Indigo Books & Music : Annual Report

ANNUAL REPORT FOR THE 53-WEEK PERIOD ENDED APRIL 3, 2021

The Indigo Mission

To inspire reading and simplify our customers'

journeys to live with intention.

Indigo operates under the following banners:,

, , ,Indigo, andBooks & Music. TheChaptersCompanyColesemploysIndigospiritapproximatelyThe Book5,000Companypeople acrossindigothe country.ca .

!ndigo Enrich Your Life, Chapters, !ndigo, Coles and indigo.ca are registered trade marks of Indigo Books & Music Inc.

Table of Contents

3.	Report of the CEO	Reporting
6.	Management's Responsibility for Financial
7.	Management's Discussion and Analysis
36.	Independent Auditor's Report
39.	Consolidated Financial Statements and Notes
71.	Corporate Governance Policies
72.	Executive Management and Board of Directors
73.	Five-Year Summary of Financial Information
74.	Investor Information
75.	Indigo's Commitment to Communities Across Canada

Report of the CEO

Dear Shareholder,

It is my pleasure to be writing to you to with a review of the year just passed, to share the results, and to provide some perspective on the year ahead.

It is almost redundant to note that 2020 will go down in history as a watershed year. A year to remember and a year which will serve to transform so much of who we are. Each of us will long remember where we were and how we navigated the year the COVID-19 pandemic stopped the world.

For Indigo, as with any customer-facing businesses, the challenges began the first day we were asked to close and continued to come at us, month after month. As I write this note for our Fiscal 2021 Annual Report, we are well into the first quarter of our new year. At this moment we remain in retail lockdown in several areas of Canada and with business constrained in most areas where our retail stores are open. To put this in clearer context - for almost half the year being addressed in this report and including the all-important holiday period, many of our stores were closed or highly limited.

The most important thing I want to share is this. Notwithstanding the relentless onslaught of challenges, the Indigo team demonstrated incredible resilience and resourcefulness. People make a business - and the ability to adapt and be ready for the recovery is totally dependent on dedication and passion to succeed.

On this key metric, Indigo has much to be proud of.

Equally worth noting - our customers, for the most part, adapted with us and with the demands of the times, interacting with us as much as possible through indigo.ca.While we could not fully make up the lost sales created by the enormous impact of closures and limitations across all our 177 stores, we were able to significantly blunt the impact.

Less satisfying, in a year when we fully expected to return to profitability, the combined cost of the sales losses and the costs associated with many elements of operating in this environment resulted, as it has for so many companies, in a loss for this year.

Annual Report 2021 3

Some key operating metrics of the year:

Retail Revenue

($ millions)
778
	512
FY20	FY21

Online Revenue

($ millions)
	370
163
FY20	FY21

Adjusted EBITDA

($ millions)
FY20	FY21
-7
	-28

On adjusting to pandemic requirements

Over the course of the year, we implemented a very well received Express Pick-Up experience to allow customers to shop online and pick up at the store door or curbside.This capability will remain valuable to our business long into the future.

Anticipating government-mandated occupancy restrictions, we successfully pulled forward a good portion of holiday sales. Originally these events were planned to take pressure off our stores in the last weeks leading to holiday when our shops are typically chock-a-block. As it turned out, due to actual shut-downs, this strategy was hugely helpful.

In addition, we did a number of things to quickly adapt to unprecedented spikes in online volumes, and implemented highly effective protocols in all stores and warehouses to ensure full safety of our employees and our customers. It is worth noting that our efforts in this regard resulted in our receiving the highest ratings on our environments from public health officials and having no outbreaks originate in any of our premises.

Other significant items in the year

During the year we created an expanded President role in anticipation of the growth ambitions we have for Indigo. After an intensive search we were successful in recruiting Peter Ruis to fill the position. Peter brings to Indigo deep executive retail and e-commerce experience gained at John Lewis, Jigsaw Group and Anthropologie where he led periods of exceptional growth.

We also launched a fulsome Diversity and Inclusion Strategy in partnership with the Canadian Centre for Diversity and Inclusion ("CCDI") and committed to The 15% Pledge.

Of particular note - Early in the year we kicked off a multi-year sustainability initiative titled

, and committed to be a net zero enterprise by 2035. An early and important element ofWritethis Thework relatesFuture to our own branded product. By the end of 2024 we expect all products under our nóta™ paper brand, our OUI home brand, and our LOVE & LORE® fashion brand to be fully sustainable.

A more detailed discussion of Write The Future can be found on www.indigo.ca.

4 Report of the CEO