Chapters Inc. ended a turbulent fiscal 2001 by reporting a net loss of C$84.5 million ($55.5 million) on sales of C$686.5 million ($451 million) for the year ended March 31. Total sales in fiscal 2000 were C$660.3 million, and the company had net income of C$17.2 million. Results do not include Indigo Books & Music, which acquired Canada's largest bookstore chain in June.

The loss in fiscal 2001 includes C$69.4 million in one-time charges. The largest charge, C$30 million, covered costs associated with corporate-wide restructuring as well as costs tied to Indigo's takeover bid for Chapters. A C$24.7-million charge was taken due to the write-down of excess inventory that had built up in Chapters' recently disbanded Pegasus wholesale operation, plus slow-moving inventory at Chapters' stores. In addition, the company took a C$14.7-million charge that reflected inventory shrinkage above the company's historical rate.

During the year, revenues at Chapters' retail operations rose 2.0%, to $634 million, as superstore sales increased 8.6%, to C$408.8 million, more than offsetting a 10.4% decline, to C$195.2 million, in sales through traditional stores. Chapters said the gain in superstore sales was due to the opening of seven new outlets—a gain that was somewhat offset by a 1.6% decline in comparable-store sales. The decline in traditional-store sales was attributed to the closure of 34 stores and a 3.0% drop in same-store sales.

Sales at Chapters Online increased 32.0% in the year, to $51.1 million, and the e-retailer had a loss before interest, taxes, depreciation and amortization of C$33.1 million, compared to a loss of C$35.2 million in the previous year. Chapters' new management has moved to cut losses in the online unit by eliminating 172 positions, which will save C$10 million annually, and by consolidating marketing with Chapters' retail operations, a move that will reduce marketing costs by C$14.5 million. Other steps include refocusing Chapters Online's offerings on books, music, video and gifts and canceling a portal agreement.

Heather Reisman, who has been running Chapters since early February, said fiscal 2002 "will be one of integration, organization and real estate portfolio streamlining, process improvements and store level merchandise improvements."