Led by a 21% increase in revenue in its children’s book publishing & distribution group, sales at Scholastic rose 14% in the fiscal year ended May 31, rising to $2.15 billion, higher than forecast. Operating income jumped to $186.3 million from $104 million while net income rose to $102.4 million from $39.4 million. Sales in the children’s publishing segment were led by The Hunger Games series. For the year, sales in the trade group (home to Hunger Games) rose 109%, to $395.7 million; in the fourth quarter alone, trade division sales soared to $155.5 million from $38.5 million, as the series benefitted from the release of the blockbuster movie.
Company chairman Dick Robinson observed that Scholastic “had a great fiscal 2012,” but in a similar circumstance to when the Harry Potter titles put Scholastic on a financial rollercoaster, Robinson noted that sales and earnings will be down in fiscal 2013 as Scholastic will not have the benefit of a Hunger Games movie. He expects results to increase in 2014.
Looking at the future, Robinson cited a number of initiatives that he expects to yield dividends including the continued rollout of Storia, launching new educational technology products that will build on Reading 180 and are designed to meet the demands of the new Common Core State Standards. For 2013, Scholastic offered the following overview: in children's book publishing and distribution, new releases in trade, as well as modest growth in school book fairs, should partially offset lower sales of The Hunger Games trilogy, which are forecast to return to pre-movie levels; in educational technology and services, revenue is expected to be approximately level, with a modest decline in product sales, offset by higher service sales; in International, continued improvements in the U.K. and growth in Asia are expected to partly offset the anticipated revenue decline versus fiscal 2012, when sales of The Hunger Games significantly benefited segment results. Overall, Scholastic believes revenue in fiscal 2013 will be between $1.9 billion and $2.0 billion with net income per share of $2.20 to $2.40 (earnings per share were $3.41 last year).
Looking back on fiscal 2012, in addition to the strong results in trade publishing, the children’s book publishing & distribution group reported a 4% increase in book fair sales to $452.1 million, while book club sales fell12%, to $263.5 million. In an update on Hunger Games sales, Scholastic reported that in the U.S. there are more than 50 million copies of the trilogy in print and digital formats: 23 million Hunger Games copies; 14 million Catching Fire; and 13 million Mockingjay).
In the educational technology group sales rose 10%, to $254.7 million, led by robust sales of technology products, including Read 180 Next Generation, as well as double-digit growth in services. Sales in the classroom and supplemental materials publishing group rose to $208.2 million from $197.2 million, reflecting increased sales of classroom magazines, as well as of classroom libraries during the first half of the year, which offset a decline in the fourth quarter. In the international group revenue was $489.6 million, compared to $444.9 million in the prior year. The UK, Canada, Australia and Asia all experienced strong revenue growth, reflecting partly the success of The Hunger Games trilogy. Media, Licensing and Advertising segment was $85.0 million, compared to $93.0 million in the prior year. The difference primarily reflects a planned decrease in custom marketing programs for third-party sponsors, partially offset by higher sales of interactive products.
Even in the banner year, Scholastic continued to remake its workforce, noting that severance expense was $14.9 million (including a $9.3 million charge for its voluntary retirement program), compared to $6.7 million in the prior year.