of the asset does not exceed the car-
rying amount that would have been determined, net of depreciation or amortization, if no impairment loss had been recog-
nized. The Company uses judgment when identifying CGUs, when assessing for indicators of impairment or reversal, and
when estimating the recoverable amount for its CGUs in impairment testing.
Annual Report 2021 21
Intangible assets
Initial capitalization of intangible asset costs is based on the Company’s judgment that technological and economic feasibility
are confirmed and the project will generate future economic benefits by way of estimated future discounted cash flows that
are being generated.
Leases
The Company assesses whether a contract is or contains a lease at inception of a contract. The Company recognizes a right-of-use
asset and a corresponding lease liability with respect to all lease agreements in which it is the lessee, except for short-term leases
(defined as leases with a lease term of 12 months or less) and leases of low-value assets. For these leases, the Company recognizes
the lease payments as an operating expense on a straight-line basis over the term of the lease unless another systematic basis is
more representative of the time pattern in which economic benefits from the leased asset are consumed.
The Company determines the lease term as the non-cancellable term of the lease, together with any periods covered by
an option to extend the lease if it is reasonably certain to be exercised. The Company has the option under many of its leases
to lease the assets for additional terms of five years, and applies judgment in evaluating whether it is reasonably certain to
exercise the option to renew. The Company considers all relevant factors that create an economic incentive for it to exercise
the renewal, including store performance, expected future performance and past business practice. After the commencement
date, the Company reassesses the lease term if there is a significant event or change in circumstances that is within its control
and affects its ability to exercise (or not to exercise) the option to renew (i.e., a change in business strategy).
Deferred tax assets
The recognition of deferred tax assets is based on the Company’s judgment. The assessment of the probability of future taxable
income against which deferred tax assets can be utilized is based on management’s best estimate of future taxable income that
the Company expects to achieve from reviewing its latest forecast. This estimate is adjusted for significant non-taxable income
and expenses and for specific limits to the use of any unused tax loss or credits. Deferred tax assets are recognized to the extent
that it is probable that taxable profit will be available against which the deductible temporary differences and the carry forward
of unused tax losses and unused tax credits can be utilized. If estimates of future taxable profit change, unrecognized deferred
tax assets can be recognized again in a future period. The recognition of deferred tax assets that are subject to certain legal or
economic limits or uncertainties are assessed individually by the Company based on the specific facts and circumstances.
Use of estimates
Information about estimates that have the most significant effect on the recognition and measurement of assets, liabilities, rev-
enues, and expenses are discussed below.
Impairment
To determine the recoverable amount of an impaired asset, the Company estimates expected future cash flows and determines
a suitable discount rate in order to calculate the present value of those cash flows. In the process of measuring expected future
cash flows, the Company makes assumptions about certain variables, such as future sales, gross margin rates, expenses, capital
expenditures, and working capital investments, which are based upon historical experience and expected future performance.
Determining the applicable discount rate involves estimating appropriate adjustments to market risk and to Company-specific
risk factors.
22
Management ’s Discussion and Analysis
Inventories
The future realization of the carrying amount of inventory is affected by future sales demand, inventory levels, and product
quality. At each balance sheet date, the Company reviews its on-hand inventory and uses historical trends and current inven-
tory mix to determine a reserve for the impact of future markdowns that will take the net realizable value of inventory on-
hand below cost. Inventory valuation also incorporates a write-down to reflect future losses on the disposition of obsolete
merchandise. The Company reduces inventory for estimated shrinkage that has occurred between physical inventory counts
and each reporting date based on historical experience as a percentage of sales. In addition, the Company records a vendor
settlement accrual to cover any disputes between the Company and its vendors. The Company estimates this reserve based
on historical experience of settlements with its vendors.
Property, plant, equipment, and intangible assets (collectively, “capital assets”)
Capital assets are depreciated and amortized over their useful lives, taking into account residual values where appropriate.
Assessments of useful lives and residual values are performed on an ongoing basis and take into consideration factors such as
technological innovation, maintenance programs, and relevant market information. In assessing residual values, the Company
considers the remaining life of the asset, its projected disposal value, and future market conditions.
Leases
The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date,
discounted by using the Company’s incremental borrowing rate (“IBR”). The Company cannot readily determine the interest
rate implicit in the lease; therefore, it uses its IBR to measure lease liabilities.
The IBR is the rate of interest that the Company would have to pay to borrow over a similar term, and with a similar
security, the funds necessary to obtain an asset of a similar value to the right-of-use asset in a similar economic environment.
The IBR therefore reflects what the Company ‘would have to pay’, which requires estimation when no observable rates are
available or when they need to be adjusted to reflect the terms and conditions of the lease. The Company estimates the IBR
using observable inputs (such as market interest rates) when available and is required to make certain entity and asset-specific
estimates (such as the subsidiary’s stand-alone credit rating).
Revenue
The Company recognizes revenue for the estimated value of gift cards that are not expected to be redeemed by customers
(“gift card breakage”) in proportion to the pattern of rights exercised by the customer. The resulting gift card breakage rev-
enue is recognized over the estimated period of redemption based on historical redemption patterns commencing when the
gift cards are sold.
Indigo’s plum® loyalty program, which includes the plum® and plum® PLUS membership tiers, allows customers to earn
points on their purchases. The allocation of transaction price to the plum® loyalty obligation, which is the estimated reward tier
value of a future redemption net of points management expects will go unredeemed (“plum breakage”), is based on a relative
stand-alone selling price basis. The Company continues to monitor trends in redemption patterns (redemption at each reward
level), historical redemption rates (points redeemed as a percentage of points issued) and net cost per point redeemed. Points
revenue is included as part of total revenue in the Company’s consolidated statements of loss and comprehensive loss.
Annual Report 2021 23
Share-based payments
The cost of equity-settled transactions with counterparties is based on the Company’s estimate of the fair value of share-based
instruments and the number of equity instruments that will eventually vest. The Company’s estimated fair value of the share-
based instruments is calculated using the following variables: risk-free interest rate; expected volatility; expected time until
exercise; and expected dividend yield. Risk-free interest rate is based on Government of Canada bond yields, while all other
variables are estimated based on the Company’s historical experience with its share-based payments.
Accounting Standards Implemented in Fiscal 2021
Amendment to IFRS 16 Leases – COVID-19-Related Rent Concessions
On May 28, 2020, the IASB issued an amendment to IFRS 16 that provides an optional practical expedient for lessees from
assessing whether a rent concession that is being offered as a direct response to the economic impacts of COVID-19 is a lease
modification, which would have capitalized the benefit received. The Company is applying the practical expedient in the cur-
rent year and will account for any eligible change in lease payments resulting from a COVID-19-related rent concession in
profit or loss in the period the deal is executed.
New Accounting Pronouncements
Classification of Liabilities as Current or Non-Current (Amendments to IAS 1)
In January 2020, the IASB issued Classification of Liabilities as Current or Non-Current, which amends IAS 1 – Presentation
of Financial Statements. The narrow scope amendments affect only the presentation of liabilities in the statement of financial
position and not the amount or timing of its recognition. It clarifies that the classification of liabilities as current or non-current
is based on rights that are in existence at the end of the reporting period and specifies that classification is unaffected by expec-
tations about whether an entity will exercise its right to defer settlement of a liability. It also introduces a definition of
‘settlement’ to make clear that settlement refers to the transfer to the counterparty of cash, equity instruments, other assets
or services. The amendments are effective for annual reporting periods beginning on or after January 1, 2022. Earlier appli-
cation is permitted. The Company is assessing the potential impact of these amendments.
Risks and Uncertainties
COVID-19 Risk
The COVID-19 pandemic introduced a number of risks and uncertainties for the Company’s business, which could signifi-
cantly impact the Company’s results of operations going forward and the forward-looking statements made herein.
The duration and severity of the COVID-19 pandemic remains uncertain as does its adverse, long-term impact on the
Company. Any estimate of the length and severity of these developments is therefore subject to significant uncertainty, and
accordingly, estimates of the extent to which the COVID-19 pandemic may, directly or indirectly, materially and adversely
affect the Company’s operations, financial results and condition in future periods are also subject to significant uncertainty.
Investors should also refer to the Company’s description of certain impacts and a number of evolving operational risk
management strategies undertaken to manage the ongoing pandemic described above under “Statement on COVID-19”.
Economic Environment
Traditionally, retail businesses are highly susceptible to market conditions in the economy. Economic conditions, both on a
global scale and in particular markets, may have significant effects on consumer confidence and spending. A decline in con-
sumer spending, especially during the November/December holiday season, could have an adverse effect on the Company’s
financial condition. Pandemics, such as the current COVID-19 pandemic, and the related governmental, private sector and
individual consumer responses could reduce retail traffic and consumer spending, result in temporary or permanent closures
of stores, offices, and factories, and could disrupt the material flow of goods, which could have an adverse effect on the
24
Management ’s Discussion and Analysis
Company’s financial situation. Other variables, such as unanticipated increases in merchandise costs, higher labour costs,
increases in shipping rates or interruptions in shipping service, foreign exchange fluctuations, political uncertainty, disrup-
tions in international trade, the impact of natural disasters, geo-political events or acts of terrorism, or higher interest rates
or unemployment rates, could also unfavourably impact the Company’s financial performance.
Competition
The retail industry is highly competitive and continues to experience fundamental changes in a rapidly evolving environment.
Specialty and independent bookstores, other book superstores, regional multi-store operators, mass merchandisers,
supermarkets, retail pharmacies, warehouse clubs, internet booksellers, publisher direct-to-consumer operations and other
retailers sell physical book offerings, often at substantially discounted prices. Many of these competitors, as well as other retail-
ers, also offer e-reading options, which compete for the share of the customer’s discretionary book and entertainment budget.
The general merchandise retail landscape also features significant competition from established retailers and emerging
disruptive digital retail options, and there can be no assurances that the Company will be able to gain market share. The
Company competes with specialty, mass, local, regional, national, and international retailers and direct-to-consumer compa-
nies that sell gift and specialty toy products through both physical and digital platforms. New competitors frequently enter
the market and existing competitors may increase market presence, expand merchandise offerings, add new sales channels,
or change their pricing methods, all of which increase competition for customers.
Many of the Company’s current and potentially future competitors are larger, have greater brand recognition, greater
online presence and access to greater financial, marketing and other resources. The size and resources of such competitors
may allow them to compete more aggressively, which could adversely impact Indigo’s revenue, market share and operating
margins. In addition, increased efforts by such competitors, including the introduction of new and innovative products and
services as well as aggressive expansion, merchandising or discounting by competitors, could reduce the Company’s revenue,
market share, and operating margins.
Consumer Trends
The Company’s success largely depends on its ability to anticipate and respond to shifts in consumer trends in an agile manner.
The general merchandise business is particularly susceptible to changing consumer preferences that cannot be predicted with
certainty. If the Company is unable to adequately respond to changing consumer trends or forecasts sales that do not match
customer demand, it could experience higher inventory markdowns or an inventory shortage, both of which would have an
adverse effect on sales and profitability. This risk is mitigated by the Company’s focus on building an assortment of innovative
products which resonate with consumers, including through its proprietary brands, and by the breadth of the Company’s
product range across diversified categories.
Strategic Initiatives and Growth Strategy
The retail industry is constantly changing and management is committed to the Company’s continued growth and success.
The Company will continue to change and modify its strategy based on its economic environment and there can be no assur-
ances that Indigo’s strategy will be successful.
The Company may be subject to growth-related risks as it undertakes its strategic initiatives; expansion into new mar-
kets, or the launch of new initiatives could place a significant strain on the Company’s management, operations, technical per-
formance, financial resources, and internal financial control and reporting functions. The ability of the Company to manage
growth effectively will require it to continue to implement and improve its operational and financial systems and to expand,
train and manage its employee base. The inability of the Company to deal with growth may have a material adverse effect on
the Company’s financial condition, results of operations and prospects.
Annual Report 2021 25
Corporate Reputation
The Company’s corporate reputation and those of its brands are very important to Indigo’s success and competitive position.
The Company’s reputation and, consequently, its brand, may be negatively affected by the various risk factors described
herein, some of which may be outside of Indigo’s control.
The use of social media platforms and other forms of Internet-based communications that provide individuals with access
to a broad audience of consumers and other interested persons is omnipresent. The availability and impact of information on
social media platforms is virtually immediate and many social media platforms publish user-generated content without filters
or independent verification as to the accuracy of the content posted. The opportunity for dissemination of information,
including inaccurate information, is effectively without limit and may negatively impact the Company’s reputation and future-
oriented prospects.
The Company’s business could be adversely affected by social reform movements seeking to change business practices by
bringing public awareness to issues through store protests and/or social media campaigns. Ineffective action or perceived
inaction pertaining to the Company’s industry and business could adversely affect its reputation.
Other adverse events may also damage the Company’s reputation and brands at the corporate or retail level. Should
negative factors materialize and diminish Indigo’s brand equity, there could be a material adverse effect on the Company’s
operations and financial condition and performance.
Key Business Relationships
Indigo relies heavily on suppliers in order to sell books and general merchandise on acceptable terms and within agreed upon
timelines. These suppliers are impacted by, among other things, increases in labour and input costs, labour disputes and dis-
ruptions, regulatory changes, political or economic instability, natural disasters, trade restrictions, tariffs, currency exchange
rates, transport costs, and other factors including the closure of national borders and disruption of merchandise deliveries
due to the effects of the COVID-19 pandemic. Collectively and individually, these factors are beyond the Company’s control
and a failure to maintain favorable terms and relationships with these suppliers, or the absence of key suppliers, may affect
the Company’s ability to compete in the marketplace. As Indigo continues to source a greater portion of its products from
overseas, events causing disruptions to imports, changes in trade restrictions and tariffs, or currency fluctuations could neg-
atively impact the Company’s revenues and margins. To date, the Company has not experienced any significant difficulty in
obtaining merchandise and considers its sources of supply to be adequate, however, the Company’s flow of merchandise could
be affected by the COVID-19 pandemic.
The Company is also reliant on third parties to provide services essential to daily operations. Any disruption to these third-
party services could have an unfavourable impact on the Company’s performance and reputation, including significant negative
impact in areas such as supply chain logistics, software development and support, transaction and payment processing, and
other key processes. The Company cannot make any assurances that it would be able to arrange for alternate or replacement
contracts, transactions, or business relationships to mitigate the impact of disruptive events related to key service providers.
As e-commerce continues to become a larger component of the Company’s omni-channel business, Indigo relies on
third-party logistics partners to fulfill sales transactions with its customers in a dependable and timely manner. Changes in
geographic coverage, service levels, capacity levels, and labour disruptions at the Company’s logistics partners, including as
a result of COVID-19, may adversely affect Indigo’s business and financial results.
26
Management ’s Discussion and Analysis
Workplace Health and Safety
The failure of the Company to create a healthy and safe workplace for all employees, to adhere to appropriate health and safety
procedures and to ensure compliance with applicable laws and regulations could result in employee injuries, productivity loss,
and liabilities to the Company. To reduce the risk of workplace incidents, the Company has health and safety programs in place
and has established policies and procedures aimed at ensuring compliance with applicable legislative requirements.
During the COVID-19 pandemic, the health and safety of the Company’s customers, employees, and communities have
remained a top priority in the face of evolving workplace risks and practices. The Company has put in place and employed
extensive health and safety measures across all of its operations based on the guidance and direction from public health author-
ities. If government authorities introduce more stringent health and safety laws, the Company may incur additional costs to
comply with these requirements, which may have an adverse impact on the Company’s financial results. Further, if the Company
is unable to meet the current or future health and safety laws, regulations and industry standards related to COVID-19, or
despite the Company’s efforts and precautions, employees are exposed and infected by the COVID-19 virus, it could have an
adverse effect on the Company’s ability to re-open and operate its stores, maintain operations at its distribution centres, or
reopen and operate its head office, all of which could have an adverse effect on the Company’s operations, corporate reputa-
tion and financial performance.
Remote Work
In addition to temporary rolling closures of its retail locations, in response to the COVID-19 pandemic the Company also had
to close its head office and implement a remote work program to maintain its operations. While head office employees are
generally able to perform their functions in a remote setting from their homes or other locations, certain additional risk
factors may negatively impact the Company’s ability to perform its operations efficiently, securely and without interruptions.
These risk factors, any of which could have an adverse effect on the Company’s operations and financial performance, include:
increased cybersecurity threats while duties are performed outside the Company’s regular offices; increased dependence on
telecommunication links such as Internet access in employees’ homes; decreased efficiency due to the change in equipment
and network speeds used for data processing and use; the timely dissemination and exchange of information in a remote work-
force environment; the dependence on certain functions that are difficult to efficiently conduct outside a regular workplace;
and the degradation of the Company’s culture and negative impacts to employee engagement and well-being.
Talent
The Company’s continued success will depend to a significant extent upon securing and retaining sufficient talent in manage-
ment and other key areas. In the course of their employment, employees develop specialized skills and an in-depth knowledge
of the business. Failure to effectively attract and retain talented and experienced employees or failure to establish adequate
succession planning could result in a lack of requisite knowledge, skill and experience. If the Company does not continue to
attract qualified individuals, train them in Indigo’s business model, support their development, and retain them, the Company’s
performance could be adversely impacted and growth could be limited. The loss of the services of key personnel, particularly
the Chief Executive Officer, could have a material adverse effect on the Company. To mitigate the risk of personnel loss, the
Company has implemented a number of employee engagement and retention strategies.
Annual Report 2021 27
Labour Relations
The majority of the Company’s employees are not subject to a collective bargaining agreement. Unions may attempt to organ-
ize and represent the Company’s employees. Responding to union organizing activities may divert attention and efforts of
management and employees and may have a negative financial impact on individual stores, distributions centres, or on the
business as a whole. The maintenance of a productive, engaged and efficient labour environment cannot be assured and if a
significant number of employees were to become unionized, it could adversely affect the business, financial condition or
results of operations of the Company. In addition, a labour dispute or work stoppage involving some or all of the Company’s
employees may harm Indigo’s reputation, disrupt its operations, and reduce its revenues, and resolution of disputes may
increase its costs.
In fiscal 2021, the non-management employees at four Indigo retail stores voted to unionize. A collective bargaining
agreement is in place for one of the locations and the Company is currently negotiating collective bargaining agreements for
the other three locations, the outcome of which is not yet known, nor is the timing of completing such agreements. Failure
to successfully negotiate collective agreements can lead to labour disruptions and could adversely affect Indigo’s reputation,
financial performance and retail operations.
Inventory Management
The Company must manage its inventory levels to successfully operate the business. Inventory purchases are based on several
variables, such as market trends and sales forecasts. An inability to respond to changing customer preferences or sales forecasts
which do not match customer demand may result in an inventory shortage or excess inventory that must be sold at lower
prices. While the majority of the Company’s book purchases are eligible for return to suppliers at full credit, the evolution
of the Company’s product assortment, namely general merchandise items, means the Company has an increasing amount of
non-returnable inventory. The Company engages with certain vendors on drop ship fulfilment terms, mitigating the inventory
management risk and offering the Company greater flexibility to respond to changes in consumer demand. The Company
monitors the impact of customer trends on inventory turnover and obsolescence, but inappropriate inventory levels could
negatively impact the Company’s revenue and financial performance.
Product Quality and Product Safety
The Company sells products produced by third-party suppliers and manufacturers and relies on vendors to provide quality
merchandise compliant with all applicable laws. Some of these products may expose the Company to potential liabilities and
costs associated with defective products, product handling, and product safety. As part of its general merchandise assortment,
the Company also sells food and personal care products and is subject to the distinctive risks associated with those products.
These product quality and product safety risks could result in harm to the Company’s customers and could expose Indigo
to product liability claims, damage the Company’s reputation, and lead to product recalls. Liabilities and costs related to product
quality and product safety may also have a negative impact on the Company’s revenue and financial performance. The
Company has policies and controls in place to manage these risks, including maintaining liability insurance and offering prod-
uct safety guidance to third-party manufacturers, but there can be no assurance that these measures can fully eliminate the
negative impact of such risks.
28
Management ’s Discussion and Analysis
Supply Chain
The Company is dependent on three distribution facilities, including two co-located at the same leased facility in Brampton,
Ontario, to fulfill inventory requirements for its retail network, and the majority of online channel sales. If one or more of
the Company’s distribution facilities becomes inoperable, capacity is exceeded or if operations are disrupted, Indigo’s business,
financial condition and operating results could be negatively affected. The Company depends on the orderly operation of the
receiving and distribution process, which relies on adherence to shipping schedules, sufficiently planned capacity, and the timely
performance of services by third-party logistics providers, among other effective distribution centre management practices.
Liquidity Risk
Liquidity risk is the risk that the Company cannot meet a demand for cash or fund its obligations as they come due. Liquidity
risk is managed by continuously monitoring actual and projected cash flows, taking into account the historical seasonality of
the Company’s revenue and working capital needs.
However, cash flows from operating activities could be negatively impacted by decreased demand for the Company’s
product offerings, which could result from factors such as, but not limited to: adverse economic conditions resulting from
the COVID-19 pandemic and associated changes in consumer preferences; the impact of social distancing policies and general
public health sentiment on retail store traffic; and the Company’s ability to safely fulfill orders through its online distribution
network. Operating cash flows could also be negatively impacted by increased expenses, and although the Company has a greater
ability to alter its cost structure in response to such events, the effectiveness and timing cannot be guaranteed.
Based on the Company’s current business plan, liquidity position, cash flow forecast, and factors known to date, including
the currently known impacts of COVID-19, it is expected that the Company’s current cash position and future cash flows
generated from operations will be sufficient to meet its working capital requirements for fiscal 2022. However, the Company’s
ability to fund future cash requirements will depend on its future operating performance, which could be affected by the risks
discussed. The Company could seek to raise additional funding in the event it fails to maintain sufficient liquidity, as it currently
has no outstanding debt financing, and reduce capital spending if necessary. However, the COVID-19 pandemic creates addi-
tional risks such as the negative impact on debt and equity capital markets, including the ability to access capital at a reasonable
cost and the trading price of the Company’s securities, which could impact future capital raising efforts if required by the
Company. A long-term decline in capital expenditures may negatively impact the Company’s revenue and profit growth.
Credit Risk
Indigo is exposed to credit risk resulting from the possibility that counterparties may default on their financial obligations to
the Company. Credit risk primarily arises from accounts receivables, cash and cash equivalents, short-term investments, and
derivative financial instruments. The Company is also exposed to operational risk from adverse impacts on fluctuations in its
own credit risk, which may hinder its ability to negotiate commercially favourable purchase terms.
Accounts receivables primarily consist of receivables from financial institutions for the Company’s sales by credit card
tender, recoveries of credits from suppliers for returned or damaged products, tenant allowances receivable from landlords
for renovations and lease inducements and receivables from other companies for sales of products, gift cards, and other services.
Credit card payments have minimal credit risk and the limited number of corporate receivables is closely monitored. In fiscal
2021, accounts receivable included material balances outstanding from the Government of Canada associated with emergency
COVID-19 support, which has been assessed to have minimal credit risk.
The Company limits its exposure to counterparty credit risk related to cash and cash equivalents, short-term investments,
and derivative financial instruments by transacting only with highly-rated financial institutions and other counterparties and
by managing within specific limits for credit exposure and term to maturity.
Annual Report 2021 29
Foreign Exchange Risk
The Company’s foreign exchange risk is largely limited to currency fluctuations between the Canadian and U.S. dollars.
Decreases in the value of the Canadian dollar relative to the U.S. dollar could negatively impact net earnings since the pur-
chase price of some of the Company’s products are negotiated with vendors in U.S. dollars, while the retail price to Indigo’s
Canadian customers is set in Canadian dollars. The Company also has a U.S. retail store that earns revenue in U.S. dollars and
incurs U.S. dollar expenses. The Company maintains a hedging program to mitigate foreign exchange risk, but there can be
no assurance that this program can fully eliminate the negative impact of such risk.
Interest Rate Risk
The Company’s interest income is sensitive to fluctuations in Canadian interest rates, which affect the interest earned on
Indigo’s cash and cash equivalents and short-term investments. The Company does not currently have any debt and all interest
expense recognized in fiscal 2021 relates to its retail lease liabilities. The Company has minimal interest rate risk and does not
use any interest rate swaps to manage its risk.
Real Estate
The Company leases all of its retail locations and while it attempts to renew these leases as they come due on favourable terms
and conditions, it is susceptible to volatility in the market for supercentre and shopping mall space. Unforeseen increases in
occupancy costs, or costs incurred due to unanticipated store closings or relocations, could also unfavourably impact the
Company’s performance.
As a result of the COVID-19 pandemic, the Company has experienced significant government mandated retail store clo-
sures and capacity constraints, materially affecting operations. The Company is currently negotiating with its landlords to
abate certain rent expense in response to the financial impact of rolling COVID-19 store closures; however, there can be no
assurance that such negotiations will be successful and there are additional risks associated with these suspensions.
The inability of the Company to enter into suitable rent relief arrangements could potentially have a cumulative material
effect, depending on the number of locations impacted and the materiality of such locations to the overall business, among
other factors. Any dispute under these leases may result in litigation with the relevant landlord.
The Company subleases space in its retail store network to café vendors, exposing the Company to certain risks inherent
in the commercial real estate business. This business has been greatly impacted by COVID-19 temporary store closures and
capacity restrictions, and adverse impacts to the Company may include an increase in re-leasing timelines, potential delays in
lease-up of vacant space and the market terms at which such subleases can be executed.
Investors should also refer to the Company’s description of certain impacts of the ongoing pandemic described above
under “Statement on COVID-19”.
Insurance Coverage
The Company maintains insurance customary for businesses of its size and nature, including liability insurance, property and
business interruption insurance, directors’ and officers’ insurance, crime insurance and cyber insurance, with deductibles,
self-insured retentions, limits of liability and similar provisions. However, there is no guarantee that the insurance coverage
will be sufficient, or that insurance proceeds will be paid out on a timely basis. In addition, there are types of losses the
Company may incur but against which insurance cannot be procured or which is not economically reasonable to insure. If the
Company incurs these losses and they are material, the business, financial condition and results of operations of Indigo may
be adversely affected.
30
Management ’s Discussion and Analysis
Information Technology and Digital Platforms
The Company increasingly depends on the proper operation of its information technology platforms and those of third parties
to successfully conduct daily business functions, maintain its competitive position in the marketplace and enable its growth
strategy. The increased adoption of e-commerce has further exposed the Company to various additional uncertainties including
website downtime and other technical failures that could adversely affect the Company’s ability to grow its digital channels.
As described above in “Description of the Business – Information Systems”, the Company continues to invest in new tech-
nologies to expand its competitiveness and customer experience. Any failure in the implementation of these solutions, the
operation of current information technology systems, platforms or third-party cloud-based processing could result in a
significant disruption to the business, potentially negatively impacting revenue or damaging the Company’s reputation.
Furthermore, the Company continues to rely on legacy technologies and systems and any failure to maintain and support
these legacy systems or migrate to new technology systems could impact Indigo’s operational effectiveness.
The rapid and exponential growth of cloud computing and e-commerce has resulted in the emergence of a global ecosystem
of digital tools and applications that have been increasingly adopted by the Company and its peers. These cloud-based solutions
promote competitiveness while offering the flexibility to respond to evolving business initiatives and have been increasingly
adopted by the Company. Migration to cloud-based providers has increased reliance on third-party technology providers and
the associated exposure to risks of such service providers ceasing business operations, changing their business models, reduc-
ing functionality or experiencing cyber-attacks or system outages. The Company is also vulnerable to the risks associated with
infrastructure complexity, vendor lock-in, and people risks associated with knowledge management and skills change.
Cybersecurity
A failure, or breach of the Company’s information technology, operational procedures, security systems, physical infrastruc-
ture, or those of Indigo’s third-party vendors and cloud-based service providers, including as a result of cyber attacks, could
disrupt the business and result in the unintended disclosure or misuse of confidential or proprietary information, damage
Indigo’s brand and reputation, lead to temporary or permanent loss of data, increase the Company’s remediation costs and
legal liabilities, and impact its financial position and/or ability to achieve its strategic objectives.
Cyber threats continuously increase in sophistication and may become more difficult to anticipate and detect on a timely
basis. A lapse in cybersecurity, or successful cyber attack, may defeat the Company’s security measures or those of its cloud-
based service providers or third-party vendors. This risk has been heightened since the onset of the pandemic as threat actors
have notably taken concerted efforts in the retail industry and the broader market to take advantage of disruptions associated
with the COVID-19 pandemic and other previously unreported flaws in third-party software as widely reported in the media.
While the Company relies on technology, training and robust processes to create secure technology systems, Indigo places
specific reliance on technology to ensure the secure transmission of information from its customers, such as credit and debit
card numbers or any other form of payment or loyalty program data. The Company also receives, transmits and stores a large
volume of personally identifiable information from current and potential customers, which is exposed to this risk. There are
also federal, provincial and foreign regulations regarding privacy and the storing, sharing, use, disclosure and protection of
personally identifiable information and sensitive data; please see the “Compliance with Privacy Laws” risk factor below.
Although Indigo has business continuity plans, business interruption and cyber insurance coverage, robust information
security procedures, employee security awareness training, and other safeguards in place, the Company’s business operations
may be adversely affected by significant and widespread disruption to its physical information technology infrastructure, net-
works, and cloud-based service providers. As the cyber threat landscape evolves, the Company may be required to expend
significant additional resources to modify or enhance its protective measures to protect against, among other things, security
breaches, computer viruses and malware, ransomware, phishing, hacktivism, cyberterrorism, denial-of-service attacks, cre-
dentials compromise, or to investigate and remediate any information security vulnerabilities. Additionally, please see the
“Remote Work” risk factor above.
Annual Report 2021 31
Disaster Recovery and Business Continuity
Weather conditions, as well as events such as political or social unrest, natural disasters, disease outbreaks such as the
COVID-19 pandemic, or acts of terrorism, could have a material adverse effect on the Company’s operations and financial
performance. Moreover, if such events were to occur at peak times in the Company’s business cycle, the impact of these
events on operating performance could be significantly greater than they would otherwise have been. The Company has pro-
cedures in place to reduce the impact of business interruptions, crises, and potential disasters, but there can be no assurance
that these procedures can fully eliminate the negative impact of such events.
Intellectual Property
The Company depends on its continued ability to use its intellectual property to increase brand awareness and further develop
brands and products. Infringement of the Company’s intellectual property could negatively affect the Company’s revenue,
profitability and reputation. While the Company is not currently aware of any infringement or material challenges to the use
of its trademarks and domain names in Canada or the United States, the Company has a strategy and processes in place to
protect and vigorously defend its intellectual property, but there can be no assurance that these measures can fully eliminate
the negative impact of such risks.
The Company may also face claims from third parties asserting that the Company’s use of intellectual property infringes
on such third party’s ownership or use rights. The defense of any such claims or litigation could result in substantial expense
and diversion of resources. There is no guarantee that the Company will be able to resolve such claims and disputes to its sat-
isfaction, and if the Company is unable to successfully defend itself against these claims, it could adversely affect the Company’s
reputation, operations and financial condition and performance. Please see the “Legal Proceedings” Risk Factor below.
Legal Proceedings
In the normal course of business, Indigo becomes involved from time to time in litigation and disputes. The outcomes of reg-
ulatory investigations, litigation and arbitration disputes are inherently difficult to predict, which creates the risk that an
unfavourable outcome in any of these matters could negatively affect the Company’s reputation, operations and financial con-
dition and performance. Regardless of the outcome, litigation may result in substantial costs and expenses to the Company
and significantly divert the attention of the Company’s management. While the final outcome of such claims and litigation
pending as at April 3, 2021 cannot be predicted with certainty, management believes that any such amount would not have a
material impact on the Company’s financial position.
Regulatory Environment
The Company’s operations and activities are subject to a number of laws and regulations in Canada, the United States and in
other countries. Changes to statutes, laws, regulations or regulatory policies, including tax laws, accounting principles, labour
and employment standards, and environmental regulations, or changes in their interpretation, implementation or enforce-
ment, could adversely affect the Company’s operations and performance. The Company may incur significant costs in the
course of complying with any such changes.
The Company is also subject to continuous examination of its regulatory filings by various securities regulators, tax
authorities, and environmental stewards. As a result, authorities may disagree with the positions and conclusions taken by the
Company in its filings, resulting in a reassessment or requiring a restatement. Reassessments or restatements could also arise
from amended legislation or new interpretations of current legislation. Any reassessment or restatement could adversely
affect the Company’s financial performance.
Failure to comply with applicable regulations could also result in judgment, sanctions, or financial penalties that could
adversely impact the Company’s reputation and financial performance. The Company believes that it has taken reasonable
measures designed to ensure compliance with applicable regulations, but there is no assurance that the Company will always
be deemed to be in compliance.
32
Management ’s Discussion and Analysis
Throughout the COVID-19 pandemic, federal, provincial, state and municipal government authorities have introduced
new legislation and regulations, as well as applied existing laws and ordinances in novel ways, in order to mitigate the impacts
of the virus. The Company has actively monitored and analysed these government actions, assessed their impact on the
Company’s operations, and, where necessary or prudent, implemented changes to the Company’s business practices and
operations. The imposition of additional regulations or the enactment of any new or more stringent legislation in response to
the COVID-19 pandemic could have a material adverse impact on the Company’s business and results of operations.
The sourcing and importation of books into Canada is governed by the Book Importation Regulations under the
Copyright Act (Canada). Any changes to the existing regulatory framework may impact the Company’s ability to secure and
maintain favorable terms and access to essential products, which could negatively impact the Company’s revenues and margins
and its ability to compete in the marketplace. As well, the distribution and sale of books is a regulated cultural industry in
which foreign investments to acquire control of an existing cultural business are subject to review under the Investment
Canada Act. There is no assurance that the existing regulatory framework will not change in the future or that it will be effec-
tive in preventing foreign-owned retailers from competing in Canada or by acting as a constraint on the acquisition by foreign
investors of Canadian retailers involved in a cultural business. An increased number of competitors could have an adverse
effect on the Company’s financial performance. Please see the “Competition” Risk Factor above.
Compliance with Privacy Laws
A number of Canadian federal and provincial statutes, as well as corresponding U.S. federal and state statutes, govern the pri-
vacy rights of the Company’s employees and customers. These privacy laws create certain obligations regarding the
Company’s handling of personal information, including obligations relating to obtaining appropriate consent, limitations on
use, retention, and disclosure of personal information, and ensuring appropriate security safeguards are in place. In the course
of its business, the Company maintains records containing sensitive information identifying or relating to individual cus-
tomers and employees. Although the Company has implemented systems and processes to comply with applicable privacy
laws in connection with the collection, use, retention, and disclosure of such personal information, if a significant failure of
such systems was to occur, the Company’s business and reputation could be adversely affected. Furthermore, the imposition
of additional regulations or the enactment of any new or more stringent privacy legislation may cause the Company to incur
significant costs in the course of complying with any such changes.
Disclosure Controls and Procedures
Management is responsible for establishing and maintaining a system of disclosure controls and procedures to provide reason-
able assurance that all material information relating to the Company is gathered and reported on a timely basis to senior man-
agement, including the Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), so that appropriate decisions
can be made by them regarding public disclosure.
As required by National Instrument 52-109, “Certification of Disclosure in Issuers’ Annual and Interim Filings,” the CEO
and CFO have evaluated, or caused to be evaluated under their supervision, the effectiveness of such disclosure controls and
procedures. Based on that evaluation, they have concluded that the design and operation of the system of disclosure controls
and procedures were effective as at April 3, 2021.
Annual Report 2021 33
Internal Controls over Financial Reporting
Management is also responsible for establishing and maintaining adequate internal controls over financial reporting to provide
reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements
for external purposes in accordance with IFRS.
All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems
determined to be effective can provide only reasonable assurance with respect to consolidated financial statement preparation
and presentation. Additionally, management is necessarily required to use judgment in evaluating controls and procedures.
As required by National Instrument 52-109, “Certification of Disclosure in Issuers’ Annual and Interim Filings,” the CEO
and CFO have evaluated, or caused to be evaluated under their supervision, the effectiveness of such internal controls over
financial reporting using the framework established in the Internal Control – Integrated Framework (“COSO Framework”)
published in 2013 by the Committee of Sponsoring Organizations of the Treadway Commission. Based on that evaluation, they
have concluded that the design and operation of the Company’s internal controls over financial reporting were effective as at
April 3, 2021.
Changes in Internal Controls over Financial Reporting
Management has also evaluated whether there were changes in the Company’s internal controls over financial reporting that
occurred during the quarter and year ended on April 3, 2021 that have materially affected, or are reasonably likely to mate-
rially affect, the Company’s internal controls over financial reporting. The Company has determined that no material changes
in internal controls over financial reporting have occurred in this period.
Cautionary Statement Regarding Forward-Looking Statements
The above discussion includes forward-looking statements. All statements other than statements of historical facts included
in this discussion that address activities, events, or developments that the Company expects or anticipates will or may occur
in the future are forward-looking statements. These statements are based on certain assumptions and analyses made by the
Company in light of its experience, analysis, and its perception of historical trends, current conditions, and expected future
developments as well as other factors it believes are appropriate in the circumstances. The extent to which the impacts of the
COVID-19 pandemic affect the factors described herein depend on future developments, which are highly uncertain and
cannot be predicted. However, whether actual results and developments will conform to the expectations and predictions of
the Company is subject to a number of risks and uncertainties, including the general economic, market, or business condi-
tions; competitive actions by other companies; changes in laws or regulations; and other factors, many of which are beyond
the control of the Company. Consequently, all of the forward-looking statements made in this discussion are qualified by these
cautionary statements and there can be no assurance that results or developments anticipated by the Company will be realized
or, even if substantially realized, that they will have the expected consequences to, or effects on, the Company.
34
Management ’s Discussion and Analysis
Non-IFRS Financial Measures
The Company prepares its consolidated financial statements in accordance with IFRS. To provide additional insight into the
business, the Company has also provided non-IFRS data, including adjusted EBITDA, in the discussion and analysis section
above. Such measures are specific to Indigo and have no standardized meaning prescribed by IFRS. Therefore, such measures
may not be comparable to similar measures presented by other companies.
The Company believes Adjusted EBITDA is a useful measure of operating performance as it provides a relevant picture
of operating results. Certain effects of financing and investing activities are excluded by removing the effects of interest
(excluding those related to lease liabilities), depreciation and amortization expenses (excluding those related to the
Company’s right-of-use assets), impairment, asset disposals, share of losses from equity investments and income taxes. As
retail occupancy leases represent a material component of the Company’s cost structure and are managed with its operating
costs, an adjustment was made for lease-related expenses in the calculation of Adjusted EBITDA. As a result, IFRS 16 right-
of-use asset depreciation and associated lease finance costs are reflected in the key metric. This represents a change in calcu-
lation methodology from the prior fiscal year, and fiscal 2020 numbers have been consistently stated.
Reconciliations between adjusted EBITDA and loss before income taxes (the most comparable IFRS measure) were
included earlier in this report.
The Company typically believes that investors would find comparable store sales and total comparable sales useful in
assessing the performance of the business. However, due to the temporary store closures and store traffic restrictions associ-
ated with COVID-19, the Company believes comparable store sales and total comparable sales are not currently representa-
tive of the underlying trends of the business, and as a result, these metrics have not been reflected in this MD&A.
Annual Report 2021 35
Independent Auditor’s Report
To the Shareholders of Indigo Books & Music Inc.
Opinion
We have audited the consolidated financial statements of Indigo Books & Music Inc. and its subsidiaries (the Group), which
comprise the consolidated balance sheets as at April 3, 2021 and March 28, 2020, and the consolidated statements of loss and
comprehensive loss, consolidated statements of changes in equity and consolidated statements of cash flows for the years then
ended, and notes to the consolidated financial statements, including a summary of significant accounting policies.
In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consoli-
dated financial position of the Group as at April 3, 2021 and March 28, 2020, and its consolidated financial performance and
its consolidated cash flows for the years then ended in accordance with International Financial Reporting Standards (IFRS).
Basis for Opinion
We conducted our audit in accordance with Canadian generally accepted auditing standards. Our responsibilities under those
standards are further described in the Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements section
of our report. We are independent of the Group in accordance with the ethical requirements that are relevant to our audit of
the consolidated financial statements in Canada, and we have fulfilled our other ethical responsibilities in accordance with these
requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgement, were of most significance in the audit of the consol-
idated financial statements of the current period. These matters were addressed in the context of the audit of the consolidated
financial statements as a whole, and in forming the auditor’s opinion thereon, and we do not provide a separate opinion on
these matters. For each matter below, our description of how our audit addressed the matter is provided in that context.
We have fulfilled the responsibilities described in the Auditor’s responsibilities for the audit of the consolidated financial
statements section of our report, including in relation to these matters. Accordingly, our audit included the performance of
procedures designed to respond to our assessment of the risks of material misstatement of the financial statements. The results
of our audit procedures, including the procedures performed to address the matters below, provide the basis for our audit
opinion on the accompanying consolidated financial statements.
Key Audit Matter
Valuation of property, plant and equipment, right-of-use-assets and intangible assets (collectively, “long-lived assets”)
As at April 3, 2021, the Company has $77M of property, plant, and equipment, $21M of intangible assets and $362M of
right-of-use assets, as disclosed in notes 10, 12 and 11, respectively, of the consolidated financial statements. As disclosed in
note 6, these long-lived assets are assessed for impairment at the store level cash-generating unit (“CGU”), except for corpo-
rate assets which cannot be allocated on a reasonable and consistent basis to individual CGUs which are assessed for impair-
ment at the corporate level. Any time an indicator of impairment exists, management assesses whether there has been an
impairment loss in the carrying value of these long-lived assets. When performing impairment tests, the Company estimates
the recoverable amount of the CGUs or group of CGUs using a discounted cash flow model. The Company discloses signifi-
cant judgments, estimates and assumptions and the result of their analysis in respect of impairment in note 6 to the consoli-
dated financial statements.
36
Independent Auditor ’s Report
Auditing management’s long-lived asset impairment tests was complex, given the degree of judgement and subjectivity
in evaluating management’s estimates and assumptions in determining the recoverable amount of the CGUs or group of CGUs.
Significant assumptions included expected sales growth rates, earnings margins and discount rate, which are affected by
expectations about future consumer behavior and the impacts of the COVID-19 global pandemic.
How Our Audit Addressed the Key Audit Matter
To test the recoverable amount for the Company’s CGUs or group of CGUs, our audit procedures included, among others,
assessing the significant assumptions discussed above and underlying data used by the Company in its analysis. With the assis-
tance of our valuations specialists, we evaluated the Company’s model, valuation methodology and certain assumptions,
including the discount rate. We assessed the selection of the discount rate by evaluating the inputs against relevant internal
and external sources. We assessed the application of the discount rate by evaluating the mathematical accuracy of the calculation.
We assessed the historical accuracy of management’s estimates on expected sales growth rates and earnings margins by com-
paring management’s past projections to actual and historical performance. We also compared the sales growth rates and the earn-
ings margins to current trends and market data discussing the outlook of the Canadian retail industry. We performed sensitivity
analysis on significant assumptions, including the sales growth rates, earnings margins and discount rate, to evaluate the impact
of the changes in the recoverable amount of the CGUs or group of CGUs that would result from changes in the assumptions.
Other Information
Management is responsible for the other information. The other information comprises:
• Management’s Discussion and Analysis
• The information, other than the consolidated financial statements and our auditor’s report thereon, in the Annual Report
Our opinion on the consolidated financial statements does not cover the other information and we do not express any
form of assurance conclusion thereon.
In connection with our audit of the consolidated financial statements, our responsibility is to read the other information,
and in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements
or our knowledge obtained in the audit or otherwise appears to be materially misstated.
We obtained Management’s Discussion and Analysis and the Annual Report prior to the date of this auditor’s report. If,
based on the work we have performed, we conclude that there is a material misstatement of this other information, we are
required to report that fact in this auditor’s report. We have nothing to report in this regard.
Responsibilities of Management and Those Charged with Governance for the Consolidated
Financial Statements
Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance
with IFRS, and for such internal control as management determines is necessary to enable the preparation of consolidated
financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, management is responsible for assessing the Group’s ability to continue
as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting
unless management either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Group’s financial reporting process.
Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free
from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Canadian
generally accepted auditing standards will always detect a material misstatement when it exists. Misstatements can arise from
Annual Report 2021 37
fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence
the economic decisions of users taken on the basis of these consolidated financial statements.
As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise professional judgment
and maintain professional skepticism throughout the audit. We also:
• Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or
error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and
appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud
is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresen-
tations, or the override of internal control.
• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate
in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related dis-
closures made by management.
• Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit
evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on
the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to
draw attention in our auditor’s report to the related disclosures in the consolidated financial statements or, if such disclo-
sures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of
our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern.
• Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclo-
sures, and whether the consolidated financial statements represent the underlying transactions and events in a manner
that achieves fair presentation.
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of
the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical require-
ments regarding independence, and to communicate with them all relationships and other matters that may reasonably be
thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated with those charged with governance, we determine those matters that were of most
significance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters.
We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when,
in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse
consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.
The engagement partner on the audit resulting in this independent auditor’s report is Jeremy Arruda.
Chartered Professional Accountants
Licensed Public Accountants
Toronto, Canada
June 1, 2021
38
Independent Auditor ’s Report
Consolidated Balance Sheets
As at As at
April 3, March 28,
(thousands of Canadian dollars) 2021 2020
ASSETS
Current
Cash and cash equivalents (note 7) 84,935 120,473
Accounts receivable 22,976 7,640
Inventories (note 8) 215,114 241,812
Prepaid expenses 12,278 6,062
Income taxes receivable – 138
Derivative assets (note 9) – 3,794
Other assets (note 13) 2,120 2,320
Total current assets 337,423 382,239
Loan receivable (note 13) – 446
Property, plant, and equipment, net (notes 6 and 10) 77,131 91,215
Right-of-use assets, net (notes 6 and 11) 361,864 382,146
Intangible assets, net (notes 6 and 12) 20,916 24,571
Equity investment, net (notes 6 and 13) 2,156 2,353
Total assets 799,490 882,970
LIABILITIES AND EQUITY
Current
Accounts payable and accrued liabilities (note 23) 145,193 164,294
Unredeemed gift card liability 58,053 51,673
Provisions (notes 15 and 23) 2,365 2,034
Deferred revenue 16,486 10,682
Short-term lease liabilities (notes 11 and 23) 67,603 68,402
Derivative liabilities (note 9) 1,622 –
Total current liabilities 291,322 297,085
Long-term accrued liabilities (note 23) 2,090 1,196
Long-term provisions (notes 15 and 23) 827 469
Long-term lease liabilities (notes 11 and 23) 482,671 500,215
Total liabilities 776,910 798,965
Equity
Share capital (note 17) 226,986 226,986
Contributed surplus (note 18) 13,782 12,822
Retained deficit (216,668) (158,801)
Accumulated other comprehensive income (loss) (note 9) (1,520) 2,998
Total equity 22,580 84,005
Total liabilities and equity 799,490 882,970
See accompanying notes
On behalf of the Board:
Heather Reisman Anne Marie O’Donovan
Director Director
Annual Report 2021 39
Consolidated Statements
of Loss and Comprehensive Loss
53-week 52-week
period ended period ended
April 3, March 28,
(thousands of Canadian dollars, except per share data) 2021 2020
Revenue (note 19) 904,738 957,722
Cost of sales (567,902) (553,627)
Gross profit 336,836 404,095
Operating, selling, and other expenses (notes 10, 11, 12, 13 and 19) (368,705) (422,624)
Impairment losses (note 6) – (56,582)
Operating loss (31,869) (75,111)
Net interest expense (note 11) (24,784) (23,524)
Share of loss from equity investments (note 13) (197) (1,651)
Loss before income taxes (56,850) (100,286)
Income tax expense (note 14) (1,017) (84,712)
Net loss (57,867) (184,998)
Other comprehensive income (loss) (note 9)
Items that are or may be reclassified subsequently to net loss, net of taxes:
Change in fair value of cash flow hedges (4,507) 2,492
Reclassification of realized loss (gain) 108 (497)
Foreign currency translation adjustment (119) 445
Other comprehensive income (loss) (4,518) 2,440
Total comprehensive loss (62,385) (182,558)
Net loss per common share (note 20)
Basic $(2.09) $(6.72)
Diluted $(2.09) $(6.72)
See accompanying notes
40
Consolidated Financial Statements and Notes
Consolidated Statements
of Changes in Equity
Accumulated
Retained Other
Share Contributed Earnings Comprehensive Total
(thousands of Canadian dollars) Capital Surplus (Deficit) Income (Loss) Equity
Balance, March 30, 2019 225,531 12,716 131,311 558 370,116
Adjustment on adoption of IFRS 16 Leases – – (105,114) – (105,114)
Balance, March 31, 2019 225,531 12,716 26,197 558 265,002
Net loss for the period – – (184,998) – (184,998)
Directors’ deferred stock units converted (note 17) 1,455 (1,455) – – –
Share-based compensation (note 18) – 1,268 – – 1,268
Directors’ compensation (note 18) – 293 – – 293
Other comprehensive income (note 9) – – – 1,995 1,995
Foreign currency translation adjustment – – – 445 445
Balance, March 28, 2020 226,986 12,822 (158,801) 2,998 84,005
Balance, March 28, 2020 226,986 12,822 (158,801) 2,998 84,005
Net loss for the period – – (57,867) – (57,867)
Share-based compensation (note 18) – 666 – – 666
Directors’ compensation (note 18) – 294 – – 294
Other comprehensive loss (note 9) – – – (4,399) (4,399)
Foreign currency translation adjustment – – – (119) (119)
Balance, April 3, 2021 226,986 13,782 (216,668) (1,520) 22,580
See accompanying notes
Annual Report 2021 41
Consolidated Statements of Cash Flows
53-week 52-week
period ended period ended
April 3, March 28,
(thousands of Canadian dollars) 2021 2020
OPERATING ACTIVITIES
Net loss (57,867) (184,998)
Adjustments to reconcile net loss to cash flows from operating activities
Depreciation of property, plant, and equipment (note 10) 17,158 23,005
Depreciation of right-of-use assets (note 11) 42,990 40,101
Amortization of intangible assets (note 12) 12,885 13,374
Gain on disposal of equity investment (note 13) – (1,484)
Loss on disposal of capital assets (notes 10 and 12) 399 1,932
Impairment losses (note 6) – 56,582
Share-based compensation (note 18) 666 1,268
Directors’ compensation (note 18) 294 293
Deferred income tax expense (note 14) 1,017 84,712
Rent concessions (note 11) (4,141) –
Other (784) 377
Net change in non-cash working capital balances related to operations (note 21) 150 4,512
Interest expense (note 11) 25,706 25,585
Interest income (922) (1,714)
Share of loss from equity investments (note 13) 197 1,651
Cash flows from operating activities 37,748 65,196
INVESTING ACTIVITIES
Net purchases of property, plant, and equipment (note 10) (4,093) (2,223)
Addition of intangible assets (note 12) (9,245) (8,397)
Change in short-term investments (note 7) – 87,150
Principal payment on loan receivable (note 13) – 719
Interest received 922 2,034
Cash flows from (used for) investing activities (12,416) 79,283
FINANCING ACTIVITIES
Repayment of principal on lease liabilities (note 11) (36,535) (40,391)
Interest paid (note 11) (25,706) (25,585)
Cash flows used for financing activities (62,241) (65,976)
Effect of foreign currency exchange rate changes on cash and cash equivalents 1,371 680
Net increase (decrease) in cash and cash equivalents during the period (35,538) 79,183
Cash and cash equivalents, beginning of period 120,473 41,290
Cash and cash equivalents, end of period 84,935 120,473
See accompanying notes
42
Consolidated Financial Statements and Notes
Notes to Consolidated Financial Statements
April 3, 2021
1. CORPORATE INFORMATION
Indigo Books & Music Inc. (the “Company” or “Indigo”) is a corporation domiciled and incorporated under the laws of the
Province of Ontario in Canada. The Company’s registered office is located at 620 King Street West, Suite 400, Toronto,
Ontario, M5V 1M6, Canada. The consolidated financial statements of the Company comprise the Company and its wholly-
owned subsidiaries, Indigo Design Studio Inc., Indigo Cultural Department Store Inc. (“Indigo U.S.”), and YYZ Holdings Inc.
(“YYZ”), along with its equity investment in Unplug Meditation, LLC (“Unplug”). The Company is the ultimate parent of the
consolidated organization.
2. NATURE OF OPERATIONS
Indigo is Canada’s leading book and lifestyle retailer and was formed as a result of the August 2001 amalgamation of Chapters
Inc. and Indigo Books & Music Inc. The Company offers a curated assortment of books, gifts, baby, kids, wellness and lifestyle
products that support customers by simplifying their journey to Living with Intention™. The Company operates retail stores in
all ten provinces and one territory in Canada, and also has retail operations in the United States through a wholly-owned sub-
sidiary, operating one retail store in Short Hills, New Jersey. The retail network includes 88 superstores (2020 – 88) under
the Indigo and Chapters names, as well as 89 small format stores (2020 – 108) under the banners Coles, Indigospirit, and The
Book Company. Retail operations are seamlessly integrated with the Company’s digital channels, including the www.indigo.ca
website and the mobile applications, which are extensions of the physical stores and offer customers an expanded assortment
of book titles, along with a meaningfully curated assortment of general merchandise. The Company also offers a marketplace
assortment of giftable products, experiences, services, and subscriptions on www.thoughtfull.co.
The Company defines an operating segment on the same basis that it uses to evaluate performance internally and to allo-
cate capital resources. At Indigo, this is done on an enterprise level. This holistic managerial approach is reflected in the
Company’s reimagined new store concept. The new store design emphasizes a central focus on enriching the lives of book
lovers with core print and general merchandise products. Therefore, the Company reports as a single segment.
The Company supports a separate registered charity, the Indigo Love of Reading Foundation (the “Foundation”). The
Foundation provides new books and learning material to high-needs elementary schools and children across the country
through donations from Indigo, its customers, its suppliers, and its employees.
3. BASIS OF PREPARATION
Statement of Compliance
These consolidated financial statements have been prepared using accounting policies consistent with International Financial
Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”).
These consolidated financial statements were approved by the Board of Directors on June 1, 2021.
Fiscal Year
The fiscal year of the Company ends on the Saturday closest to March 31. Under an accounting convention common in the
retail industry, the Company follows a 52-week reporting cycle, which periodically necessitates a fiscal year of 53 weeks. The
year ended April 3, 2021 contained 53 weeks, while the year ended March 28, 2020 contained 52 weeks.
Annual Report 2021 43
COVID-19 Pandemic
On March 11, 2020, the World Health Organization declared the outbreak of COVID-19 a pandemic, significantly impacting
the Company’s operations during fiscal 2021, most notably by numerous temporary mandated store closures.
The impact of the outbreak on the financial results of the Company will depend on future developments, including the
duration and spread of future waves of the outbreak and its impact on the overall economy and related advisories and restric-
tions. Further or prolonged closures of the Company’s stores could result in the reassessment of its significant accounting esti-
mates, including but not limited to impairment of assets.
The Company has suspended normal rent payments on certain leases as of February 1, 2021, making partial payments.
The Company is in negotiations with its landlords regarding rent abatement to address the financial impacts of the current
wave of COVID-19 related store closures, which have extended into fiscal 2022.
Use of Judgments
The preparation of the consolidated financial statements in conformity with IFRS requires the Company to make judgments,
apart from those involving estimation, in applying accounting policies that affect the recognition and measurement of assets,
liabilities, revenues, and expenses. Actual results may differ from the judgments made by the Company. Information about
judgments that have the most significant effect on recognition and measurement of assets, liabilities, revenues, and expenses
is discussed below. Information about significant estimates is discussed in the following section.
Impairment
An impairment loss is recognized for the amount by which the carrying amount of an asset or a cash-generating unit (“CGU”)
exceeds its recoverable amount. Impairment losses are reversed if the recoverable amount of the capital asset, CGU, or group
of CGUs exceeds its carrying amount, but only to the extent that the carrying amount of the asset does not exceed the car-
rying amount that would have been determined, net of depreciation or amortization, if no impairment loss had been recog-
nized. The Company uses judgment when identifying CGUs, when assessing for indicators of impairment or reversal, and
when estimating the recoverable amount for its CGUs in impairment testing.
Intangible assets
Initial capitalization of intangible asset costs is based on the Company’s judgment that technological and economic feasibility
are confirmed and the project will generate future economic benefits by way of estimated future discounted cash flows that
will be generated.
Leases
The Company assesses whether a contract is or contains a lease at inception of a contract. The Company recognizes a right-of-use
asset and a corresponding lease liability with respect to all lease agreements in which it is the lessee, except for short-term
leases (defined as leases with a lease term of 12 months or less) and leases of low-value assets. For these leases, the Company
recognizes the lease payments as an operating expense on a straight-line basis over the term of the lease unless another system-
atic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed.
The Company determines the lease term as the non-cancellable term of the lease, together with any periods covered by
an option to extend the lease if it is reasonably certain to be exercised. The Company has the option under many of its leases
to lease the assets for additional terms of five years, and applies judgment in evaluating whether it is reasonably certain to
exercise the option to renew. The Company considers all relevant factors that create an economic incentive for it to exercise
the renewal, including store performance, expected future performance and past business practice. After the commencement
date, the Company reassesses the lease term if there is a significant event or change in circumstances that is within its control
and affects its ability to exercise (or not to exercise) the option to renew (i.e., a change in business strategy).
44
Consolidated Financial Statements and Notes
Deferred tax assets
The recognition of deferred tax assets is based on the Company’s judgment. The assessment of the probability of future taxable
income in which deferred tax assets can be utilized is based on management’s best estimate of future taxable income that the
Company expects to achieve from reviewing its latest forecast. This estimate is adjusted for significant non-taxable income
and expenses and for specific limits to the use of any unused tax loss or credits. Deferred tax assets are recognized to the
extent that it is probable that taxable profit will be available against which the deductible temporary differences and the carry -
forward of unused tax losses and unused tax credits can be utilized. If estimates of future taxable profit change, unrecognized
deferred tax assets can be recognized again in a future period. The recognition of deferred tax assets that are subject to certain
legal or economic limits or uncertainties are assessed individually by the Company based on the specific facts and circumstances.
Use of Estimates
The preparation of the consolidated financial statements in conformity with IFRS requires the Company to make estimates
and assumptions in applying accounting policies that affect the recognition and measurement of assets, liabilities, revenues,
and expenses. Actual results may differ from the estimates made by the Company, and actual results will seldom equal esti-
mates. Information about estimates that have the most significant effect on the recognition and measurement of assets, liabil-
ities, revenues, and expenses are discussed below.
Impairment
To determine the recoverable amount of an impaired asset, the Company estimates expected future cash flows and determines
a suitable discount rate in order to calculate the present value of those cash flows. In the process of measuring expected future
cash flows, the Company makes assumptions about certain variables, such as future sales, gross margin rates, expenses, capital
expenditures, and working capital investments, which are based upon historical experience and expected future performance.
Determining the applicable discount rate involves estimating appropriate adjustments to market risk and to Company-specific
risk factors.
Inventories
The future realization of the carrying amount of inventory is affected by future sales demand, inventory levels, and product
quality. At each balance sheet date, the Company reviews its on-hand inventory and uses historical trends and current inven-
tory mix to determine a reserve for the impact of future markdowns that will take the net realizable value of inventory on-
hand below cost. Inventory valuation also incorporates a write-down to reflect future losses on the disposition of obsolete
merchandise. The Company reduces inventory for estimated shrinkage that has occurred between physical inventory counts
and each reporting date based on historical experience as a percentage of sales. In addition, the Company records a vendor
settlement accrual to cover any disputes between the Company and its vendors. The Company estimates this reserve based
on historical experience of settlements with its vendors.
Property, plant, equipment, and intangible assets (collectively, “capital assets”)
Capital assets are depreciated and amortized over their useful lives, taking into account residual values where appropriate.
Assessments of useful lives and residual values are performed on an ongoing basis and take into consideration factors such as
technological innovation, maintenance programs, and relevant market information. In assessing residual values, the Company
considers the remaining life of the asset, its projected disposal value, and future market conditions.
Leases
The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date,
discounted by using the Company’s incremental borrowing rate (“IBR”). The Company cannot readily determine the interest
rate implicit in the lease; therefore, it uses its IBR to measure lease liabilities.
Annual Report 2021 45
The IBR is the rate of interest that the Company would have to pay to borrow over a similar term, and with a similar
security, the funds necessary to obtain an asset of a similar value to the right-of-use asset in a similar economic environment.
The IBR therefore reflects what the Company ‘would have to pay’, which requires estimation when no observable rates are
available or when they need to be adjusted to reflect the terms and conditions of the lease. The Company estimates the IBR
using observable inputs (such as market interest rates) when available and is required to make certain entity and asset-specific
estimates (such as the subsidiary’s stand-alone credit rating).
Revenue
The Company recognizes revenue for the estimated value of gift cards that are not expected to be redeemed by customers
(“gift card breakage”) in proportion to the pattern of rights exercised by the customer. The resulting gift card breakage rev-
enue is recognized over the estimated period of redemption based on historical redemption patterns commencing when the
gift cards are sold.
Indigo’s plum® loyalty program, which includes the plum® and plum® PLUS membership tiers, allows customers to earn
points on their purchases. The allocation of transaction price to the plum® loyalty obligation, which is the estimated reward tier
value of a future redemption net of points management expects will go unredeemed (“plum breakage”), is based on a relative
stand-alone selling price basis. The Company continues to monitor trends in redemption patterns (redemption at each reward
level), historical redemption rates (points redeemed as a percentage of points issued) and net cost per point redeemed. Points
revenue is included as part of total revenue in the Company’s consolidated statements of loss and comprehensive loss.
Share-based payments
The cost of equity-settled transactions with employees is based on the Company’s estimate of the fair value of share-based
instruments and the number of equity instruments that will eventually vest. The Company’s estimated fair value of share-
based compensation is calculated using the following variables: risk-free interest rate; expected volatility; expected time until
exercise; and expected dividend yield. The risk-free interest rate is based on Government of Canada bond yields, while all
other variables are estimated based on the Company’s historical experience with its share-based payments.
4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accounting policies set out below have been applied consistently to all periods presented in these consolidated financial
statements.
Basis of Measurement
The Company’s consolidated financial statements are prepared on the historical cost basis of accounting, except as disclosed
in the accounting policies set out below.
Basis of Consolidation
The consolidated financial statements comprise of the financial statements of the Company and entities controlled by the
Company. Control exists when the Company is exposed to, or has the right to, variable returns from its involvement with
the controlled entity and when the Company has the current ability to affect those returns through its power over the con-
trolled entity. When the Company does not own all of the equity in a subsidiary, the non-controlling interest is disclosed as a
separate line item in the consolidated balance sheets and the earnings accruing to non-controlling interest holders are dis-
closed as a separate line item in the consolidated statements of earnings (loss) and comprehensive earnings (loss).
The financial statements of the subsidiaries are prepared for the same reporting period as the parent company, using con-
sistent accounting policies. Subsidiaries are fully consolidated from the date of acquisition, being the date on which the
Company obtains control, and continue to be consolidated until the date that such control ceases. Once control ceases, the
Company will reassess the relationship with the former subsidiary and revise Indigo’s accounting policy based on the Company’s
46
Consolidated Financial Statements and Notes
remaining percentage of ownership. All intercompany balances and transactions and any unrealized gains and losses arising
from intercompany transactions are eliminated in preparing these consolidated financial statements.
Foreign Currency
The functional currency for each entity included in these consolidated financial statements is the currency of the primary eco-
nomic environment in which the entity operates. The consolidated financial statements are presented in Canadian dollars,
which is the functional currency of the Company.
Assets and liabilities of the Company’s U.S. operations have a functional currency of U.S. dollars and are translated into
Canadian dollars at the exchange rate in effect at the reporting date. Revenues and expenses are translated into Canadian dol-
lars at average exchange rates during the reporting period. The resulting unrealized translation gains or losses are included in
other comprehensive income (loss).
Monetary assets and liabilities denominated in foreign currencies that are held at the reporting date are translated at the
closing consolidated balance sheet rate. Non-monetary items are measured at historical cost and are translated using the
exchange rates at the date of the transaction. Non-monetary items measured at fair value are translated using exchange rates
at the date when fair value was determined. The resulting exchange gains or losses are included in earnings.
Equity Investments
The equity method of accounting is applied to investments in companies where Indigo has the ability to exert significant influ-
ence over the financial and operating policy decisions of the company but lacks control or joint control over those policies.
Under the equity method, the Company’s investment is initially recognized at cost and subsequently increased or decreased
to recognize the Company’s share of earnings and losses of the investment, distributions received and for impairment losses
after the initial recognition date. The Company’s share of losses that are in excess of its investment is recognized only to the
extent that Indigo has incurred legal or constructive obligations or made payments on behalf of the company. The Company’s
share of earnings and losses of its equity investment are recognized through profit or loss during the period. Cash distributions
received from the investment are accounted for as a reduction in the carrying amount of the Company’s equity investment.
Cash and Cash Equivalents
Cash and cash equivalents consist of cash on hand, balances with banks, and highly liquid investments that are readily convert-
ible to known amounts of cash with original maturities of 90 days or less at the date of acquisition. Cash equivalents of fixed
deposits or similar instruments with an original term of longer than three months are also included in this category if they
are readily convertible to a known amount of cash throughout their term and are subject to an insignificant risk of change in
value assessed against the amount at inception.
Short-term Investments
Short-term investments consist of guaranteed investment securities with an original maturity date greater than 90 days and
remaining term to maturity of less than or equal to 365 days from the date of acquisition. These investments are non-redeemable
until the maturity date.
Inventories
Inventories are valued at the lower of cost, determined on a moving average cost basis, and market, being net realizable value.
Costs include all direct and reasonable expenditures that are incurred in bringing inventories to their present location and
condition. Net realizable value is the estimated selling price in the ordinary course of business. When the Company permanently
reduces the retail price of an item and the markdown incurred brings the retail price below the cost of the item, there is a
corresponding reduction in inventory recognized in the period. Vendor rebates are recorded as a reduction in the price of the
products and corresponding inventories are recorded net of vendor rebates.
Annual Report 2021 47
Prepaid Expenses
Prepaid expenses include store supplies, software subscription fees, and insurance. Store supplies are expensed as they are used
while other costs are amortized over the term of the contract.
Income Taxes
Current income taxes are the expected taxes payable or recoverable on the taxable earnings or loss for the period. Current
income taxes are payable on taxable earnings for the period as calculated under Canadian and U.S. taxation guidelines, which
differ from taxable earnings under IFRS. Calculation of current income taxes is based on tax rates and tax laws that have been
enacted, or substantively enacted, by the end of the reporting period. Income taxes relating to items recognized directly in
equity are recognized in equity and not in the consolidated statements of loss and comprehensive loss.
Deferred income taxes are calculated at the reporting date using the liability method based on temporary differences
between the carrying amounts of assets and liabilities and their tax bases. However, deferred tax assets and liabilities on temporary
differences arising from the initial recognition of goodwill, or of an asset or liability in a transaction that is not a business com-
bination, will not be recognized when neither accounting nor taxable profit or loss are affected at the time of the transaction.
Deferred tax assets arising from temporary differences associated with investments in subsidiaries are provided for if it
is probable that the differences will reverse in the foreseeable future and taxable profit will be available against which the tax
assets may be utilized. Deferred tax assets on temporary differences associated with investments in subsidiaries are not pro-
vided for if the timing of the reversal of these temporary differences can be controlled by the Company and it is probable that
reversal will not occur in the foreseeable future.
Deferred tax assets and liabilities are calculated, without discounting, at tax rates that are expected to apply to their
respective periods of realization, provided they are enacted or substantively enacted by the end of the reporting period.
Deferred tax assets and liabilities are offset only when the Company has the right and intention to set off current tax assets
and liabilities from the same taxable entity and the same taxation authority.
Deferred tax assets are recognized to the extent that it is probable that taxable profit will be available against which the
deductible temporary differences and the carryforward of unused tax credits and unused tax losses can be utilized. In this
consideration, the Company evaluates forecasted earnings, future market growth, future sources of taxable income, the mix
of earnings in the jurisdictions in which the Company operates, and prudent and feasible tax planning strategies. To the extent
that uncertainty exists surrounding the probability of utilizing such deferred tax assets, they are no longer recognized.
Likewise, these assets can be recognized again should it be probable that sufficient taxable profit will be available against which
they can be utilized.
Property, Plant, and Equipment
All items of property, plant, and equipment are initially recognized at cost, which includes any costs directly attributable to
bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by the
Company. Subsequent to initial recognition, property, plant, and equipment assets are shown at cost less accumulated depre-
ciation and any accumulated impairment losses.
Depreciation of an asset begins once it becomes available for use. The depreciable amount of an asset, being the cost of
an asset less the residual value, is allocated on a straight-line basis over the estimated useful life of the asset. Residual value is
estimated to be nil unless the Company expects to dispose of the asset at a value that exceeds the estimated disposal costs.
The residual values, useful lives, and depreciation methods applied to assets are reviewed based on relevant market informa-
tion and management considerations.
48
Consolidated Financial Statements and Notes
The following useful lives are applied:
Furniture, fixtures, and equipment 5 – 10 years
Computer equipment 3 – 5 years
Equipment under finance leases 3 – 5 years
Leasehold improvements over the shorter of useful life and lease term plus expected renewals,
to a maximum of 10 years
Items of property, plant, and equipment are assessed for impairment as detailed in the accounting policy note on impair-
ment and are derecognized either upon disposal or when no future economic benefits are expected from their use. Any gain
or loss arising on derecognition is included in earnings when the asset is derecognized.
Intangible Assets
Intangible assets are initially recognized at cost, if acquired separately, at fair value, or as part of a business combination. After
initial recognition, intangible assets are carried at cost less accumulated amortization and any accumulated impairment losses.
Amortization commences when the intangible assets are available for their intended use. The useful lives of intangible
assets are assessed as either finite or indefinite. Intangible assets with finite lives are amortized over their useful economic life.
Intangible assets with indefinite lives are not amortized but are reviewed at each reporting date to determine whether the
indefinite life continues to be supportable. If not, the change in useful life from indefinite to finite is made on a prospective
basis. Residual value is estimated to be zero unless the Company expects to dispose of the asset at a value that exceeds the
estimated disposal costs. The residual values, useful lives, and amortization methods applied to intangible assets are reviewed
annually based on relevant market information and management considerations.
The following useful lives are applied:
Computer application software 3 – 5 years
Internal development costs 3 years
Retail lease over the lease term
Domain name indefinite useful life – not amortized
There are no legal, regulatory, contractual, competitive, economic or other factors that limit the useful life of the domain
name to the Company. Therefore, the useful life of the domain name is deemed to be indefinite.
Intangible assets are assessed for impairment as detailed in the accounting policy note on impairment. An intangible asset
is derecognized either upon disposal or when no future economic benefit is expected from its use. Any gain or loss arising on
derecognition is included in earnings when the asset is derecognized.
Computer application software
When computer application software is not an integral part of a related item of computer hardware, the software is treated
as an intangible asset. Computer application software that is integral to the use of related computer hardware is recorded as
property, plant, and equipment.
Internal development costs
Costs that are directly attributable to internal development are recognized as intangible assets provided they meet the defini-
tion of an intangible asset. Development costs not meeting these criteria are expensed as incurred. Capitalized development
costs include external direct costs of materials and services and the payroll and payroll-related costs for employees who are
directly associated with the projects.
Annual Report 2021 49
Retail lease
Amounts paid as a premium to gain access to a property located in a specific location, inclusive of any associated professional
fees, are treated as an intangible asset.
Leases
The Company assesses whether a contract is or contains a lease at inception of a contract. The Company recognizes a right-of-
use asset and a corresponding lease liability with respect to all lease agreements in which it is the lessee, except for short-term
leases (defined as leases with a lease term of 12 months or less) and leases of low-value assets. For these leases, the Company
recognizes the lease payments as an operating expense on a straight-line basis over the term of the lease unless another sys-
tematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed.
The Company determines the lease term as the non-cancellable term of the lease, together with any periods covered by
an option to extend the lease if it is reasonably certain to be exercised. The Company has the option under many of its leases
to lease the assets for additional terms of five years, and applies judgment in evaluating whether it is reasonably certain to
exercise the option to renew. The Company considers all relevant factors that create an economic incentive for it to exercise
the renewal, including store performance, expected future performance and past business practice. After the commencement
date, the Company reassesses the lease term if there is a significant event or change in circumstances that is within its control
and affects its ability to exercise (or not to exercise) the option to renew (i.e., a change in business strategy).
The Company performs quarterly assessments of contracts that do not take the legal form of a lease to determine
whether they convey the right to use an asset in return for a payment or series of payments and therefore need to be
accounted for as leases. As at April 3, 2021, the Company had no such contracts.
Impairment Testing
Capital assets
For the purposes of assessing impairment, capital assets are grouped at the lowest levels for which there are largely independ-
ent cash inflows and for which a reasonable and consistent allocation basis can be identified. For capital assets that can be rea-
sonably and consistently allocated to retail stores, an individual or flagship group of stores is used as the CGU for impairment
testing. For all other capital assets, the corporate level is used as the group of CGUs. Capital assets and related CGUs or
groups of CGUs are tested for impairment quarterly and whenever events or changes in circumstances indicate that the car-
rying amount may not be recoverable. Events or changes in circumstances that may indicate impairment include a significant
change to the Company’s operations, a significant decline in performance, or a change in market conditions that adversely
affects the Company.
An impairment loss is recognized for the amount by which the carrying amount of a CGU or group of CGUs exceeds its
recoverable amount. To determine the recoverable amount, management applies the higher of the CGU’s value-in-use or fair
value less costs to dispose. Value-in-use calculation quantifies the present value of the expected future cash flows from each
CGU or group of CGUs based on the CGU’s estimated growth rate. The Company’s growth rate and future cash flows are
based on historical data and management’s expectations. Impairment losses are charged pro rata to the capital assets in the
CGU or group of CGUs. Capital assets and CGUs or groups of CGUs are subsequently reassessed for indicators that a pre-
viously recognized impairment loss may no longer exist. An impairment loss is reversed if the recoverable amount of the cap-
ital asset, CGU, or group of CGUs exceeds its carrying amount, but only to the extent that the carrying amount of the asset
does not exceed the carrying amount that would have been determined, net of depreciation or amortization, if no impairment
loss had been recognized.
50
Consolidated Financial Statements and Notes
Financial assets
Individually significant financial assets are tested for impairment on an individual basis. The remaining financial assets are
assessed collectively in groups that share similar credit risk characteristics. Financial assets are tested for impairment when-
ever events or changes in circumstances indicate that the carrying amount may not be recoverable. Evidence of impairment
may include indications that a debtor or a group of debtors are experiencing significant financial difficulty, default, or delin-
quency in interest or principal payments, and observable data indicating that there is a measurable decrease in the estimated
future cash flows.
A financial asset is deemed to be impaired if there is objective evidence that one or more loss events having a negative
effect on future cash flows of the financial asset occur after initial recognition and the loss can be reliably measured. The
impairment loss is measured as the difference between the carrying amount of the financial asset and the present value of the
estimated future cash flows, discounted at the original effective interest rate. The impairment loss is recorded as an allowance
and recognized in net loss. If the impairment loss decreases as a result of subsequent events, the previously recognized impair-
ment loss is reversed.
Provisions
A provision is a liability of uncertain timing or amount. Provisions are recognized when the Company has a present legal or
constructive obligation as a result of past events for which it is probable that the Company will be required to settle the obli-
gation and a reliable estimate of the settlement can be made. The amount recognized as a provision is the best estimate of the
consideration required to settle the present obligation at the end of the reporting period, taking into account risks and uncer-
tainties of cash flows. Where the effect of discounting to present value is material, provisions are adjusted to reflect the time
value of money. Examples of provisions include decommissioning liabilities, onerous leases, legal claims and other accrued
liabilities where there is uncertainty regarding the timing or amount outstanding.
Total Equity
Share capital represents the nominal value of shares that have been issued. Retained earnings include all current and prior
period retained profits. Dividend distributions payable to equity shareholders are recorded as dividends payable when the divi -
dends have been approved by the Board of Directors prior to the reporting date.
Share-Based Awards
The Company has established an employee stock option plan for key employees. The fair value of each tranche of options
granted is estimated on the grant date using the Black-Scholes option pricing model. The Black-Scholes option pricing model
is based on variables such as: risk-free interest rate; expected volatility; expected time until exercise; and expected dividend
yield. Expected stock price volatility is based on the historical volatility of the Company’s stock for a period approximating
the expected life. The grant date fair value, net of estimated forfeitures, is recognized as an expense with a corresponding
increase to contributed surplus over the vesting period. Estimates are subsequently revised if there is an indication that the
number of stock options expected to vest differs from previous estimates. Any consideration paid by employees on exercise
of stock options is credited to share capital with a corresponding reduction to contributed surplus.
Revenue Recognition
The Company recognizes revenue when control of goods has been transferred at the amount of consideration to which the
Company expects to be entitled. Revenue is recorded net of sales discounts, estimated returns, sales tax, environmental fees
and amounts deferred related to the issuance of plum® points. Revenue is recognized when control of goods has been trans-
ferred (as described below) for each of the Company’s revenue-generating activities.
Annual Report 2021 51
Retail sales
Revenue for retail customers is recognized when the product is delivered to the customer, which for the majority of retail
transactions occurs at time of purchase.
Online and kiosk sales
Revenue for online and kiosk customers is recognized when the product is shipped to customers.
Gift cards
The Company sells gift cards to its customers and recognizes the revenue as gift cards are redeemed for merchandise. A cus-
tomer’s non-refundable prepayment to the Company gives them a right to receive product in the future. However, historically
customers do not exercise all of their contractual rights, which is referred to as breakage.
The Company determines its average gift card breakage rate based on historical redemption rates. Breakage income rep-
resents the estimated value of gift cards that is not expected to be redeemed by customers and is determined in proportion
to the pattern of rights exercised by the customer. Gift card breakage is included in revenue in the Company’s consolidated
statements of loss and comprehensive loss. Changes in estimated breakage should be accounted for by adjusting the contract
liability to reflect the remaining rights expected to be redeemed.
Indigo plum® rewards program
Indigo’s loyalty program, plum®, has two tiers: plum®, a free points-based tier; and plum® PLUS, an annual fee-based tier. The
plum® program is an omni-channel program that allows members to earn and redeem points online and in-store, seamlessly. This
program engages members through mass promotions and targeted one-to-one promotional offers, as well as invitations to
exclusive events and member-only shopping experiences. The Company launched the plum® PLUS membership program in
fiscal 2020, replacing its former annual fee-based irewards® program. plum® PLUS offers its members an immediate discount
on eligible products, free shipping and the ability to earn points on almost every dollar spent at the Company’s Canadian stores,
as well as on its digital platforms.
When a plum® member purchases merchandise, the Company allocates consideration received between the loyalty pro-
gram points and the merchandise on which the points were earned based on their relative stand-alone selling prices. The por-
tion of revenue attributed to the merchandise is recognized at the time of purchase. Revenue attributed to the points is recorded
as deferred revenue and recognized when points are redeemed.
The stand-alone selling price of the points issued is determined based on the estimated reward tier value, net of points
that management expects will go unredeemed. The Company continues to monitor trends in redemption patterns (redemption
at each reward level), historical redemption rates (points redeemed as a percentage of points issued) and net cost per point
redeemed to reduce estimation uncertainty in the consideration allocated to the loyalty contract right. Points revenue is
included as part of total revenue in the Company’s consolidated statements of loss and comprehensive loss.
Interest income
Interest income is reported on an accrual basis using the effective interest method and included as part of net interest in the
Company’s consolidated statements of loss and comprehensive loss.
Vendor Rebates
The Company records cash consideration received from vendors as a reduction to the price of vendors’ products. This is
reflected as a reduction in cost of sales and related inventories when recognized in the consolidated financial statements.
Certain exceptions apply where the cash consideration received is a reimbursement of incremental selling costs incurred by
the Company, in which case the cash received is reflected as a reduction in operating, selling, and administrative expenses.
52
Consolidated Financial Statements and Notes
Loss per Share
Basic loss per share is determined by dividing the net loss attributable to common shareholders by the weighted average
number of common shares outstanding during the period. Diluted loss per share is calculated in accordance with the treasury
stock method and is based on the weighted average number of common shares and dilutive common share equivalents out-
standing during the period. The weighted average number of shares used in the computation of both basic and fully diluted
loss per share may be the same due to the anti-dilutive effect of securities.
Financial Instruments
Financial assets and financial liabilities are recognized when the Company becomes a party to the contractual provisions of
the financial instrument. Financial assets are derecognized when the contractual rights to the cash flows from the financial
asset expire. A financial liability is derecognized when it is extinguished, discharged, cancelled, or expires. Where a legally
enforceable right to offset exists for recognized financial assets and financial liabilities and there is an intention to settle the lia-
bility and realize the asset simultaneously, or to settle on a net basis, such related financial assets and financial liabilities are offset.
Non-derivative financial assets are initially measured at fair value and subsequently measured at amortized cost using the
effective interest method if both of the following conditions are met and they are not designated as fair value through profit
and loss (“FVTPL”):
• the financial asset is held within a business model whose objective is to hold financial assets to collect contractual cash
flows; and
• the contractual terms of the financial asset give rise, on specified dates, to cash flows that are solely payments of
principal and interest on the principal amount outstanding.
All financial assets not classified as amortized cost as described above are measured at FVTPL.
Non-derivative financial liabilities are initially measured at fair value, less any directly attributable transaction costs, and
subsequently measured at amortized cost using the effective interest method.
The Company designates its derivative financial assets and liabilities under a cash flow hedge program for its foreign cur-
rency exposures on a portion of its U.S. dollar denominated cash outflows. The forward contracts used for hedging are rec-
ognized at fair value. Subsequent to initial recognition, the forward contracts are measured at fair value and changes therein
are accounted for as described in the derivative disclosure below.
Financial Asset /Liability IFRS 9 Classification and Measurement
Cash and cash equivalents Amortized cost
Short-term investments Amortized cost
Accounts receivable Amortized cost
Accounts payable and accrued liabilities Amortized cost
Derivative instruments FVTPL
Financial assets and financial liabilities are measured at fair value using a valuation hierarchy for disclosure of fair value
measurements. The determination of the applicable level within the hierarchy of a particular asset or liability depends on the
inputs used in the valuation as of the measurement date, notably the extent to which the inputs are market-based (observable)
or internally derived (unobservable). Observable inputs are inputs that market participants would use in pricing the asset or
liability based on market data obtained from independent sources. Unobservable inputs are inputs based on a company’s own
assumptions about market participant assumptions using the best information available.
The hierarchy is broken down into three levels based on the reliability of inputs as follows:
Level 1: Valuations based on quoted prices in active markets for identical assets or liabilities that a company has the ability to
access at the measurement date.
Annual Report 2021 53
Level 2: Valuations based on quoted inputs other than quoted prices included within Level 1, that are observable for the asset
or liability, either directly or indirectly through corroboration with observable market data.
Level 3: Valuations based on inputs that are unobservable and significant to the overall fair value measurement.
The following methods and assumptions were used to estimate the fair value of each type of financial instrument by ref-
erence to market data and other valuation techniques, as appropriate:
(i) The initial fair values of cash and cash equivalents, short-term investments, accounts receivable, and accounts payable
and accrued liabilities approximate their carrying values given their short maturities; and
(ii) The fair value of derivative financial instruments are estimated using quoted market rates at the measurement date
adjusted for the maturity term of each instrument. The Company’s portfolio of derivative financial instruments as at
April 3, 2021 is classified as Level 2 in the fair value hierarchy.
Derivative financial instruments and hedge accounting
The Company enters into various derivative financial instruments as part of its strategy to manage foreign currency exposure.
All contracts entered into during the year have been designated as cash flow hedges for accounting purposes. The Company
does not hold or issue derivative financial instruments for trading purposes.
All derivative financial instruments, including derivatives embedded in financial or non-financial contracts not closely
related to the host contracts, are measured at fair value. The gain or loss that results from remeasurement at each reporting
period is recognized in net loss immediately unless the derivative is designated and effective as a hedging instrument, in which
case the timing of the recognition in net loss depends on the nature of the hedge relationship.
At the inception of a hedge relationship, the Company documents the relationship between the hedging instrument and
the hedged item along with the Company’s risk management objectives and strategy for undertaking various hedge transac-
tions, together with the methods that will be used to assess the effectiveness of the hedging relationship. Such hedges are
expected to be highly effective in achieving offsetting changes in cash flows and are assessed on an ongoing basis to determine
that they actually have been highly effective throughout the financial reporting periods for which they were designated.
Accordingly, the effective portion of the change in the fair value of the foreign exchange forward contracts that are
designated and qualify as cash flow hedges is recognized in other comprehensive income (loss) until related payments have
been made in future accounting periods. The Company has not made an election to exclude the time value component of
forward contracts designated as cash flow hedges from the hedging relationship. Associated gains and losses recognized in
other comprehensive income (loss) are reclassified to earnings in the periods when the hedged item is recognized in earnings.
These earnings are included within the same line of the consolidated statement of loss as the recognized item. However, when
the hedged forecast transaction results in the recognition of a non-financial asset, the gains and losses previously recognized
in other comprehensive income (loss) are transferred from equity and included in the initial measurement of the cost of the
non-financial asset. The gain or loss relating to the ineffective portion is recognized immediately in the consolidated state-
ments of loss.
If the hedging instrument no longer meets the criteria for hedge accounting, expires or is sold, terminated or exercised,
then hedge accounting is discontinued prospectively. If the forecasted transaction is no longer expected to occur, then the bal-
ance in accumulated other comprehensive income (loss) is recognized immediately in net loss.
Retirement Benefits
The Company provides retirement benefits through a defined contribution retirement plan. Under the defined contribution
retirement plan, the Company pays fixed contributions to an independent entity. The Company has no legal or constructive
obligations to pay further contributions after its payment of the fixed contribution. The costs of benefits under the defined con-
tribution retirement plan are expensed as contributions are due and are reversed if employees leave before the vesting period.
54
Consolidated Financial Statements and Notes
Accounting Standards Implemented in Fiscal 2021
Amendment to IFRS 16 Leases (“IFRS 16”) – COVID-19-Related Rent Concessions
On May 28, 2020, the IASB issued an amendment to IFRS 16 that provides an optional practical expedient for lessees from
assessing whether a rent concession that is being offered as a direct response to the economic impacts of COVID-19 is a lease
modification, which would have capitalized the benefit received. The Company is applying the practical expedient in the cur-
rent period and will account for any eligible change in lease payments resulting from a COVID-19-related rent concession in
profit or loss in the period the deal is executed.
5. NEW ACCOUNTING PRONOUNCEMENTS
Classification of Liabilities as Current or Non-Current (Amendments to IAS 1)
In January 2020, the IASB issued Classification of Liabilities as Current or Non-Current, which amends IAS 1 – Presentation of
Financial Statements. The narrow scope amendments affect only the presentation of liabilities in the statement of financial posi-
tion and not the amount or timing of their recognition. It clarifies that the classification of liabilities as current or non-current
is based on rights that are in existence at the end of the reporting period and specifies that classification is unaffected by expec-
tations about whether an entity will exercise its right to defer settlement of a liability. It also introduces a definition of
‘settlement’ to make clear that settlement refers to the transfer to the counterparty of cash, equity instruments, other assets
or services. The amendments are effective for annual reporting periods beginning on or after January 1, 2022. Earlier appli-
cation is permitted. The Company is assessing the potential impact of these amendments.
6. IMPAIRMENT OF ASSETS
Assets are assessed for impairment at the CGU level, except for those assets that are considered to be corporate assets. As
certain corporate assets cannot be allocated on a reasonable and consistent basis to individual CGUs, they are tested for
impairment at the corporate level. A CGU has been defined as either an individual retail store or grouping of stores where a
flagship in a prime and much sought-after location serves the same customer base as stores in a surrounding vicinity, as this
was determined to be the lowest level for which cash inflows are largely independent. CGUs are tested for impairment if
impairment indicators exist at the reporting date.
Recoverable amounts for CGUs being tested are based on the higher of the value-in-use and the fair value less cost of dis-
posal, which is calculated from discounted cash flow projections and the amount obtainable from the sale of a CGU in an
arm’s-length transaction between knowledgeable, willing parties, less the costs of disposal.
Retail Store Impairment
Impairment indicators were identified for certain retail store CGUs as at April 3, 2021 and as at March 28, 2020. Accordingly,
the Company performed impairment testing and determined there was no impairment for the year ended April 3, 2021
(2020 – impairment losses of $15.3 million, across a number of CGUs; $9.4 million recognized against the right-of-use
assets, $5.0 million against property, plant and equipment and $0.9 million against intangible assets.)
Recoverable amounts were determined as the higher of their value in use or fair value less cost of disposal. Uncertainties
around the impact of COVID-19 on projected sales and the Company’s discount rate are key assumptions in determining the
value-in-use recoverable amount. Management’s estimate of the discount rate reflects its weighted average cost of capital,
which intrinsically considers the current market assessment of the time value of money and the risks specific to the CGU.
The recoverable amount is based on an average discount rate of 12.5% for retail store CGUs (2020 – 13.5%), which is reflec-
tive of concentration and geographic risk premiums.
Where the recoverable amount of a CGU was measured at its fair value less cost of disposal, the fair value was categorized
as level 3 in the fair value hierarchy. Management’s fair value estimate was based on prevailing commercial rent rates, man-
agement’s judgment on the comparability of these market inputs, and management’s estimate of the risks associated with
brick-and-mortar retail properties in the current COVID-19 pandemic.
Annual Report 2021 55
Corporate Asset Impairment
As at April 3, 2021, and March 28, 2020, the Company had identified impairment indicators relating to its corporate assets.
Corporate asset testing calculates discounted cash flow projections over a five-year period plus a terminal value. For the year
ended April 3, 2021, it was determined there was no impairment (2020 – impairment losses of $41.2 million; $31.5 million
recognized against the right-of-use assets, $7.5 million against property, plant, and equipment, $2.0 million against intangible
assets, and $0.2 million against the equity investment).
The recoverable amount was determined using the value-in-use methodology. Key assumptions were the cash flow pro-
jections, terminal growth rate, and the discount rate. Cash flow projections were based on financial forecasts approved by
management, and covered a five-year period. The cash flows represent management’s best projections based on current and
anticipated market conditions, however, these projections are inherently uncertain due to the impact of the COVID-19 pan-
demic. The cash flows beyond the five-year period for corporate asset testing have been extrapolated using a steady 1.0% ter-
minal growth rate, which management has assessed to be the projected long-term average growth rate. Consistent with retail
store impairment, management’s estimate of the discount rate reflects its weighted average cost of capital. Management’s esti-
mate of the discount rate is assessed as at April 3, 2021 and reflects the current market assessment of the time value of money,
enterprise market risk and the risks specific to the Company. The recoverable amount is based on a discount rate of 11.7%
(2020 – 12.5%). Although the Company believes the assumptions and estimates made are reasonable and appropriate, differ-
ent assumptions and estimates could materially impact its reported financial results.
7. CASH, CASH EQUIVALENTS, AND SHORT-TERM INVESTMENTS
Cash and cash equivalents consist of the following:
As at As at
April 3, March 28,
(thousands of Canadian dollars) 2021 2020
Cash 84,516 48,955
Restricted cash 391 1,212
Cash equivalents 28 70,306
Cash and cash equivalents 84,935 120,473
Restricted cash represents cash pledged as collateral with its financial institution in support of the Company’s credit card
purchasing program, as well as certain deposits related to utilities contracts.
As at April 3, 2021, the Company held no short-term investments (March 28, 2020 – no short-term investments). Short-
term investments consist of guaranteed investment securities with an original maturity date greater than 90 days and remain-
ing term to maturity of less than or equal to 365 days from the date of acquisition. These investments are non-redeemable
until the maturity date, and therefore they are classified separately from cash and cash equivalents.
8. INVENTORIES
The cost of inventories recognized as an expense during the 53-week period ended April 3, 2021 was $530.1 million (2020 –
$550.0 million). Inventories consist of the landed cost of goods sold and exclude inventory shrink and damage reserve and
all vendor support programs. The amount of inventory write-downs as a result of net realizable value lower than cost during
the 53-week period ended April 3, 2021 was $9.2 million (2020 – $10.2 million). The amount of inventory with net realizable
value equal to cost was $5.4 million as at April 3, 2021 (March 28, 2020 – $4.4 million).
56
Consolidated Financial Statements and Notes
9. DERIVATIVE FINANCIAL INSTRUMENTS
The Company uses derivative financial instruments, such as foreign exchange forward contracts, to manage the currency fluc-
tuation risk associated with forecasted U.S. dollar payments, primarily for general merchandise inventory purchases. These
contracts have been designated as cash flow hedges for accounting purposes. There is an economic relationship between the
hedged items and the hedging instruments as the terms of the foreign exchange forward contracts match the terms of the
expected highly probable forecast transactions (i.e. notional amount and expected payment date). Furthermore, the Company
has established a hedge ratio of 1:1 for the hedging relationships as the underlying risk of the foreign exchange forward con-
tracts is identical to the hedged risk components.
The fair values of derivative financial instruments are determined based on observable market information as well as val-
uations determined by external evaluators with experience in financial markets.
During the fiscal year ended April 3, 2021, the Company entered into contracts with total notional amounts of C$69.7 mil-
lion to purchase U.S. dollar/Canadian dollar currency pair forwards (2020 – C$118.8 million). As at April 3, 2021, the Company
had remaining contracts in place representing total notional amounts of C$34.6 million (March 28, 2020 – C$66.2 million)
at an average forward rate of 1.32 (2020 – 1.32). These contracts extend over a period not exceeding 12 months.
The total fair value of the contracts as at April 3, 2021 resulted in the recognition of no derivative asset (March 28, 2020 –
$3.8 million) and a derivative liability of $1.6 million (March 28, 2020 – no derivative liability).
During the quarter ended September 26, 2020, the Company terminated derivative instruments based on the heightened
credit risk of one of its counterparties during the COVID-19 pandemic; consequently, hedge accounting was discontinued
and a gain of $0.3 million as at that date was deferred in other comprehensive income. This gain has since been recognized in
earnings and loss in the 53-week period ended April 3, 2021, concurrently with the related hedged transactions. There were
no other forecast transactions for which hedge accounting had been used, but which were no longer expected to occur, or
hedging relationships discontinued and restarted during the 53-week period ended April 3, 2021 and 52-week period ended
March 28, 2020.
During the fiscal year ended April 3, 2021, the Company had net losses of $4.5 million (net of taxes of $1.0 million) from
the change in fair value of outstanding cash flow hedges (2020 – net gains of $2.5 million, net of taxes of $0.9 million). During
the same period, the Company reclassified net losses from settled contracts out of other comprehensive income to inventory
and expenses of $0.1 million (net of taxes of below $0.1 million) (2020 – net gains of $0.5 million, net of taxes of $0.2 million).
This resulted in an other comprehensive loss of $4.4 million for the 53-week period ended April 3, 2021 (2020 – other com-
prehensive income of $2.0 million).
Potential causes of mismatch between the hedging instrument and hedged item which would generate ineffectiveness
include changes in credit risk, a timing mismatch between the maturity of the instrument and the future transaction date,
and/or the hedged transaction does not occur. For the year ended April 3, 2021, reclassified amounts resulting from hedge
ineffectiveness totaled $0.3 million (2020 – immaterial) and realized foreign exchange amounts as a result of derivative finan-
cial instruments totaled $0.3 million (2020 – immaterial).
Annual Report 2021 57
10. PROPERTY, PLANT, AND EQUIPMENT
Furniture,
fixtures, and Computer Leasehold
(thousands of Canadian dollars) equipment equipment improvements Total
Gross carrying amount
Balance, March 31, 2019 102,440 17,171 80,285 199,896
Additions, net 4,169 1,234 (3,180) 2,223
Disposals (1,446) (204) (2,274) (3,924)
Assets with zero net book value (7,431) (2,498) (10,592) (20,521)
Foreign currency adjustment 171 – 336 507
Balance, March 28, 2020 97,903 15,703 64,575 178,181
Additions, net 824 2,331 938 4,093
Disposals (351) (97) (62) (510)
Assets with zero net book value (9,939) (2,291) (11,277) (23,507)
Foreign currency adjustment (259) – (502) (761)
Balance, April 3, 2021 88,178 15,646 53,672 157,496
Accumulated depreciation and impairment
Balance, March 31, 2019 38,974 7,030 27,986 73,990
Depreciation 10,149 3,118 9,738 23,005
Disposals (745) (133) (1,165) (2,043)
Impairment losses 4,884 649 7,002 12,535
Assets with zero net book value (7,431) (2,498) (10,592) (20,521)
Balance, March 28, 2020 45,831 8,166 32,969 86,966
Depreciation 8,487 2,800 5,871 17,158
Disposals (177) (46) (29) (252)
Assets with zero net book value (9,939) (2,291) (11,277) (23,507)
Balance, April 3, 2021 44,202 8,629 27,534 80,365
Net carrying amount
March 28, 2020 52,072 7,537 31,606 91,215
April 3, 2021 43,976 7,017 26,138 77,131
58
Consolidated Financial Statements and Notes
11. LEASE BALANCES
The following table reconciles the change in right-of-use assets:
(thousands of Canadian dollars)
Gross carrying amount
Balance on transition, March 31, 2019 388,492
Additions 73,148
Foreign currency adjustment 1,494
Balance, March 28, 2020 463,134
Additions 25,765
Foreign currency adjustment (3,057)
Balance, April 3, 2021 485,842
Accumulated depreciation and impairment
Balance on transition, March 31, 2019 –
Depreciation 40,101
Impairment losses 40,887
Balance, March 28, 2020 80,988
Depreciation 42,990
Balance, April 3, 2021 123,978
Net carrying amount
March 28, 2020 382,146
April 3, 2021 361,864
The following table reconciles the change in lease liabilities:
53-week 52-week
period ended period ended
April 3, March 28,
(thousands of Canadian dollars) 2021 2020
Balance, beginning of period 568,617 533,367
Lease renewals included in the scope of IFRS 16 25,899 73,950
Accretion of lease liabilities 25,706 25,585
Repayment of interest and principal on lease liabilities (62,241) (65,976)
Rent concessions (4,141) –
Foreign currency adjustment (3,566) 1,691
Balance, end of period 550,274 568,617
For the 53-week period ended April 3, 2021, the Company has applied the practical expedient offered under the amend-
ment to IFRS 16 for COVID-19 to all rent concessions that met the criteria. The Company recognized $4.1 million in the
year in its Consolidated Statements of Loss and Comprehensive Loss to reflect the changes in lease payments that arose from
COVID-19-related rent concessions (2020 – not applicable).
During the year ended April 3, 2021, the Company expensed $1.8 million (March 28, 2020 – $2.9 million) of base rent
payments relating to short-term leases for which the recognition exemption was applied, and these payments were not included
in the lease liabilities.
The Company earned income from subleases of $4.5 million for the 53-week period ended April 3, 2021 (March 28,
2020 – $7.7 million). All of the Company’s subleases are classified as operating leases and are net against occupancy expenses.
Annual Report 2021 59
As at April 3, 2021, the Company had leases in respect of its stores and support office premises. The future undiscounted
minimum lease commitments for the Company’s leases for its premises, excluding other occupancy charges and variable lease
payments, are as follows:
(thousands of Canadian dollars) Total
2022 67,041
2023 62,289
2024 58,708
2025 52,251
2026 42,812
Thereafter 119,152
Total obligations 402,253
12. INTANGIBLE ASSETS
Computer Internal
application development Domain Retail
(thousands of Canadian dollars) software costs name lease Total
Gross carrying amount
Balance, March 31, 2019 28,508 15,486 3,387 1,207 48,588
Additions 3,831 4,566 – – 8,397
Disposals (23) (4) – – (27)
Assets with zero net book value – (3,012) – – (3,012)
Balance, March 28, 2020 32,316 17,036 3,387 1,207 53,946
Additions 4,837 4,408 – – 9,245
Disposals (25) – – – (25)
Assets with zero net book value (11,158) (3,907) – – (15,065)
Balance, April 3, 2021 25,970 17,537 3,387 1,207 48,10 1
Accumulated amortization and impairment
Balance, March 31, 2019 10,244 5,672 – 145 16,061
Amortization 8,199 5,051 – 124 13,374
Disposals (13) – – – (13)
Impairment losses 1,056 713 259 938 2,966
Assets with zero net book value – (3,012) – – (3,012)
Balance, March 28, 2020 19,486 8,424 259 1,207 29,376
Amortization 7,449 5,436 – – 12,885
Disposals (11) – – – (11)
Assets with zero net book value (11,158) (3,907) – – (15,065)
Balance, April 3, 2021 15,766 9,953 259 1,207 27,185
Net carrying amount
March 28, 2020 12,830 8,612 3,128 – 24,570
April 3, 2021 10,204 7,584 3,128 – 20,916
The useful life of the domain name has been deemed to be indefinite because there are no legal, regulatory, contractual,
competitive, economic, or other factors that limit the useful life of this asset to the Company.
60
Consolidated Financial Statements and Notes
13. EQUITY INVESTMENTS
The Company holds an equity ownership in Unplug, which operates meditation studios in the U.S., resulting in a 20% voting
interest and representation on the board of managers. The Company uses the equity method of accounting to record Unplug
results. The Company did not receive a distribution from Unplug during the period.
Changes in the carrying amount of Unplug were as follows:
(thousands of Canadian dollars) Carrying value
Balance, March 30, 2019 2,610
Share of loss from Unplug (63)
Impairment of investment (194)
Balance, March 28, 2020 2,353
Share of loss from Unplug (197)
Balance, April 3, 2021 2,156
During the prior year, the Company sold its equity investments in Calendar Club of Canada Limited Partnership
(“Calendar Club”) and Calendar Club of Canada Ltd. (the general partner of the partnership) to Paris Southern Lights Inc.
(a minority partner in the partnership). The financial impact of the transaction consisted of proceeds of $1.8 million, which
generated a gain on the sale of $1.5 million recognized in fiscal 2020. The proceeds outstanding at the time of sale were to
be paid in installments, with the final payment in calendar 2022.
Prior to the sale, the Company used the equity method of accounting to record Calendar Club results. In fiscal 2020,
Indigo had recognized a net loss from Calendar Club of $1.7 million and received no annual distribution.
14. INCOME TAXES
Deferred income taxes reflect the net tax effect of temporary differences between the carrying amounts of assets and liabil-
ities for financial reporting purposes, and the amounts used for income tax purposes. The Company recognizes deferred tax
assets to the extent that it is probable that taxable profit will be available against which the deductible temporary differences
and the carryforward of unused tax credits and unused tax losses can be utilized.
Significant components of the Company’s net deferred tax assets are as follows:
As at As at
April 3, March 28,
(thousands of Canadian dollars) 2021 2020
Reserves and allowances 3,216 1,777
Non-capital loss carryforwards 25,425 20,413
Capital loss carryforwards 319 319
Corporate minimum tax credit 3,379 3,379
Book amortization in excess of capital cost allowance 43,858 36,359
Lease liabilities 141,445 148,551
Cash flow hedges 434 –
Total deferred tax assets 218,076 210,798
Right-of-use assets (92,001) (100,310)
Cash flow hedges – (1,017)
Total deferred tax liabilities (92,001) (101,327)
Net deferred tax assets 126,075 109,471
Value of deferred tax assets not recognized in the current period (126,075) (109,471)
Recognized net deferred tax assets – –
Annual Report 2021 61
As at April 3, 2021, all net deferred tax assets have not been recognized (March 28, 2020 – all net deferred tax assets
not recognized). This decision was influenced by the Company’s current operating loss and uncertainty surrounding future
profitability as a result of the COVID-19 pandemic, among other factors. As such, uncertainty exists surrounding the proba-
bility of sufficient taxable income being available to utilize all deferred tax assets within the time line of management’s fore-
casts. The time period of future projected taxable profits used to assess the recognition of deferred tax assets was shorter than
the expiration period of the non-capital tax loss carry-forwards, and other deferred tax assets which do not expire.
As at April 3, 2021, the Company had Canadian non-capital tax loss carryforwards of $64.2 million that expire in 2031,
$8.3 million that expire in 2039, $1.2 million that expire in 2040, and $14.7 million that expire in 2041, as well as capital
losses of $2.4 million. The Company also had $8.1 million of both U.S. federal and U.S. state non-capital losses in the states
in which it operates. The federal losses have no expiration, and the state losses expire between 2039 and 2041.
Significant components of income tax expense are as follows:
53-week 52-week
period ended period ended
April 3, March 28,
(thousands of Canadian dollars) 2021 2020
Current income tax expense – –
Deferred income tax expense
Origination and reversal of temporary differences (10,194) (25,588)
Deferred income tax recovery relating to change in non-capital loss
carryforwards (5,158) (174)
Deferred income tax recovery relating to change in capital loss
carryforwards – (319)
Adjustment resulting from a change in substantively enacted tax rates
and expected pattern of reversal 122 1,423
Adjustment for deferred tax assets not recognized 16,343 109,471
Other, net (96) (101)
Total income tax expense 1,017 84,712
The reconciliation of income taxes computed at statutory income tax rates to the effective income tax rates is as follows:
53-week 52-week
period ended period ended
April 3, March 28,
(thousands of Canadian dollars) 2021 % 2020 %
Loss before income taxes (56,850) (100,286)
Tax at combined federal and provincial tax rates (15,063) 26.5 % (26,838) 26.8 %
Tax effect of expenses not deductible
for income tax purposes 374 (0.7)% 573 (0.6)%
Adjustment to deferred tax assets resulting
from reduction in substantively enacted tax rates
and expected pattern of reversal 122 (0.2)% 1,423 (1.4)%
Adjustment for deferred tax assets not recognized 16,343 (28.7)% 109,471 (109.2)%
Adjustment with respect to prior periods (824) 1.4 % 459 (0.5)%
Other, net 65 (0.1)% (376) 0.4 %
1,017 (1.8)% 84,712 (84.5)%
62
Consolidated Financial Statements and Notes
15. PROVISIONS
Provisions consist primarily of amounts recorded in respect of decommissioning liabilities, legal claims and other liabilities
where there is uncertainty regarding the timing or amount outstanding. The Company is subject to payment of decommis-
sioning liabilities upon exiting certain leases. The amount of these payments may fluctuate based on negotiations with the
landlord. Legal claim provisions fluctuate depending on the outcomes when claims are settled.
Activity related to the Company’s provisions is as follows:
53-week 52-week
period ended period ended
April 3, March 28,
(thousands of Canadian dollars) 2021 2020
Balance, beginning of period 2,503 105
Arising during the year 689 2,398
Balance, end of period 3,192 2,503
The Company reviews the merits, risks and uncertainties of each provision, based on current information, and the
amount expected to be required to settle the obligation. Provisions are reviewed on an ongoing basis and are adjusted accord-
ingly when new facts and events become known to the Company.
16. CONTINGENCIES
Legal Claims
In the normal course of business, the Company becomes involved in various claims and litigation. While the final outcome of
such claims and litigation pending as at April 3, 2021 cannot be predicted with certainty, management believes that any such
amount would not have a material impact on the Company’s financial position or financial performance, except for those
amounts that have been recorded as provisions on the Company’s consolidated balance sheets.
17. SHARE CAPITAL
Share capital consists of the following:
53-week period ended 52-week period ended
April 3, 2021 March 28, 2020
Number of Amount C$ Number of Amount C$
shares (thousands) shares (thousands)
Balance, beginning of period 27,273,961 226,986 27,136,386 225,531
Issued during the period
Directors’ deferred stock units converted – – 137,575 1,455
Balance, end of period 27,273,961 226,986 27,273,961 226,986
18. SHARE-BASED COMPENSATION
The Company has established an employee stock option plan (the “Plan”) for key employees. The number of common shares
reserved for issuance under the Plan as at April 3, 2021 is 3,591,094 (March 28, 2020 – 3,591,094). Most options granted
after 2013 have a five-year term, with one third of the options granted being exercisable one year after the date of issue, and
the remainder exercisable in equal installments on the anniversary date over the next two years. Stock options granted after
August 2019 vest over a two-year period, while all other outstanding options vest over the above referenced three-year period.
The vesting schedule was changed in fiscal 2020 to reward and retain plan participants. Each option is exercisable into one
common share of the Company at the price specified in the terms of the option agreement.
Annual Report 2021 63
The Company uses the fair value method of accounting for stock options, which estimates the fair value of the stock
options granted on the date of grant, net of estimated forfeitures, and expenses this value over the vesting period. During
fiscal 2021, the pre-forfeiture value of options granted was $0.8 million (2020 – $1.3 million).The weighted average fair value
of options issued in fiscal 2021 was $1.30 per option (2020 – $1.49 per option).
The fair value of the employee stock options is estimated at the date of grant using the Black-Scholes option pricing
model with the following weighted average assumptions during the periods presented:
53-week 52-week
period ended period ended
April 3, March 28,
2021 2020
Black-Scholes option pricing assumptions
Risk-free interest rate 0.3% 1.3%
Expected volatility 64.6% 32.9%
Expected time until exercise 2.6 years 2.6 years
Expected dividend yield – –
Other assumptions
Forfeiture rate 25.7% 26.7%
A summary of the status of the Plan and changes during both periods is presented below:
53-week period ended 52-week period ended
April 3, 2021 March 28, 2020
Weighted Weighted
average average
Number exercise price Number exercise price
# C$ # C$
Outstanding options, beginning of period 2,218,488 12.21 1,737,593 15.34
Granted 1,077,500 1.74 905,000 6.74
Forfeited (815,975) 10.10 (306,205) 14.73
Expired (104,538) 10.99 (117,900) 10.46
Exercised – – – –
Outstanding options, end of period 2,375,475 7.90 2,218,488 12.21
Options exercisable, end of period 1,157,825 13.43 995,913 15.73
A summary of options outstanding and exercisable is presented below:
As at April 3, 2021
Outstanding Exercisable
Weighted
Weighted average Weighted
Range of average remaining average
exercise prices Number exercise price contractual life Number exercise price
C$ # C$ (in years) # C$
1.00 – 1.56 655,000 1.00 4.2 – –
1.57 – 5.47 262,500 4.02 4.8 – –
5.48 – 6.92 528,000 6.60 3.4 314,000 6.60
6.93 – 15.38 335,025 11.60 2.7 248,875 12.75
15.39 – 18.40 594,950 17.32 1.1 594,950 17.32
1.00 – 18.40 2,375,475 7.90 3.1 1,157,825 13.43
64
Consolidated Financial Statements and Notes
Directors’ Compensation
The Company has established a Directors’ Deferred Stock Unit Plan (“DSU Plan”). Under the DSU Plan, Directors annually
elect whether to receive their annual retainer fees and other Board-related compensation in the form of deferred stock units
(“DSUs”) or receive up to 50% of this compensation in cash. All Directors’ compensation during the year was issued in the
form of DSUs, with the exception of cash awards of less than $0.1 million (2020 – all DSUs).
The number of shares reserved for issuance under this plan is 500,000. The Company issued 164,979 DSUs with a value
of $0.3 million during the year (2020 – 76,269 DSUs with a value of $0.3 million). The number of DSUs to be issued to each
Director is based on a set fee schedule. The grant date fair value of the outstanding DSUs as at April 3, 2021 was $3.2 million
(March 28, 2020 – $4.4 million) and was recorded in contributed surplus. The fair value of DSUs is equal to the traded price
of the Company’s common shares on the grant date.
19. SUPPLEMENTARY OPERATING INFORMATION
Set out below is the disaggregation of the Company’s revenue from contracts with customers.
The following table summarizes net revenue by product line:
53-week 52-week
period ended period ended
April 3, March 28,
(thousands of Canadian dollars) 2021 2020
Print 1,4 527,985 539,288
General merchandise 2,4 354,364 401,370
Other 3 22,389 17,064
Total 904,738 957,722
1 Includes books, magazines, newspapers, eReaders, and related shipping revenue.
2 Includes lifestyle, paper, toys, electronics, and related shipping revenue.
3 Includes Indigo cafés, irewards, gift card breakage, plum® breakage, plum® PLUS membership fees (“plum PLUS revenue”), corporate sales, and Rakuten Kobo Inc.
(“Kobo”) revenue share.
4 Certain comparative information relating to eReaders has been reclassified to conform to the current year’s presentation.
The following table summarizes net revenue by channel:
53-week 52-week
period ended period ended
April 3, March 28,
(thousands of Canadian dollars) 2021 2020
Superstores1 439,797 655,844
Small format stores1 72,597 122,138
Online (including store kiosks) 369,955 162,676
Other2 22,389 17,064
Total 904,738 957,722
1 Includes sales on orders placed on www.indigo.ca and fulfilled through express pick-up.
2 Includes Indigo cafés, irewards, gift card breakage, plum® breakage, plum® PLUS revenue, corporate sales, and Kobo revenue share.
Annual Report 2021 65
Supplemental operating, selling, and other expenses information:
53-week 52-week
period ended period ended
April 3, March 28,
(thousands of Canadian dollars) 2021 2020
Wages, salaries, and bonuses 146,959 172,597
Short-term benefits expense 17,857 20,807
Termination benefits expense 7,138 6,027
Retirement benefits expense 1,847 1,774
Share-based compensation 666 1,268
Total employee benefits expense 174,467 202,473
In fiscal 2021, the Company has recognized payroll subsidies from the COVID-19 Canada Emergency Wage Subsidy
(“CEWS”) program of $27.4 million (2020 – not applicable). These subsidies were recorded as a reduction in the associated
eligible salaries and wage expenses recognized in cost of operations and selling, general and administrative expenses. Of the
amount recognized, $7.3 million remains outstanding in accounts receivable as at April 3, 2021.
Termination benefits arise when the Company terminates certain employment agreements.
Contingent rents recognized as an expense during fiscal 2021 were $0.9 million (2020 – $1.5 million).
20. LOSS PER SHARE
Loss per share is calculated based on the weighted average number of shares outstanding during the period. In calculating
diluted loss per share amounts under the treasury stock method, the numerator remains unchanged from the basic loss per
share calculations as the assumed exercise of the Company’s stock options does not result in an adjustment to net loss. The
Company’s stock options were anti-dilutive as the Company reported a loss and, therefore, were not included in the April 3,
2021 and March 28, 2020 diluted loss per share calculations.
The weighted average number of common shares outstanding for fiscal 2021 was 27,664,268 (2020 – 27,515,109).
21. STATEMENTS OF CASH FLOWS
Supplemental cash flow information:
53-week 52-week
period ended period ended
April 3, March 28,
(thousands of Canadian dollars) 2021 2020
Accounts receivable (15,336) 2,903
Inventories 26,698 10,729
Prepaid expenses (6,216) (260)
Income taxes recoverable 138 345
Other assets 200 (1,467)
Accounts payable and accrued liabilities (current and long-term) and other 1 (18,207) (16,126)
Unredeemed gift card liability 6,380 2,944
Provisions (current and long-term) 689 2,398
Deferred revenue 5,804 3,046
Net change in non-cash working capital balances 150 4,512
1 This change has been impacted by the adoption of IFRS 16.
66
Consolidated Financial Statements and Notes
22. CAPITAL MANAGEMENT
The Company’s main objectives when managing capital are:
• Ensuring sufficient liquidity to support financial obligations and to execute operating and strategic objectives;
• Maintaining financial capacity and flexibility through access to capital to support future development of the business; and
• Minimizing the cost of capital while taking into consideration current and future industry, market, and economic
risks and conditions.
There were no changes to these objectives during the year. The primary activities engaged by the Company to generate
attractive returns for shareholders include transforming its digital platforms and driving productivity improvement through
investments in information technology and distribution infrastructure to support the Company’s sales networks. The
Company’s main sources of capital are its current cash position, short-term investments, and cash flows generated from oper-
ations. Cash flow is primarily used to fund working capital needs and capital expenditures. The Company manages its capital
structure in accordance with changes in economic conditions.
23. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
The Company’s activities expose it to a variety of financial risks, including risks related to foreign exchange, interest rate, credit,
and liquidity.
Foreign Exchange Risk
The Company is exposed to foreign exchange risk on foreign currency denominated transactions, monetary assets and liabil-
ities denominated in a foreign currency, and net investments in foreign operations located in the United States. The
Company’s foreign exchange risk is largely limited to currency fluctuations between the Canadian and U.S. dollars. Decreases
in the value of the Canadian dollar relative to the U.S. dollar could negatively impact net earnings since the purchase price
of some of the Company’s products are negotiated with vendors in U.S. dollars, while the retail price to customers is set in
Canadian dollars. The majority of the Company’s foreign currency risk is concentrated in this area, as a significant amount of
the Company’s general merchandise inventory purchases are denominated in U.S. dollars, and the Company had a New York
office and has a New Jersey retail location that incurs U.S. dollar expenses. The Company’s New Jersey retail location gener-
ates sales in U.S. dollars, reducing the Company’s overall net exposure.
The Company uses derivative instruments in the form of forward contracts to manage its exposure to fluctuations in U.S.
dollar exchange rates. As the Company has hedged a significant portion of the cost of its near-term forecasted U.S. dollar pur-
chases, a change in foreign currency rates will not impact that portion of the cost of those purchases.
In fiscal 2021, the effect of foreign currency translation on other comprehensive income (loss) was a loss of $0.1 million
(2020 – gain of $0.4 million), and the effect of foreign currency transactions on net loss was a loss of $1.9 million (2020 –
gain of $0.5 million).
Interest Rate Risk
The Company’s interest income is sensitive to fluctuations in Canadian interest rates, which affect the interest earned on the
Company’s cash, cash equivalents, and short-term investments. The Company has minimal interest rate risk and does not use
any interest rate swaps to manage its risk. The Company does not currently have any debt.
Annual Report 2021 67
Credit Risk
The Company is exposed to credit risk resulting from the possibility that counterparties may default on their financial obli-
gations to the Company. Credit risk primarily arises from accounts receivable, cash and cash equivalents, short-term invest-
ments, and derivative financial instruments. Fair values of financial instruments reflect the credit risk of the Company and
counterparties when appropriate.
Accounts receivable primarily consist of receivables from retail customers who pay by credit card, recoveries of credits
from suppliers for returned or damaged products, and receivables from other companies for sales of products, gift cards, and
other services. Credit card payments have minimal credit risk and the limited number of corporate receivables are closely
monitored. In fiscal 2021, accounts receivable included material balances outstanding from the Government of Canada asso-
ciated with emergency COVID-19 support, which has been assessed to have minimal credit risk.
The Company limits its exposure to counterparty credit risk related to cash and cash equivalents, short-term invest-
ments, and derivative financial instruments by transacting only with highly-rated financial institutions and other counterpar-
ties, and by managing within specific limits for credit exposure and term to maturity. The Company’s maximum credit risk
exposure if all counterparties default concurrently is equivalent to the carrying amounts of accounts receivable, cash and cash
equivalents, short-term investments, and derivative financial instruments.
Liquidity Risk
Liquidity risk is the risk that the Company will be unable to meet its obligations relating to its financial liabilities. The
Company manages liquidity risk by preparing and monitoring cash flow budgets and forecasts to ensure that the Company
has sufficient funds to meet its financial obligations and fund new business opportunities or other unanticipated requirements
as they arise.
Based on the Company’s current business plan, liquidity position, cash flow forecast, and factors known to date, including
the currently known impacts of COVID-19, it is expected that the Company’s current cash position and future cash flows
generated from operations will be sufficient to meet its working capital requirements for fiscal 2022. However, the
Company’s ability to fund future cash requirements will depend on its future operating performance, which could be affected
by risks associated by the COVID-19 pandemic, as discussed. The Company could seek to raise additional funding in the event
it fails to maintain sufficient liquidity, as it currently has no outstanding debt financing, and reduce capital spending if neces-
sary. However, the COVID-19 pandemic creates a number of additional risks such as the negative impact on debt and equity
capital markets, including the ability to access capital at a reasonable cost and the trading price of the Company’s securities,
which could impact future capital raising efforts if required by the Company.
The contractual maturities of the Company’s current and long-term liabilities as at April 3, 2021 are as follows:
Payments
Payments due between Payments
due in the 90 days and due after
(thousands of Canadian dollars) next 90 days less than a year 1 year Total
Accounts payable and accrued liabilities 139,482 5,711 145,193
Provisions 1,856 509 – 2,365
Short-term lease liabilities 17,368 50,235 – 67,603
Long-term accrued liabilities – – 2,090 2,090
Long-term provisions – – 827 827
Long-term lease liabilities – – 482,671 482,671
Total 158,706 56,455 485,588 700,749
68
Consolidated Financial Statements and Notes
24. RELATED PARTY TRANSACTIONS
The Company’s related parties include its key management personnel, shareholders, defined contribution retirement plan,
equity investments in associates, and subsidiaries. Unless otherwise stated, none of the Company’s related party transactions
incorporate special terms and conditions and no guarantees were given or received. Outstanding balances are usually settled
in cash.
Transactions with Key Management Personnel
Key management of the Company includes members of the Board of Directors, as well as members of the Executive
Committee. Key management personnel remuneration includes the following:
53-week 52-week
period ended period ended
April 3, March 28,
(thousands of Canadian dollars) 2021 2020
Wages, salaries, and bonus 5,156 3,612
Short-term benefits expense 151 154
Termination benefits expense 1,437 793
Retirement benefits expense 66 68
Share-based compensation 469 767
Directors’ compensation 294 293
Total remuneration 7,573 5,687
Transactions with Shareholders
During fiscal 2021, the Company purchased goods and services from companies in which Mr. Gerald W. Schwartz, who is
the controlling shareholder of Indigo, holds a controlling or significant interest. In fiscal 2021, the Company paid $0.3 million
for these transactions (2020 – $2.2 million). As at April 3, 2021, Indigo had $0.1 million payable to these companies under
standard payment terms (March 28, 2020 – $0.1 million). In prior periods, an amount of restricted cash had been pledged as
collateral for letter of credit obligations issued to support the Company’s purchases of merchandise from these companies,
however there was no amount pledged as at April 3, 2021 (March 28, 2020 – $1.0 million restricted cash). All transactions
were measured at fair market value and were in the normal course of business, under normal commercial terms, for both
Indigo and the related companies.
During the second quarter of fiscal 2021, the Company entered into a secured revolving credit facility of $25 million with
a company controlled by Mr. Gerald W. Schwartz. The non-interest bearing facility was issued on favourable commercial terms
to Indigo.The purpose of the credit facility was to allow the Company to manage the seasonal nature of cash flows in the most
effective manner. No advances were made on the facility, which matured on February 1, 2021.
Transactions with Defined Contribution Retirement Plan
The Company’s transactions with the defined contribution retirement plan include contributions paid to the retirement plan
as disclosed in note 19 “Supplementary Operating Information”. The Company has not entered into other transactions with
the retirement plan.
Annual Report 2021 69
Transactions with Associates
The Company had immaterial transactions with Unplug during the 53-week period ended April 3, 2021, and the comparable
period in the prior year.
On October 22, 2019, the Company sold its equity investment in Calendar Club and Calendar Club of Canada Ltd. (the
general partner of the partnership) to Paris Southern Lights Inc. (a minority partner in the partnership).
25. SUBSEQUENT EVENTS
On June 1, 2021, a secured revolving credit facility for $25 million was approved by the Company’s Board of Directors from
a company controlled by Mr. Gerald W. Schwartz, who is the controlling shareholder of Indigo. The non-interest bearing
facility will be issued on favourable commercial terms, and will have a maturity date of February 1, 2022. The credit facility
is not convertible, directly or indirectly, into equity or voting securities. The purpose of this credit facility is to allow the
Company to manage its operations in the most effective manner.
70
Consolidated Financial Statements and Notes
Corporate Governance Policies
A presentation of the Company’s corporate governance policies is included in the Management Information Circular, which
is either mailed directly to shareholders or made available through the Notice and Access process. If you would like to receive
a copy of this information, please contact Investor Relations at Indigo.
Annual Report 2021 71
Executive Management and Board of Directors
As at June 1, 2021
EXECUTIVE MANAGEMENT
BOARD OF DIRECTORS
Heather Reisman
Chair and Chief Executive Officer
Peter Ruis
President
Gildave (Gil) Dennis
Chief Operating Officer
Andrea Limbardi
Chief Digital Officer
Craig Loudon
Chief Financial Officer and Executive Vice President,
Supply Chain
Bahman (Bo) Parizadeh
Chief Technology Officer
Nathan Williams
Chief Creative Officer
72
Executive Management and Board of Directors
Frank Clegg
Volunteer Chairman and Chief Executive Officer
C4ST (Canadians for Safe Technology)
Jonathan Deitcher
Investment Advisor
RBC Dominion Securities Inc.
Mitchell Goldhar
Executive Chairman
SmartCentres REIT and
Owner
Penguin Group of Companies
Howard Grosfield
Executive Vice President and General Manager
US Consumer and Global Premium Services
American Express
Robert Haft
Managing Partner
Morgan Noble Healthcare Partners
Andrea Johnson
Chief Executive Officer
Rally Reader, LLC
Anne Marie O’Donovan
President
O’Donovan Advisory Services Ltd.
Chika Stacy Oriuwa
Medical Doctor
Psychiatry Resident, University of Toronto
Heather Reisman
Chair and Chief Executive Officer
Indigo Books & Music Inc.
Gerald Schwartz
Chairman and Chief Executive Officer
Onex Corporation
Five-Year Summary of Financial Information
For the years ended April 3, March 28, March 30, March 31, April 1,
(financial information in millions of Canadian dollars, except per share data) 20211 20201 2019 20182 20172
SELECTED STATEMENT OF EARNINGS
(LOSS) AND COMPREHENSIVE EARNINGS
(LOSS) INFORMATION
Revenue
Superstores 439.8 655.8 711.4 728.6 702.1
Small format stores 72.6 122.1 144.8 143.6 140.7
Online 370.0 162.7 175.9 176.8 148.2
Other 22.3 17.1 14.7 30.6 29.0
Total revenue 904.7 957.7 1,046.8 1,079.6 1,020.0
Adjusted EBITDA3 (28.3) (7.3) (19.1) 55.2 52.4
Earnings (loss) before income taxes (56.9) (100.3) (49.6) 30.7 29.2
Net earnings (loss) (57.9) (185.0) (36.8) 21.9 21.0
Net earnings (loss) per common share $(2.09) $(6.72) $(1.35) $0.82 $0.80
SELECTED CONSOLIDATED BALANCE
SHEET INFORMATION
Working capital 46.1 85.2 164.1 258.8 248.9
Total assets 799.5 883.0 610.5 634.0 609.3
Total liabilities 776.9 799.0 240.3 231.6 236.8
Total equity 22.6 84.0 370.1 402.4 373.3
Weighted average number of
common shares outstanding 27,664,268 27,515,109 27,354,358 26,849,418 26,384,775
Common shares outstanding at end of period 27,273,961 27,273,961 27,136,386 26,800,609 26,351,484
STORE OPERATING STATISTICS
Number of stores at end of period
Superstores 88 88 89 86 89
Small format stores 89 108 115 123 123
Selling square footage at end of period (in thousands)
Superstores 1,941 1,941 1,962 1,887 1,953
Small format stores 231 279 287 308 304
Sales per selling square foot
Superstores 227 338 363 386 360
Small format stores 314 438 504 467 463
1 The Company implemented IFRS 16 Leases in fiscal 2020 using the modified retrospective approach. As a result, the Company’s fiscal 2020 and 2021 results reflect lease
accounting under IFRS 16 Leases, while the prior years have not been restated.
2 The Company implemented IFRS 15 Revenue from Contracts with Customers, in fiscal 2019 using the full retrospective transition method. As a result, certain prior year balances
were restated.
3 In fiscal 2021, an adjustment was made for lease-related expenses in the calculation of Adjusted EBITDA. This represents a change in calculation methodology from the prior
fiscal year. Fiscal 2020 has been consistently stated, while other years, prior to the implementation of IFRS 16 Leases, have not been restated.
In fiscal 2020 and 2021, Adjusted EBITDA is defined as earnings before interest, taxes, depreciation, amortization, impairment, asset disposals, and share of loss from equity
investments, and includes IFRS 16 right-of-use asset depreciation and associated finance charges.
In fiscal 2019 and prior years, Adjusted EBITDA was defined as earnings before interest, taxes, depreciation, amortization, impairment, asset disposals, and share of earnings
(loss) from equity investments.
For further information, see “Non-IFRS Financial Measures” in the Company’s Management Discussion and Analysis section of the Annual Report.
Annual Report 2021 73
Investor Information
AUDITORS
Ernst & Young LLP
EY Tower
100 Adelaide Street West, PO Box 1
Toronto, Ontario
Canada M5H 0B3
ANNUAL MEETING
The 2021 Annual Meeting of Shareholders of Indigo
Books & Music Inc. will be held on July 15, 2021
at 10:00 a.m. via live audio webcast at:
https://web.lumiagm.com/423445804
Shareholders are encouraged to attend and
guests are welcome.
Une traduction française de ce document est
disponible sur demande.
CORPORATE HOME OFFICE
620 King Street West
Suite 400
Toronto, Ontario
Canada M5V 1M6
Telephone (416) 364-4499
Fax (416) 364-0355
INVESTOR CONTACT
InvestorRelations @indigo.ca
www.chapters.indigo.ca/investor-relations/
MEDIA CONTACT
Madeleine Lowenborg-Frick
Director, Corporate Communications
MLowenborgFrick@indigo.ca
Telephone (647) 326-6633
STOCK LISTING
Toronto Stock Exchange
TRADING SYMBOL
IDG
TRANSFER AGENT AND REGISTRAR
AST Trust Company (Canada)
P.O. Box 700, Station B
Montreal, Quebec
Canada H3B 3K3
Telephone (Toll Free) 1-800-387-0825
(Toronto) (416) 682-3860
Fax: 1-888-249-6189
Email: inquiries@astfinancial.com
Website: www.astfinancial.com/ca-en
74
Investor Information
Indigo’s Commitment to Communities
Across Canada
The Company supports a separate registered charity, called the Indigo Love of Reading Foundation (the “Foundation”), which
is committed to addressing the underfunding of Canadian elementary school libraries and the resulting literacy challenges
children face in such schools. The Foundation’s goal is to raise awareness of the lack of funding in Canadian schools and close
the budget gap by providing new books and educational resources to high-needs children across Canada. The Foundation
accomplishes this goal through its $1.5 million annual Literacy Fund grants and its grassroots Indigo Adopt a School program
that unites Indigo staff, local schools, and their communities to raise money for new and engaging books for elementary
school libraries. Most recently, in the wake of the COVID-19 pandemic and the unprecedented nation-wide school closures,
the Foundation committed $1.0 million to provide books to families in need. With the support of the Company, its cus tomers,
employees, and suppliers, the Foundation has committed over $33 million to more than 3,000 high-needs elementary
schools across Canada since 2004. The Foundation is dedicated to putting books in the hands of children to support a lifelong
love of reading.
Annual Report 2021 75
Our Beliefs
• We exist to add joy to customers’ lives – when
they interact with us and, when they interact with
our products.
• Each and every person in the company should
understand how his or her work contributes to the
creation of joyful customer moments.
• We owe to each other, irrespective of role or position,
the same level of respect and caring as we would show
to a valued friend.
• We have a responsibility to create an environment
where each individual is inspired to perform to the
best of his or her ability.
• Passion, creativity and innovation are the keys to
sustainable growth and profitability. Each individual
working at Indigo should reflect this in his or her work.
Our role, as a company, is to encourage and reward the
demonstration of these attributes.
• We have a responsibility to give back to the communities
in which we operate.
“ When you get right down
to it, intentional living is
about living your best story.”
—John C. Maxwell
F P O
Printe d in Canada
Printed in Canada