Value Investors: Could This Stock Be the Amazon of Canada?

Indigo Books & Music Inc. (TSX:IDG) is following a path to profitability similar to Amazon.com Inc. (NASDAQ:AMZN). There could be massive upside ahead for this stock.

| More on:
Question marks in a pile

Image source: Getty Images

Indigo Books & Music (TSX:IDG) is Canada’s largest book, gift, and specialty toy retailer, with store locations in all 10 provinces and online sales through the company’s website and mobile applications. The company is a leading gift destination with an extensive selection of books, paper, toys, baby, and lifestyle products. The company’s digital platforms feature an extension of the in-store shopping experience, with an expanded selection of book titles and general merchandise.

Digital platforms business potential

Indigo’s digital platforms provide customers with a seamless shopping experience. These platforms are an extension of the in-store shopping experience with an expanded selection of book titles, eBooks, and a broad assortment of paper, baby, and lifestyle products. These digital platforms provide a rich user experience and promote customer loyalty and repeat purchases with an engaging experience that encourages customers to return frequently.

Further, the company’s digital platforms offer a wide range of shipping options along with easy returns. The company’s mobile application also offers a number of time-saving and stress-reducing features, such as managing wish lists, scanning any product in store for online purchase, and shipping to the customer’s home or to a gift recipient.

In 2020, the online channel represented approximately 17% of the company’s revenue. However, the company experienced a significant acceleration of online sales fueled by retail stores closures and government stay-at-home orders in response to the COVID-19 pandemic. The company‘s online channel continues to experience significant growth in comparison to the prior year.

Popular loyalty programs

Indigo’s loyalty program allows members to earn and redeem points online and in-store, seamlessly. This program engages members through mass promotions and targeted one-to-one promotional offers, as well as invitations to exclusive events and member-only shopping experiences. The program offers an members immediate discount on eligible products, free shipping and the ability to earn points on almost every dollar spent at the company’s Canadian stores and website.

Loyalty programs are important in generating significant customer commitment and value. In addition, the programs enable the company to better understand Indigo’s customers. The company monitors and evolve the program constructs and communications to ensure the programs meet business objectives.

Diverse product categories

Indigo currently has an active list of approximately 200,000 book titles purchased from more than 25 major publishers. In addition, the company offers over 12 million titles through Indigo’s digital platforms. The company is also committed to becoming the premier year-round gifting destination in Canada with a curated assortment of home, baby, toys, and electronics products.

Optimization strategies

Indigo employs inventory management strategies to analyze sales data to maintain adequate inventory levels, make inventory adjustments, and maximize full-price sales through the company’s retail and digital channels. The company is a leading destination for developmental and technology toys and baby books.

The company’s design and global sourcing team develops proprietary merchandise exclusively for Indigo. Products developed by the design and global sourcing team are designed to improve the breadth and quality of products offered by the company.

Indigo is following a path to profitability similar to Amazon.com. There could be massive upside ahead for this stock.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Fool contributor Nikhil Kumar has no position in any of the stocks mentioned. David Gardner owns shares of Amazon. The Motley Fool owns shares of and recommends Amazon and recommends the following options: long January 2022 $1920 calls on Amazon and short January 2022 $1940 calls on Amazon.

More on Investing

tsx today
Stock Market

TSX Today: What to Watch for in Stocks on Wednesday, February 21

The Federal Open Market Committee’s meeting minutes and more corporate results are likely to keep TSX stocks volatile today.

Read more »

Retirement
Investing

Got $5,000? Buy and Hold These 3 Value Stocks for Years

Given their solid underlying businesses, healthy growth prospects, and attractive valuation, I am bullish on these three value stocks.

Read more »

money cash dividends
Stocks for Beginners

Got $1,000 to Invest in Stocks? Put It in This Index Fund

This low-cost beginner-friendly ETF is a great way to invest $1,000.

Read more »

Overhead shot of young adults using technology at a table
Tech Stocks

3 Cheap Tech Stocks to Buy Right Now

Given their long-term growth prospects and discounted stock prices, I am bullish on these tech stocks.

Read more »

money cash dividends
Dividend Stocks

Have $500? 2 Absurdly Cheap Stocks Long-Term Investors Should Buy Right Now

Want some absurdly cheap stocks for your portfolio? Here are two options trading at a huge discount right now.

Read more »

Gas pipelines
Dividend Stocks

TFSA Passive Income: Is Enbridge Stock a Buy, Sell, or Hold?

Enbridge now offers a yield near 8%. Is the dividend safe?

Read more »

A worker uses the cloud for paperless work. tech
Tech Stocks

Wanna Beat the Market? Try These 2 Tech Stocks That Look Undervalued Today

Here's why undervalued TSX stocks such as Vitalhub can help you generate outsized gains in the next 12 months.

Read more »

Redwood trees stretch up to the sunlight.
Tech Stocks

These 3 Magnificent Stocks Keep Driving Higher

Constellation Software, Dollarama and another TSX stock have consistently generated positive investment returns. Here’s why they belong in your retirement…

Read more »