A solid fourth quarter helped Scholastic rebound from a fiscal 2021 that saw financial results fall 12.5% due to the pandemic. For the year ended May 31, 2022, total revenue was $1.64 billion, a 26% increase over the $1.30 billion the company reported in the fiscal year ended May 31, 2021, and higher than the $1.40 billion the publisher had in the fiscal year ended May 31, 2020, when its fourth quarter revenue fell 40%.
“Our results exceeded expectations for this rebuilding year, particularly for book fairs, which was initially the area most affected by Covid,” said CEO Peter Warwick in a call with analysts. The higher sales turned an operating loss of $22.7 million in fiscal 2021 to a profit of $97.4 million last year.
The big revenue driver in the year was the company’s largest division, its children’s book publishing and distribution group, where sales jumped 40%, to $946.5 million. Within the group, the company’s book fair business, where sales plunged in fiscal 2021, saw sales hit $429.7 million, compared to $164.3 million a year ago. The increase was due to “historically high revenue-per-fair” levels—sales were up 13% on a same-fair basis—and an increase in the number of fairs, which reached about 72% of pre-pandemic numbers.
The group’s trade division had a 7% sales increase, to $390.4 million, as both backlist and frontlist titles sold well. Book club revenue fell 13%, to $126.4 million, which the company said reflected labor and systems issues that impacted Scholastic early in the fiscal year.
Sales in the educational solutions group increased 26%, to $393.6 million. Scholastic cited two underlining trends for the improvement: higher government funding abd increased demand for educational materials, which Scholastic said is caused by the need “to support a generation of students affected by the Covid pandemic.” International group revenue fell 3%, to $302.8 million, due largely, the company said, to closing its direct sales business in Asia and Covid restrictions in China.
Scholastic expects several of fiscal 2022’s positive trends to carry over into 2023. The number of book fairs is expected to increase to 85% of pre-pandemic levels, while high per-fair sales is expected to continue. Problems with the book clubs have been fixed, Scholastic said, and it is hopeful of improved results in fiscal 2023. In the trade group, Scholastic pointed to new releases by some bestselling authors such Dav Pilkey, Brian Selznick, and Tui Sutherland to drive sales. The publisher also said that sales in the trade division should continue to benefit from media adaptations of a number of its popular series. The company noted that Scholastic Entertainment has more than 35 projects in development, some of which will impact fiscal 2023.
Continued higher levels of government funding, as well as the ongoing efforts to have students close the education gap caused by the pandemic, will lead to higher sales in the education solutions unit, Scholastic said. Internationally, the company is expecting modest improvement in operating profits as its major markets continue to recover from the impacts of the global pandemic.
Overall, Scholastic expects total revenue to rise by 8% to 10% over fiscal 2022. Not all of that gain will fall to the bottom line, however, as the company expects costs to rise. “Product costs for printing, paper and inbound freight have increased our per unit cost by approximately 16% for purchases made this year and are expected to remain at these levels for the foreseeable future,” said CFO Ken Cleary. An increase in spending to support future growth will also dent earnings. Still, Scholastic expects earnings to increase between 3.2% and 8.5% over fiscal 2022.
