Declines in Scholastic’s children’s book publishing and distribution, as well as its international businesses, offset an increase in its education group in the quarter ended August 31, 2020, compared to a year ago. As a result, revenue fell 7% in the most recent quarter, to $215.2 million, but cost controls reduced the operating loss to $51.8 million, from $87.1 million in the quarter ended August 31, 2019.
In his remarks about the quarter, CEO Dick Robinson said Scholastic "substantially completed our $100 million cost reduction program and our transition to a more flexible operating model." For the quarter, he explained, "most reductions were related to labor, resulting in a one-time pre-tax severance charge of $12 million. We've streamlined all of our U.S. units, and particularly our club and fair organizations, significantly reducing headcount and improving efficiency."
The company’s children’s book publishing and distribution group took the biggest revenue hit from the impact of the pandemic, with revenue falling 17%, to $90.9 million, in the quarter. In particular, school closing and partial reopenings led to a decline in both its book fairs and book club businesses in what is generally a small quarter for those operations.
Sales in the trade division fell 3%. Scholastic attributed the dip primarily to shifts in the scheduled on-sale dates for books in the bestselling Dav Pilkey Dog Man series; Grime and Punishment was released the day after the close of the quarter, while last year’s For Whom the Ball Rolls came out in the first quarter. The division benefited from strong sales of The Ballad of Songbirds and Snakes, while workbooks in the company’s Scholastic Early Learners and BOB Books lines were major sellers, Scholastic said.
In addition to the release of Grime and Punishment this quarter, the trade group is expected to get a boost from the November 10 release of Ickabog by J.K. Rowling. Robinson didn't give a precise first printing for the novel, saying only that Scholastic "is printing an awful lot of copies worldwide."
In Scholastic’s education group, revenue rose 11%, to $53.6 million, over last year’s quarter, led by higher sales of digital product subscriptions, teaching resources, summer literacy camps, and summer reading programs. The company said it expects sales of its digital offerings to continue to grow in the new school year "as we are able to provide schools the blended learning solutions they need for students in the classroom and at home," CFO Ken Cleary said.
First quarter segment revenue fell 5% in the international group, to $70.7 million. The decline, Scholastic said, was due to lower volumes in book fair channels in Canada, Australia, and the U.K., as well as lower direct sales in Asia, partially offset by stronger trade publishing globally.
While Scholastic said it expects business conditions to improve in the second half of its fiscal year, which begins in December, it reported that pandemic-caused delays in club orders and fair bookings “will likely lead to a significant decline in revenues in the company’s children’s book publishing and distribution segment in the second quarter.” The company added that, while it expects increasing demand for several of the publisher’s new services—such as virtual and shippable fair options and home delivery of club and fair orders—“given the variability in school schedules, as well as the possibility of new COVID outbreaks and their potential impact on schools, Scholastic is not providing a financial outlook for fiscal year 2021.”