Indigo Books & Music (TSX:IDG) is a Canadian bookstore chain. Chain bookstores dethroned “mom and pop” bookstores in the late 20th and early 21st century. Now, these same gigantic chains are being swept away by the march of progress. This time it has taken the form of online retail and e-commerce giants like Amazon.
The retail chain has attempted to beat back this trend by expanding its own e-commerce offering. Indigo released its second quarter fiscal 2020 results on November 6. It marked yet another disappointing quarter for the retailer, and shares have plunged 22% over the past month.
Revenue in Q2 FY2020 fell to $203.4 million compared to $216.3 million in the prior year. Its net loss deepened to $20.5 million or $0.74 per share compared to a loss of $19.1 million or $0.70 per share in Q2 FY2019. Management blamed its poor results on “competitive pressures” and its planned efforts to reduce promotions in order to improve profitability. This is a scary space for Indigo to be in right now. Fortunately, it still boasts an excellent balance sheet which will give it time as it looks to reorient.
Indigo is near its 52-week low, but it still does not offer great value. This is especially true in this volatile retail environment. The stock possesses a high price-to-earnings ratio of 30. Shares had an RSI of 31 at the time of this writing, which puts Indigo just outside of technically oversold territory. It is approaching the key holiday season, but I’m staying away from the stock as it struggles with this transition period.
