Scholastic Tanks on Lowered Guidance
Scholastic Corporation (Nasdaq: SCHL) announced Tuesday that it has revised its earnings guidance for the fiscal year ending on May 31, 2013.
Originally, the company projected a range of $2.20 to $2.40 per diluted share on revenues between approximately $1.9 to $2.0 billion. The revised guidance now projects a range of $1.40 to $1.60 per diluted share, with revenues between $1.8 to $1.9 billion. Free cash flow is expected to be between $100 million and $120 million for the fiscal year.
Shares of Scholastic traded sharply lower, down nearly 20 percent early on Wednesday.
The world's largest children's book publisher cited lower sales in its educational technology segment as a significant factor affecting the adjustment. Earlier this year, guidance had been favorable in anticipation of the movie release of Hunger Games, but sales figures have been underwhelming for the trilogy of books in the months since.
In addition, the company's major promotions like the School Book Fair and School Book club took hits after Hurricane Sandy hit the Northeast coast.
Another reason Scholastic adjusted their guidance for 2013 was the expectation that schools will be focusing their funding on curriculum rather than textbooks due to the potential federal spending cuts.
The company also pointed to schools gearing towards training for educators and administrators in preparation for the Common Core State Standards, which further reduces funds that might otherwise have been spent on Scholastic products.
After the announcement yesterday, shares of the company fell 20 percent in after-hours trading to end at $25.50. As of the time of this writing, the pre-market share price remains near the $25.00 mark.
The company plans to announce fiscal second quarter results on December 10, 2012.
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