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Scholastic Has Stable Finish to Soft Year

July 19, 2018
By Erin Somers

Scholastic reported results for the fiscal fourth quarter and full year ending May 31, with a stable finish to a year that suffered from comparison to the “prior year’s outstanding success of Harry Potter and the Cursed Child,” as well as some significant one-time charges.

Fourth quarter sales of $496.2 million were down $3.4 million, but operating income of $73.9 million gained $9.6 million versus a year ago. Consolidated trade sales were $45.8 million, up $2.5 million (or 6 percent) for the quarter. Operating income in the larger children’s book publishing and distribution segment — which includes book clubs and book fairs — declined $1.6 million, which Scholastic says was caused by “higher roll-out costs of a new point-of-sale system in book fairs.”

For the full fiscal year, revenues decreased $113.2 million or 6 percent to $1.63 billion and operating income was down 38 percent to $55.6 million, compared to $89.2 million the previous year. The gap was primarily in trade sales, $84.3 million lower due to the Harry Potter comparisons, at $223.6 million for the year.

Operating income fell 38 percent to $55.6 million, in comparison to $89.2 million in the prior year. The company took a non-cash charge of $57.3 million for discontinuing their domestic defined benefit pension plan, and $11.2 million in non-cash impairment charges primarily associated with the renovation of the New York City headquarters building.

For fiscal 2019, the company expects revenues in the range of $1.65 to $1.70 billion, with an EBITDA target of $160 to $170 million, up from $140 million, excluding one-time items. That will be helped by lower planned capital expenditures of $70 to $80 million in fiscal 2019, down from $121.5 million in 2018. They project growth over the next three years “in education and trade, underpinned by new publishing” as well as “more targeted revenue growth in clubs, fairs, and international.”

CEO Dick Robinson said in the release: “Strong fourth quarter results helped us reach the higher end of full-year guidance for earnings per share, excluding one-time items. We continued to invest in new publishing and productivity-focused technologies under our Scholastic 2020 plan. The implementation of new finance and operating systems will bring us information much more quickly, enabling improved inventory and cost management, and is expected to provide cost savings of $10 million in fiscal 2019.” He noted, “We finished the major office renovation of our headquarters building, adding capacity and technology enhancements, and are now completing new high-value retail space for tenanting in fiscal 2019 and beyond.”

Filed Under: Earnings Reports, Free

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