Scholastic was founded in 1920 as a single classroom magazine. Today, the company is the world’s largest publisher and distributor of children’s books and is the leading operator of school-based book clubs and school-based book fairs in the United States. It distributes its products and services through these proprietary channels, as well as directly to schools and libraries, through retail stores and through the Internet. The company categorizes its businesses into three segments: Children’s Book Publishing and Distribution; Education (formerly titled Classroom and Supplemental Materials Publishing); and International. Furthermore, Scholastic and its subsidiaries compete in more than 145 countries and publish books in 47 languages.

Analysis Key Developments

For fiscal 2018, Scholastic reported decreasing revenues of 6%, to 1.63 billion USD, and operating income decreased 38% to 55.6 million USD in comparison to the prior fiscal year, which benefited from strong sales of Harry Potter and the Cursed Child.

Financial

Scholastic’s revenues for fiscal year ended May 31, 2017 increased by 4.1%, to 1.74 billion USD, compared to 1.67 billion USD in the prior fiscal year. According to the company, the performance was solid in 2017 with strong trade publishing and market share growth in education. Scholastic’s operating income in fiscal 2017 grew by 21.3 million USD. The company’s revenues from fiscal 2017 broke down as follows: 18% from the Education segment, 21.6% from the International segment, and 60.4% from the Children’s Book Publishing and Distribution segment.

During 2017 Children’s Book Publishing and Distribution generated the largest share of the company’s revenues. The segment’s revenues totaled 1.05 billion USD in 2017 (2016: 1 billion USD), primarily by the strength of frontlist and backlist Harry Potter titles including Harry Potter and the Cursed Child, as well as the screenplay for Fantastic Beasts and Where to Find Them, released in November 2016.

The Education segment (previously Classroom and Supplemental Materials Publishing) revenues increased during fiscal 2017 by 13 million USD and amounted to 313 million USD, driven by strong fiscal year fourth quarter sales of literacy initiatives, particularly family and community engagement and summer reading programs, as well as higher professional development and services revenue.

The International segment includes the publication and distribution of products and services outsides the U.S., by Scholastic’s international operations, and its exports and foreign rights businesses. The segment’s revenues were slightly up in 2017 and totaled 377 million USD, compared to 372 million USD in 2016. Overall the segment’s revenues amounted to 21.6% of fiscal 2017.

Internal Organization

In 2017, the company launched Scholastic 2020, a three-year plan to significantly improve operating income as the company approaches its 100th anniversary in October 2020.

In May 2017, Scholastic announced the opening of a new branch in Bogota, Colombia. Due to this, the company expects to increase the reach of the literacy and mathematics solutions provided by Scholastic for students and educators in K–12 schools throughout Latin America.

During April 2017 the company announced the launch of Leveled Bookroom 4.0, a comprehensive literacy resource for grades K–6 that combines high quality leveled books with print and digital instructional materials to support educators.

In November 2017, Scholastic appointed Ken Cleary as its new CFO, succeeding Maureen O’Connell, Scholastic’s long-time CFO and chief administrative officer.

In February 2018, Scholastic announced the launch of a new imprint named Scholastic Focus. Starting with September 2018, the imprint will produce exclusively narrative nonfiction for middle grade and YA readers with topics ranging from history to identity, to wide-reaching cultural ideas.

In fiscal 2017, Scholastic purchased 100% of Ooka Island Inc., a Canadian-based digital phonics business.

The company also acquired the assets of a U.S.-based book fair business in fiscal 2017. Results from the acquisition are included in the Children’s segment.

International

Scholastic has operations in 13 countries throughout the Americas, the United States, Europe, the Middle East and Africa as well as Asia, Australia and New Zealand. The company exports educational materials, digital educational resources and children’s books to schools, libraries, bookstores and other book distributors in more than 145 countries worldwide. Scholastic licenses the rights to titles in 47 languages to other publishing companies around the world and partners with governments and nongovernmental agencies to create and distribute books to public schools in developing countries.

Bestsellers

Bestsellers during fiscal 2017 included Harry Potter and the Cursed Child (Parts One and Two), the original screenplay for Fantastic Beasts and Where to Find Them, Ghosts, Dogman and Dogman Unleashed, Five Nights at Freddy’s: The Silver Eyes, and the Pokemon: Deluxe Essential Handbook, as well as multiple series, such as Harry Potter, Captain Underpants, Wings of Fire, The Baby-Sitters Club Graphix, and Star Wars: Jedi Academy.

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