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Wow, Scholastic shares are being rapped across the knuckles pretty badly today. The Reuters reports appear below. I'd like to initiate a thread to discuss --if SCHL mass-selling is justified or panic-driven at this point, and --does anyone have any data sources indicating insider activity prior to SCHL's announcement? My first (not well-informed) impression: Goosebumps books may be a fad item lacking the staying power of, say, Clifford the Big Red Dog or Magic School Bus. That seems like an isolated problem as opposed to mismanagement or similar serious business-wide problems. Thanks Mike NEW YORK, Feb 21 (Reuter) - Scholastic Corp, the widely-recognized publisher of children's books, suffered a sharp dose of market discipline Friday after blindsiding investors and analysts with a warning about future results. In late morning Nasdaq trade, Scholastic shares were trading at 36, a decline of 25-1/2 points, or 41.5 percent. In two hours, Scholastic's trading volume reached almost three million shares, exceeding the average daily volume by 10 times. Earlier, the stock traded as low as 32, but rebounded somewhat. The selloff pushed the stock to a low unseen since May 1994. The New York-based publisher went public five years ago, when it offered 4.3 million shares at $22.50 each. After the Nasdaq market close Thursday, Scholastic said it expects a loss of between $0.70 and $0.80 per share for the fiscal third quarter ending February 28, including a $0.50 per share charge related to reserves taken on retail book returns. Third quarter profits a year ago were $0.55 per share. Scholastic said it also expects earnings for the fiscal year ending May 31 to be between $1.45 and $1.60 versus $1.97 one year ago. Soon after the announcement, the company held a conference call with analysts to "detail a dramatic and unforeseen shortfall in trade book sales at its major Goosebumps franchise. In addition, an expected sales revival at its core book club business in the second half of fiscal ... 1997 has now been pushed out to fiscal 1998," according to a research note preapred by UBS Securities analyst Edward Hatch. With no warning or inclination of the news, Hatch suggested Scholastic appeared tardy in realizing and reporting the sales trouble, calling into question "the veracity of its systems and response time in learning problems." Hatch was among several analysts who downgraded the stock upon digesting the warning, moves that included two rare Wall Street recommendations to sell stock outright: Merrill Lynch slashed the near-term recommendation to "reduce" from accumulate while Deutsche Morgan Grenfell declared the stock a "sell," down from hold. DMG analyst Rudolf Hokanson said in his note that, "Goosebumps, while still a very valuable brand, has slowed so dramtically its returns became 'frightening' according to management" in the conference call. NEW YORK--(BUSINESS WIRE)--February 20, 1997--Scholastic Corporation (NASDAQ: SCHL) announced that, for the third quarter ending February 28, 1997, it will experience reduced sales in its children's book retail trade channel and in its school book club business. As a result, the Company expects to report a loss of approximately $0.70-$0.80 per share, which includes $0.50 per share for the effect of a $13 million pre-tax special charge primarily consisting of a reserve for anticipated additional retail book returns, compared to a profit of $0.55 per share in the year ago quarter. The Company expects its earnings per share for its fiscal year ending May 31, 1997 to be approximately $1.45 - $1.60, as compared to $1.97 in the prior fiscal year, which included the impact of $0.88 in connection with the Company's early adoption of FAS 121. In recent years, Scholastic's trade book business has grown substantially, led by Goosebumps(R), the most successful children's book series ever published. In the third quarter, shipments of older Goosebumps titles declined, resulting in a decrease in total shipments. Newly released Goosebumps titles continue to perform extremely well, shipping nearly one million copies per month. Overall the balance of Scholastic's trade book program, including new series such as Animorphs(TM) and Dear America(TM), continues to experience strong growth. The Company believes that Literacy Place(R), Scholastic's new core reading program, will exceed earlier expectations for its share of the California core reading adoption market. This would have a modest benefit in the current fiscal year and a larger benefit in the next fiscal year. The third quarter will also be affected by planned promotion costs for Literacy Place. Richard Robinson, President, Chief Executive Officer, and Chairman of the Board of Scholastic, commented, "Scholastic has doubled revenues since our initial public offering in fiscal 1992. Much of this growth has come from our children's book business, which now is the strongest, most successful in the industry. The reduced sales of older Goosebumps titles came a bit sooner than we had planned, but we have developed an outstanding trade publishing program for the future, including a strong Goosebumps presence. In addition, our reading program, Literacy Place, is doing better than expected, and we believe it will soon provide an additional significant source of revenues and profits. Meanwhile, we are committed to reducing costs where possible without adversely impacting future revenues. On the whole, Scholastic's future remains extremely bright." For more than 75 years, Scholastic has been committed to creating quality educational materials for students and teachers. The Company is one of the leading publishers and distributors of children's books, classroom and professional magazines, instructional materials and other educational products. Scholastic also publishes educational software and produces children's and family-oriented video and television programming. The Company's international operations include Canada, Australia, New Zealand, the United Kingdom, France and Mexico. | ||||||||||||
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