In a conference call with analysts 10 days after the terrorist attacks, Scholastic chairman Dick Robinson said the company still expects to meet its earnings target for the year ended May 31, 2002, and that Scholastic's business "remains solid in an uncertain world." In the first quarter ended August 31, 2001, sales fell 15% to $306.1 million, and the company had a net loss of $37.0 million, compared to a loss of $10.6 million in the first quarter of fiscal 2001. Both sales and losses were better than analysts had estimated, which Scholastic attributed to stronger-than-forecast results from its trade and education divisions as well as benefits from its ongoing cost-cutting initiatives.
Sales in the children's book publishing and distribution segment fell 31%, to $141.1 million, as the company recorded sales from its Harry Potter titles of $14 million, compared to sales of $100 million in last year's first quarter. Sales of Potter-related product picked up at the end of the quarter as the November 16 release of the Harry Potter and the Sorcerer's Stone movie draws closer. The group also benefited from strong sales of Captain Underpants and the Wrath of the Wicked Wedgie Women as well as higher sales to mass merchandisers.
Barbara Marcus, president of Scholastic Books, said the company is committed to expanding its business with mass merchandisers through such licensing programs as Barney and Clifford. Harry Potter merchandise, such as journals and coloring books, has been released, and a Sorcerer's Stone mass market paperback edition with a new cover will be published before the movie debuts.
In the quarter, the children's group had a $28-million loss compared to profits of $7 million in last year's first period.
Revenues in the educational publishing group slipped to $91.3 million, from $91.8 million, as sales of Literacy Place, Scholastic's basal program, which it is phasing out, did better than expected. Sales of Early Literacy and Reading Improvement were also up. With much lower costs for Literary Place, the group's profit rose 10% to $15.5 million.
Revenues in the international segment increased 6%, to $55.0 million, but the operating loss rose to $3.5 million from $2.0 million. Growth in Southeast Asia and Canada was offset by declines in the U.K. and Australia.
The loss in the media, licensing and advertising segment was cut to $9 million from $11 million, as sales jumped 41% to $18.7 million. Higher magazine advertising plus strong sell-through of Clifford merchandise led the sales gains.
Following the close of the quarter, Scholastic shipped 200,000 copies of Conversations with J.K. Rowling, an authorized biography of the author featuring interviews, as well as two million copies of the trade paperback edition of Harry Potter and the Prisoner of Azkaban. Scholastic.com opened its book club ordering site September 24, the first of its e-commerce plans, which will include the launch of a teacher store in the fall and a family store early next year.
New Fairs Chief
In a personnel move, Scholastic has named David Krishock president of the company's book fairs division. Krishock is a newcomer to publishing, with a background in the manufacturing and distribution business. He most recently was president and CEO of Suntory Water, a branded water business. Krishock will report to Barbara Marcus.
