Scholastic Says Profits Will Rise in 2010

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)