When the Covid-19 pandemic began to tighten its grip on the U.S. in early spring, most people in publishing were bracing for the worst. Indeed, sales reports from April and May were worrisome, but they began to improve in June. For three publishers that reported their financial results August 6 for the period ended June 30, 2020, sales were down from a year ago. It was a different story for earnings, however. For all three companies—HarperCollins, Houghton Mifflin Harcourt, and Simon & Schuster—a combination of cost and expense cuts and increased sales of higher-margin digital products drove an improvement in their respective bottom lines for the quarter.
HarperCollins closed out its fiscal year ended June 30, 2020, with a 2.9% drop in revenue from the comparable quarter of fiscal 2019. Revenue fell to $407 million, from $419 million. Earnings increased 9.3% over last year’s fourth quarter, to $47 million. HC parent company News Corp attributed the increase in quarterly EBITDA (earnings before interest, taxes, depreciation, and amortization) to unspecified cost savings and the mix of titles. During the fourth quarter, digital sales had what News CFO Susan Panuccio called their best performance in years, rising by 26% from a year ago due to a 31% increase in e-book sales and a 17% gain in digital audiobook sales.
The improved digital sales, while helping to boost profits, were not enough to offset a decline in print sales in the quarter. News attributed the fourth-quarter revenue decline at HC primarily to “lower retail sales of foreign language titles and in Christian publishing due to store closures caused by Covid-19, partially offset by the success of Magnolia Table, Vol. 2.
The improvement in fourth-quarter profits was not enough to prevent earnings for the full year from dropping 15.1%, to $214 million. Revenue fell 5% from fiscal 2019, to $1.67 billion.
For the full year, the 5% revenue decline was largely attributed to difficult comparisons to the prior year. Despite the big gains in the fourth quarter, digital sales for the year increased a relatively modest 7% from the previous year, primarily driven by the continued growth in downloadable audiobook and e-book sales.
Panuccio gave a glimpse into how sales have progressed since the new fiscal year began July 1, saying that online sales for HC continued to be strong as physical stores slowly began to reopen.
At S&S, sales for the second quarter fell 8.3% from the same quarter in 2019, to $200 million, but lower production and distribution costs were enough to give the company an 8.6% increase in earnings, to $38 million. While print sales fell in the period, digital sales soared, up 44% over the second quarter of 2019, led by a 51% jump in e-book sales and a 34% increase in sales of digital audiobooks, S&S CEO Jonathan Karp told PW. While not predicting that the renewed interest in e-book sales will be permanent, Karp said that he sees “no reason to believe the new consumer behavior will change any time soon.” He added that, during the quarter, S&S did well in big box retailers, as well as at mass merchandisers, with those outlets not only selling lots of S&S’s nonfiction books, but some fiction as well. S&S is also keeping up its support for independent bookstores and will continue to organize numerous online author events, Karp said.
Karp credited the publisher’s operations teams “for keeping the books flowing” during the quarter. Noting that S&S delayed publication of 150 titles in the period, Karp said “we picked our shots” and focused on promoting titles with breakout potential. S&S scored big with John Bolton’s The Room Where It Happened, which sold 780,000 copies across all formats in the week following its June 23 release. Karp also pointed to the success of Chris Wallace’s Countdown 1945, which hit numerous bestseller lists and which Karp expects to sell throughout the fall. “We think Wallace will become a franchise author,” he said. Jennifer Weiner’s Big Summer was a big fiction hit, Karp noted.
At Houghton Mifflin Harcourt, a 38% plunge in sales in its education group during the second quarter of 2020 led to an overall decline of 35.5% in sales compared to a year ago. Total revenue was $251.2 million in the quarter, down from $388.9 million in last year’s second period. Cost cuts, however, limited the operating loss to $22.2 million, less than the $30.2 million reported in the second quarter of 2019.
In HMH’s Book & Media division, sales fell 10.2% in the quarter, to $35.1 million. HMH said the decline was due to a decrease in sales in both its adult and young readers segments, which the company attributed to pandemic-related bookstore closures and publication delays for new frontlist titles. Like the entire company, however, the trade division’s bottom line improved in the quarter because of cost cuts and lower expenses.
Among the cost-saving measures implemented by HMH in the second quarter were a temporary reduction in the work week to four days, which cut employee weekly pay by 20%, and lower discretionary spending. HMH said it ended the four-day work week program at the end of July, but that it has begun an early retirement offering for employees 55 and older who have been at the company for at least five years. HMH said that about 625 employees, or 18% of its workforce, are eligible for the program, which the publisher said it expects to conclude in the current quarter.