Lack of Adoptions Drops Sales at HM

by Jim Milliot -- Publishers Weekly, 8/23/2004

Similar to its competitors, Houghton Mifflin cited an "adoption trough" as the reason for the decline in sales for the second quarter ended June 30. Total revenue fell 7.5%, to $334.1 million, and the company had a net loss of $8.4 million, compared to net income of $9.2 million in last year's second quarter.

Sales in the k–12 publishing segment dropped 11.7%, to $247.4 million. Tony Lucki, HM president, attributed the decline to the "low point" in the adoption cycle, combined with strong sales in last year's comparable quarter, particularly in California.

College division sales rose 3%, to $33.9 million, with gains limited by lower backlist orders. Lucki said HM's college division is large enough to "adequately compete" in the market. HM's trade and reference group had the best performance in the period, with sales increasing 11.3%, to $33.6 million. The gain was led by sales of the Oprah pick The Heart Is a Lonely Hunter.

Lucki said HM was using 2004 to invest in new products, systems and personnel to position the company to take advantage of the greater adoption opportunities in 2005 and beyond. HM's k–12 sales force has added 47 new reps and will add 20 more by the fall. Lucki said the goal is to "build critical mass" that will allow the publisher to increase sales by reducing the sales territory of its school reps. The company is also in the middle of an ERP (enterprise resource planning) implementation that, when completed, will improve HM's decision-making capabilities, said Joe Fargnoli, v-p and treasurer.

For the first half of 2004, total revenue was down 4.3%, to $473.1 million, while the net loss was cut to $98.9 million from $112.7 million. Lucki said HM "has made progress in our strategic direction. We know what we have to do to be successful."