With sales of the Hunger Games trilogy falling even more than expected in the quarter ended February 28 compared to a year ago, Scholastic this morning reported that revenue for the company fell 18.5%, to $380.5 million, while the net loss deepened to $20.1 million from $10.3 million. As a result of the soft quarter, Scholastic lowered its forecast for the full fiscal year for the second time and is now projecting sales to be between $1.75 billion and $1.8 billion from earlier estimates of revenue between $1.8 billion and $1.9 billion. Earnings per share are also expected to be lower than earlier forecasts. Hunger Games was not the only problem for Scholastic as school customers continued to delay purchases.
"We knew that fiscal 2013 would be challenging, given the tough comparisons for The Hunger Games trilogy, our significant investments in digital initiatives, and the timing of our major new Educational Technology product launches later this calendar year,” commented Dick Robinson, chairman, president and CEO. “However, third quarter sales of the Hunger Games trilogy were significantly lower than our expectations, particularly in the U.S., Canada and Australia. Further, delays in customer purchases of our educational products have continued, as school districts focus on professional development and training in the context of the Common Core State Standards, and invest in iPads and other digital devices for the classroom.”
Bright spots in the quarter, Robinson said, included growing interest in Storia and increased revenues from Scholastic’s Common Core focused professional development and consulting services. (During the conference call with analysts, Robinson said HarperCollins has agreed to add "hundreds" of its children's books to Storia). Scholastic has also accelerated its digital investments in advance of the summer 2013 Educational Technology product introductions.
The Children’s Book Publishing and Distribution segment had the biggest hit in the quarter with sales down 30%, to $189.4 million. The trade unit had the toughest period with sales tumbling 59%, to $45.9 million as no book or series came close to making up for the huge Hunger Games sales a year ago. School book fair revenue increased 2%, reflecting a continued increase in overall fair count, but sales in school book clubs fell 21% due to lower revenue per order.
In other segments, revenue in the Educational Technology and Services group rose to $41.8 million, compared to $40.0 million in the prior year period, primarily due to increased sales of professional development services and consulting in advance of the Common Core implementation. Classroom and supplemental materials publishing sales also rose, up 13% strong sales of classroom magazines were driven by schools' need for nonfiction content aligned to Common Core State Standards.
Internationally, segment revenue in the quarter was $94.4 million, compared to $105.6 million in the prior year period, primarily reflecting lower sales of the Hunger Games trilogy in Canada and Australia, partially offset by strong performance in Asia, Scholastic said.
For the nine month period, revenue was down 12.2%, to $1.47 billion, and net income dropped to $9.6 million from $45.4 million. Earlier in the year, Scholastic said he was imposing a hiring freeze and was implementing other cost-cutting measures to make up for the revenue shortfall.
