Scholastic saw revenues plunge 32% year on year to $406.2m and operating income fall 54% in the second quarter, as its business continued to be hit by the pandemic, although trade sales rose.
The firm's revenues for the three months ending 30th November 2020 were down from $597.2m at the same time last year, while operating income fell 54%, from $105.1m to $48.8m. Excluding one-time items in both periods, operating income in the second quarter was $54.3m, compared to $107m in the second quarter of the prior fiscal year.
Net income for the period was $35.1m, compared to net income in the prior year of $71m, a fall of 51%.
Scholastic said the results reflected “significant pressure” from Covid-19 delays and disruptions on its schools-based distribution channels, particularly its book fairs businesses in the US, UK and Canada.
However, its other major businesses “performed well and showed significant improvements in operating income year-over-year”, including a 21% increase in trade sales to $125.7m, thanks to titles such as J K Rowling's The Ickabog and Dav Pilkey’s Dog Man: Grime and Punishment.
Scholastic said it had also taken “aggressive actions” to reduce operating costs, resulting in a $69.5m reduction in selling, general and administrative expenses. The firm, which had previously announced a $100m cost savings target, said it had identified scope for additional savings in the second half of the fiscal year, without giving further details.
The company said it was “cautiously optimistic” that it would see improved results, especially in its book fairs operations, in the fourth quarter of the fiscal year.
It noted: “A strong second half pipeline of new releases will continue to position the trade business for growth, and Scholastic’s growing media and entertainment business, through its production partnerships and the licensing of Scholastic’s content and characters, should continue to complement the company’s book sales.”
C.e.o. Richard Robinson said: “While fiscal second quarter book fairs’ revenues were adversely impacted by Covid, all of Scholastic’s other major businesses, in the US and internationally, showed major improvements in operating income, year-over-year. These gains, along with a reduction in overhead expense, helped to lessen the impact of the lower fairs’ revenues on Scholastic’s profitability and cash position.
“Trade’s strong fall frontlist, including the New York Times bestseller The Ickabog by J K Rowling, helped propel a 21% increase in trade sales, and we ended the quarter with an impressive showing of 10 of our children’s titles on the incredibly competitive Amazon Best Books of 2020 list.
“We continued to take major steps to reduce our operating costs, right-size our employee base, and match our inventory purchases to customer demand. If school operations stabilise and business conditions improve in the second half, as expected, the company’s new lower cost structure should result in higher profit margins and increased cashflow.”
He added: “During the quarter, both the economy and our educational systems continued to be upended by the devastating pandemic and schools faced daily challenges in meeting the needs of their students with only one-third of all schools open for in-person learning. As a trusted partner to educators and families all over the world, the passion and commitment of our employees has provided innovative, practical literacy solutions to these partners, [who have been] struggling to keep their children learning and safe. With increased interest in our take-home reading packs, easy-to-use digital programmes—including our new 'digital-only' classroom magazines, virtual book fairs and ship-to-home options for clubs and fairs—we were able to help teachers and schools to overcome these obstacles, even as our own top line was significantly impacted by the absence of traditional school-based in-person book fairs, here and abroad.”
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