Education publisher Scholastic (NASDAQ: SCHL) fell short of expectations in its most recent quarter. Investors are giving the results an F, sending shares down 19% as of 12:30 p.m. ET.
Tepid demand from key consumer categories
Scholastic is a publisher of education textbooks, related products, and other books aimed at children. The company earned $1.73 per share in its fiscal fourth quarter ending May 31 on revenue of $474.9 million, falling short of Wall Street's expectations for $2.66 per share in earnings on sales of $552 million.
Revenue was down 10% year over year.
Scholastic is in the middle of a transformation plan that includes acquiring more interactive media and new intellectual property. But the company said it facing spending headwinds in its school-based business.
"In our seasonally important fourth quarter, a slowdown in supplemental curriculum purchases by schools and increasing pressure on consumer spending, as seen across the economy, impacted sales in Scholastic's Education Solutions and School Book Fairs businesses, respectively," CEO Peter Warwick said in a statement. "We took steps to carefully manage and align operating expenses in response, while protecting investment in long-term growth opportunities, but these factors caused Scholastic's fourth quarter revenue and profit to come in below our expectations."
Is Scholastic stock a buy?
Scholastic is forecasting a return to revenue growth in its new fiscal year, predicting sales to be up 4% to 6% in part thanks to the contribution of recently acquired 9 Story Media Group. At the same time, Scholastic does expect continued pressure on consumer and school spending.
The company did return more than $180 million to shareholders in its recently completed fiscal year, including $24.7 million in dividends and $156.8 million in share repurchases. Scholastic's share count is now down about 15% over the past three years.
For growth-focused investors, there is little reason to get excited right now. But Scholastic has strong brands and a cash-generation strategy that makes it worthy of consideration for investors looking to generate income.
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Lou Whiteman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
