Scholastic is the world’s largest publisher and distributor of children's books, and was established in 1920. The company publishes and distributes children’s books, educational technology products, and children’s media under five divisions: Children’s Book Publishing and Distribution, Classroom and Supplemental Materials Publishing, Educational Technology and Services, Media, Licensing and Advertising (which collectively represent the Company’s domestic operations), and the International division. Children’s Book Publishing and Distribution account for publication and distribution in the United States through school-based book clubs, school-based book fairs, e-commerce, and trade. Scholastic and its subsidiaries compete in more than 140 countries.
Classroom and Supplemental Materials Publishing were introduced after fiscal 2011, after being under Educational Technology and Services (formerly Education Publishing). Scholastic split the results retroactively.
Key Company Developments in 2013 & 1st Half Year 2014
Financial
In fiscal 2013, revenue was 1.79 billion USD, down from 2.14 billion USD. 2012 was a peak year due to sales of the Hunger Games trilogy, but all reportable divisions closed with lower sales figures except for Classroom and Supplemental Materials Publishing.
Beside the Hunger Games’ effect, a weak result of the Children’s Book Publishing and Distribution’s book clubs channel was offset by an increase in the segment’s book fair channel. Also operating income fell due to lower trade channel sales, lower revenues and higher promotional expenses for book clubs. Children’s Book Publishing and Distribution covered 47.2% of fiscal revenues.
The International unit saw revenues fall by 49 million USD, related to lower revenues in Canada as well as lower revenues in Australia. Poor results in Canada and Australia also impacted income.
Educational Technology and Services reports a decline in revenue and profit due to decreased sales of curriculum educational technology products and lower spending by school districts. Last year’s operating income benefited from the launch of READ 180 Next Generation, and did not have similar product launches in fiscal 2013.
Ownership, Mergers & Acquisition, Internal Organization
On January 3, 2012, Scholastic acquired Learners Publishing, a Singapore-based publisher of supplemental learning materials for English-Language Learners that will be integrated into its International segment.
Bestselling Authors & Titles
Strong titles for Children’s Book Publishing and Distribution included the 39 Clues series and Harry Potter, as well as Drama by Raina Telgemeier, The Raven Boys by Maggie Stiefvater, and Captain Underpants and the Revolting Revenge of the Radioactive Robo-Boxers by Dav Pilkey.
Earlier Developments
Financial
Scholastic anticipated a strong performance in 2012 with The Hunger Games trilogy by Suzanne Collins. While revenue rose 14%, to 2.15 billion USD, net income jumped from 39.4 million USD to 102.4 million USD.
Children’s Book Publishing and Distribution rose 21% to cover more than half (51.7%) of corporate revenues, thanks to a 109% increase from trade sales with than 50 million copies of The Hunger Games trilogy in print and digital editions.
The newly introduced Classroom and Supplemental Materials Publishing segment generated 9.7% of corporate revenues.
Despite revenue growth in the full year results of 2012, fiscal 2013 would be “challenging”, as Dick Robinson put it. In the quarter ending February 2013 the corporate revenue fell 18.5%, to 380.5 million USD, while the net loss reached 20.1 million USD from 10.3 million USD. The forecast for the full fiscal year was lowered for the second time, projecting sales between 1.75 billion USD and 1.8 billion USD due to lower sales of The Hunger Games and delays in customer purchases of educational products. According to CEO Dick Robinson, schools were more likely invest in the iPad and other digital devices. Compared with 2012, Children’s Book Publishing and Distribution faced the biggest decline in the nine month period, with sales down 30%. The Hunger Games left a big void, with trade losses of 59%.
Early in 2013, Scholastic imposed a hiring freeze and announced to reduce staffing levels in some areas due to its effort to cut costs by 20 million USD to 30 million USD in fiscal 2013. There would be no management bonuses in fiscal 2013.
Ownership, Mergers & Acquisition, Internal Organization
The newly-introduced Classroom and Supplemental Materials Publishing unit publishes and distributes children’s books, classroom magazines, supplemental classroom materials, and print and online reference and non-fiction products for schools and libraries in the United States.
At the beginning of 2012, Scholastic announced the acquisition of the Singapore-based publisher Learners to enhance their English-language training products. Founded in 2000, Learners has 400 titles, mainly for English-language training.
International
Scholastic plans to expand in Southeast Asia. Main operations take place in UK, Australia, New Zealand and Asia, where Scholastic is the largest school-based book club distributor. In Australia and New Zealand, book club and book fair operations reach nearly 90% of primary schools. In Asia, Scholastic reaches the Indian, Indonesian, Malaysian, Philippine, Singaporean, and Thai book markets through Grolier, its wholly-owned direct sale business. Scholastic plans to expand in the Asian market with school-based book clubs and fairs, with an emphasis on educational publishing and English-language training. The International division achieved a double-digit revenue growth through Australian and south-east Asian subsidiaries.
Digital
Facing a dip in revenue in fiscal 2012, Robinson continues to invest in e-book and e-commerce initiatives. Scholastic is gearing up to expand Storia, an e-book platform launched in 2012 with 2,000 titles. Similar to Amazon, Storia provides a link that will allow customers to buy e-books from Pottermore, which can be read in the Storia app. However, Scholastic doesn’t expect the product “to drive significant revenue until fiscal 2014 at the earliest.”
According to Scholasitc’s estimates, approximately 65% of all elementary school teachers in the United States participate in the company’s school-based book clubs. In fiscal 2012, over 80% of total book club orders were placed via the internet through COOL (Clubs Ordering On-Line).
Bestselling Authors & Titles
Scholastic saw trade growth of nearly 15 million USD from Hunger Games e-book sales. Trade bestsellers in print during fiscal 2012 included the Hunger Games trilogy, The 39 Clues® series, and the Harry Potter series.
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