High inflation and the rebranding of its direct sales force led to a steep drop in revenue at Educational Development Corp. in the fourth quarter and fiscal year ended February 28, 2023, and the company posted a net loss of $2.5 million in fiscal 2023 compared to a profit of $8.3 million in fiscal 2022. Sales were down 35.8% in the fourth quarter and 38.3% for the year, finishing fiscal 2023 at $87.8 million.
“Inflation has been a headwind for us all year and we expect this to continue into our fiscal 2024,” said CEO Craig White, explaining that high food and fuel costs directly impact EDC’s primary customers, families with young children. Sales were also depressed by the effort to rebrand its direct sales division, previously known as Usborne Books & More, as PaperPie Resource Library.
EDC has long relied on home-based sales consultants to sell its line of books and related products, and the number skyrocketed during the pandemic, to over 50,000, but has fallen since. In February of 2023, the number of consultants, now known as brand partners, fell below 25,000 for the first time since 2016. The brand partners who remain have also been "distracted," White said, by updating their social media pages and websites to reflect the change over to PaperPie. Sales were particularly hurt in early January, but the impact has lessened since.
Sales were also down in EDC’s publishing division. In 2022, U.K.-based Usborne Publishing, which has provided EDC with much of its book inventory, reached an agreement with HarperCollins to take over retail distribution of its line in the U.S. beginning last November, though EDC reps can still sell the titles through other channels. The transition date was extended until fiscal 2024, but confusion among retailers resulted in some early ordering that hurt fourth quarter sales in the division, EDC reported.
In an effort to diversify its offerings, last year EDC acquired SmartLab Toys, producer of STEAM toys and games, from Quarto Group. EDC has since launched 13 new products and plans to release an additional 10 products this summer and three more in the fall. While White is hopeful the toy line will spark sales—the company generated $2 million in gross sales since January—he acknowledged that the company still faces challenges.
White expects the next few months to be pivotal in gauging how the PaperPie rebranding is being accepted, since by the end of June, every brand partner will have made a sale under PaperPie or will have initially joined as a PaperPie brand partner. He also believes the number or brand partners could increase this summer since during difficult economic times in the past, the number of reps has increased as families look for new revenue streams. In addition, White said, “we have reduced payroll and other operating costs and continue to focus on every opportunity to improve bottom line performance in order for us to return to profitability.”