Scholastic Corp (NASDAQ: SCHL) stock lost over 1.4% on December 14th, 2017 (as of 10:13AM EST; Source: Google finance) on the back of lower than expected second quarter of 2018 performance. The stock lost over 12.3% in this year to date.
The group’s top line fell to $598.3 million during the second quarter of 2018 from $623.1 million in the prior corresponding period while Operating profit from continuing operations lost to $107.2 million against $112.1 million in the prior year period. This is a relatively subdued performance as compared to the best-selling new Harry Potter releases in last year. Children’s Book Publishing and Distribution segment revenue lost to $411.8 million during the quarter from $432.5 million in the prior year period, which is a fall of $20.7 million or 5%. International. Segment revenue lost 3% yoy to $115.6 million, while Education Segment revenue fell to $70.9 million in the second quarter, from $71.1 million in the prior corresponding period
The group’s cash provided by operating activities fell to $120.8 million in the current fiscal quarter from $179.7 million in the second quarter of fiscal 2017. The Company had free cash flow of $90.7 million in the current quarter, but their cash and cash equivalents exceeded their total debt by $376.5 million, from $435.6 million in the prior corresponding period. Capital spending program to upgrade its facilities and technology hurt the group’s cash position.
The group is aiming a Scholastic 2020 strategic technology transformation plan and intends to enhance their operating profitability by 2020 via a better marketing efficiency and simplified business processes leading to lower operating costs.
The group spent $21.3 million of capital during the quarter which comprises $9.1 million towards the redesign and upgrade of its headquarters and $7.8 million for strategic technology development and deployment. The group is increasing their CRM investments for a better customer information, which would lead to a higher revenue per fair in their book fairs business, as well as better pipeline and market share in the education business.