Scholastic reports operating income drop of 55%

Scholastic Inc's operating income for the fiscal year ending 31st May fell 55% to $25m (£20.3m), despite a 2% increase in revenues to $1.65bn (£1.34bn), according to its latest financial results.

There were costs of  $14.7m (£11.9m) associated with building and technology upgrades and the impact of foreign exchange resulted in a $1.1m (£0.9m) reduction in operating income. 

Results for the fourth quarter were “disappointing”, said the company, as revenue dropped 5.1% and operating income fell 57%. 

Richard Robinson, chairman, president and c.e.o., said: "Outstanding trade book sales globally were overshadowed by sales tax collection issues, which affected our book clubs, and increased services and incentives in book fairs, responding to expanded competition, as well as higher costs in printing, paper and labor. As we begin fiscal year 2020, we are driving operating margin expansion through pricing and cost management. We are more effectively leveraging our editorial, procurement, inventory management and other services worldwide, as well as improving efficiencies in marketing and operations.”

In the international division, which includes Scholastic UK, revenues for the fiscal year fell 1% to $366.2m (£296.8m), as “exceptional” trade results were offset by currency exchange rates. Operating income fell 22%, mainly due to lower volumes in the company’s book clubs and education business units in Canada, although popular authors included Julia Donaldson and Liz Pichon in the UK, and Aaron Blabey and Anh Do in Australia. 

In 2020 Scholastic will aim to improve operating income and profitability and expects revenues to be in the range of $1.67-1.7bn (£1.35-1.38bn).

Robinson said: "While our major focus in fiscal 2020 is on improving operating margins and cost management, we are growing revenues in three areas of the business. First, in US and global trade, we expect significant growth through Make Believe Ideas, a fast growing mass market early childhood publisher, in which we acquired a majority ownership in 2019, and, as earlier announced, the publication of a fourth title in the global bestselling series, The Hunger Games, by Suzanne Collins scheduled for release in May 2020, as well as new outstanding trade titles from our leading authors including Dav Pilkey, Raina Telgemeier, Aaron Blabey, and others. Second, we will expand education sales through the launch of Scholastic Literacy, a core K-6 reading program, as well as continued growth in supplementary literacy. And third, we expect double-digit revenue growth in Asia through the sale of English language learning programs."