Revenue at Scholastic rose 1% for the third quarter ended February 28, 2003, to $433.7 million, and the company posted a net loss of $500,000, compared to net income of $11.9 million in last year's third period. The results were in line with the reduced guidance the company provided in mid-February, when it announced it would not hit its financial forecasts for the year ended May 31 (News, Feb. 17). Lower sales in its higher-margin trade channels was cited as the primary reason for the profit decline.
Company chairman Dick Robinson said Scholastic has instituted a series of aggressive actions to improve the publisher's operating performance. In addition to new marketing programs for its school book club and education businesses, Robinson said the company is "freezing head count" and has no plans to award bonuses at current profit levels. He said that despite the uncertainty caused by the Iraqi war and economic softness, Scholastic was holding to its forecast that earnings per share will fall 10% to 22% for the year.
In some good news that will affect results in next fiscal year's first quarter, Scholastic said that due to strong demand for Harry Potter and the Order of the Phoenix, it has ordered a second printing of 1.7 million copies, bringing the total to 8.5 million.
Sales of Harry Potter titles declined by $14 million in the third quarter, while sales of other trade books fell by $4 million. Those declines, plus a 4% drop in book club revenue, offset an 8% increase in book fair revenue, a 16% gain in continuities sales and $8 million from the Klutz purchase resulting in flat revenue of $269 million in the period in the children's book publishing and distribution group. Group president Barbara Marcus said the book club segment had a better than expected third quarter and that the segment should finish the year with a sales decline in the low single digits. Sales in the trade segment came in below expectations in the quarter, although Marcus said February sales were up over January. She said the trade unit is on track to meet its fourth quarter plan. Regarding the flap over Scholastic's book fairs selling copies of Phoenix, Marcus said the company takes the complaints of its customers seriously and "is working with retailers to make everyone satisfied."
Scholastic's educational publishing group was the only business to post a revenue increase in the quarter, with sales up 5%, to $64.3 million. The gain was due to higher sales of its Read 180 reading intervention program. Robinson said he expects budget pressures on schools to accelerate during the year, but that he remained optimistic about prospects for Scholastic because of the growing acceptance of Read 180.
Sales in the international segment were flat at $70 million. A decline in export sales and loss in revenue from discontinued operations in Canada and the U.K. was offset by favorable currency exchange rates. Sales in the media, licensing and advertising segment fell 6%, to $30.1 million, due to lower software and licensing revenue.
For the first nine months of the year, revenue was up 1%, to $847.6 million, while net income dropped 28%, to $29.9 million.
Reynolds Replaces Goff
Joe Reynolds, who most recently served as president of ProQuest's information and learning group, has been named president of Scholastic Library Publishing. Reynolds succeeds Neal Goff, who has resigned from that position after a one-year tenure. Reynolds has a long background in the online and education markets, having worked at Thomson Corp. before moving to ProQuest.
