Rising Costs Compound First Quarter Loss at Scholastic

Scholastic’s revenue increased 1.2% in the quarter ended August 31, 2022, compared to the comparable period a year ago, to $262.9 million. But in a refrain heard more often in the business world, rising costs slashed profits or, in the case of Scholastic, worsened its quarterly operating loss, which hit $58.1 million, only doubling. not quite its $32 million loss in the first quarter. of the 2022 financial year.

Scholastic attributed the higher loss to lower sales in its education solutions group, which led to an $11.6 million increase in the group’s operating loss. The higher loss, the company added, was also due to higher freight costs in the trade channel. Additionally, the publisher’s inventory purchases increased by $77.3 million in the quarter as part of the strategy “to offset long lead times related to ongoing global supply chain challenges and to to meet expected demand. The company described the results as “in line with plan”.

Sales of the company’s children’s book publishing and distribution group were mixed. Book fair activity continued to rebound from pandemic lows, with revenue up $12.3 million to $28.3 million. The company said it was on track to operate 85% of the shows it held before the pandemic. Book club revenue remained relatively flat at $6.3 million in what is typically a quiet period.

Commerce revenue fell $2.9 million to $90.1 million in the quarter. Last year, the comparable quarter benefited from the successful release of limited-edition foil covers for Dav Pilkey’s Dog Man series books, Scholastic said. In the current fiscal year, the trade group expects strong sales for a number of first-list titles, including Dav Pilkey’s fourth title Cat Kid Comic Club, and secondary-list titles should perform well.

Education Solutions Group sales decreased $6.9 million to $73.2 million from the same quarter last year, when sales changed from the prior fourth quarter in due to supply chain issues. International revenues increased by $5.8 million to $65.0 million, mainly due to the performance of the trade fair and book fair channels in the Australian and Canadian markets. Additionally, during the quarter, the company said it completed the sale of its “low-margin” direct-to-consumer business in Asia, which had generated losses the previous year.

First quarter results were strong enough for Scholastic to confirm its fiscal 2023 financial guidance, with revenue expected to grow 8% to 10%, with adjusted EBITDA between $195 million and $205 million, versus $189 million. million for fiscal year 2022.

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