A solid performance by Scholastic's trade group and international division offset revenue declines in book clubs and book fairs, leaving total sales of roughly $324 million at the company basically flat in the quarter ended February 29, 2024, with the comparable period a year ago. The operating loss rose to $30.6 million, from $27.7 million, an increase executives attributed to higher spending to prepare for what they believe will be a good fourth quarter in fiscal 2024.
The sore spot for Scholastic, as it has been for about a year, is its book club business. The company is in the midst of what CEO Peter Warwick called a “some quarters-long” project to downsize the clubs to a profitable core. By that measure, Scholastic had success in the period, as book club sales plunged 52%, to $13.3 million. Book fair sales fared better, slipping 1%, to $102.7 million. Revenue per fair fell slightly, Warwick said, attributing the dip to holding more smaller fairs as Scholastic works to increase its fair count, which fell during the pandemic. Warwick said that the number of fairs held by Scholastic in the quarter was at roughly 90% compared to pre-pandemic levels.
Last year, Scholastic combined clubs and fairs into a school reading events group, and profits in that group did improve in the quarter, due in part to lower spending on the book club operation. The company also seems to have weathered the controversy over its decision last year to offer an optional collection of diverse books at its book fairs—a move that drew heavy criticism from authors, librarians, educators, and freedom to read advocates.
Trade revenues rose 7% in the quarter, to $77.6 million. Scholastic cited strong backlist sales as well as good sales for new graphic novels for the increase. Revenue from Scholastic Entertainment was down slightly from last year’s third quarter, which saw the animated TV show Eva the Owlet, based on Scholastic’s Owl Diaries book series, debut. Executives, however, haven’t wavered from their 360-degree strategy of flooding the zone with Scholastic characters and franchises on as many media platforms as possible. The company doubled down on that strategy earlier this month, paying $186 million to acquire 9 Story Media Group, its longtime media partner. The acquisition is expected to be completed this spring.
International revenues at the publisher increased 16%, to $59.1 million, over the third quarter of fiscal 2023. Trade sales were up in both Canada and the U.K., and the number of book fairs abroad, as well as revenue per fair, rose over fiscal 2023.
For the first nine months of the year, total Scholastic sales fell 5%, to $1.12 billion, from $1.17 billion in the comparable period a year ago. The company had an operating loss of $22.1 million, compared to a profit of $14.3 million in the first nine months last year. Executives said that they are optimistic about prospects for the final quarter, and expect yearly revenue to be slightly below that of fiscal 2023. Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) is projected to finish between $165 million and $175 million.
