Second Cup (TSX:SCU) brought in a little more money compared to the same time last year, but overall profits are still down.

The coffee chain brought in revenue of almost $6.7 million, a 6.8% increase from the third quarter of last year, when the figure was $6.2 million. Gross profits, however, dropped by just over seven per cent compared to the same period in 2013.

Management Discussion and Analysis on DocumentCloud

But that could be expected for a company that is only starting to turn around its performance after a few years of disappointments. Second Cup has recently brought in a new CEO, Alix Box, from Starbucks Canada, and has made several moves to make the company more attractive to investors.

More worrying is the drop in same-store sales for the year. In the first three quarters of 2014, the chain dropped sales in the same individual stores by just over five per cent.

“A same-store sales drop is bad news,” says Ian Lee, a business professor who teaches corporate strategy at Carleton University.

Professor Ian Lee. Source: Carleton University

Essentially, Lee says, Second Cup is being “squeezed” by its two main competitors in the market, Tim Hortons and Starbucks.

“Tim Hortons is competing on price, but Starbucks is trying to compete on differentiation,” says Lee. Differentiation means the experience of buying a coffee in one of their stores. Between those two, they seem to have a lot of the coffee market in Canada covered—those who want a cheap coffee will go to Tim Hortons and those willing to splurge a little on a five-dollar latte will go to Starbucks.

“The question for Second Cup is, is there a third space they can occupy? And so far it’s not clear there is,” says Lee.

Second Cup, though, seem to think there is reason for optimism. Although the company did not respond to requests for comment by deadline, in a presentation given to investors last November, they tried to make the case that now is a great time to invest in their company.

They appear to be betting that they can expand more in the higher end of the market, planning to renovate many stores so that they have a more welcoming look and feel and planning the launch of a more upscale ‘café of the future’ in downtown Toronto.

The company is also trying to attract more franchise partners. As part of its strategy to get back on track, it reduced the royalty rates franchisees must pay. The royalty rates are the money that a franchisee, who owns their own business, must pay to the parent company for the use of their brand. Some of the drop in profits shown this quarter came about as a result of decreased royalty rates.

Like many food service companies in Canada, Second Cup operates as a mixture of franchises, which are owned by independent partners, and corporate-owned stores. Second Cup shut down two of its corporate stores in the third quarter, and according to its management discussion and analysis (embedded below) was planning to close six more in the last quarter of 2014.

Lee is skeptical that trying to concentrate more on the higher-end market will do Second Cup much good.

“I think it will do well in places like Toronto, which has a lot of affluent people and a dense population” says Lee of the ‘café of the future’ concept. “Not sure about the rest of Canada. It doesn’t seem like it’s scalable at all.”

“Me-too strategies don’t work,” says Lee. “What they have to do is figure out what part of the market is not being served and go for that.”

Second Cup Stock Prices by sarahtrick on TradingView.com

Tesla has been losing money for six years, but the company is asking its investors to be patient.

The electric car company has enjoyed rapid growth, selling luxury vehicles that compete with BMWs and Mercedes sedans in 35 countries. Their vehicles are both fuel efficient and environmentally friendly.

“It is a premium vehicle, but it’s cheaper to operate than petrol powered cars,” said Martin Paquet, Tesla’s manager of Tesla sales for eastern Canada

“People buy our cars because we sell a product that’s way ahead of the industry.”

While the cars they build are technologically advanced, Tesla’s most recent financial statements suggest that their business model is inefficient.

The company lost $186 million dollars through the first three quarters of 2014. This was not an isolated trend. Tesla has consistently operated at a loss through that same nine-month time period in each of the six years it has been publicly traded.

A look at their yearly figures shows similar results. In 2011, the company reported net losses of $254 million dollars. In 2012, the losses grew to $396 million. In 2013, this number reduced significantly to $74 million..

Tesla has limited their losses recently because they sold more cars in foreign markets. They have also been making it easier to own their vehicles. Networks of superchargers capable of one hour charges have been installed strategically in the countries where Tesla’s are sold.

“We’re investing in our networks,” said Paquet, “The electrical infrastructure is everywhere.”

Investing money to make money is normal business. However, Tesla has to lose money to even sell its cars, and its losses are increasing again

Through three quarters in 2014, Tesla spent 72 per cent of its total income getting its vehicles to the show room.

The rest of its revenue was spent on research and development, leaving nothing for profit.

This has been the case from the time Tesla began its operations.

Following this pattern, Tesla will continue to lose money even as it expands globally and sells more cars.

This is causing concern amongst Tesla shareholders who may not be comfortable making such a long term commitment to a company that is yet to make any money. After peaking at $291 per share in 2014 the price of Tesla stock has decreased steadily over the past 4 months. It currently sits at $203/share.

This trend does not surprise Ian Lee, a business professor and financial strategist at Carleton University.

“The car industry is capital intensive.” he said, “It takes a lot of money to produce a car from start to finish, and Tesla is losing money hand over fist”

Executives at Tesla recognize that in order for it to become profitable, it will have to lower how much it costs to produce the cars it sells.

In 2014, the company broke ground on the Tesla Gigafactory. The facility will allow Tesla to develop and produce the batteries that will power its vehicle at a significantly reduced cost. This will allow the company to make cheaper vehicles.

Crucially, it will allow the company to mass produce their vehicles, and sell them to average people.

Currently, Tesla vehicles range from $82,000 – $140,000 in price. This makes it a very exclusive vehicle.

“It’s currently a niche product,” said Lee, “It allows people who have enough money who want to make a statement to make one. Tesla has only been able to crack the elite market”

Tesla founder Elon Musk is confident that the Gigafactory will make his vehicles affordable and his company profitable. In addition to building the factory, Tesla is designing the model 3, which they hope will retail for $35,000.

The factory won’t be completed until 2020, however, and without it, Tesla will continue to lose money.

But Musk is confident in the company’s future. He needs his investors to wait for the future to arrive.

Canada’s largest retail landlord RioCan is likely to be affected by Target’s departure as the company generates 2.5 per cent of RioCan’s total annualized rental revenue.

The financial information of the 3^rd Quarter of 2014 shows a slight increase in earnings before interest, tax, depreciation and amortization, which indicate that RioCan may have hard time tackling the blow Target’s withdrawal may cause.

According to the report, net earnings attributable to the investors is $162 million, which is $33 million more than the amount posted for the same period last year.

Deen Taposh, an investment analyst at Lamarnic & J Ltd. said, “RioCan reports another stable year. The increase in the company’s enterprise value in 2014 shows Riocan, as a company has experienced an increase in its value or takeover price but that’s not substantial.”

According to the financial report, in 2014, RioCan has experienced a modest increase in its asset and a decrease in its debt too.

When asked how Target’s withdrawal will affect RioCan, Taposh said, “They will be affected for sure as Target constitutes a good share of RioCan’s revenue but it depends a lot on how the management deals with the crisis.”

“When you see a company’s debt coverage ratio is higher than 1, you know it can sustain damages as it illustrates that the company is generating enough income to pay its debt obligations. Then again RioCan is not able to carry the burden for long period of time,” Taposh added.

According to RioCan’s 2014 Q3 financial records, the company’s debt service coverage ratio is 2.89. Last year it was 2.10.

Minneapolis-based clothing and housewares retailer Target announced on Jan. 15 that they are going to withdraw themselves from the Canadian market.

According to a RioCan statement issued the same day, RioCan has 26 locations leased by Target. In the statement Edward Sonshine, Chief Executive Officer of RioCan said, ” While significant, Target currently represents less than two percent of RioCan’s annual rental revenue, thus reinforcing the strength of the Trust’s tenant diversification within the portfolio.”

“Our locations are in strong retail nodes, and while this process will unfold over time, we expect that the interruption to revenue will be minimal, if at all. Ultimately, this could prove to be an opportunity for RioCan,” Sonshine said.

RioCan, however, has been struggling to regain its committed occupancy rate in Canadian portfolio. Now the rate is 97 per cent while in the fourth quarter of 2012 it was 97.2 per cent.

The committed occupancy rate of the Canadian portfolio

over the most recent eight quarters:

Source: RioCan Real Estate Investment Trust 3^rd Quarter Report 2014

The company’s committed occupancy rate in the US market is in a standstill as well.

RioCan owns and operates Canada’s largest portfolio of shopping malls, with ownership interests in a portfolio of 340 retail properties in Canada and US combined, containing approximately 80 million square feet as at Sep. 30, 2014.

Known for their figure-hugging yoga pants and colourful workout tops, athletic and leisure wear giant Lululemon Athletica is selling more products than last year – but it comes at a higher cost.

The Vancouver-based retailer spent $33 million more this quarter doing business. The company’s cost of goods sold was $208 million compared to $175 million spent the previous year.

The cost of goods sold refers to the total cost for Lululemon to manufacture their gear and get it into their stores. For a retail company, this includes the cost of fabric, factory workers’ salaries and freight transportation, among other things.

The company’s quarterly report states that a “natural growth in labour hours” increased their costs by $10.9 million.

Lululemon opened 42 new stores over the year. This meant having to hire more workers in their oversea factories to keep up with the demand for their products.

However, there were few references in the quarterly report to what factors affected their costs of goods sold. In fact, it is hardly mentioned.

In an email reply from Lululemon Athletica, guest educator Kevin O’Grady explained that while the cost of product materials didn’t change, other expenses did. He said, “2014 saw an increase in various factors related to Selling, General and Administrative Expenses. Increases in these costs do have an impact on the cost of goods sold since many of these costs are part of that calculation.”

Lululemon senior management also addressed the third quarter results during a teleconference with a group of Lululemon analysts on Dec. 11, 2014. Once again, no explicit reference to the increase in costs was made during the meeting.

However, John Currie, former chief financial officer, said that 2014 was “a year of investment and shoring up supply chain.” These investments increased the cost of production and are expected to continue in 2015.

Sheldon Weatherstone, a financial accounting professor at the Telfer School of Management, said that Lululemon’s cost of goods sold is rising at a faster rate than their revenue.

“Their sales increased by 10 per cent, but their cost of goods sold increased by nearly 19 per cent. So despite the fact that they managed to generate more revenue and more sales selling more products, their cost to sell those products outpaced their growth by almost nine percent.”

He said another increase in cost of goods sold could mean trouble for the company.

Lululemons’s gross profit margin has already dipped from 53.9 per cent down to 50.3 per cent. Weatherstone said if Lululemon can’t keep their costs under control, their profit will continue to slide

“It doesn’t take much to impact a public company,” he said. “Even though three or four per cent may not seem like a big deal, when you look at it in dollar terms it can be pretty significant.”

Lululemon’s share price has also taken a small hit in 2014. Their earnings per share in one year have gone down from $0.46 to $0.42.

Weatherstone said shareholders aren’t going to be very happy if Lululemon can’t manage their costs in the next year.

“If their profit margin continues to drop, their share price is going to diminish and their popularity as an investment to shareholders is going to decrease,” he said. “As a shareholder, you don’t want to see your investment erode.”

In 2015, Lululemon could face another increase in their costs due to the fluctuating price of the raw materials used to manufacture their gear.

Canada’s second-largest airline may have taken a $45.5 million hit on the sale of 10 planes last year, but they stand to gain in the long run—and so do their customers.

WestJet Airlines sold 10 Boeing 737-700s to Southwest Airlines last year, as part of a routine upgrade to WestJet’s fleet. The deal resulted in a non-cash loss, meaning there are no direct implications for WestJet’s cash flow.

But it does mean they lost money.

The loss came from a difference in exchange rate from the time the planes were purchased over a decade ago. Aircraft are dealt in American funds, and the Canadian dollar was much stronger when WestJet sold the planes than it was when they first purchased them.

Despite the loss, WestJet says there’s value to the upgrade for both the company and their customers.

“We saw an opportunity to replace 10 old 737-700s with 10 new 737-800s,” said Robert Palmer, manager of WestJet’s public relations. “Fleet optimization will result in lower costs because the fleet is, overall, younger and more fuel-efficient.”

For WestJet customers, that means cheaper flights.

The new Boeing planes in WestJet’s fleet have more seats, and can operate at less cost with higher fuel efficiency and lower maintenance costs.

According to one of WestJet’s financial analysts, David Tyerman, the fleet optimization is part of a larger trend.

“In the industry you’re seeing more upgauging,” said Tyerman.

“Upgauging” is the practice of replacing smaller planes in a fleet with larger, more economic and efficient aircraft.

“A side benefit of all this is bigger airplanes have a lower seat cost,” said Tyerman. “The reason for that is they seat an extra 20 people roughly, but they don’t use a lot more fuel or other costs to fly those extra people.”

Tyerman said the $45.5 million hit is just a drop in the bucket for WestJet.

“Relative to the magnitude of the company, it’s not that large,” said Tyerman.

But it does hold implications for WestJet’s financial long game. The company is in a race with their biggest competitor, Air Canada, to expand in response to consumer demand. Both airlines have been adding seats and routes, in addition to upgauging.

“They’re trying to match their capacity and size of airplane better with the demand,” said Tyerman.

This month WestJet announced the addition of nine new routes and more flights on 15 existing routes.

“WestJet Encore is now serving Canadians coast to coast,” the company announced in a press release.

The addition of flights mostly impacted Atlantic Canada, and business routes including flights in and out of Calgary.

Both WestJet and Air Canada expanded their capacity in 2014 at a rate much greater than the growth in the economy. Both airlines project similar growth in 2015.

“How can you possibly add that many seats when the economy’s not growing that fast?” asked Tyerman.

“Those two airlines in particular picked up enough demand to be able to fill their aircraft and make more money,” said Tyerman. “Their strategies worked.”

The question is whether the same strategy will work for WestJet in 2015.

“It’s a risk for sure,” said Tyerman. “They just got a big windfall that might help them fill the airplanes, with the crash in oil prices.”

The plummeting price of oil means jet fuel will be cheaper. So while WestJet continues to upgauge, they’ll also enjoy lower fuel costs.

“Ticket prices will come down also, over time,” said Tyerman. “Which is great news for consumers.”

It’s only the first year after Loblaw Companies Limited and Shoppers Drug Mart’s business marriage.

But for some employees, the honeymoon phase is illusive.

A year after acquiring Shoppers Drug Mart, Loblaw is reporting $44 million in savings as a positive effect of the merger.

But, it cost them $46 million to fire employees and cut departments.

Two things typically happen when companies merge– they save more money together and they also cut employees, according to Carleton professor Qui Chen.

That’s exactly what happened after Loblaw Co. bought Shoppers Drug Mart last year, according to the most recent Loblaw financial statement.

Except it cost Loblaw more to fire its employees than the amount it saved from its merge with Shoppers Drug Mart.

Two scenarios can ensue during this honeymoon phase, said Chen.

First, there is an increase in savings if the company can negotiate better deals for purchasing goods.

Savings can also increase because of layoffs and the cutting of overlapping departments. This is manifested in the layoffs of corporate employees in the Tim Hortons and Burger King merger.

Second, there are internal struggles after a merge that decreases the company’s overall efficiency.

“When I say lots of internal battles, it’s because people are not happy,” said Chen.

Unhappy people means less efficient people. Less efficiency means a lavish price-tag for the company.

“You can see a lot of waste because of this internal battle sometimes,” said Chen.

Loblaw’s saving of $44 million is explicable by case number one.

“Big companies have negotiation power,” said Chen. “Big companies get bigger discounts.”

On the other hand, the $46 million cost to fire employees makes scenario two also a possibility.

Prior to the merger, Loblaw reported that it cost $35 million to cut employees in 2013.

This compares to this year’s $46 million in just nine months into their 2014 fiscal year.

This year, the cuts were mainly corporate and store sales employees, as well as executives at certain departments, according to the financial statement. Departments like advertising, marketing and transportation are likely to suffer.

This spike in layoff costs is normal after a merger, said Chen. 

The increased savings are normal too. “Employees are gone, which means cost saved because we don’t need to pay salaries and we don’t need to run all the departments,” she said.

The marriage of two companies doesn’t look so promising for some employees. Though, for customers, this could be good news.

“For the whole company, I would say it’s more efficient,” said Chen. “That’s good for customers because we get a lower cost of everything.”

Loblaw set a $100 million merger savings goal for the 2014 year.

The goal of $100 million is a reasonable one, according to Chen.

At nine months, Loblaw is still less than halfway there. The financial statement, however, reports that they are “on track” to achieve this goal.

“They say ‘on track’, but that does not necessarily mean it’s really on track,” said Chen.

In an email correspondence, Loblaw Vice President of Communications Kevin Groh said, “We are pleased with our progress to date and remain entirely confident in our ability to meet our [….] goals.”

These savings goals may be met, but at the expense of Loblaw employees.

Comparison of GoPro and Apple stocks over the past month. by jwints on TradingView.com

Action camera company GoPro is going to have to “innovate like hell” if it wants to survive a potential marketing war with one of the largest companies in the world.

The company’s stock price took a major hit, dropping 12 per cent two weeks ago when news broke that Apple Inc. had filed patents for wearable, remote-controlled cameras similar to the ubiquitous sports action cams that GoPro is known for.

“Because it’s a small company that’s living on its innovation, GoPro’s got to try and innovate like hell or else it just dies,” said business analyst and Carleton University professor David Cray.

It might be doing just that. Last week GoPro announced that it is partnering with the NHL to provide the players’ point of view in real time on the ice. That constitutes a major breakthrough for the company’s technology, which so far hasn’t included live high definition video streaming.

Cray says the NHL partnership announcement was likely timed to reassure GoPro investors that the company still has lots of fight left in it.

“They’re probably also doing something else,” Cray said. “GoPro might be saying ‘Look, we’re still out ahead in this race so if you want to buy us it’s going to cost you a lot of money’”.

“That happens a lot, especially with technology companies. At first it’s sort of ‘Hey, we’re the rebels, we’re going up against Google and Microsoft and whatever,’ but then somebody comes along with a fistful of money and the implicit threat that if you don’t sell us your technology we’re going to hammer you,” he said.

Neither GoPro nor Apple returned requests for comment. Both companies have remained tight-lipped about the potential camera showdown.

The battle for action cam supremacy looks to be a David-and-Goliath dual. Apple is 241 times bigger than GoPro, pulling in $18 billion in profit last quarter alone compared to GoPro’s $14 million.

But when it comes to research and development, GoPro out-spends Apple five-to-one as a percentage of each company’s profits.

Right now, GoPro controls almost the entire action-camera market, in part through aggressive marketing strategies. It’s cameras have put viewers in the cockpit of fighter planes, provided a literal eagle’s eye view of base-jumpers and documented the world’s highest-ever skydive by Felix Baumgartner in 2012.

The patents Apple filed make specific mention of GoPro cameras, prompting speculation that the company isn’t just entering the wearable-camera market; it intends to take direct aim at GoPro much like it did when it took over the smartphone market from Blackberry with the first iPhone 2007.

If GoPro is going to avoid a similar fate, it needs to keep setting the action-camera agenda, Cray said. And that means not only keeping up on the R&D front, but also the marketing side of things.

With that in mind, a look at GoPro’s latest quarterly results should reassure investors, Cray said.

Last quarter, the company plowed 89 per cent of its profits back into operating costs, which have almost doubled since last year. That might seem worrying, but the it’s because the company is taking on a lot of new staff, something Cray said is a sign GoPro intends to step up the fight.

Since first going public in June, the company’s stock price has doubled, and aside from the hiccup over the Apple announcement, it has continued its upward trend.

But if it comes down to a battle for the action camera market, Cray said GoPro’s chances of holding off the Apple juggernaut are slim at best, no matter how innovative it is.

Canadian mining giant Kinross Gold made an 85 per cent loss at its Ghanaian Chirano mines  in the first quarter of 2014 compared to the same period last year.

This huge dip in loss comes despite the company’s ability to reduce cost of production by 20 per cent. The company attributes the huge loss of profit to the reduction in global price of the precious metal.

In a statement after releasing 2014 first quarter results, CEO of the company Paul Rollinson said “While lower gold prices affected earnings, Kinross is making steady progress to reduce costs.”

Rollinson also touted the company’s ability to reduce production costs of gold at the mines. Despite reducing costs, Kinross also produced 12 per cent more gold in the first quarter of 2014 than 2013. “Capital expenditures for the quarter were approximately half of what they were a year ago, while our all-in sustaining cost continued to decline” he said. Rollinson added “in addition, we’ve been able to reduce production cost of sales on a per ounce basis by 16% at Chirano.” The company’s first quarter financial statement it made made $3.10 million in 2014 compared to $24 million. Analysts say this is a true reflection of how companies are feeling the pinch of the price fall. Frank Ametefe, an analyst and a lecturer at University of Ghana’s Business School said Chirano is not the only mine that is affected. He said as a result of the falling prices of gold on the world market, companies are cutting costs as much as possible. “From the results posted, you can see the company is trying very hard to reduce costs just to make up for some of the losses,” he said. The report saw Kinross’ other mines in Russia, U.S.A, Chile, Brazil and Mauritania reduce production costs. As a result, the company which is listed on the Toronto stock Exchange and the New York Stock Exchange has not declared any dividend since March 2013.

Ametefe fears the reduction in cost production might result in the company laying off workers. “Already we have seen Newmont Ghana and Anglogold Ashanti lay off almost 5,000 workers, I’ll not be surprised if Chirano announces it is going to fire workers,” he said. Kinross plans to reduce production in its Obra open pit mines and later close it. Ametefe fears this could result in worker layoffs. With gold prices predicted to fall further, and the company predicting to further cut costs, it is unclear what the fate of local workers would be. Emails to Kinross to make comments on this issue were not responded to. Emails to the Ghana Chamber of Mines to ascertain whether Kinross has sacked workers also were not answered. Rollinson hopes the company could break even or make profit with the measures of cost reduction. “We continue to deliver on our strategy, which is focused on capital discipline, operational excellence, quality over quantity and balance sheet strength,” he said.

Kinross Shares closing 30th January 2015 by EddieAmeh on TradingView.com

Already, the shares of Kinross which have plummeted over the past months is beginning to see a steady rise.

The number of international subscribers grows steadily for Netflix as U.S. growth begins to stall.

In their recent third quarter, Netflix posted below-average domestic results — showing only 980,000 new U.S. subscribers, compared to just over two million new international subs. Netflix originally attributed this to their U.S. price-hike in May.

“As best we can tell, the primary cause is the slightly higher prices we now have compared to a year ago,” they wrote in their third quarter statement.

The last time Netflix tried to raise their price it led to a large consumer-revolt and many cancelled subscriptions.

However, May’s hike of $1 per month was different in that it was announced well in advance, and applied only to new customers. Their third quarter report showed uninspiring domestic growth — which they attributed to the U.S. hike. However, their fourth quarter statement says they now believe that the lack of growth was due to a “natural progression” in the U.S. market.

It seems the slowing was not related to the price-hike after all. In fact, Michael Mulvey, a business professor at the University of Ottawa, says their decision to avoid a price-hike on their original supporters showed respect and likely proved positive for their overall brand.

“If you show good faith to your customers, they’ll reciprocate.. and that good-will will cash in at a later date when they’re deciding if they should cancel or switch,” he said.

The number of U.S. subscribers grew by 14 per cent this year, as opposed to a 25 per cent growth in 2013 and a 26 per cent growth in 2012.

Though overall positive, their fourth quarter results still revealed a stall in the U.S., proving that the sluggish growth from the past few quarters might be a trend.

There’s only so much room to grow, said Mulvey, referring to the American market.

In their most recent statement, Netflix promised shareholders they’d keep U.S. contribution margins growing, despite slowing subscriber growth.

On the other hand, there has been a reassuring boost in international subscribers, which increased by 71 per cent this year.

One market they’re increasingly excited about, according to David Wells, Netflix CFO, is their Latin American market. In a publicly broadcast interview for their shareholders, Wells said the market reached five million subscribers last quarter.

“We continue to see great growth and great potential in the market. It’s a market with about 65 million broadband households. If you take that five million number that we talked about, and 65 million in terms of addressable, we think we’ve got a lot of room for growth in the market,” he said.

The obvious move now — if domestic growth appears to be stalling — is to continue to focus more energy on global expansion.

According to their recent statement, Netflix plans to do just that.

Australia and New Zealand will welcome Netflix in the latter part of the first quarter, and so  will additional “major countries” later this year.

“…We now believe we can complete our global expansion over the next two years, while staying profitable, which is earlier than we expected,” the statement reads.

However, Mulvey says they may face challenges along the way.

“When it comes to creative works… there’s not one set of international law that governs that, so they have to negotiate rights within each of those geographical areas,” he said. “There’s a lot that happens behind the scenes… there’s a lot of lawyers working to see how they can make this happen.”

According to their fourth-quarter statement, original content — that debuts exclusively on Netflix — topped their list of watched-content globally.

In order to continue their positive growth, they plan on releasing 320 hours of original programming this year.

Everyone’s favourite bookstore is leaving the books behind and focusing on what really makes money — electronics, toys and scented candles.

In their latest quarterly report, Indigo Books and Music saw their revenue grow by 5.4 per cent from the same period last year. Although Indigo is still losing money, they are doing so at a slower rate than before. This is a result of some changes in merchandise strategy.

It’s out with the old and in with the new as print books are cast aside for digital text. Indigo has reduced their inventory by $6.9 million since last year, most of that coming from cutting back on the books they keep in stock.

To get rid off all the old merchandise sitting in their warehouses Indigo held a number of discount and clearance sales. Although sales increased, Indigo didn’t end up making much of a profit because the sales were at reduced prices.

“Indigo is really feeling the pinch, having to compete with companies like Amazon — they pushed out all the smaller bookstores and one might say that now they are getting their just desserts,” said David Gray, economics professor at the University of Ottawa.

To keep up with the technological age, Indigo is diversifying their portfolio as part of their transformation agenda. In their last annual report they laid out a strategy for dealing with a rapidly changing market.

In the report Indigo stated, “The company’s priorities remain focused on advancing the core retail business through adapting its physical stores, improving productivity, driving employee engagement, and expanding the company’s online and digital presence.”

One example of how Indigo has embraced digital media is with last year’s rollout of Indigotech shops, which sell things like tablets and e-readers.

This foray into the digital world doesn’t just mean a stronger focus on e-books. Indigo is looking to become more versatile in terms of online accessibility. In the last quarter they have seen a significant jump in online sales, as compared to in-store purchases.

“The share of all retail done online in Canada is only ten per cent but it is growing,” said Gray.

Bit by bit, Indigo is slowly chipping away at their debt and in the last quarter their net loss decreased by 15.19 per cent.

In a public statement released November 2014, Indigo attributed their increase in revenue to better sales in their lifestyle, paper, toys and electronics sections. They have worked to expand these sections to come in line with their company’s image as a gift-giving shopper’s destination.

“This has been achieved through a reduction in the floor space allotted to books, given the erosion of physical book sales,” stated Indigo in their last annual report.

In 2014, Indigo also launched several American Girl specialty boutiques to compliment the children’s sections of select superstores.

“They really need to make it fun for people to go in and browse,” said Gray. “They make it fun for the kids so they’ll pressure the parents.”

Indigo is casting positive predictions on the future of their company, even despite their uphill struggle with debt.

In their public statement, Indigo CEO Heather Reisman stated, “These results demonstrate that our customers are responding to the investments we have made to transform Indigo.”

If Indigo keeps doing what they’re doing they might just weather out the storm that has shaken up book retail. What comes out on the other side though might bear little resemblance to the bookstores that we grew up with.

Photos taken by Tanya Kirnishni.