Indigo Books & Music Inc. says declining sales of both books and e-readers took a toll on revenue during the most recent quarter, which included the holiday sales period.
The consumer shift to digital reading and the lack of any hit books on offer was offset somewhat by the continuing growth of its gift, lifestyle and toy business, the Toronto-based retailer said.
On a comparable store basis, Indigo and Chapters superstores saw a 5 per cent decrease in revenue, while its Coles and IndigoSpirit small format stores were down 5.2 per cent.
Online sales, however, increased 3.6 per cent year over year.
Despite the drop in revenue, gross profit was up slightly due to the shift to "higher margin gift and lifestyle products, lower sales discounts, fewer markdowns, and shipping more products through the company's distribution centres," it said.
"We are pleased that our results reflect our efforts to dramatically improve margins and significantly expand our product mix in key categories and online to drive sales growth," chief executive officer Heather Reisman said in a release.
"We've made great strides during the quarter to accelerate our transformation while reinforcing our position as Canada's preferred destination for gift giving."
Indigo posted net earnings from continuing operations of $22-million, or 86 cents per diluted share, compared to $23.7-million, or 93 cents per diluted share, in the year-earlier period.
Revenue for the quarter ended Dec. 29 was $335.6-million, down from $353-million year over year.
When losses from discontinued operations are figured into the third quarter of 2011, net earnings for that period come in at $14.4-million, or 56 cents per diluted share — making the $22-million profit in the most recent quarter a $7.6-million improvement over the year-earlier period.
Indigo credits the increase to the elimination of losses from discounted operations – it sold its e-reader maker Kobo Inc. last year – partly offset by investments in the business.