Scholastic Shares Drop on Weak Q1 Earnings Report
The education company's stock fell after it reported a wider-than-expected loss and missed revenue estimates for the first quarter.
Scholastic Corporation (SCHL) shares declined sharply after the company reported disappointing first-quarter financial results, missing analyst expectations and posting a wider loss than in the same period last year. The children's publishing and education company announced a net loss of $71.1 million, or $2.83 per share, for the quarter ending August 31, compared to a net loss of $62.5 million, or $2.21 per share, in the prior-year quarter. On an adjusted basis, the loss was $2.52 per share, which was worse than the analyst consensus.
Revenue for the first quarter fell 4.9% to $225.6 million from $237.2 million a year ago, falling short of the of $238.91 million. The company attributed the weak performance to the seasonal nature of its school-based businesses, which are typically slow during the summer months. The market reacted negatively to the news, with Scholastic's stock falling nearly 10% in after-hours trading.
Despite the poor start to the fiscal year, Scholastic reaffirmed its full-year guidance for fiscal 2026. The company's management expressed confidence in its ability to achieve its targets, citing ongoing cost-saving initiatives and strategic moves, such as the integration of its trade, book fairs, and book clubs into a new Children's Book group. This reorganization is intended to streamline operations and create efficiencies. The company also highlighted an improvement in its adjusted EBITDA, which reached a loss of $55.7 million compared to a loss of $60.5 million a year ago, as noted in a .
A bright spot in the report was the Children’s Book Publishing and Distribution segment, which saw a 4% increase in revenues to $109.4 million, driven by an 18% rise in school book fair revenues. However, this was offset by a decline in the Education Solutions segment, where revenue dropped to $40.1 million from $55.7 million in the prior year. The company stated that this was due to a volatile funding environment and delays in federal education grants. The provides additional detail on the segment performance.
Analysts have taken a cautious stance on Scholastic following the earnings miss. Zacks Investment Research currently has a "Strong Sell" rating on the stock, indicating a potential for underperformance in the near term. The negative market reaction, as detailed by , suggests that investors are concerned about the company's ability to meet its full-year targets despite the management's reassurances.