Publishing Stocks Post Big '04 Gains

It was another good year for the Publishers Weekly Stock Index, although the 13.1% increase posted in 2004 was only half of the 26.3% gain recorded in 2003. Still, the PWSI easily beat the 3.1% increase posted by the Dow Jones Average and the NASDAQ's 8.6% gain. The stock prices of 16 companies rose in the year, while only five recorded losses.

Despite the rise of online bookselling during 2004, retailers had the strongest gains in the year. Hastings Entertainment's share price had the biggest increase, jumping 95.7% in 2004, to $8.28 per share. The multimedia chain reported sales and earnings to be on track through the beginning of the holiday season. The stock price of Books-A-Million, which shot up 135% in 2003, rose 48.9% in 2004; BAM is expecting solid gains in sales and earnings for 2004, despite taking a hit from the summer hurricanes. Barnes & Noble's stock price benefited from the spinoff of its GameStop subsidiary late in 2004. The move resulted in a one-time dividend of $10.20 per share to stockholders, and B&N's share price was adjusted to reflect the absence of the videogame chain from its financials. The strongest year in Amazon.com's history, however, couldn't prevent its share price from falling in 2004. The e-tailer's stock price fell 15.8% in 2004 as investors worried that the company may be unable to sustain its rapid growth pace in the years ahead. Amazon's stock price had jumped 178% in 2003.

The Internet played a key role in revitalizing the stock price of MediaBay. The spoken-word audio club had flirted with being delisted from the NASDAQ during the year for failure to keep its stock price above $1. But its decision to focus on the digital download market and its agreement with Microsoft to offer digital content through the MSN network gave MediaBay's stock price a permanent boost. MediaBay is hoping it can emulate the success of Audible. Helped in part by the success of iTunes, Audible's digital download business took off in 2004 and its stock price, which benefited from a one-for-three stock split, soared from $3.96 at the beginning of 2004 to close the year at $26.05 (Audible will be added to the PWSI in 2005).

The three printers included on the PWSI all had increases in their stock prices in the year. The largest gain came at the smallest company, Courier Corp., whose stock price rose 35%. All printers are expected to benefit from the projected surge in spending on school textbooks in 2005, but the impact should be greatest on Courier since its printing operations are more focused on the educational market than those of Donnelley and Banta.

The rosy outlook for the educational market in 2005 also played a role in lifting the stock prices of the McGraw-Hill Cos., Reed and Pearson.

The company that had the biggest decline in the year was one-time Wall Street favorite LeapFrog. The educational company has repeatedly downgraded its sales and earnings forecasts. Advanced Marketing Services' stock price took a hit for the third year in a row as the company's advertising accounting problems were compounded with the first indictments last year in the SEC and FBI's ongoing investigations. The inability of Reader's Digest to sustain a financial turnaround led to the third straight year of price declines at the publisher.

Industry Stocks: 2004 Performance