Scholastic chairman Dick Robinson's prediction to analysts in September that sales of Harry Potter and the Order of the Phoenix would drop dramatically in the second quarter proved accurate, as the company reported total Potter series sales of $13 million in the period ended November 30, compared to sales of $170 million in the first quarter. The company estimated that about 70% of Potter sales in the second quarter came from Phoenix. Potter sales in the most recent quarter were also down from the $25 million the series chalked up in last year's second quarter. Since its release in June, Phoenix has sold 12 million copies, generating sales of about $185 million.
Gains in Scholastic's other divisions offset the decline in Potter revenue, resulting in a sales increase of 6%, to $699 million, in the quarter. Net income, however, fell 11%, to $66.7 million, which the company attributed to the decline in high-margin Potter sales and lower results in the company's continuity programs, which incurred $9 million in bad debt. Earnings in fiscal 2003 also reflect one-time charges of $4.4 million.
In the children's book publishing and distribution segment, total revenue increased 3%, to $450.4 million. The 30% decline in trade sales was partially countered by a 16% gain in book clubs and a 5% increase in book fairs. Book clubs benefited from the July purchase of selected Troll Book Club assets, which added about $7 million to sales, while the increase in book fair sales was driven by more fairs and higher revenue per fair. Continuity revenue was up 3%.
In Scholastic's other segments, sales in the educational publishing group rose 13%, to $87.3 million, as higher sales of classroom libraries and the Read 180 program offset softness at Scholastic Library. Sales in the media, licensing and advertising group rose 1%, to $46.7 million, while international sales jumped 16%, to $114.6 million, helped by a $5-million order for Department of Defense schools.
Robinson said that at the halfway point of fiscal 2004, the company was on track to achieve its financial targets, including sales of more than $2.2 billion. Total sales in the first half of the year were up 21%, to $1.17 billion, and net income increased 38%, to $41.9 million.