After several years of steady growth Penguin Group had a 4% decline in sales to £441 million, and a 48% drop in adjusted operating profit, to £22 million, in the first six months of 2012, parent company Pearson reported this morning. The declines were attributed primarily to softness at Penguin Group USA, which the company said was due to a ”lighter” publishing schedule,” big sales of Fifty Shades of Grey and Hunger Games trilogies which siphoned sales from other titles, and continued pressure on physical book publishing and retailing. Penguin Group USA CEO David Shanks said that while the company had a number of strong selling books “none of them were Fifty Shades of Grey.” He said publishing is becoming more hits driven than ever, and observed that in last year’s first half Penguin was boosted by surging sales of The Help. Loss of shelf space has hurt sales of physical books, Shanks noted, particularly Penguin’s large mass market paperback business. He attributed the steep decline in profits to several factors, the most important of which was softness in the more profitable backlist business. “That really hurt,” Shanks said. Growth in e-book sales have also slowed. For all of Penguin Group, e-book sales increased 33% in the first six months of 2012 and accounted for 19% of worldwide sales, or about 84 million pounds.

There were some bright spots in the U.S., including a strong performance by the children’s and YA division and a 12% increase in international sales. While the rate of e-book growth has slowed, Penguin still began new initiatives in the year, including the publication of five new enhanced e-books, the release of more apps, and growth in its eSpecials program that has published over 100 titles to date with The 7th Month and What the Most Successful People Do Before Breakfast the top sellers.

Penguin Group chairman John Makinson noted that outside of Penguin USA, the company was either on track or ahead of last year, and noted that DK had an “excellent” first six months.

Makinson and Shanks were confident that Penguin USA and the group as a whole will do better in the second half of the year. Makinson said there have been no new structural issues that point to a steady deterioration of the company’s business. A strong adult frontlist in the U.S. that includes books by Neil Young Ken Follett, Patricia Cornwell, Nora Roberts, Dolly Parton, Kofi Annan, Zadie Smith Junot Diaz, should help the company turn in a second half performance that comes close to matching results in the second half of 2011, Makinson said. Shanks added Penguin USA is off to a good start, helped by Bared to You, its answer to Fifty Shades.

Bookish in September

Penguin is one of three founding members of Bookish and Shanks said that it is all but certain that the site will launch in September. He said the Department of Justice action held up plans as Bookish needed to discuss various legal issues pertaining to possible oversight by the DoJ and how two “settling” publishers—Simon & Schuster and Hachette—and one continuing to challenge the DoJ, Penguin, can work together. The issues have been resolved and Bookish “looks good for September” Shanks said.