Indigo Reports Full Year Results: Impressive growth in revenue and profit Comparable Superstore Sales grow by 12.8% and Online Sales grow by 15.3% TORONTO, ON – May 31, 2016 -- Indigo Books & Music Inc. (TSX: IDG), Canada’s largest book, gift and specialty toy retailer reported revenue of $994 million for its fiscal year ended April 2, 2016. Total revenue increased by $99 million or 11% compared to the previous year despite operating seven fewer stores. The Company noted that this year was a 53-week reporting period. On a 52-week, comparable store basis, Indigo and Chapters superstore revenue increased 12.8%, while Coles and Indigospirit small format store revenue increased 10.9%. Comparable sales from Indigo’s online channel, indigo.ca, grew by 15.3%. Revenue growth was driven by continued double-digit growth in the general merchandise business and high single-digit growth in the core book business, boosted by the trend for adult coloring books. Commenting on the results, CEO Heather Reisman said, “We are delighted with our full year results which demonstrate that our transformation efforts have delivered real growth momentum. I am incredibly proud of the whole Indigo team and we all feel energized to continue providing our customers with the inspiring experience that we know they love.” The Company recognized net earnings of $28.6 million for the year compared to a net loss of $3.5 million last year. The improvement in earnings was driven by revenue growth, improved margin rate, proceeds from the disposal of a lease and a lower tax expense. Revenue for the fourth quarter was $220 million, up $34 million from the same quarter last year. The Company noted that this was a 14-week reporting period. On a 13-week, comparable store basis, Indigo and Chapters superstores were up 14.7%, while Coles and Indigospirit small format stores were up 15.8%. Sales from Indigo’s online channel, indigo.ca, grew by 9.8%. Net loss for the quarter was $13.4 million compared to a net loss of $13.9 million last year. The improvement in earnings was a result of higher revenues, improved margin rate, lower tax expense off-set by increased bonus and reorganization costs. In May 2016, Indigo received recognition as the top retail employer brand by Randstad Canada, and was cited as the organization with the best workplace environment. It was also recognized in the top 5 employer brands nationally. The Randstad survey is the only employer award chosen entirely by workers and job seekers in search of employment opportunities within Canada’s leading organisations. Also subsequent to the year-end, Indigo opened its first booklovers’ cultural department store, a 30,000 square foot location at CF Sherway Gardens, Toronto. The Company plans to roll out the cultural department store concept to more stores in the future. In May 2016, the Indigo Love of Reading Foundation granted an additional $1.5 million to 25 high-need elementary schools across the country, bringing the total committed by the Foundation, since its inception in 2004, to $23.5 million.

Analyst/Investor Call

Indigo will host a conference call for analysts and investors to review these results at 8:45 a.m. (Eastern Time) tomorrow, June 1st, 2016. The call can be accessed by dialling 416-764-8688 from within the Toronto area, or 1-888-390-0546 outside of Toronto. The eight digit participant code is 69700106. A playback of the call will also be available by telephone until 11:59 p.m. (ET) on Wednesday, June 8th, 2016. The call playback can be accessed after 10:00 a.m. (ET) on Wednesday, June 1st 2016, by dialing 416764-8677 from within the Toronto area, or 1-888-390-0541 outside of Toronto. The six-digit replay passcode number is 700106#. The conference call transcript will be archived in the Investor Relations section of the Indigo website, www.indigo.ca. Forward-Looking Statements

Statements contained in this news release that are not historical facts are forward-looking statements which involve risk and uncertainties that could cause results to differ materially from those expressed in the forward-looking statements. Among the key factors that could cause such differences are: general economic, market or business conditions in Canada; competitive actions by other companies; changes in laws or regulations; and other factors, many of which are beyond the control of the Company. Non-IFRS Financial Measures

The Company prepares its consolidated financial statements in accordance with International Financial Reporting Standards (“IFRS”). In order to provide additional insight into the business, the Company has also provided non-IFRS data, including comparative store sales growth, in the press release above. This measure does not have a standardized meaning prescribed by IFRS and is therefore specific to Indigo and may not be comparable to similar measures presented by other companies. Comparative store sales growth is a key indicator used by the Company to measure performance against internal targets and prior period results. This measure is commonly used by financial analysts and investors to compare Indigo to other retailers. Comparable store sales are defined as sales generated by stores that have been open for more than 12 months on a 52-week basis. About Indigo Books & Music Inc.

Indigo is a publicly traded Canadian company listed on the Toronto Stock Exchange (IDG). As the largest book, gift and specialty toy retailer in Canada, Indigo operates in all provinces under different banners including Indigo Books & Music; Indigo Books, Gifts, Kids; Indigospirit; Chapters; and Coles. The online channel, indigo.ca, offers a one-stop online shop with a robust selection of books, toys, home décor, stationery, and gifts. Indigo founded the Indigo Love of Reading Foundation in 2004 to address the underfunding of public elementary school libraries. Every year the Love of Reading Foundation makes grants to high-needs elementary schools so they can transform their libraries with the purchase of new books and educational resources. To date, the Love of Reading Foundation has committed over $23.5 million to 2,600 elementary schools, benefitting more than 750,000 students. To learn more about Indigo, please visit the Our Company section at indigo.ca. For further information please contact: Janet Eger Vice President, Public Affairs 416 342 8561 [email protected]

Consolidated Balance Sheets

(thousands of Canadian dollars) ASSETS Current Cash and cash equivalents Accounts receivable Inventories Income taxes recoverable Prepaid expenses Total current assets Property, plant and equipment Intangible assets Equity investment Deferred tax assets Total assets LIABILITIES AND EQUITY Current Accounts payable and accrued liabilities Unredeemed gift card liability Provisions Deferred revenue Current portion of long-term debt Total current liabilities Long-term accrued liabilities Long-term provisions Long-term debt Total liabilities Equity Share capital Contributed surplus Retained earnings Total equity Total liabilities and equity

As at April 2, 2016

As at March 28, 2015

216,488 7,663 217,788 25 11,290 453,254 60,973 16,506 1,421 51,836 583,990

203,162 4,896 208,395 25 5,477 421,955 54,886 16,587 726 44,241 538,395

171,112 50,969 34 13,232 53 235,400 4,483 109 239,992

160,645 48,211 913 13,298 172 223,239 3,841 110 56 227,246

209,318 10,591 124,089 343,998 583,990

205,871 9,770 95,508 311,149 538,395

Consolidated Statements of Cash Flows 14-week period ended April 2, 2016

13-week period ended March 28, 2015

(13,413)

(13,946)

28,581

(3,534)

3,909 2,203 (1) 143 261 90 (5,504) 3,258 (75,825) 991 (696) 303 (84,281)

3,753 3,032 58 97 89 (3,475) (1,244) (71,705) 21 (653) 431 (83,542)

14,739 9,073 (1,620) 1,039 1,212 384 (7,595) (58) (5,102) 1,000 (1,753) 50 (1,397) 38,553

14,789 11,913 (458) 92 910 341 363 (1,960) 37,841 69 (1,906) 26 (655) 57,831

CASH FLOWS FROM INVESTING ACTIVITIES Purchase of property, plant and equipment Addition of intangible assets Proceeds from disposal of capital assets Distributions from equity investment Interest received Cash flows used for investing activities

(6,681) (3,120) 1 702 752 (8,346)

(1,925) (1,718) 527 903 (2,213)

(20,243) (9,000) 6 702 1,522 (27,013)

(10,832) (6,914) 527 1,898 (15,321)

CASH FLOWS FROM FINANCING ACTIVITIES Repayment of long-term debt Interest paid Proceeds from share issuances Cash flows from financing activities

(40) (944) 1,206 222

(50) (17) 770 703

(175) (995) 2,672 1,502

(586) (67) 1,758 1,105

(3,361)

987

284

1,969

(95,766) 312,254 216,488

(84,065) 287,227 203,162

13,326 203,162 216,488

45,584 157,578 203,162

(thousands of Canadian dollars) CASH FLOWS FROM OPERATING ACTIVITIES Net earnings (loss) for the period Add (deduct) items not affecting cash Depreciation of property, plant and equipment Amortization of intangible assets Net reversal of capital asset impairments Loss on disposal of capital assets Stock-based compensation Directors' compensation Deferred tax assets Other Net change in non-cash working capital balances Interest expense Interest income Income taxes received Share of loss (earnings) from equity investment Cash flows from (used for) operating activities

Effect of foreign currency exchange rate changes on cash and cash equivalents Net increase (decrease) in cash and cash equivalents during the period Cash and cash equivalents, beginning of period Cash and cash equivalents, end of period

53-week period ended April 2, 2016

52-week period ended March 28, 2015

Press Release

May 31, 2016 - Comparable sales from Indigo's online channel, indigo.ca, grew by 15.3%. Revenue growth was driven by continued double-digit growth in the general merchandise business and ... elementary schools across the country, bringing the total committed by the Foundation, since its inception in 2004, to $23.5 ...

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