The three major trade publishers that reported financial results for the quarter ended March 31 posted sales gains over the same period in 2021, but had generally muted expectations for the remainder of the year.
HarperCollins, the nation’s second-largest trade publisher, posted a 5% sales increase over the first quarter of 2021, but earnings fell 16%. Executives at HC parent company News Corp said the profit decline was driven by higher manufacturing and freight costs as well as ongoing supply chain and inflationary pressures. And while sales rose to $515 million, the company acknowledged the increase was due almost entirely to last spring’s acquisition of the Houghton Mifflin Harcourt trade group, which added $35 million in the period. The contribution from HMH was offset by a $14 million decline in sales of the Bridgerton books, which benefitted last year from the debut of the Netflix series adaptation. Sales of children’s books also declined, as did sales of foreign-language books. E-book sales fell in the quarter, which News Corp attributed to a drop in sales of Bridgerton titles, and while sales of downloadable audio rose, total digital sales fell 6%.
News Corp CEO Robert Thomson told analysts in a conference call that the company expects the disruptions currently impacting publishing to “abate over time.” He noted that even as sales growth has slowed, he expects book sales to be “significantly higher” than before the pandemic.
CFO Susan Panuccio pointed out that, while earnings fell, book “consumption levels” remain higher than they were prior to the pandemic. She acknowledged, however, that supply chain issues, inflation, and “talent retention” are likely to remain challenges for News Corp’s book and newspaper publishing companies, at least for the short term.
Lagardère’s publishing group also benefitted from an acquisition: the September purchase of Workman Publishing by its Hachette Book Group division. The acquisition, plus favorable exchange rates, lifted Lagardère Publishing’s first-quarter sales by 8.8% over the same period in 2021, to €554 million ($591 million). Workman contributed about €21 million ($22.5 million) to first-quarter sales. Excluding those factors, sales were up 1.4%. Lagardère does not report quarterly profit numbers.
HBG revenue, excluding Workman, increased 2.2% in the first quarter. CEO Michael Pietsch attributed the increase to good performances from most divisions, increases in HBG’s distribution business, and continuing high backlist sales.
Pointing to uncertainty caused by the pandemic, the invasion of Ukraine, and inflationary pressures, Lagardère repeated its financial forecast for the publishing group. It expects sales to be about even with 2021 but also anticipates that earnings will decline, resulting in an operating margin just above 11%, down from a record 13.5% in 2021.
Simon & Schuster posted the most remarkable first-quarter results of the three publishers, with operating income soaring 85% over 2021, to $50 million, while sales increased 17%, to $217 million. CEO Jonathan Karp was ecstatic about the quarter—“I am pleased we are defying gravity,” he said—and especially about the jump in profits, which he attributed in part to higher backlist sales and refinements S&S has made to its metadata that improved sell-through, thereby cutting book returns.
All of S&S’s divisions had double-digit sales increases in the quarter, led by the international group, where sales rose 30%. The children’s division also did well, with sales increasing 16%, driven, Karp said, by S&S’s growing list of graphic novels.
To stay ahead of possible printing issues, Karp said S&S moved a number of its third-quarter titles into the fourth period to ensure they will be available. And while he is bullish on the second quarter, he does not expect S&S to keep its stellar performance up for the remainder of 2022, but he noted that he remains optimistic for the full year.