Simon & Schuster was the only one of the country’s four largest trade publishers to show an improved profit margin in the first half of 2023 compared to last year. While industry sales were generally flat in the first six months of the year, companies cited higher costs as the major reason profit margins shrank in the first six months of 2023.

In reporting Penguin Random House’s first-half results last week, where sales rose 9.5% but profits were up less than 1%, interim global CEO Nihar Malaviya told employees the small earnings increase “should come as no surprise, as industry inflationary cost pressures and increased costs across our businesses have continued to impact us.”

HarperCollins CEO Brian Murray noted earlier that in addition to higher manufacturing, freight, and distribution costs, the industry has faced macroeconomic headwinds that he hasn’t seen since the Great Recession of 2008. Those challenges, as well as the unique conditions tied to the pandemic—including overprinting by publishers and over-ordering by most accounts to meet the early surge in book buying—created a bubble that began to fizzle last year, and it took time for all industry players to recover, Murray said. That resulted in earnings falling 32.4% at HC in the first half of the year on a 6.5% decline in sales.

Profits fell 19.7% at Lagardère Publishing despite a 2.5% increase in six-month sales. In addition to inflationary pressures, Lagardère cited increased costs incurred on “transformation projects in France” as the reason for the earnings decline. Some of those costs were partly offset by higher selling prices and the impacts of operational efficiency plans, particularly in the United States, the company said.

Among the cost-cutting measures employed by all three companies were workforce reductions, with HarperCollins’s and PRH’s efforts garnering the most attention. HC was under a corporate mandate to reduce its North American workforce by 5%, while PRH cut staff through layoffs and an early retirement program for employees over 60 who were with the company for at least 15 years (voluntary separation offer). HBG also had its own early retirement initiative (voluntary resignation benefits program).

S&S managed to avoid job cuts, as sales in the period rose 7.8% and operating income increased 14.6% in the first half of the year following a very strong 2022. Many of the same factors that led to a record performance in 2022 continued into this year, including strong audiobook sales, solid adult fiction sales, and good results in its largest overseas divisions.

Despite its small profit increase, PRH’s sales actually grew faster than those of S&S, due largely to acquisitions, with total sales rising to €2.1 billion ($2.29 billion) from €1.92 billion in the first half of 2022. The most notable acquisition was the purchase of another 8% interest in Sourcebooks, which gave PRH a 53% stake in the publisher. With its majority interest, PRH incorporated Sourcebooks’ revenues with its own, and PRH parent company Bertelsmann said that since its “initial consolidation, Sourcebooks has contributed €71 million to revenue and €7 million” in profits.

PRH made two other U.S. acquisitions in the year, including the May purchase of the assets of Callisto Media, which are being managed by Sourcebooks. According to Bertelsmann, PRH paid €63 million for Callisto, of which €57 million was paid in cash. In addition, a loan of €7 million was repaid in the course of the transaction. Since its purchase in May through the end of June, Callisto added €2 million to revenue, Bertelsmann said. If Callisto’s results were reported for the full six months of the year, the publisher would have contributed €13 million to revenue and a €27 million loss.

The third U.S. purchase was of the audiobook company Playaway Products. Outside of the U.S., Penguin Random House Grupo Editorial fully acquired Barcelona-based Roca Editorial, one of Spain’s leading independent publishers.

CEOs of the four companies had mixed expectations about how the remainder of the year will play out. Jonathan Karp, CEO of high-flying S&S, acknowledged that sales of adult fiction would likely slow—“Colleen Hoover can’t keep selling in the numbers she has been forever,” he said—but he is counting on a strong adult nonfiction list to drive sales. Potential blockbusters include The Woman in Me by Britney Spears, The Democratic Party Hates America by Mark Levin, Enough by Cassidy Hutchinson, and Walter Isaacson’s Elon Musk.

Murray said he thinks the worst of HC’s problems are behind it, as most accounts are now in a much better position than they were a year ago. “I think the industry is finding its equilibrium,” he said, adding that he believes the industry, and HC, are well positioned for the fall. He pointed to the strong start for Ann Patchett’s Tom Lake, and said he expects fiction to remain popular for the remainder of 2023.

HBG CEO Michael Pietsch said backlist sales began to grow toward the end of the first half, and he anticipates “a considerably stronger second half,” pointing to continued strength from HBG’s adult fiction programs, strong travel book sales, and solid sales from TikTok-promoted nonfiction and fiction books.