Increased operating efficiencies, higher gross margins in its children's book business and $50 million in incremental revenue for its educational technology products will result in an additional $30 million to $70 million of operating income in fiscal 2010 that will bring it close to achieving an operating margin of 9%, Scholastic chairman Dick Robinson said in a conference call discussing fiscal 2009 results. The company eliminated more than 500 positions in the last fiscal year and will realize the full benefit from that cost savings in the current year, Robinson said. More job cuts are expected to take place in the current year, primarily in the U.K., where Scholastic will reduce its “footprint,” Maureen O'Connell, v-p, CFO, said. In the U.S., the company will also continue to streamline the distribution operations of its book fair business; it recently cut the number of regions from 14 to seven.

Total revenue is expected to be roughly the same in fiscal 2010 as it was in 2009, between $1.8 billion and $1.9 billion. In addition to gains in educational technology, the company should see some increase in trade book sales, including more sales of Potter-related titles (in fiscal 2009 sales were $35 million, with half coming from Beedle the Bard), plus continued solid sales from multiplatform games such as 39 Clues. More online orders through book clubs should increase profits in that sector, Robinson said, noting that Scholastic generated online sales of $370 million last year. He said Scholastic was in the early stages of building a digital distribution business that will be able to deliver a range of children's digital content, including e-books.

Scholastic Results
2008—2009 ($ in millions)

Segment 2008 2009 % Change
Source: Reed Business Information
Children's Book Publishing & Distribution $1,161.4 $913.5 -21%
Book Clubs 336.7 330.2 -2
Trade 419.0 183.8 -56
Book Fairs 405.7 399.5 -2
Educational Publishing 407.1 384.2 -6
International 449.8 399.0 -11
Media/Licensing/Advertising 140.8 152.6 8
Total revenue 2,159.1 1,849.3 -14
Earnings from continuing operations 117.3 13.2 -89
Net loss 17.2 14.3

Remaking Scholastic, Fiscal 2009
Over $30 million in salary reduction

Operations in Argentina and MexicoDoor-to-door sales operation in Puerto RicoContinuities business in Australia and New Zealand, Canada and the U.S.Scarsdale Scholastic StoreNon-children's book and gift fair operationA professional magazine

Scholastic at Home (U.S.)QED in deal worth $29 million

In Process
Selling Maumelle, Ark., distribution centerSelling Danbury, Conn., facilitySelling Spanish book channel