Despite a 5.5% decline in sales, adjusted operating income at Simon & Schuster rose 10.9% in the third quarter, to $29.5 million. Revenue in the period fell to $217.7 million. For the first nine months of the year, earnings jumped over 42%, to $46.7 million, despite a 2.4% decline in sales to $559.1 million. S&S CEO Carolyn Reidy credited the strong earnings improvement to a variety of factors. “We’ve been working hard on cost containment for 18 months and it is paying off,” she said. “We’ve also had a good publishing program.” Strong gains internationally, particularly in the U.K. where sales are up by double digits, has also contributed to the improved results.
S&S has also been adjusting to the changing marketplace. Through the first nine months of the year, digital sales accounted for 7.1% of domestic sales, Reidy said, and while the majority of those sales have come in the adult side, S&S is beginning to see more e-book sales of children’s titles, especially in the teen segment. Reidy said the addition of the Nookcolor should provide a boost in the e-book sales of children’s books, noting that S&S will have 30 books available for the device by the end of the year. S&S has not moved aggressively in developing apps, Reidy noted, because "the app store is too crowded and price prices too low.” The ability to sell full color children’s books in a general retail market “is a huge positive,” she added.
In addition to cost controls and supply chain improvements, the sale of more digital titles has played a role in boosting margins, Reidy said, as has other changes in the sales mix. S&S is selling more trade paperbacks and more teen titles and fewer picture books, as that market continues to struggle. The renegotiation of S&S’s four-color printing contract also aided margins, Reidy added.
Despite the improvement in margins, S&S would like to improve its top line, but Reidy is concerned about the ability of traditional bookstores to help them accomplish that goal. Bookstore still serve as key outlets where books are displayed and customers can interact with titles and talk about them with booksellers, she noted, and their financial health is a concern. Apart from working with retailers on programs they develop to spur sales, however, Reidy is not sure what else publishers can do to help stores.
Still, Reidy said she sees signs that the combination of print and digital sales will keep publishing healthy. There has been excitement in stores about the titles just being released and she is hopeful that all the press about e-books and e-readers will get people thinking about books as presents this holiday season. She was cautiously optimistic about prospects for S&S, noting the company has its traditional strong lineup of fourth quarter titles. Among books just out or set for release are American Assassin by Vince Flynn, Broke by Glenn Beck, Unbearable Lightness by Portia DeRossi, Inside of A Dog by Alexandra Horowitz, The Christmas Spirit by Joel Osteen, Full Dark, No Stars by Stephen King, One Big Table by Molly O’Neill, and The Athena Project by Brad Thor.