The Perseus Books Group, Thomas Nelson and Scholastic, three publishers that operate in different segments of the publishing industry, all took actions last week to shore up their operations in what continues to be a challenging business environment.
In a move that continues the streamlining of its operations, the Perseus Books Group is integrating its Perseus Publishing imprint into its Basic Books and Da Capo Press imprints. The restructuring will be accompanied by a 7% reduction in the title output at Perseus, to 625 titles, a figure that includes titles being developed under the new Running Press Kids imprint. The title cuts will come in all publishing categories, with no segment targeted for deep reductions.
Under the reorganization, all Perseus Publishing science, business and general nonfiction titles will be published under the Basic Books umbrella as Perseus Basic Books. Health, parenting and reference/how-to books will be published as Perseus Da Capo Press books. The restructuring will result in the departure of three of Perseus Publishing's top executives: publisher David Goehring, associate publisher Elizabeth Carduff and executive editor Nicholas Philipson. Three assistants who worked for these executives will also lose their jobs.
Perseus's Cambridge, Mass., offices will remain open, and John Radziewicz, publisher of Da Capo, will oversee the expanded Da Capo line. He will report directly to Perseus Books CEO Jack McKeown; he had reported to Goehring. Perseus Books acquired the Perseus Publishing imprint, then known as the Addison Wesley Longman trade group, in December 1997, four months after it bought Basic Books.
McKeown said the restructuring will permit Perseus to devote more resources to the titles on a tighter-focused list. To help reach that goal, Perseus Books has reorganized its publicity department to create one central unit under the direction of Jamie Brickhouse, who was named v-p, executive director of publicity. Lissa Warren, formerly director of publicity for Perseus Publishing, has been promoted to senior publicity director for Perseus Basic and Da Capo, reporting to Radziewicz, and she will also work with Brickhouse.
The integration of the Perseus Publishing imprint caps a busy 12 months for Perseus Books, which began with the acquisition of Running Press, the folding of Counterpoint into Basic Books and the launch of its own sales force.
Nelson "Hunkered Down"
Thomas Nelson announced last week that it has reorganized its operations, a decision that resulted in the layoff of about 30 people, or 5% of staff. The company will also cut back on titles. "We have experienced more of our sales coming from fewer of our authors," said chairman Sam Moore, and "as a result, we intend to publish fewer but better-performing titles."
Spokesman Joe Powers said the cuts won't come "at a particular imprint," but that Nelson will be careful about what new authors it signs up. "We have to be a lot more selective," he said. The company focus will now be on the tried-and-true, like Max Lucado, because Nelson believes customers are increasingly reluctant to try new authors. The company expects to be able to reduce its SKU (stock-keeping unit) count by 20%—25% over the next nine to 12 months.
As part of the consolidation, the children's division, previously run by David Moberg, is being merged into the adult division. The new group will be called Thomas Nelson Book Group and will be run by former adult-only publisher Michael Hyatt. The reorganization also resulted in the formation of a Bible group headed by Phil Stoner and a sales and conference group run by Lee Gessner. Staff cutbacks will be made across the board. Powers said that while Nelson could have decided to grow its way out of the slump, it chose a more prudent course. "A lot of publishers will say, 'We're having difficulties and the way to resolve that is to ship more titles.' We didn't want to do that," Powers said.
The staff and title reductions came as Nelson reported disappointing sales in the third quarter ended December 31. Sales in the period fell 12%, to $53 million. Net income rose to $2.5 million from $1.9 million, a figure that included a $4.4-million restructuring charge. Sales were particularly weak in Nelson's gift books segment, while sales in the Bible, children's and backlist categories were also soft. A bright spot was the strong showing of The Savage Nation, which shipped in late December and has hit many national bestseller lists. The success of Savage contributed to solid sales gains in January, and the company expects revenue in the fourth quarter to be up over the final period last year. Nonetheless, Moore said Nelson is "still in a hunkered-down mode. We're assuming things will remain tough."
Scholastic's Terrible January
Scholastic's announcement that Harry Potter and the Order of the Phoenix will have a 6.8 million—copy first printing was not enough to prevent Scholastic's stock from taking a beating last week.
Rather than focusing on the Phoenix news, investors were troubled by Scholastic's warning that its sales and earnings for the fiscal year ending May 31 will not meet expectations. It was the second time in less than two months that the company lowered its financial forecasts. The company now expects revenue to increase 3%—5%, while earnings per share will be between $1.85 and $2.15, a 10%—22% decline from last year's earnings of $2.38 per share. In late December, the company was looking for flat earnings and a 7% sales increase. Scholastic's stock fell 22.9%, to $25.95 per share, on February 11, the day after the warning was issued.
The company blamed extremely weak January sales in its trade and school book club divisions for the lowered expectations. Barbara Marcus, president of the children's book publishing and distribution division, said trade sales were "disappointing across the board," with the company receiving few reorders in January. While business has picked up in recent weeks, it will not be enough to recover the sales lost in January. Book club sales are projected to fall in the mid-single digits for the year due primarily to a decline in Scholastic's Firefly (pre-k—k) and Lucky (grades 2—3) clubs.
Company chairman Dick Robinson said the publisher was also concerned about the possible negative impact state budget pressures will have on the purchase of materials by school libraries in the fourth quarter. In addition, a war with Iraq could disrupt Scholastic's export business, including sales to Department of Defense schools.
To bring spending in line with revenue, Scholastic is "exercising tight control over head count" and is reducing spending on such discretionary items as travel and entertainment, conventions and consultants, Robinson said. Scholastic denied reports that the company has instituted a hiring freeze and described "exercising tight control of head count" as "giving head count a high degree of scrutiny."