After two years of solid growth, HarperCollins had a bad first quarter in its fiscal year 2023, which ends next June. In the period ended September 30, 2022, revenue fell 11%, to $487 million, compared to a year ago, and earnings plunged 54%, to $39 million.

HC parent company News Corp attributed the sales decline primarily to “lower physical book sales due to Amazon’s reset of its inventory levels and rightsizing of its warehouse footprint, which resulted in lower order volume and higher returns.” In addition to lower sales from Amazon, the revenue decline reflects a $22 million, or 4%, negative impact from foreign currency fluctuations. Excluding foreign currency changes, revenue was down 7%.

The lower sales, plus higher manufacturing and freight costs—which News Corp attributed to the impact from ongoing supply chain issues, as well as inflation—led in the steep drop in profits.

HC is the latest publisher to point to significantly lower sales from Amazon. Over the summer, a number of Amazon’s book suppliers reported steep sales declines, which improved briefly before tailing off again. In its financial report for the quarter ended September 30, Amazon reported that online sales were up a relatively modest 7%, and it predicted that total revenue in its fourth quarter would only rise 2%, to 8%—modest gains by Amazon standards.

HC CEO Brian Murray said that sales through all other channels held up well in the most recent quarter. Business has been better with Amazon in recent weeks, Murray added, and he hopes the worst of the declines with the e-tailer are over. But Murray also acknowledged that, after a pandemic boom, the overall market has become tougher. “The party’s over,” he said.

The book industry has not yet seen a holiday sales increase, something Murray attributed to distractions caused by the midterm elections, as well as to many retailers offering deep discounts on other items besides books. Murray also remains concerned over how consumers will respond to the ongoing high inflation rate, adding that he has a cautious outlook for the holidays. “Inflation isn’t going away overnight,” he observed.

Books that did well in the most recent quarter included Portrait of an Unknown Woman by Daniel Silva and Live Wire: Long-Winded Short Stories by Kelly Ripa. Backlist sales did well, and accounted for 65% of total sales, while an increase in digital audiobook sales offset declines in e-books, leading to a 1% gain in digital sales over last year's first quarter. Sales of Lord of the Rings titles were 2.5 times higher than a year ago thanks to the new Amazon Prime series based on the books. Murray believes the titles will be popular gift items.