Profits Declined 12% in Scholastic Publishing Unit
by Jim Milliot -- Publishers Weekly, 9/2/2002
Operating profit in Scholastic's children's book publishing and distribution segment fell 12.4%, to $189.8 million, for the fiscal year ended May 31, due largely to decline in sales of Harry Potter titles, the company reported in its year-end filing with the Securities and Exchange Commission. Earlier this year, Scholastic reported that sales in the publishing segment fell 4.3%, to $1.17 billion (News, July 29).
Sales of Potter product were $80 million in the most recent fiscal year, compared to $200 million in fiscal 2001. Although a number of Scholastic's other lines—Clifford, Captain Underpants and I Spy—did well in the year, their sales were not enough to offset the decline in Potter revenues. As a result, sales in Scholastic's trade division fell 33% in the year, to $215 million.
The best-performing unit in the publishing group was the book fair division, which had a 17% sales gain, to $313 million. The $4.2 million July acquisition of Troll's book fairs helped increase revenues, as did a 13% increase in the number of fairs. Revenues at book clubs rose 9%, to $360 million, which Scholastic attributed simply to an increase in orders. Sales in the continuity division declined 7%, to $280 million, although its profits increased due to the elimination of less profitable programs, particularly in its direct-to-home business. Sales in the direct-to-home segment fell 4.8%, to $207 million, while sales to the school market fell 13%, to $73 million.
Scholastic's educational publishing segment posted an operating profit of $51.5 million in fiscal 2002, compared to a loss of $56.9 million in the previous year, when the company took a large write-off to reflect the phasing out of its Literary Place basal program. Sales increased 2%, to $315.5 million, due to higher sales of paperback reading collections, supplementary reading-improvement materials and better than expected sales of Literary Place. Profits improved due to significant cost savings associated with the decision not to update Literary Place.
The operating loss in the media, licensing and advertising segment fell to $15.6 million from $23.5 million. Scholastic attributed the decline to a $7.1-million reduction in marketing and promotional expenses. Revenue was down 2.3%, to $131.2 million.
Operating profits in the international segment rose 4.7%, to $20.2 million, on a 1.7% sales gain, to $301.7 million. The strongest results were in Australia, where profits increased by $3 million; export profits were down by $1.6 million in the year.
