Scholastic Corp (NASDAQ: SCHL) reported Q4 EPS of ($0.23), $0.70 better than the analyst estimate of ($0.93). Revenue for the quarter came in at $284 million versus the consensus estimate of $272.6 million.

Chairman's Commentary

"In the fourth quarter, we took decisive action to mitigate the impact of COVID-19 on our operating income and cash flow, while continuing to support schools, teachers, parents and children as schools were closed in the U.S. and globally," said Richard Robinson, Chairman, President and Chief Executive Officer. "Responding to the revenue drop from school closings of $187 million, primarily from book clubs and book fairs, we focused on four key areas. First, we successfully drove a 45% increase in trade sales in the quarter, as children who could not access our in-school clubs and fairs found our books in stores and on-line, including favorite series like The Hunger Games, Dog Man®, The Baby-Sitters Club®, The Bad Guys™ and Wings of Fire™. Second, our new Scholastic Learn at Home hub, a free at-home digital learning tool for pre-K to Grade 6 and up, reached over 20 million families as they looked for support for home learning, paving the way for future revenue opportunities. Third, we successfully preserved cash through reducing inventory purchases, cutting capital spending, and suspending our stock buy-back program. And fourth, we slashed costs by more than $50 million in the quarter through closing distribution centers in highly impacted regions, scaling our operations to meet near-term business needs, and reducing labor costs. We ended the fiscal year with a strong balance sheet, with over $175 million in net cash and stockholders' equity of approximately $1.2 billion."

Mr. Robinson continued, "Scholastic has faced many challenges in its 100-year history and we have always emerged better and stronger. More than 90% of U.S. schools use Scholastic's products, and at this time of concern on school openings, we are acquiring information from school districts about starting dates, and whether classes will be in-person, remote, or hybrid. Whatever the format, schools will be able to turn to Scholastic for reading and information to combat children's learning loss. Scholastic is offering digital classroom magazines for use in school and at home, improved online ordering for parents seeking quality inexpensive books through book clubs, and Safe & Easy book fairs, which simplify planning and setup, as well as expanded virtual fairs. In short, we are flexibly modifying our familiar services to meet the needs for books and digital learning, whether in physical or virtual classrooms this fall."

“For many people who are working from home and isolating at home, online services are critical. More businesses and individuals than ever depend on internet infrastructure for their livelihood. Commitment to our mission of maintaining our unparalleled record of uninterrupted .com and .net DNS is our priority,” said Jim Bidzos, Executive Chairman and Chief Executive Officer.

Fiscal 2021 Outlook and Cost Savings Initiatives

Scholastic is planning for a slower than normal start to the 2020-21 school year, with expectations for most schools to be open, but with a variety of in person, distance learning and hybrid options. As schools re-open, the Company expects strong demand for children's books delivered through book clubs and book fairs to schools and direct-to-home. We expect to have strong sales for our digital education programs, including classroom magazines, as schools look for digital learning tools to bridge the gap between home and school. The trade business is expected to remain strong with scheduled releases including Dog Man: Grime and Punishment by Publishers Weekly's 2019 Person of the Year, Dav Pilkey, as well as a new Pilkey series, Cat Kid Comic Club™, launching in the fall. The Ickabog®, the first new children's book by J.K. Rowling in 13 years will launch in November and new titles from other best-selling authors such as Tui T. Sutherland, Alan Gratz, Kelly Yang and Varian Johnson will appear throughout the year.

At the same time, Scholastic has already made significant progress in its cost savings program, with a target of reducing expenses by $100 million in fiscal 2021. The program is designed to preserve the Company's profitability and cash flow on likely lower revenues. The $100 million cost reduction plan focuses mainly on labor-related costs, as well as process improvements. These changes will provide the Company with increased flexibility to achieve higher operating leverage and adjust its cost structure to align with changes in volume. Additional details on these initiatives will be provided throughout the year.

In light of the evolving situation with school openings, the Company expects revenues in FY2021 to be slightly below FY2020 sales, offset by the Company's $100 million cost reduction plan which is currently being implemented.

For earnings history and earnings-related data on Scholastic Corp (SCHL) click here.