BUSINESS

Indigo Books & Music Says Weak Loonie Is Hitting Its Bottom Line

08/05/2015 11:47 EDT | Updated 08/05/2015 11:59 EDT

TORONTO — A weaker Canadian dollar left a mark on the bottom line of Indigo Books & Music Inc. (TSX:IDG) in the latest quarter.

The company's chief financial officer Laura Carr says the company took a $3 million hit on its bottom line during the first quarter ended June 27, a direct impact from the exchange rate with the U.S. dollar.

The details were disclosed in a conference call with analysts on Wednesday after Indigo reported its financial results a day earlier.

Carr said Indigo managed to absorb the effect of the exchange rate by funnelling the costs into its book and merchandise prices and securing better agreements with its suppliers by increasing the volume of its orders.

Book and magazine prices are often a hot topic when currency exchange rates dramatically fluctuate, partly because it's one of the few retail goods that lists how much they cost in each currency on the same product.

When the value of the loonie soared to near par with the American dollar several years ago, some consumers complained they were paying excessive markups on books when factoring in the better exchange rate.

Eventually, publishers and retailers made changes to factor in at least some of the improved currency rates.

However, as the loonie sits around 76 cents U.S., retailers are facing the challenge of recouping lost profit margins.

Late Tuesday, Indigo reported it tightened losses by more than 35 per cent over a year ago, helped by growth in its general merchandise business.

The company posted a net loss of $9 million for the quarter, or 35 cents per share, compared to a loss of $14 million, or 55 cents per share, in the same period a year ago.

Overall, revenue climbed to $189.4 million from $180.8 million in the same period of last year.

Indigo Books & Music operates 90 large format stores under the Chapters and Indigo banners, as well as 126 smaller locations with names like Coles, Indigospirit and SmithBooks.

Also on HuffPost

Retailers At Risk Of Disappearing From Canada