Sales and earnings at Educational Development Corp. plunged in the first quarter ended May 31, 2022, from the comparable period last year. Revenue dropped 43.1%, to $23.2 million, and the company reported quarterly net income of $216,000 compared to $3.4 million last year. The decline came mainly in EDC’s direct sales division, due in part to a drop in the number of at-home sales reps, which fell to 32,200 from 52,200 in last year’s first fiscal quarter.
EDC experienced record sales and profits in last year’s first quarter as the pandemic drove up demand for its children’s books and the number of people looking for work-from-home jobs. Those factors have changed significantly over the last year, and CEO Craig White acknowledged that EDC’s sales have suffered as high inflation has reduced the amount of disposable income consumers have to spend on books.
White added that in a high inflation period, EDC often sees an uptick in people looking to supplement their income, which increases the number of the company's sales consultants. In general, though, White’s remarks about the first quarter and the future were guarded, noting that the company is focused on managing its costs as it works down existing inventory in its warehouse and rebuilds its number of reps.
Like many companies, EDC now offers comparisons to pre-pandemic times, but those comparisons for EDC were not favorable. Sales in the first quarter of fiscal 2020 (which ended in May 2019) were 16% higher than the first quarter of fiscal 2023, and net income was more than $1 million higher than the most recent quarter.
In May, EDC announced a change in its distribution agreement with U.K.-based Usborne Publishing, which supplies most of EDC’s inventory. Under the terms of the new agreement, EDC's direct sales division will continue to sell Usborne titles through its sales channels. The division will also continue to have non-exclusive rights to sell Usborne titles to individuals in the school and library market through book fairs, but will no longer sell directly to schools and libraries.
In addition, following a six-month period, EDC will discontinue selling Usborne products through its publishing division. EDC has been distributing Usborne titles for more than 40 years, and White said the new agreement updates sections that were outdated or irrelevant. EDC said the discontinuance of rights to sell Usborne products through the publishing division and direct to schools and libraries is not expected to have a material impact on financial results, noting that, for the last five years, those efforts represented less than 10% of net sales. White noted that Usborne remains committed to selling through EDC’s multi-level marketing channels.
