Indigo Books & Music, Canada’s largest book retailer, reported a 4.9% drop in net revenue in its third quarter, which ended Dec. 29, 2012, to C$335.6 million, compared to the same quarter last year. The company attributed the decrease to lower e-reader revenues and declining sales of print books as its customers shift to digital reading. A lack of big blockbuster books in the season was also noted.

While revenue in Indigo and Chapters superstores was down 5% and Coles and IndigoSpirit small format stores was down 5.2%, online sales were up 3.6%. The company credited that increase to growth in its gift, lifestyle and toy sales, as well as higher book sales.

Net earnings attributable to shareholders increased from C$14.4 million last year to C$22.0 million this year. Indigo said the increase was due to the elimination of losses from discontinued operations as a result of the sale of Kobo in January 2012, partially offset by increased investment in its “transformation” to more diverse product base.

Gross profit was up slightly to C$144.7 million from C$144.4 in 2011. That was due, Indigo said, to a 2.2% improvement in margin rate, which was attributed to a recent shift in its inventory toward higher margin gift and lifestyle products, as well as lower sales discounts, fewer markdowns and shipping more products through its distribution centers.

"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,” CEO Heather Reisman said. "We've made great strides during the quarter to accelerate our transformation while reinforcing our position as Canada's preferred destination for gift giving.”