Revenue at Scholastic rose 1.2% in the quarter ended August 31, 2022, over the comparable period a year ago, rising to $262.9 million. But in a refrain being heard more often in the business world, higher costs cut profits—or, in the case of Scholastic, deepened its quarterly operating loss, which rose to $58.1 million, not quite doubling its $32 million in losses during the first quarter of fiscal 2022.
Scholastic described the results as “on plan,” noting attributed that the quarter is typically a quiet one for the company. Scholastic attributed its higher losses to lower sales in its education solutions group, which resulted in an $11.6 million increase in the operating loss in the group. The higher loss, the company added, was also due to increased freight costs in the trade channel. In addition, the publisher’s inventory purchases amounted to $77.3 million in the quarter, as part of a strategy “to offset long lead times related to continuing global supply chain challenges and to meet expected demand.”
Sales in the company’s children’s book publishing and distribution group were mixed. The book fairs business continued to bounce back from the lows of the pandemic, with revenue rising $12.3 million, to $28.3 million. The company said that it is on track to operate 85% of the fairs it conducted prior to the pandemic. Book club revenue was relatively flat, at $6.3 million, in what is typically a quiet period.
Trade revenue fell $2.9 million, to $90.1 million, in the quarter. Last year, the comparable quarter benefited from the successful release of the limited-edition foil covers for books in Dav Pilkey's Dog Man series, Scholastic said. In the current fiscal year, the trade group expects strong sales for a number of frontlist titles, including the fourth Cat Kid Comic Club title from Dav Pilkey, and backlist titles are expected to perform well.
Sales in the education solutions group decreased $6.9 million, to $73.2 million, from the comparable quarter last year, when sales shifted from the preceding fourth quarter because of supply chain problems. International revenues increased $5.8 million, to $65.0 million, primarily driven by the performance of the trade and book fairs channels in the Australia and Canada markets. In addition, during the quarter, the company said it finalized the sale of its “low margin” direct-to-consumer business in Asia, which generated losses in the prior year.
The first quarter results were good enough for Scholastic to affirm its financial guidance for fiscal 2023, with revenues expected to increase 8% to 10%, with adjusted EBITDA of between $195 million to $205 million, up from $189 million in fiscal 2022.
Correction: A previous version of this article said that Scholastic's inventory purchases increased to $77.3 million; the number was the total in purchases, not the increase.