Indigo president resigns as profits fall in third quarter

After less than a year in the role, Tedford G. Marlow has resigned as president of Indigo Books & Music and resumed a senior position with U.S.-based retailer Urban Outfitters, where he has been named CEO.

The move, reported by U.S. business media last week, was confirmed by Indigo in its third-quarter results, which saw revenues increase slightly for the period ending Dec. 31 (to $353 million) and profits decline (to $24 million, down from $27 million for the same period in 2010). Marlow assumed the role of Indigo president in April, replacing Joel Silver, who now leads Trilogy Growth, an investment firm affiliated with Indigo’s majority shareholder, Trilogy Retail Enterprises.

Marlow’s tenure at Indigo was brief but controversial, at least among members of the book trade. Under his stewardship the retailer introduced a new line of lifestyle products that competed with books for floor space. Behind the scenes, Indigo imposed new terms that many publishers have struggled with, including a 4 per cent co-op surcharge on all books sold through the chain and a shorter turnaround time for returns.

Marlow also oversaw the sale of Indigo’s ebook division, Kobo, to Japanese software firm Rakuten, a deal that netted Indigo $146 million (U.S.) when it closed last month.

In its Q3 report, Indigo reported double digit increases in its gift, lifestyle, and toy lines, as well as marginal revenue increases at its Chapters and Indigo superstores (up 1.8 per cent) and its small-format IndigoSpirit and Coles locations (2.5 per cent). Online sales increased by 9.3 per cent compared to last year.

Indigo CEO Heather Reisman attributed reduced profits to “lower gross margins as a result of increased promotional discounts to drive print sales and increased sales of low margin e-readers.”

She added in a press release: “This margin impact has not yet been offset by expected growth in the gift, lifestyle, and toy businesses. The Company also recorded a $4.0 million non-cash asset impairment charge during the quarter. Excluding this charge, net profit increased $0.7 million.”

Canadian literary event round-up: Dec. 9-15

Even the cold can’t stop the literary scene, with events in full swing across the country next week. Here’s a sample of what’s coming up:

• Derek Beaulieu, Kevin McPherson Eckhoff, and Jake Kennedy read from their new poetry collections, Pages on Kensington, Calgary (Dec. 9, 7:30 p.m., free)
• Small Press of Toronto winter book fair, Hart House (Dec. 10, 11 a.m. to 5 p.m., free)
• Michael Smith signs Chef Michael Smith’s Kitchen, Bookmark, Charlottetown (Dec. 10, 2 p.m., free)
• Douglas Gibson discusses Stories About Storytellers, Burlington Performing Arts Centre, Burlington, Ontario (Dec. 10, 7 p.m., $10)
• National Ballet of Canada dancer Sonia Rodriguez signs T is for Tutu: A Ballet Alphabet, Indigo Manulife Centre, Toronto (Dec. 11, 10:30 a.m., free)
• The Field Stone Poets read from Whistle for Jellyfish and David Groulx launches Rising with a Distant Dawn, Collected Works, Ottawa (Dec. 11, 2 p.m. to 5 p.m., free)
• Actor and musician Jody Richardson performs dramatic reading of Bella’s Tree, a picture book by Janet Russell, The Rooms, St. John’s (Dec. 11, 2:30 p.m., $5)
• Michael Morpurgo reads from War Horse with music by John Tams, Panasonic Theatre, Toronto (Dec. 12, 7 p.m., $15)
• Esi Edugyan and Jen Sookfong Lee read from Half-Blood Blues and The Better Mother, respectively, UBC Bookstore at Robson Square, Vancouver (Dec. 15, 7 p.m., free)

Canadian literary event round-up: Nov. 11-17

Here are just a few of the literary events happening across the country in the next week:

• Maria Meindl reads from Outside the Box, Type Books, Toronto (Nov. 12, 5 p.m., free)
• Hal-Con sci-fi, fantasy, and comic convention, World Trade & Convention Centre, Halifax (Nov. 12–13, tickets at hal-con.com)
• CBC’s Carol Off interviews Jeffrey Sachs, author of The Price of Civilization: Economics and Ethics After the Fall, Toronto Reference Library (Nov. 14, 7 p.m., free)
• Neil Pasricha signs The Book of (Holiday) Awesome, Indigo Manulife Centre, Toronto (Nov. 14, 7 p.m., free)
• Readings from Somebody’s Child: Stories About Adoption by contributors J. Jill Robinson, Bonnie Evans, Dale Lee Kwong, Raquel Schneidmiller, Elaine Hayes, and Judith Hope, Memorial Park Library, Calgary (Nov. 15, 7 p.m., free)
• Helen Humphreys presents at Heart of Niagara Fall Reading Series, Pelham Public Library, Fonthill, Ontario (Nov. 16, 7:30 p.m., $8)
• Tightrope Books launches How to Get a Girl Pregnant, a memoir by Karleen Pendleton Jiménez; Onion Man, a poetry collection from Kathryn Mockler; and Prick, a novel by Ashley Little, Slack’s Restaurant, Toronto (Nov. 17, 6 p.m., free)
• Local authors K.L. Denman, Christy Goerzen, Cristy Watson, and Nikki Tate launch new YA titles, Kidsbooks, Surrey, B.C. (Nov. 17, 7 p.m., free)
• Beverley Brenna launches Falling for Henry, McNally Robinson, Saskatoon (Nov. 17, 7:30 p.m., free)
• Kathleen Winter reads from Annabel, Killam Library, Halifax (Nov. 17, 7:30 p.m., free)

Indigo to focus on new product design with Kobo cash influx

A story in today’s Globe and Mail looks at what the Kobo sale means for its majority owner, Indigo Books & Music, which is likely to find itself flush with cash as a result of the deal. The sale, which could net Indigo up to $150 million, frees up the retail chain to invest in new products and “expand non-book ventures,” the Globe reports.

Indigo president and CEO Heather Reisman is quoted in the story:

“We have to grow very considerably to balance off what we lose in our book business,” said Ms. Reisman, who, with her husband, financier Gerald Schwartz, owns more than half of Indigo. “But I have every expectation that within 18 months, we will fully make that transformation … I would rather, for shareholders, to employ the funds and deliver to them a great result.”

The Globe goes on to report that Indigo expects book sales to fall to 50 per cent of overall sales in coming years, down from the current level of 75 per cent. Reporter Marina Strauss points to the 2013 Canadian expansion of Target as a major competitor in the toy, home decor, and giftware market.

For anyone who has visited one of Indigo’s new format stores, in which books vie for floor space with an array of household products, Indigo’s survival strategy will not come as a surprise. However, with its significant investment in Kobo, Indigo had seemed to be in an enviable position in the burgeoning e-book market. In an interview yesterday with Canadian Business, Reisman said the capital requirements of remaining competitive in that market were too much.

Still, e-books will remain part of Indigo’s future. According to the Globe, “[A] 10-year pact with Kobo ensures Indigo a ‘meaningful’ share of Kobo’s profits on electronic-book sales in Canada.”

Kobo to be acquired by Japanese e-commerce company Rakuten

Kobo announced Tuesday it has entered into a definite agreement under which it will be acquired by the Japanese e-commerce company Rakuten. The deal is expected to close in early 2012.

According to a press release, Rakuten intends to “acquire 100 per cent of total issued and outstanding shares of Kobo for US$315 million in cash.” As part of the agreement, the e-reading platform will continue as a stand-alone operation, maintaining its Toronto headquarters and employees under the leadership of Kobo CEO Michael Serbinis.

In the press release, Serbinis said:

“From a business and cultural perspective this is a perfect match….We share a common vision of creating a content experience that is both global and social. Rakuten is already one of the world’s largest e-commerce platforms, while Kobo is the most social e-book service on the market and one of the world’s largest e-book stores with over 2.5 million titles. This transaction will greatly strengthen our position in our current markets and allow us to diversify quickly into other countries and e-commerce categories.”

Kobo was founded in 2009 by Indigo Books & Music before it was spun off into a separate company 10 months later, with Indigo remaining as the majority shareholder. Indigo will receive approximately $140 million to $150 million in the Rakuten deal. In a separate press release, Indigo CEO and chair of Kobo Heather Reisman said:

“Notwithstanding the sale, Indigo will maintain a very strong relationship with Kobo, supporting the products and the services both in-store and online…. The success of Kobo confirms that Indigo is a great brand and a strong platform on which we can continue to innovate and grow.”

In October, Kobo announced it would be offering self-publishing services and launched the Kobo Vox, a tablet to compete against the Kindle Fire and iPad.

Indigo becoming a model for bookstores as lifestyle emporia?

Publishers and other industry stakeholders reacted with predictable dismay when Indigo Books & Music announced changes to its product mix earlier this year, decreasing floorspace for books in favour of lifestyle products and giftware. However, an article in the Sydney Morning Herald indicates that Indigo’s new business model may be a trailblazer as bookstore chains react to tectonic shifts in the market caused by e-books.

The SMH article refers to a study commissioned by the Australian government’s Book Industry Study Group, which suggests that while print and e-books might co-exist in the short term, the long-term “cannibalisation” of print will require bookstores to rethink the way they do business if they wish to remain profitable. The report, by PricewaterhouseCoopers, points to Indigo as a possible model to follow. From the SMH:

While there was no ”silver bullet” for booksellers, the report singles out Indigo, Canada’s largest bookseller, which promotes books as a ”lifestyle,” not a product. It sells giftware, children’s toys, video games, music, gourmet food and even flowers and is an example of an independent bookseller leveraging people’s affection for books.

Jane Turner, owner of Bondi’s Gertrude & Alice Cafe Bookstore, said it had featured a cafe since it opened 11 years ago.

”We just put in a little wine licence about six months ago, because you’re constantly trying to do things to look after the customers that you have,” she said.

The report is not likely to boost the spirits of booksellers who continue to see their bottom lines eroded by the twin forces of big-box chain stores and the shift to digital bookselling. Just today, Q&Q reported on the incipient demise of the Bookery, Newfoundland’s remaining independent bookstore, which its owner blamed on a combination of big-box stores and people “coming in with their iPhones, taking a picture of a book, and ordering it online.”

Book links round-up: Mistry wins Neustadt Prize, a wordless book, and more

• Rohinton Mistry wins the University of Oklahoma’s $50,000 Neustadt International Prize for Literature
• Ontario author Mark Zelinski publishes an untitled, wordless photography book to distribute to children’s charities
• Australian industry analysis singles out Indigo for successfully promoting books as a “lifestyle”
• Lack of access to video streaming and cloud storage make Amazon’s Kindle Fire unlikely to take off in Canada

Kobo sues Borders, strikes European deal

It’s been a busy week for Canadian e-reading company Kobo. On Tuesday, representatives for Kobo filed documents at a bankruptcy court in New York to ensure that Kobo licenses held by Borders are not put up for sale when the failed U.S. bookstore chain starts liquidating its intellectual property assets. PaidContent.org reports:

Kobo … wants to prevent whoever wins the auction from obtaining the customer data. The company may also be worried because the licenses are likely to contain an exclusivity clause that prevents Kobo from partnering with another seller. … In its filing, Kobo says the licenses are invalid because Borders did not hold up its end of the bargain. The Toronto-based company also says it is illegal under Canadian privacy law to transfer customer data.

Borders was an early partner with Kobo, at one time owning an 11 per cent stake in the e-reading company, which is backed by Indigo Books & Music and the beleaguered REDgroup Retail, among others.

Then, on Wednesday, Kobo announced a new deal with the German store of online retailer Redcoon that will finally introduce the company’s Kobo eReader Touch Edition to the European market (it was originally set to release in Germany in August). The Kobo Touch will be available in October at a price of €149.

According to a press release from Kobo:

Redcoon is one of the largest online retailers for consumer electronics in Europe, serving consumers in Germany as well Austria, Spain, Portugal, Netherlands, Belgium, Poland, Italy, Denmark and France – in this market segment, the online retailer is seen as a major competitor to Amazon.com in Europe.

…

“The retail partnership with Redcoon starts in Germany, but is going beyond this market,” [explains Kobo EU director of sales Thorsten Schröer]. “As Kobo expands to additional European countries later this year, Redcoon will offer our products there as well.” Additional leading retail partners will be announced shortly.

Publishers to ship directly to Indigo stores this fall

Indigo Books & Music is asking publishers to send books directly to individual store locations for 10 weeks this fall while the company updates its distribution centre.

Publishers Weekly reports:

Indigo wrote to its vendors to explain that it is asking for the temporary measure in order to ensure a good supply of books in stores for the holiday season while it changes and updates its distribution centre. Indigo opened an online facility last year, has invested in the physical infrastructure, and it is adding a new software system, which will begin to be used in 2012. During this time, it expects that 85 per cent of its stock will be received directly from sources.

“We will reduce or even remove the store-specific minimum order thresholds to ensure that we are outputting orders on a timely basis,” the letter promised, “and hope that you will not consolidate orders for more than one week to avoid stocking out at the store level.”

Canadian literary event round-up: July 22-28

Here are just a few of the literary events happening across the country in the next week:

• Melancthon (7 Directions & the African Reparations Fund) poetry reading with NourbeSe Philip, Jumari Giles, Truth Is, Zainab Amadahy, Sonny Be, and Sedina Fiati, Blue Moon, Toronto (July 22, 9 p.m., $10 or pwyc)
• Don Banting signs Two Shadows Have I, Indigo South Edmonton Common (July 23, 1 p.m., free)
• Dorothy Ellen Palmer, author of When Fenelon Falls, reads with Chad Pelley, The Ship, St. John’s (July 24, 7:30 p.m., free)
• Alison Uitti reads from First Days Night Movies, McNally Robinson, Saskatoon (July 25, 7:30 p.m., free)
• Chevy Stevens signs Never Knowing, Chapters Granville, Vancouver (July 25, 7 p.m., free)
• Farzana Doctor reads from Six Metres of Pavement, Little Sister’s Book & Art Emporium, Vancouver (July 26, 7 p.m., free)
• Misha Glouberman and Sheila Heti launch The Chairs Are Where the People Go, The Garrison, Toronto (July 27, 7 p.m., free)