The Quarto Group accomplished its three major goals during the first six months of 2019: company revenue was stabilized, up 0.3% to $56.4 million; its operating loss was cut to $1.2 million, from $4.7 million a year ago; and its debt was reduced to $65 million, from $73.2 million in the first half of 2018.
Ken Fund, COO of Quarto, pointed to the reduction in its debt as a key achievement. “The debt is all anyone talks about when they talk about Quarto,” he said. Overall, Fund said he believes the business “is heading in the right direction.”
Last year, Quarto initiated a number of cost cutting steps, and those moves paid off in the first part of 2019, helping the company to lower its costs, Fund said. Even with the cuts, Quarto was able to maintain the same output level for its frontlist titles as last year, and sold more copies per title. “That’s good for business,” Fund said.
The brightest spot for Quarto was its children’s group, where sales rose 14% over the first half of 2018. Gains were across the board, Fund said, led by U.K.-based Frances Lincoln Children’s Books and the Young Quarto line. In the U.S., Quarto’s SmartLab Toys business had a good first six months.
Sales in the adult group fell 6%, which Quarto attributed to softness in the co-editions market. The company has been hurt by market consolidation, and Fund said Quarto is turning more of its attention to custom publishing projects. A bright spot on the adult side was Quarto’s cooking list at its Fair Winds and Harvard Common Press U.S. imprints. Even though Quarto doesn’t have lots of brand name cookbooks authors, “our titles continue to sell, especially in specialty shops such as Whole Foods,” Fund said.
Fund said Quarto is in a good spot to have a solid second half of the year, but how well the company will do depends on factors outside its control. Tariffs on goods imported from China is one key concern, with Fund estimating that if the September 1 tariffs take place, it could add $1 million in costs between September and the end of 2019. The company is looking for alternatives to printing in China, but no clear solution has emerged, Fund said. For the U.K.-based Quarto, Brexit is another issue, as is what will happen to Barnes & Noble under the direction of new CEO James Daunt. The U.S. is Quarto’s largest market, and accounted for 65% of its revenue in the first half of the year.
Despite the various challenges, Fund said he is confident 2019 will be a profitable year for Quarto.