The impact of supply chain disruptions and higher costs on publishers’ earnings is starting to come into focus with the release of the quarterly report for HarperCollins for the three months ended December 31, 2021. Sales increased 13% in the quarter over the comparable period in fiscal 2021, rising to $617 million, from $544 million a year ago. The gain included a $50 million contribution from the May purchase of the trade division of Houghton Mifflin Harcourt. Excluding the contribution from HMH and other one-time factors, adjusted revenues increased only 4%.
Segment EBITDA (earnings before interest, taxes, depreciation, and amortization) grew at a slower rate than revenue, increasing 3%, or $3 million, over the second quarter of fiscal 2021, to $107 million. The increase included $10 million from the HMH acquisition. That gain, however, was partially offset by higher costs related to increased sales volumes and the quarter's mix of titles, “as well as the increase in manufacturing and freight costs exacerbated by supply chain pressures,” parent company News Corp said. As a result, adjusted HC earnings decreased 7% in the quarter from a year ago.
News Corp CFO Susan Panuccio said that while book industry trends remain generally favorable, the company is “clearly mindful of the uncertainty and lack of visibility from the ongoing impacts of the pandemic, including the potential cost impacts from continued supply chain pressures, particularly in book publishing.” Asked about the effect of higher inflation by analysts, News Corp CEO Robert Thomson said it is “an important issue,” and the company has told its businesses to be “cost conscious.”
Returning to top-line trends in the quarter, News Corp reported that among revenue growth drivers were higher frontlist sales in HC’s general books group, including Twelve and a Half by Gary Vaynerchuk, The Pioneer Woman Cooks by Ree Drummond, and The Storyteller by Dave Grohl. Sales were also up at HarperCollins Christian Publishing and at the publisher's U.K. division, while sales of children’s books fell. Digital sales rose 8% in the quarter compared to the prior year, driven by growth in downloadable audiobooks. Digital sales represented 17% of HC’s consumer revenues for the quarter.
For the first half of HC’s fiscal year, which ends June 30, 2022, sales increased 16%, to $1.16 billion. Profits rose 10%, to $192 million.
