Scholastic Plans Cost Cuts, Price Hikes

Having shed the money-losing continuities business and without new titles in the money-making Harry Potter franchise ($270 million in sales last fiscal year), Scholastic executives presented analysts with their plan to hit a 9%–10% operating margin in fiscal 2010. A key element will be cutting costs by as much as $35 million in the current year, something that will mean an unspecified cut in head count. The educational technology sales force has already been restructured and streamlined, and jobs eliminated in book fairs. Other areas where positions are likely to be eliminated include IT, the supply chain and business operations. Improving the efficiency of the supply chain will be necessary to offset what chairman Dick Robinson predicted will be an increase in paper, printing, shipping and fuel costs of $15 million to $20 million. Another step Scholastic will take is “selective” price increases, a move that Robinson estimated could add $20 million this year. To generate that amount, Robinson said Scholastic will do more “strategic pricing” in its different marketing channels (i.e., trade, fairs and clubs). International expansion, especially in Asia, where sales were about $70 million last year, is another initiative. In particular, Scholastic plans to expand its business in China, where a new book club operation generated almost $1 million in sales.