Third quarter revenue at Harlequin fell 7.1%, to C$107.8 million, and operating earnings declined to C$14.1 million from C$18.8 million in the comparable period in 2012, parent company Torstar reported this morning. The drop at Harlequin was attributed to declines in print sales in both its North American and Overseas operations that was not offset by growth in digital sales. Revenue in North America had a slight benefit from favorable foreign exchange.
In North America, Harlequin declines in the retail print and direct-to-consumer channels were only partially offset by growth in digital revenues. Overseas revenues remained weak in the quarter affected by challenging economic conditions, particularly in Europe, Torstar said. Consistent with North America, Overseas growth in digital revenue was insufficient to offset print declines. Elaborating on the performance, Harlequin's Craig Swinwood said the print decline was most evident in its series titles where space reductions continue to be more of an issue than for the publisher's single title line where print has held up better. Swinwood said he believes Harlequin will see stability throughout the print market by the end of the year.
Torstar reported that global digital sales were 25.2% of total revenue in the third quarter compared to 20.3% in the third quarter of 2012, while digital sales accounted for 24.4% of revenue in the first nine months of 2013, up from 20.4% in the first nine months of 2012, largely reflecting growth in Overseas digital revenues. Swinwood noted that since romance was one of the first categories to see a spike in e-book sales, it follows that the category--Harlequin's most important--would also be the first to be affected when growth began to slow.
Torstar gave a mixed outlook for how Harlequin will do in the fourth quarter. It said it expects Harlequin sales to be lower in the current quarter compared to a year ago, but will not decline by as much as the third quarter. Torstar said revenue through the first nine months of the year--down about 6%--were weaker than expected and that the 27% decline in earnings was due to “lower revenues, higher author royalties for digital sales and lower favourable adjustments to prior year returns provisions.“