Adjusted operating profit at Simon & Schuster rose 13% in the second quarter ended June 30, to $17 million, despite a 3% decline in sales, which fell to $183 million. The improved profitability was due to higher sales of digital content—which represented 15% of total sales in the quarter (about $27.5 million)—and other cost savings. Higher sales of e-books and other digital content were somewhat offset by declines in print sales especially in hardcover commercial fiction and mass market paperback, said S&S CEO Carolyn Reidy. The movement of print to digital as well as the demise of Borders were the two major factors behind the decline in print sales, Reidy said.
Although digital sales doubled in the period compared to last year’s second quarter, digital’s share of sales fell from 18% in the first period, something Reidy attributed to first-quarter e-book sales benefitting from consumers stocking up on e-books after getting a reading device for the holidays. Reidy expects digital sales to take a larger piece of revenue in the second half of the year, especially in the fourth quarter when device sales increase. But to ensure the viability of physical stores, S&S has been in discussions with all the players in its different sales channels. “We're exploring ways to keep sales of physical books profitable at stores,” Reidy said. She is also optimistic that “a good portion” of Borders’s customers will migrate to other physical stores as well as to online retailers.
In the U.S., sales in S&S’ children’s division and audio units were “way up,” Reidy said, sales in adult were down. The publisher’s worldwide results benefitted from a strong showing by its international group with sales up 32% led by gains in the U.K. and Canada. The company’s new India office opened yesterday, Reidy noted. U.S. adult hardcover sales were led by The Greater Journey by David McCullough, The 17 Day Diet by Dr. Mike Moreno, and From this Moment On by Shania Twain. In the children’s group, Dork Diaries 3 by Rachel Renee Russell, City of Fallen Angels by Cassandra Clare, and We’ll Always Have Summer by Jenny Han were among the top sellers.
For the first half of 2011, adjusted profits rose 29%, to $29 million, while revenue slipped to $338 million from $341 million. Reidy said that given a strong fall and holiday lineup she is very optimistic that S&S “will have a strong rest of the year.” She was encouraged by the strong performance of Jaycee Dugard’s recently released A Stolen Life, which sold 240,000 e-books in its first two weeks on sale after setting an S&S record for most e-book copies sold in its first day on sale. Total digital and physical copies in print for Stolen are 1 million.
S&S parent company CBS had an extremely good second quarter, which CEO Leslie Moonves was largely due to increase demand for content delivered on new platforms and overseas. He noted in prepared remarks that S&S, “is embracing digital distribution as effectively as any of the businesses in our Content group.”