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Scholastic Has Record Year and Begins Grolier Integration
Jim Milliot -- 7/24/00
Consolidation cuts 50 jobs and looks to save $20 million
Scholastic posted record results for the fiscal year ended May 31, 2000, with total revenues up 20% to $1.40 billion and net income ahead 39% to $51.4 million, a figure that includes an $8.5-million onetime charge. The company's profit margin inched up to 3.7% from 3.2% in fiscal 1999.
Revenue growth was led by Scholastic's children's book publishing and distribution division, where sales rose 31% to $872.1 million largely on the strength of a better than 100% increase in the trade publishing unit, which benefited from the sale of the first three Harry Potter titles. The latest Potter title, Harry Potter and the Goblet of Fire, was released after the close of Scholastic's fiscal year, although company chairman Richard Robinson said that the soaring sales of Goblet "will help us achieve our revenue goals for trade publishing in 2001." The doubling of its retail sales is likely to make Scholastic the second-largest children's book publisher.
In the division's other units, school book clubs and home continuities sales rose 15%, while revenues from school book fairs increased 18%.
Revenues in the educational publishing division rose 8% to $219.8 million due in part to higher sales of Scholastic's reading materials. Sales in the international division also increased 8% to $206.7 million, as higher sales in Canada and Australia offset slower sales in the U.K. Revenues in the media, licensing and advertising division remained flat at $103 million as increased advertising sales were offset by lower tv production fees.
Scholastic completed its acquisition of Grolier in late June and results from its newest acquisition were not included in fiscal 2000. Scholastic has stepped up its integration efforts since the closing and hopes to produce cost savings of $20 million over the next two years as well as adding $10 million in operating profits. Approximately 50 jobs out of 800 positions at Grolier are being eliminated as part of the consolidation, mainly in Grolier's Danbury, Conn., offices. Employees whose jobs have been cut can apply for positions at Scholastic's New York headquarters. Brian Beckwith, Grolier president, will serve as a consultant to Scholastic.
A six-person transition team has been established to help facilitate the consolidation. Scholastic's Judy Newman is working with George Saul of Grolier in merging the direct-to-home business; Scholastic international head Dave Walsh is working with Barry Jones, Grolier International president, to combine the two companies' international operations; while Hugh Roome, Scholastic executive v-p for the school group, is working with J Tessitore, Grolier Publishing president, to merge the library sales and marketing operations.
Scholastic also announced that it has appointed Donna Iucolano executive v-p of its Internet group. Iucolano, who has been senior v-p for interactive services at 1-800-FLOWERS.com, replaces Ruth Otte, who is resigning in mid-August for health reasons. Iucolano will head Scholastic's efforts to integrate Grolier's Web operations with its own, while also launching Scholastic's e-commerce efforts.
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