Revenue fell 7% at Harlequin in the second quarter ended June 30, to C$99.5 million, and operating earnings dropped to C$10.5 million from C$18.1 million in the second quarter of 2012. CEO Donna Hayes attributed the declines to currency fluctuations, continued weakness in its North America book club business, and a deeper than expected decline in overseas sales. She noted that print retail sales in North America were stable in the quarter and that e-book sales were up, albeit at a much less faster pace than in last year’s second quarter. Global digital sales were 24.5% of total revenue in the quarter compared to 20.4% in last year’s second quarter.
Hayes, along with Harlequin COO Craig Swinwood, said several new initiatives did well in the quarter, including Harlequin’s expanded nonfiction program whose bestsellers included The Virgin Diet and The Beauty Detox Foods, as well as its digital-first programs which had several hits in the period. The publisher also had strong performances from some of its top-selling authors, including Robyn Carr and Susan Mallery. In addition to lower revenue, earnings were hurt because of the change in author royalty payments instituted one year ago which moved Harlequin to a net receipts model; Harlequin will not face those comparisons again in the second half of the year since the net model was implemented in the middle of 2012.
Hayes and Swinwood were hopeful that results will improve in the second half of the year, citing stability in the North American print and digital segments and high hopes for Harlequin’s Teen line, digital first programs and an overall stronger book lineup. Swinwood pointed in particular to the release, in partnership with Cosmopolitan, of several Sylvia Day titles that will be released in a combination of print and digital editions.
For the first half of 2013, Harlequin sales were down 5.4%, to C$202.1 million, and operating earnings fell to C$27.6 million from C$38.6 million.