Scholastic Corporation has said it expects business in the fourth quarter to be affected by coronavirus-related school closures and it is taking "agressive actions to reduce operating expenses throughout the Company" as a result, including the temporary closure of US warehouse and distribution centres. UK warehouses are not affected.
The comments were made as Scholastic reported its third quarter results to 29th February 2020, with revenue up 4% to $373.3m ($360.1m in the third quarter of 2019). The lift was led by the company's education and trade businesses, which grew sales 23% and 17% respectively.
However operating loss stood at $60m, up from $21.4m a year ago, "largely attributable to a one-time $40m non-cash write down of inventory primarily resulting from lower anticipated requirements in the Company’s school channels, in addition to $3.2m in pre-tax severance". Excluding these one-time items, the operating loss in the "seasonally lower" third quarter was $16.8m, a 10% improvement from the prior year period’s operating loss of $18.7m. Net loss was $43.3m, versus a net loss in the prior year period of $12.6m.
Richard Robinson, chairman, president and c.e.o., said: “Following our strong third quarter with revenue gains of 4% and a threefold improvement in adjusted EBITDA, and year-to-date results trending ahead of our fiscal year targets, Scholastic’s business in the fourth quarter will be affected by coronavirus-related school closings mandated by states and districts, which will impact our school-based businesses directly. Given this situation, we will no longer be affirming guidance for the fiscal year.
"While revenues will be lower in the seasonally important fourth quarter, we are taking aggressive actions to reduce operating expenses throughout the Company, including the temporary closing of warehousing and distribution centers, and a freeze on hiring, travel and other discretionary spending not directly tied to short-term revenue, while working hard to ensure the safety and well-being of our staff worldwide. And still, we remain dedicated to our mission, providing the children and schools we serve free access to Scholastic’s Learn at Home digital hub with learning content for children from Pre-K to 12, which has seen over eight million visitors in less than one week as parents turn to Scholastic for resources to help their children learn at home.”
Robinson continued, “Scholastic has significant cash reserves and access to liquidity, and we have implemented immediate actions to protect our strong financial position in this period of uncertainty by discontinuing all non-essential cash outlays and deferring capital spending plans. Additionally, the one-time non-cash excess inventory write-off taken in the quarter, and associated changes in inventory policies, will result in more efficient asset utilization, lower obsolescence expense and reduced warehouse labor costs in future periods.”