Total revenue at Scholastic rose 2% in the fiscal year ended May 31, 2014, to $1.82 billion, and operating income fell 7% to $63.1 million. Excluding one-time charges, operating income was $107 million compared to $81.5 million in fiscal 2013.
The company posted sales growth in its children’s book publishing and distribution, educational technology, and classroom and supplemental materials groups, but revenue fell in the international and media, licensing and adverting units.
In the children’s group, Scholastic’s largest segment, sales rose 3% to $873.5 million, driven by a 12% increase in book club sales and a 3% gain in book fair revenue. Sales in its trade segment fell 7%, to $170.5 million. The decline in trade was due to a drop in Hunger Games revenue, partially offset by strong sales of Minecraft and Lego titles. Chairman and CEO Dick Robinson said the “re-energized book clubs” hit their stride in the second half of the fiscal year, with more popular titles and better marketing programs. Book fair gains were due to higher revenue per fair.
In the educational technology segment, revenue was $248.7 million compared to $227.7 million a year ago. Fiscal year results were driven by higher purchases of new curriculum educational technology products: MATH 180, System 44 Next Generation, iRead and Common Core Code X. The games were offset by lower mid-year sales of READ 180, which were affected by a realignment of the sales force, and lower revenues from professional development and consulting services.
In the classroom and supplemental materials publishing segment, revenue was $229.6 million, compared to $218.0 million a year ago with Scholastic citing strong sales of classroom magazines, especially the Common Core-aligned print and digital editions of Scholastic News/Weekly Reader, and classroom books and summer reading programs. International revenue fell to $414.3 million from $441.1 million in the prior year. Due to the strengthening of the U.S. dollar, foreign exchange had a negative impact on revenue of $24.2 million in the full year. Media, licensing and advertising fell to $56.2 million from $58.7 million.
Among the one-time charges that impacted the year was a $14.6 million charge related to Storia’s operating system apps that will no longer be supported as Scholastic plans to make the transition to a streaming model for Storia. Scholastic also took $10.8 million in severance charges.
In its earnings announcement, Scholastic was bullish on the outlook for fiscal 10'5, projecting that revenue would hit $1.9 billion with earnings per share put in the $1.80 to $2.00 range, excluding one-time charges; in fiscal 2014 EPS, excluding charges was $1.84. Looking at the children’s group in particular, Scholastic believes sales will continue to rise in it book clubs while in book fairs sales per fair are projected to increase . Hunger Games sales are expected to fall again in fiscal 105, but the company expects that to be partially offset by revenue from new Minecraft titles and new books in a number of bestselling series including Captain Underpants and Star Wars.
