Scholastic's operating income rises 7% in 2020 second quarter

Scholastic's operating income rises 7% in 2020 second quarter

The Scholastic Corporation has revealed a 7% rise in operating income in the second quarter of the fiscal year, as c.e.o. Richard Robinson said the firm "continued to stand out as the world’s leading children’s book publisher and distributor".

Operating income increased to $105.1m (£80.6m) for the second quarter (for the three months ending 30th November 2019), a 7% increase on the previous year's figure of $98.2m (£75.3m). This was attributed to process improvements in the company’s book fair operations, better cost management in clubs, and lower technology-related overhead expense. 

There was a dip in revenue to $597.2m (£458m), a decrease of 1% compared to $604.7m (£463m) in the second quarter of 2019. Scholastic said that despite a decline in book clubs sales, revenue grew in book fairs, classroom collections and consulting services in Scholastic Education, Asia trade and education, and US trade.

Top selling frontlist titles released in the current year period included Raina Telgemeier’s Guts, Alan Gratz’s Allies, Maggie Stiefvater’s Call Down the Hawk (The Dreamer Trilogy, Book 1), The Dinky Donkey and Harry Potter and the Goblet of Fire: The Illustrated Edition. The impact of foreign exchange on the publisher’s international businesses resulted in a $1.9m (£1.4m) reduction in revenues versus the previous year.

Despite the rise in operating income, all of Scholastic's three operating groups—children book publishing and distribution (trade, book clubs and book fairs), education and international—reported small declines in general.

Across children’s, second quarter revenues fell $4.3m (£3.30m), by 1%, to $413.6m (£317m), driven by a decline in sponsorship levels coupled with lower revenue per sponsor in the company’s book clubs channel. 

Across education, revenue for the second quarter was $69.9m (£52n) compared to $71.5m (£54m) a year ago representing a 2% decrease, attributed to the lower revenues in the segment’s national partnership program.

In the international division, which includes Scholastic UK, second quarter revenue was $113.7m (£86.75m), a $1.6m (£1.23m) decline from the previous year. This was attributed to the "unfavorable impact of foreign exchange" by the company.

Richard Robinson, chairman, president and c.e.o., said of the results overall: “In the second quarter, Scholastic continued to stand out as the world’s leading children’s book publisher and distributor, at a time when the category is viewed as the most stable part of the market, with our new titles and series performing at the top of bestsellers’ lists.”

“Trade revenues grew 8% despite difficult comparisons with last year. Book fairs increased revenues in a more competitive environment in this important back-to-school period. With actions taken to improve fair quality and selection, and the introduction of our e-Wallet digital payment option at more fairs, we saw an increasing number of transactions per fair. With additional steps taken to contain costs, fair profitability increased. While book clubs sales declined due to a lower number of teacher sponsors and the effect of sales tax collection, significant cost reductions largely mitigated the impact on club profitability in the quarter. Internationally, we saw growth in China in local currency terms, where we continue to expand our position as a leading provider of educational books for English language learning.”

Robinson added: “Based on our overall year-to-date results and margin improvements from the ongoing Scholastic 2020 process, we expect to remain on plan for the year, and are therefore affirming our guidance for revenues and adjusted EBITDA [earnings before interest, tax, depreciation and amortisation].”