Poor 'Hunger Games' sales cost Scholastic
The popularity of the trilogy is finally subsiding and its publisher is feeling the pinch.
In March 2012, the release of the movie based on the first book in "The Hunger Games" trilogy, published by Scholastic (SCHL), bolstered sales of the books. Since then, no more movies have been released, resulting in slower book sales.
The Wall Street Journal reported that "Catching Fire," a movie based on the second book in the trilogy is due out in November -- but that's too far away to do any good now.
Lower sales figures, weaker book-club demand and delays in educational product purchases by school districts all contributed to a wider than anticipated Q3 loss for Scholastic.
Overall sales at the book publisher dropped 19%, according to the company. Shares fell $4.32 or nearly 14% on Thursday. Scholastic also trimmed its full-year estimates and the stock has fallen 9% in 2013 to date.
The company is now projecting full-year adjusted earnings between $1.10 to $1.30 a share on revenue of $1.75 billion to $1.8 billion. This is down from $1.40 to $1.60 a share on $1.8 billion to $1.9 billion in revenue previously announced.
It's not unusual for Scholastic to show losses in the third quarter, traditionally the smallest sales period for the company's educational division. Add to that a 30% drop in the book-publishing and distribution segment -- mostly due to lower "The Hunger Games" sales and a 21% drop in school book club sales, and the results reflect a harsh reality for Scholastic.
"We knew that fiscal 2013 would be challenging," Chief executive officer Richard Robinson said in a statement reported by Bloomberg. "However, third-quarter sales of 'The Hunger Games' trilogy were significantly lower than our expectations, particularly in the U.S., Canada and Australia."
Meanwhile, Scholastic is looking to other series, such as "Captain Underpants" and "Tea Time with Sophia Grace and Rosie," to help maintain revenue.
Publisher's Weekly reports that cartoonists Jimmy Gownley, James Sturm, Keny Widjaja and Mike Maihack have all inked new book deals with the Graphix, Scholastic's graphic novel imprint. Unfortunately, children's book publishing, overall, is not healthy.
However, Forbes reports that the DividendRank formula at Dividend Channel ranks Scholastic in the top 10% of the coverage universe, suggesting the company is among the top most "interesting" ideas that merit further research by investors.
Scholastic has struck gold at least twice in the past -- once with "Harry Potter," more recently with "The Hunger Games' trilogy. Long-term investors are hoping for another rebound in the near future.
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