The June release of Harry Potter and the Order of the Phoenix sent Scholastic's sales from the series soaring to $170 million in the first quarter of fiscal 2003, ended August 31. That's up from $15 million for the comparable period the prior year. The company sold 11 million copies of the book during the first quarter, about as many as it had expected to sell for the entire year. While they touted the achievement, Scholastic executives warned that the Potter windfall will weaken in the second quarter.
"Most of the sales are done," Scholastic CEO Dick Robinson told analysts in a conference call. "We hope that there will be a little bit of a pickup for Christmas and the holidays. But looking coolly at this, most of the sales have already been made. It's been such a phenomenal success that it would be a little foolhardy to expect it to continue at the rate it's been going."
An abrupt slowdown in Potter sales will make it challenging for Scholastic to maintain robust trade revenue growth. The jump in Potter sales was responsible for boosting Scholastic's trade revenue to $203.3 million in the quarter, up from $57.4 million in the comparable period a year ago. Non-Potter trade revenue for the first quarter was $9 million lower than in the comparable period the prior year, with the company blaming lower sales from Klutz and a generally weak retail market. The $170 million from Potter was reflected in sales figures for the children's book publishing and distribution division, which saw revenue in the quarter more than double, from $140.2 million to $288.2 million.
Not surprisingly, the division was the company's star performer. Scholastic's total revenue rose 55% in the quarter, to $475.4 million. Net loss shrank to $24.8 million, from $44.6 million in the first quarter of the previous year.
Other first-quarter highlights included a 20% increase, to $105.8 million, in educational publishing revenue, resulting from strong sales to New York City and other public school systems; sales of the READ 180 intervention program; and sales of the Scholastic Early Intervention Program in Texas. Revenue from the media, licensing and advertising unit fell 4%, to $161.1 million, because of lower sales of software and consumer magazines. International revenue increased 6%, to $65.3 million, on the strength of favorable currency exchange rates.
Looking ahead, Barbara Marcus, president of the children's book publishing and distribution group, said the company is working on improving its book clubs and book fairs, with changes such as better teacher benefits to encourage participation in book clubs and training volunteers to guide children and parents in making purchases at book fairs. On the trade side, Marcus pointed to a number of strong releases in the second quarter, including two Captain Underpants books, each with a million-copy printing. Another highlight will be the relaunch of Goosebumps, with 25 titles that will each have a first printing of 75,000 to 100,000 copies. Marcus called the retail market "still a little unpredictable and sluggish."
More Potter Promos
Scholastic isn't giving up on squeezing out more sales from Order of the Phoenix. It is launching a print ad campaign aimed at getting adults to read the book. Scholastic said the ads will feature "unlikely types of adult readers," including "a tattooed biker, a fashionista, skateboarders and sports fans," with the tag line "We all have our reasons. What's yours?" Ads will run in Rolling Stone, US Weekly, Time Out New York and Outside.
Children may make up Potter's most ardent fan base, but adults have hardly ignored the series. According to Ipsos BookTrends, about one out of five adults surveyed in 2002 had read at least one Harry Potter book.
As for when the next Harry Potter title will come along, no one can say but J.K. Rowling herself—and she isn't talking, Marcus said. "Jo has made it very clear that she is not going to be rushed, and when she's done she will tell us."
