Scholastic stock drops on Q1 earnings

Shares of Scholastic (SCHL) plummeted in early trading after the children's book publisher reported a wider-than-expected loss in its fiscal first quarter. Revenue of $228.5 million also missed Wall Street estimates. The company cited "continued retail softness" as a key drag on results, along with seasonal impacts due to the summer months. Yahoo Finance Live breaks down the report.

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Video Transcript

- Imagine, you're a couple of weeks into the school year. Your school tells you you've got a book fair coming up. Immediately, what are some names that come to mind? Scholastic. One of them. This week, the children's book publisher reported a worse than expected loss here for the second quarter. And the company also saying here that one of the things that had contributed to some of the financial performance was the summer break, well, yeah, and the timing of some of its revenue contributed to their losses here.

Notably here, the company did say, at least, from their plan going forward here, Peter Warwick, president and chief executive officer, saying we have a strong plan for book fairs this year. And that's why I brought up that story. Many of us remember the early weeks of a new school year-- you're bright-eyed, you got the outfit laid out--

- Excited to read.

- Exactly-- to read. But here's the issue, is that you've got so many different ways of reading and ways of engaging with books now. For Scholastic, of course, there's the relations with so much of the authors of these books, as well as the distribution of them. And so if you see a major technological shift in the way that people are consuming with that, and Scholastic does not keep up, well that can have a much more longer term impact but stronger plan for book fairs this year, building on some of the strategies that they've transformed the business over the past two years, and applying some of that learning as well here. But we'll see if that ultimately does net out positively for them.

- Yeah. We will see. The executives though obviously, striking an optimistic tone in this report. We know, like you said, the seasonality, this isn't exactly a surprise, coming off the summer months. Clearly, a company like this is going to be up against, what is a challenging several months. But as we head into the back-to-school season, they did reaffirm their guidance, saying that back-to-school season represents another opportunity for scholastic to really help address the critical need that we do have for literacy and reading across the country. But what those numbers look like are going to be so important as we look ahead to the current quarter, because revenue, for the most recent quarter for the company, dropping 18%.

Book fair sales declining 4%, the trade revenue falling nearly 20% to just under 73 million. So we know the softening retail market, obviously a headwind here for a name like Scholastic. And we're seeing some of those concerns reflected in the share price move here at the open with the stock off nearly 15%