Operating profit in Scholastic's children's book publishing and distribution group dropped 23.1% in the fiscal year ended May 31, 2003, to $137.1 million, the company reported in its year-end filing with the Securities and Exchange Commission. Combined with a sales increase of 1.8%, to $1.19 billion, the decline in earnings lowered the group's operating margin to 11.5% from 15.3% in fiscal 2002.
The company attributed the decline in earnings primarily to a decrease in sales of the high-margin Harry Potter books as well as other backlist titles. Potter sales fell to $50 million from $80 million, while sales of other backlist titles declined by $6 million. Profits were also down in the group's direct-to-home continuity business, with earnings off $9 million due to higher selling, general and administrative costs.
Sales in the year fell in two of the group's four operating units. Trade sales declined 3%, to $208 million, with the declines of general trade titles partially offset by $31.3 million in Klutz sales. Revenue from Scholastic's book fairs fell 2.2% in the year, to $352 million, due to a decrease in orders. The number of book fairs held by Scholastic increased by about 7% in the year, raising fair sales 4.6%, to $327.5 million. The largest sales increase was in the continuity unit, where revenue rose by nearly 8%. The largest gain within the continuity unit came in the school program, where sales increased to $90 million from $73 million. Sales in the home continuity program increased 1.6%, to $212.3 million.
Operating profit in Scholastic's educational publishing group fell 5.4% last year, to $41.7 million, despite a 2.8% sales increase to $325.9 million. The majority of the profit decline, $2.1 million, was attributed to severance charges. The group received a $10.4 million boost in sales from acquisitions, while sales of its publishing programs increased $9.3 million last year. Library sales fell by $7.2 million, an 11% decline.
In the media and licensing group, a 4.9% decline in sales was the major factor behind an increase in the unit's operating loss, which rose to $5.4 million from $0.2 million in fiscal '02. Operating profit in the international group fell 21.1%, to $19.4 million, with severance charges cited as the primary reason for the decline.
