‘Softening retail demand for children’s books’ sees Scholastic revenues dip but book fairs thrive

Scholastic revenues declined by 6% year-on-year according to its latest set of quarterly results, in part due to a “softening retail demand for children’s books”, which impacted trade sales in the US and major international markets, however the publisher noted improved profitability of its book fairs.

According to the publisher’s Q3 report (covering the three months to 28th February 2023) revenues decreased 6% from $344.5m (£281.2m) in the same period in 2022 to $324.9m (£265.2m). An operating loss of $27.7m (£22.6m) was noted for this year’s third quarter, compared to a loss of $19.5 (£15.9m) in the same period in 2022.

The report notes, however that “despite these headwinds, the Children’s Book Publishing and Distribution segment revenues grew in the quarter with continued strong performance in the Book Fairs channel, reflecting investments in innovation and improved fair experiences since the pandemic, as well as Scholastic’s unique and trusted position in schools.

“In addition, continued delays in school and school districts’ purchasing of instructional materials, as they focus on managing staffing challenges, contributed to lower revenues in Education Solutions. The International segment experienced trends similar to the US markets with lower revenues in Trade channels partially offset by improvements in Book Fairs sales."

Book Fair revenues increased $27.5m (£22m) to $103.5m (£86m) due to increased number of fairs, higher revenue-per-fair and increased shipments on reward redemptions, while trade revenues decreased $11.7m (£9.5m) to $72.8m (£59.4m), “reflecting softness in the retail market, in addition to lower ordering by key wholesalers and retailers adjusting inventory levels to align with improvements in the supply chain and consumer demand. These factors primarily impacted backlist titles but were partially offset by new titles that continue to regularly appear on bestseller lists.”

Peter Warwick, president and chief executive officer, said, “Scholastic navigated short-term headwinds in domestic and international markets, which contributed to modest sales declines and higher losses in our seasonally small third quarter. The company used its strong balance sheet to return over $53m [£43m] to shareholders through our dividend and expanded open-market share repurchases, while continuing to invest in strategic growth opportunities. Scholastic remains committed to deploying its capital to drive long-term growth and sustained value for its shareholders and other stakeholders.

“The Children’s Books segment sustained growth and outperformed the overall retail children’s book market in Q3, as Book Fairs continued to perform strongly. Investments in innovation and improved fair experience since the pandemic drove both higher fair count and revenue per fair. Book Clubs results came in lower, reflecting the timing of shipments a year ago. Multiple Scholastic titles again made bestseller lists, but Trade sales declined, as major book retailers slowed their ordering."

He added that Scholastic continues "to invest in new go-to-market capabilities to advance our literacy platform strategy. We also announced key new products and collaborations last quarter that will contribute to segment results over the long term."

He said tougher market conditions are expected to continue into the fourth quarter. "We have quickly adjusted short-term spending, in line with our revised top-line outlook, and focused on initiatives to improve margins. Critically, the long-term outlook for the importance of children’s books and of solutions to raise literacy rates remains as strong as ever, as does our optimism in Scholastic’s ability to grow and uniquely meet these critical needs.”