Encouraged by a 61% increase in operating income in fiscal 1999, which resulted in an operating margin of 6.8% (News, July 26), Scholastic chairman Richard Robinson told shareholders in the company's annual report that he remains confident the company can achieve its objective of reaching a 10% operating margin in fiscal 2002.

Scholastic's 9.8% sales gain last year was driven by a strong performance by its children's book publishing and distribution segment in which sales increased 17% to $657.9 million and operating profit rose 29% to $109.3 million. Within the segment, the trade division had the largest increase, with sales up 25% to $106 million due to the strong performances of a variety of series and titles. Book fair sales rose 20% to $197 million mainly because of last June's acquisition of Pages Book Fairs. Book club sales were up 14% to $355 million.

The 2.8% decline in the educational publishing division to $190 million was largely attributed to winding down the California adoption of Scholastic Literacy Place, which was partially offset by an increase in sales in supplemental materials and classroom magazines. Operating profit in the division rose 360% to $2.3 million.

Revenues in the media, licensing and advertising segment rose 9.8% to $115 million as higher software and multimedia sales offset the loss of revenues from the divested SOHO (magazine) Group. The unit broke even in fiscal '99, compared to a loss of $9.5 million in fiscal 1998.

Scholastic's biggest disappointment was in its international segment in which sales fell 2.8% to $196 million and operating profit dropped to $4.9 million from $9.7 million. Canadian results were hurt by a move to a new warehouse, and sales in the U.K. and Australia book club and book fair operations were below expectations.

Expanding Web Site

A major initiative for Scholastic in the current year is the reworking of its Internet operations. The company is converting its Scholastic Network site for teachers into a free site beginning this fall. Scholastic is spending $24 million to expand the site (www.scholastic.com), which will include an e-commerce feature for teachers through which they can buy professional books as well as place book club orders. In addition, Scholastic expects to provide a direct-to-home service for parents to buy materials to support their child's learning. Scholastic anticipates that it will eventually offer a home-learning subscription service.

To date, the Scholastic Network has operated at a loss, and the company expects the loss to increase in fiscal 2000 as a result of the planned expansion.