Children’s book and instructional material publisher Scholastic Corp (SCHL 35.40, -3.11 -8.1%) trades to some pretty interesting lows this afternoon after essentially missing on both the top and bottom line for Q1.
When you look at the print, it’s not hard to discern where SCHL underperformed the Street this period. A Q1 loss of $1.81 per share was solidly worse than market expectations while the revenue declines of 33.1% to about $189.2 million also push the stock lower.
SCHL had expected Q1 revenue declines, particularly in its Children's Book Publishing and Distribution and International segments, following the July 2016 publication of Harry Potter and the Cursed Child, Parts One and Two, the best-selling book in North America last year. While Education sales were lower in the quarter based on timing, the Company expects to meet its revenue plan for the education business for the fiscal year. Since its release on August 29th, Dav Pilkey's Dog Man: A Tale of Two Kitties has been the top seller of all books in the U.S. and Canada. Strong children's titles also include: I Survived the American Revolution, 1776; The Bad Guys in Attack of the Zittens; and the new paperback edition of Harry Potter and the Cursed Child, Parts One and Two.
Children’s Book Publishing and Distribution segment revenue was $66.8 million, compared to $137.8 million in the prior year period, a decline of $71.0 million or 52%. Lower quarterly revenues were wholly attributable to the strong frontlist performance of Harry Potter and the Cursed Child, Parts One and Two, which was released in the first quarter of the previous fiscal year.
Education segment revenue was $45.0 million in Q1, compared to $55.2 million in the prior year period, a decline of $10.2 million, or 18%. The sales decline was primarily the result of the timing of orders for customized curriculum product, as well as the absence of classroom magazine's election skills book revenue in this non-election year.
International segment revenues in Q1 were $77.4 million, compared to $89.7 million in the prior year period, a reduction of $12.3 million, or 14%. The lower revenues in the current quarter are mainly due to lower sales of Harry Potter and the Cursed Child, Parts One and Two in the company's Canada business unit and export channel.
Further, SCHL also gave some underwhelming FY18 guidance. For the fiscal year 2018, the company sees EPS of $1.20-1.30 on revenues between $1.65-1.70 billion.