A weak U.S. dollar and economy had a negative impact on Harlequin’s third quarter results with retail sales in North America down, offsetting gains in direct-to-consumer and overseas sales. Overall, Harlequin’s revenue fell 4.1%, to C$117.5 million ($118 million), although operating profits inched up to C$23.0 million from C$22.9 million. Excluding the impact of foreign exchange, sales and earnings would have both increased by about C$1.4 million.
Sales and earnings gains in the direct-to-consumer North America unit were led by digital sales. Although parent company Torstar does not breakout digital sales by geography, it said global digital sales jumped 73% in the quarter, to C$9.5 million, representing 8.1% of total revenue. In last year’s third quarter, digital sales represented 4.5% of sales. The North America retail division had lower sales for both series and single title books during 2010 so far and this trend continued through the third quarter, resulting in both lower results for the quarter as well as a negative adjustment to prior period returns provisions. In addition to the sluggish economy, retail sales of print books were hurt by “some shift” of sales to digital formats. Sales in the overseas segment benefitted from the acquisition of the 50% stake in Harlequin’s German unit that it didn’t already own.
For the first nine months of 2010, global digital sales rose 70%, to C$24.6 million, 7.1% of company revenue of C$348.1 million; in the first nine months of 2009, digital sales represented 3.8% of Harlequin’s C$371.1 million in sales. Operating profits in the nine months rose to C$66.1 million from C$63.1 million.
Among its different imprints, Harlequin is discontinuing the use of the Silhouette and Steeple Hill imprints and expanding under the Harlequin brand. According to a spokesperson, as search and discovery becomes more important to readers, "we feel that these changes will make it easier to find authors under the trusted Harlequin brand." All series books will remain the same, the spokesperson said, adding "this move to consolidate more under the Harlequin brand further maximizes out promotional spend."
Looking ahead, Torstar said given the softness in the North America retail market, it expects full year results to be down slightly compared to 2009. While continued growth in digital sales in North America could offset some decline in the retail segment, "the weak U.S. economy causes some concern for fourth quarter sales."
