Sales and earnings fell in Scholastic’s second quarter ended November 30, 2017, compared to the second quarter last year, but company chairman and CEO Dick Robinson said the company remains on track to hit its financial targets for fiscal 2018. Revenue declined 4% from a year ago, to $598.3 million, and operating profit dropped 4%, to $107.2 million.
The company expected results in the quarter and year to be below comparable periods a year ago, when Harry Potter and the Cursed Child and Fantastic Beasts and Where to Find Them: The Original Screenplay posted strong sales. While sales in the children’s publishing and distribution group fell 5%, Robinson said the decline was less than expected due to strong sales of Harry Potter and the Prisoner of Azkaban: The Illustrated Edition, Dav Pilkey's Dog Man series, and tie-in titles to the popular Five Nights at Freddy's video game series. Still, trade sales fell 18% in the quarter due to the lack of a new Potter titles.
The group also benefited from a 2% increase in the book fair business. Book club revenue was down 7% in the quarter compared to fiscal 2017, but Robinson said profits at the clubs were higher than last year due to “lower cost digital marketing and improved efficiencies in customer service and fulfillment.”
The improved profitability in the book club division was one result of the company’s Scholastic 2020 program, which aims to lower costs throughout the company by greater investment in technology.
In Scholastic’s education unit, revenue in the quarter slipped to $70.9 million in the second quarter compared to $71.1 million in the prior year period, with slightly better results in classroom books and classroom magazines, the publisher said.
The lack of a new Potter title also affected the international group, where sales fell 3% to $115.6 million in the quarter. The lower revenue in the current quarter, Scholastic said, was mainly due to the higher level of Potter-related sales in Canada and in the export channel in the prior year period.
Sales in the first half of fiscal 2018 fell 13% from the same period in fiscal 2017, and operating income was $5.4 million, down from $49.6 million in the first six months of fiscal 2017.