After posting lackluster financial results for the first nine months of fiscal 2024, Scholastic’s hopes for a good fourth quarter did not materialize, with the company posting a 10% decline relative to last year’s record quarter. In announcing the company’s results for the fiscal year ended May 31, 2024, Scholastic CEO and president Peter Warwick said a slowdown in supplemental curriculum purchases by schools and increasing pressure on consumer spending cut into expected sales in both its education solutions and book fair businesses.
For the full year, Scholastic revenues decreased 7% to $1.6 billion, and adjusted EBITDA decreased to $136.9 million from $196.3 million in fiscal 2023. Full year earnings per diluted share were $1.14, down 54% from $2.49 in the prior year period.
In his remarks, Warwick said the company was continuing to invest in “key growth initiatives and long-term opportunities” while “navigating current market headwinds.” Specifically, Warwick cited Scholastic's acquisition of media production and animation company 9 Story as “a major advance in our evolution as a global children's media company.”
In the coming fiscal year, Warwick said 9 Story would be “consolidated and integrated with Scholastic Entertainment in a new Entertainment segment.”
The company’s trade revenue in the fourth quarter rose to $81.6 million compared to $79.3 million a year ago, a 3% gain paced by the spring release of the 12th book in Dav Pilkey's Dog Man series, which topped bestseller lists around the world. Full year trade channel revenues were $349 million, "in line with $348.1 million the prior year."
Despite what Warwick called “solid trade results,” the children's books segment declined by 9% to $266 million in the quarter, which he said largely reflects “the resizing” of School Book Clubs and “the increasing pressure this spring on consumer spending and participation in School Book Fairs.”
Book Fairs have indeed faced a challenging environment in the last year, with Scholastic officials reporting that Book Fair revenues decreased 6% in the fourth quarter to $169.5 million and 2% for the full year to $541.6 million. Although the company’s “fair count” increased, revenue per fair was lower than prior year record levels, although still “well ahead of pre-pandemic levels on lower transaction volumes.”
The rise of book bans has also complicated matters for Book Fairs. Last fall, Scholastic apologized and withdrew a controversial program offering an optional collection of diverse books at its book fairs, after a chorus of criticism from authors, librarians, educators, and freedom to read advocates.
Book Club revenues in the fourth quarter, meanwhile, were $14.4 million, down from prior-year period revenues of $26.2 million. For the year, Book Club revenues finished at $62.7 million, compared to $117.8 million last year, as a plan to resize and remake the business with an emphasis on profitability takes root. "I think we're optimistic the changes that we're making are going to be much more in tune with being able to grow back the business," Warwick said when asked about the "shrink-to-grow" strategy for Book Clubs. "The key point," he added, "is the business needs to be profitable, and we have been able to make sure that the profitability year-over-year has not deteriorated."
Looking ahead, company officials said they were targeting revenue growth of 4% to 6% in FY 2025, reminding analysts that Scholastic results are highly seasonal.
Asked about the outlook for a bounceback in the Book Fair segment, Warwick sounded an optimistic note: “In terms of revenue per fair going forward, we're expecting modest growth in the forthcoming financial year 2025.”
