In last month's conference call with analysts regarding second-quarter results, Barbara Marcus, president of Scholastic's children's book publishing and distribution group, outlined a number of new initiatives the group is taking to grow sales and profits in non—Harry Potter periods.
To help improve sales in its trade segment, Scholastic will soon release its first new monthly paperback series in several years. Geronimo Stilton, an import from Piemme in Italy, and a big hit internationally, is a series starring a mouse newspaper editor. Scholastic will release two titles in February and one per month after the initial launch. Marcus said the series will be released simultaneously in the company's trade, book fair and book club channels, a tactic that often helps drive sales through Scholastic's trade avenues.
The trade group is also continuing to sign new licensing agreements in order to expand its presence in the mass market. Among its licensed properties are Shrek 2, Spiderman 2, Rubbadubbers and Care Bears, all of which the company will publish in a variety of formats. For Shrek 2, for example, 16 SKUs are planned, including novelizations, storybooks, and coloring and activity books.
A third initiative is to "repackage, repromote and refresh" more titles in the company's backlist, Marcus said. The relaunch of Goosebumps, she noted, has gone well, with about one million copies of the series in the market.
Marcus said that for the second half of the year, she expects sales in the trade segment to be "down somewhat" in the third quarter due to continued softness in backlist sales, but expects sales to increase in the fourth quarter, driven by a strong frontlist.
In the other segments in the children's book publishing and distribution group, Marcus said the rebound in book clubs is better than anticipated, and low double-digit revenue growth is expected for the full year. New promotions, the purchase of the Troll book club assets and the growth in online ordering (which accounts for 30% of orders) all contributed to the improved results.
Book fair sales in fiscal 2004 are expected to increase by mid-to-upper single digits, Marcus said. Better title availability and new promotional programs helped boost sales per fair, she said, and the company continues to streamline its warehouses as part of its effort to improve routing efficiency. Scholastic is also testing growth plans for middle school book fairs, and initial results are positive, Marcus said.
Revenue in the company's direct-to-home business is projected to be flat for the remainder of the year, although bad debt is expected to improve. Marcus explained that the higher bad debt in the second quarter was partly the result of initiatives undertaken to sign new members following passage of the Do Not Call legislation that will limit telemarketing opportunities. Marcus said Scholastic believes the direct-to-home channel "is a fundamentally sound way to deliver high-value, low-priced books... and we are committed to it."
