Educational Development Corp. continues to work through a host of issues since its sales and earnings peaked in the fiscal year ended February 28, 2021, when the company benefitted from lockdown mandates that drove up demand for children’s books and increased the number of its local sales reps among people looking for at-home work.
For the third quarter ended November 30, 2022, sales fell 32.8%, to $30.3 million, from the comparable quarter in fiscal 2022, and net earnings dropped from $2.6 million to zero. CEO Craig White said a major factor in the decline in earnings was the company’s decision to offer additional discounts and other incentives to accelerate sales and reduce EDC’s inventory.
Sales fell in both of EDC’s operating divisions. Revenue in its direct home party sales group fell 38.4%, to $25.5 million, due in part to a 34.7% decline in its number of sales consultants, to 27,100, and a decline in demand due to inflation. Sales in its much smaller publishing division declined 29.7% in the quarter, to $3.7 million. The publishing division is home to EDC’s children’s publishing operations, including Kane-Miller.
In late October, EDC signed an agreement to acquire SmartLab Toys, producer of S.T.E.A.M. toys and games, from Quarto Group. EDC expects to begin distributing SmartLab products to its retail accounts and through its direct sales division this month.
The company hopes the addition of SmartLab will offset the loss of its ability to distribute Usborne titles, EDC’s largest offering, to retail accounts. In November, U.K.-based Usborne Publishing reached an agreement with HarperCollins to take over retail distribution of its line in the U.S. HC has exclusive retail rights, though EDC reps can still sell the titles through other channels. EDC said Usborne sales through retailers accounted for about 10% of its business. Late last year, EDC completed the rebranding of its direct home party division (known as Usborne Books & More) to PaperPie in an effort to indicate the range of products the company offers beyond Usborne titles, including the recently added SmartLab Toys items.
"Our business has a long history of profitability and our core pricing, product costs and sales compensation fundamentals remain unchanged,” White said in a statement. “While we are challenged by recent macro-economic pressures, we continue to face these pressures head on and are working diligently to restore profitability to historical levels."
For the first nine months of fiscal 2023, which ends February 28, sales were down 39% from a year ago, to $72.8 million, and the company had a net loss of $585,200, compared to earnings of almost $8 million in the first nine months of fiscal 2022.