It’s All About the Core for Scholastic

At a conference call reviewing results for fiscal 2015, which ended May 31, Scholastic chairman, CEO and president Dick Robinson said that, after the sale of the publisher’s educational technology group to Houghton Mifflin Harcourt in May, Scholastic’s strategy is clear: “We are focusing on growing our core businesses.” He added that those core operations are all tied to the same mission—developing literacy at school and encouraging independent reading at home.

The sale of the educational technology group, which had revenue of $249 million in fiscal 2014, makes Scholastic a smaller company (its total revenue in fiscal 2014 was $1.82 billion, though for 2015 comparisons, the company revised that downward to $1.56 billion, to exclude the technology group and other discontinued operations). But Robinson insisted that the publisher will be more nimble in responding to market opportunities that center around the growing enthusiasm for independent reading among parents and teachers. Indeed, revenue from continuing operations grew to $1.64 billion in fiscal 2015, up 4.7% over the previous year, and net income increased 13.5%, to $15.5 million.

In addition to Scholastic’s divestiture of its technology group, last year the company also reduced its involvement in the media and entertainment business. Deborah Forte, who was president of Scholastic Media, left in March, and the company took an $8.3 million charge to account for the restructuring. The changes included the closing of the publisher’s interactive operations. Scholastic’s audiobook and video operations, which include Weston Woods and TV production for shows such as Clifford, are now part of the company’s children’s book publishing and distribution group, under its consolidated trade division.

In fiscal 2015, sales in the consolidated trade group, which includes books, fell 2.1% compared to the previous year, to $186 million. Scholastic declined to discuss how book sales fared, noting only that strong sales of its Minecraft titles helped to replace Hunger Games revenue from fiscal 2014. Elsewhere in the children’s book publishing and distribution group, book club revenue jumped 19%, driven by more teacher-sponsored clubs and increased spending by families, and book fair revenue rose 5%, driven by more spending per fair.

In the education group, fiscal 2015 revenue rose 8%, to $275.9 million. International sales fell 2.3%, which the company attributed primarily to the strong dollar. Excluding currency fluctuations, overseas sales were up 4%.

Looking at fiscal 2016, Scholastic sees total revenue rising to about $1.7 billion, with “steady but moderate growth across the majority of its businesses,” the company said. Scholastic provided a little more detail, explaining that it expects sales in fairs and clubs to grow in the low single digits. Executives offered no forecast for book sales but pointed to a strong “pipeline” of titles that includes a new illustrated edition of Harry Potter and the Sorcerer’s Stone, the 12th volume of Dav Pilkey’s Caption Underpants series, and books connected to the release of the Goosebumps movie, which opens in October. Among its Goosebumps offerings, Scholastic will publish five movie tie-in titles.

Scholastic Results, Fiscal 2014 v. 2015

($ in millions)