May 22, 2009 / 2:51 PM / in 8 years

UPDATE 1-Indigo profit down, but sales up; starts dividend

* Q4 EPS C$0.08 vs C$0.12 in year-before quarter

* Sales rise 4 percent

* Initiates dividend of C$0.40 a share a year

TORONTO, May 22 (Reuters) - Indigo Books & Music (IDG.TO) posted a drop in quarterly profit on Friday as tax expenses ate into results, but Canada’s biggest book retailer said the recession isn’t stopping customers from reading as it posted a 4 percent increase in sales.

The company also said it would start paying a dividend to shareholders of 10 Canadian cents a share each quarter, or 40 Canadian cents a share a year.

Indigo said it earned C$1.92 million ($1.71 million), or 8 Canadian cents a share, in its fourth quarter ended March 28. That was down from a profit of C$3.13 million, or 12 Canadian cents a share, a year earlier.

The quarter included a C$400,000 tax expense, while the year-earlier results included a C$1.2 million tax recovery, the company said.

Sales jumped to C$214.5 million from C$206.2 million a year earlier. The company’s Indigo and Chapters superstores posted 3.8 percent growth, while its Coles and Indigo Spirit stores were up 6.2 percent. Online sales fell 6.5 percent.

“We are very satisfied with both our top-line growth and operating profits, especially in this challenging economic climate,” Chief Executive Heather Reisman said in a statement.

Indigo’s shares were halted on the Toronto Stock Exchange on Friday. They last changed hands at C$12.01 each.

$1=$1.12 Canadian Reporting by Wojtek Dabrowski; editing by Peter Galloway

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