Scholastic Weathers Tough Fiscal 2009; Optimistic on 2010
By Jim Milliot -- Publishers Weekly, 7/23/2009 7:23:00 AM
After a year in which Scholastic eliminated about 500 positions, sold off a host of non-core assets and wrote-down the value of other units, the publisher has begun fiscal 2010 as a streamlined company that is well positioned to improve profits and cash flow, Scholastic chairman Dick Robinson said. In the year ended May 31, 2009, total revenue fell 14.3%, to $1.85 billion, and the company had a net loss of $14.3 million compared to a loss of $17.2 million in fiscal 2008. The drop in sales, which was expected, reflected the decline in Harry Potter sales as well as a negative impact of $62.5 million from foreign exchange. The loss in the year includes a number of one-time items; earnings from continuing operations was $13.2 million in the year, down from $117.3 million.Without the benefit of the sales from Harry Potter and the Deathly Hallows, revenue in the Children’s Book Publishing & Distribution group fell 21% in fiscal 2009, to $913.5 million. Trade sales tumbled 56%, although sales of non-Potter titles rose modestly in the year led by The 39 Clues and The Hunger Games. Book club and book fair sales each fell 2% in the year, to $336.7 million and $405.7 million, respectively. Scholastic said increased customer participation offset lower transaction sizes.
Sales in the educational technology group fell 6%, to $384.2 million. The decline was attributed to poor sales execution of its technology products in the first quarter and the negative impact of weak funding in the library market. Robinson was optimistic about prospect for educational technology in the current year as Federal stimulus money begins to make its way to schools. In the first seven weeks of the current year sales of educational technology and classroom books rose 40% and Scholastic expects to achieve $50 million in incremental revenue because of the stimulus funds.
In the international segment, sales fell 11%, to $399 million, with the entire decline due to the negative impact of currency exchange. Sales were up in Australia and Canada but down in the U.K. which has undergone some restructuring to curb losses. Sales in the media/licensing/advertising group increased 8%, to $152.6 million, with gains in advertising, interactive products and television programming.
For fiscal 2010, Scholastic expects revenue to be roughly flat with this year, between $1.8 billion and $1.9 billion. Earnings per share is expected to come in between $1.80 and $2.30 per share, before the impact of one-time items. Robinson said profit and free cash flow improvements “will enable us to further reduce debt, pursue strategic opportunities and enhance shareholder value.”
