Earnings Jump at Harper Despite Flat Revenues
By Jim Milliot -- Publishers Weekly, 8/27/2001
Operating income rose 25%, to $111 million, at HarperCollins for the year ended June 30, 2001, while revenues were virtually flat at $1.03 billion. The flat revenues "were not troublesome at all. In fact, they were planned for," HC president Jane Friedman told PW, explaining that the lack of growth was due to the streamlining of HC's U.S. operations, which resulted in the release of fewer titles, as well as to unfavorable foreign exchange rates. Excluding the effects of foreign exchange, sales would have increased 3%.
Profit growth in the U.S. was led by the children's division, where operating profits increased 32% on a slight increase in revenues. Earnings at Zondervan rose 25% on flat sales, while the operating profit in general books increased 10%. Profits were also given a boost by HC's agreement with Scholastic for which HC performs customer service, billing and credit functions. HC's recently launched e-book imprint, Perfectbound, has sold some units, and Friedman vowed that HC will "stick with it until e-books becomes a market, a market we hope to help develop."
Returns were "more significant than we would have liked" in the year, Friedman said, adding that she was "shocked" by the amount of children's book returns. "Thankfully they've stopped," she said. Friedman attributed the higher return rate to the loss of some 350 retail outlets during the course of the year, and she noted, "for the first time, some of our bookseller accounts were paying their bills with books. It's not the best economy." Sales through online retailers were good, but "not up to expectations," Friedman said. She credited continued improvement in HC's supply chain management with boosting earnings in a soft economy. HC had an operating margin of 10.8% in fiscal 2001, compared to 8.6% in fiscal 2000, and the company represented 6.6% of parent company News Corp.'s profits last year, up from 5.1% in fiscal 2000.
Looking ahead to fiscal 2002, Friedman was hopeful that despite a weak economy, HC's strong fall list will translate into strong Christmas sales. And although the company lost a bid to acquire Golden Books, Friedman said Harper is in an "acquisition mode."
