Scholastic reported higher sales and a smaller loss in the first quarter of fiscal 2022 ended August 31, 2021 compared to the first quarter of fiscal 2021, and while it said business is improving in most areas, it did point to some “headwinds” which all publishers are facing: rising costs and disruptions in the supply chain.
At an operating level, total revenue rose 21%, to $259.8 million, and the operating loss was cut to $32 million, from $57 million. Since the pandemic hit, Scholastic’s biggest trouble spot has been its book fairs, which had a 57% decline in fiscal 2021. In what it acknowledged is a “quiet” summer period for the fair and club business, Scholastic nonetheless said it is seeing some encouraging signs: fair revenue went up 21%, to $16 million, and club sales rose 17%, to $6.8 million.
Scholastic president and CEO Peter Warwick told analysts in a conference call that, in addition to higher sales in the first quarter, the company has seen more positive trends in the second quarter, with rising orders from schools and teachers for its clubs and fairs as well as higher revenue per fair. The company has reopened 43 fair distribution centers to meet the renewed demand, and CFO Ken Cleary said that Scholastic has raised pay for employees at those centers. While Warwick said that fair revenue will not return to pre-pandemic levels this year, he noted that Scholastic expects to see steady improvement throughout fiscal 2022.
In another example of the impact of labor shortages, Cleary noted that, at Scholastic's main distribution center in Jefferson City, Mo., limited “staff resources” have resulted in a backlog of orders for the company's book clubs. Cleary added that Scholastic expects to work through the backlog over the next few weeks, specifically after increasing wages at the site.
The third part of Scholastic’s children’s publishing and distribution group, its trade book publishing arm, had a great quarter, with sales up 27%, to $93 million. Sales were driven by strong demand for books by a number of its most popular authors and series, including Dav Pilkey’s Dog Man series, the Baby-sitters Club Graphix and Baby-sitters Little Sisters Graphix, Five Nights at Freddy’s, the Bad Guys, and Nat Enough. Scholastic's Klutz division also has a good quarter.
While Scholastic is expecting a good fiscal 2022 as demand for its products increase, Cleary noted that the year offers both challenges and opportunities, pointing to rising costs for labor, paper, printing, and transportation. To meet the printing crunch, Scholastic said it will continue to diversify its supplier base, including using more North American printers. With the conflicting positive and negative trends, Scholastic did not offer a forecast for how fiscal 2022 will finish.