Second quarter sales at Harlequin fell to C$107.0 million from C$110.3 million, but operating profit rose to C$18.0 million from C$16.3 million in last year’s second period, parent company Torstar reported this morning. The drop in revenue was due to the decline in sales of print titles that was not entirely offset by higher digital sales. Earnings rose due to lower promotional spending and a lower returns provision. Foreign exchange had a C$100,000 negative impact on revenue.

According to Torstar, North America sales were down C$3.3 million in the quarter with declines of C$2.6 million in retail print and C$2.3 million in direct-to-consumer revenue more than offsetting digital revenue growth of C$1.6 million. Torstar noted that in North America, the shift in retail sales from print to digital moderated in the second quarter, although it added that Harlequin has adjusted its print volumes to account for the higher percentage of digital sales. For all of Harlequin, digital revenue was 20.4% of total sales in the quarter (and the six month period), compared to 15.0% for the second quarter of 2011 (and 14.3% for the six months).

In overseas markets, business continued to be negatively impacted by softness in Europe, although in the quarter digital revenue growth offset lower retail print and direct-to-consumer revenue resulting in an increase in sales of about C$200,000.

For the first half of 2012, sales were down 5.3%, to C$213.7 million, but operating earnings were up slightly, rising to C$38.4 million from C$38.3 million. Torstar said it expects results in the second half of 2012 at Harlequin to decline due to factors that include higher author royalty rates for digital sales and a difficult comparison with a strong 2011 performance. Beginning July 1, Harlequin raised its e-book royalty rate on its frontlist titles and for much of its backlist.