Scholastic Looks for Spell To Steady Its Share Price
In the latest Harry Potter book, the hero has become an adolescent whose mood swings between happiness and despair. Sounds like Scholastic Corp.'s stock.
Even as Scholastic announced Tuesday that it will print an additional 800,000 copies of "Harry Potter and the Order of the Phoenix," bringing the total to 9.3 million, its shares sank for the second day in a row. The new copies will begin shipping during the next month, and will further enshrine the book as the fastest-selling title ever.
But investors, who have gotten over the hype surrounding the latest Harry Potter novel, are trying to determine just what the company is worth. And while some see value now that the stock has fallen from its Harry-induced high, many are wary of buying the shares because of Scholastic's history of disappointing investors.
What they see is a company that is eerily similar to Tonks, the witch in Harry Five who can change her appearance at will.
One day, Scholastic is a book distributor that has a virtual lock on the lucrative school-book-clubs-and-fairs business. Scholastic gets 51% of its revenue distributing books from all the major publishers to book clubs and fairs and through direct sales to the home. The other 49% comes largely from its own book publishing, international sales and licensing opportunities. Besides Harry Potter, it publishes such perennial favorites as "Clifford" and "The Magic School Bus." Its "Captain Underpants" series, which made its debut in 1997, now has 25 million copies in print, including hard covers and paperbacks. Scholastic also owns the Klutz and Grolier imprints.
Considering the powerful franchise -- nearly every kid in America carries the fliers home in his or her backpack -- Scholastic shares should be worth far more than their current value. That would even be true if the infant Harry had never survived Lord Voldemort's attack 15 years ago.
Scholastic's shares, which settled at $29.42, down eight cents, in 4 p.m. Nasdaq Stock Market trading Tuesday, fetch 15.6 times analysts' consensus estimate for its earnings in the fiscal year that ended May 31; the company hasn't released the earnings yet. While the shares are down 5% this week and 18% for the year, they have soared nearly 28% since bottoming in early March.
Other days, such as Feb. 10 of this year and Dec. 19 of last year, the company makes Harry's dark dreams seem downright pleasant. On those days, the company is an erratic performer, sideswiping investors with bad news about one or another of its businesses, including most recently disappointments in the book-club operations. In February, Scholastic shares fell nearly 23% when the company reduced its earnings outlook for the second half of its fiscal year. Some long-term shareholders became so frustrated that they sold out, even with Harry Five coming soon.
"There had been issues with the company over the years ... and it happened again last year," says Amy Croen, co-president of Geneva Capital Management Ltd., a Milwaukee money manager that had been a long-term Scholastic shareholder. "That's why we sold it, knowing that Harry Potter would come this year and be a real positive for them."
Scholastic spokeswoman Judy Corman acknowledges the company has had problems recently. "While it has clearly been a tough year for publishers and book retailers, we are confident that our leadership in children's brands and distribution will enable us to continue to deliver value to our shareholders" she says.
The question now is which version of Scholastic will emerge when the company enters the inter-Harry lull. "The core business of the company is book clubs and they've had some issues with the book clubs," says Charles Glovsky, a portfolio manager at Independence Investment LLC, a Boston-based money manager that owned 35,000 shares as of March 31, the latest data the firm has released about its Scholastic holdings. "If they can resolve those issues, it's a cheap stock, if they can't, it's not."
The business has been plagued by weak orders, which have been blamed on the economy, cuts in school spending, and too many offerings. "They know their market very well," Mr. Glovsky says. "I'm confident they'll take steps to address the issues, but the fact of the matter is we won't know if these steps are effective until the fall." That's when students get back to school and start ordering books from Scholastic .
Few doubt that Scholastic has a gem in its distribution operation. "Their distribution arm is a huge driver of their business," says Brenda Bowen, executive vice president and publisher of children's hardcover books at Viacom Inc.'s Simon & Schuster. "They dominate the book-fair/book-club business, and they are in a unique position, because they are distributing books in an environment where book buying is strongly encouraged." Ms. Bowen, who was once a Scholastic employee, considers the distribution arm to be "vastly undervalued."
Scholastic controls more than 80% of the book-club market, according to Goldman Sachs, and its position is likely to get stronger with the bankruptcy-court filing of its only remaining national competitor last month. Scholastic hopes to buy some of that company's assets, pending bankruptcy-court approval.
Because of Scholastic's quirky fiscal year, back-to-school sales information won't be available until after the fiscal second quarter ends Nov. 31. Between now and then, the company will rack up big profits from Harry Five. Credit Suisse First Boston says that if Harry sells 10.5 million copies during the next year, it will generate $135 million in revenue, which translates into about 58 cents a share. That's nearly a quarter of the $2.45 that analysts expect Scholastic to earn in fiscal 2004, according to Reuters Research. Most of the profit will come during the next two quarters. That could get the stock moving. If the first four Harry books get a sales boost because of the hype surrounding Harry Five, profits could be even stronger.
There are also signs that Scholastic's management is getting serious about dealing with the company's problems. Last month it said it would cut 400 management and administrative positions, about 4% of the company's total work force. The move came as part of cost-cutting efforts following this year's earnings shortfall and was cheered by analysts.
But investors have long memories and are waiting for concrete results. Scholastic was a hot growth stock after its 1992 initial public offering, and the shares soared on the strength of the company's then-hot children's mystery series "Goosebumps." But in February 1997, Scholastic dropped a bomb, saying sales of "Goosebumps" had slowed. The stock slid 40% in a day. Says Mr. Glovsky: "There have been disappointments."
Scholastic says things are different now, the company is bigger and profitable, and the current slowdown is due to the economy, rather than a weak product. "With 'Goosebumps,' it was a product not selling," Scholastic's Ms. Corman says. "In fact our lead property is now Harry Potter, which is the biggest book in history."
哈利．波特与Scholastic
在《哈利．波特》(Harry Potter)系列小说的第五集中，男主人公变成一个情绪在快乐和绝望之间来回波动的青春期少年。这听起来很像Scholastic Corp.的股票。
尽管Scholastic周二宣布将加印80万册《哈利．波特与凤凰令》(Harry Potter and the Order of the Phoenix)，从而使总发行量达到930万册，但该公司的股价仍然连续第二天下挫。加印的版本将从下月开始发货，并将进一步证明这是有史以来销售速度最快的一本书。
但是对于已经忍受了围绕这本小说所进行的大肆宣传的投资者来说，他们只是想努力判断这家公司股票的价值。虽然在该股已经从哈利?波特热引发的高点回落的情况下，一些人看到了它的价值，但仍有许多人对购买该股持谨慎态度，因为Scholastic的过去令投资者感到失望。
他们认为该公司与《哈利．波特与凤凰令》中的女巫Tonks一样怪诞，她可以随心所欲地变换形象。
有些时候，Scholastic是一位牢牢掌握利润丰厚的学校购书会和书展(school-book-clubs-and-fairs)业务的书刊分销商。Scholastic收入的51%来自于将所有主要出版商的书籍分销给购书会和书展或直接出售给家庭。另外49%主要来自自己的书籍出版、跨国销售和特许权转让机会。除了《哈利?波特》系列小说外，该公司还出版了《Clifford》以及《神奇校车》(The Magic School Bus)这类经久不衰的畅销书。该公司在1997年首次推出的《内裤超人》(Captain Underpants)系列现在已经印制了2,500万册，包括精装本和平装本。
考虑到强大的特许权－－几乎每个美国小孩都会把书中描写的飞行器放在背包中带回家－－Scholastic的股票价值应该远远高于目前的水平。
Scholastic的股价周二收盘下跌8美分，至29.42美元，是分析师对该公司截至5月31日的财年收益普遍预期的15.6倍；该公司尚未公布收益。虽然该股本周下跌5%，今年下跌18%，但是从3月初触底以来已经上涨了近28%。
而在另一些时候，例如今年的2月10日和去年的12月19日，该公司的表现极不稳定，关于其业务的坏消息不时打击投资者，其中包括最近购书会业务令人失望的表现。在2月份，该股几乎下跌了23%，当时该公司下调了下半财政年度的收益预期。一些长期股东变得灰心丧气，以至于不顾《哈利．波特》第五集即将问世而纷纷出清该股。
Geneva Capital Management Ltd.的联席总裁艾米?戈洛恩(Amy Croen)是Scholastic的长期股东，这位投资经理说，该公司在过去数年一直存在问题，去年又出现了。这就是他们抛售该股的原因，虽然明知《哈利．波特》第五集将于今年出版并将成为对该公司有利的因素。
Scholastic的发言人朱迪?考曼(Judy Corman)承认，公司最近出现问题。虽然今年对出版商和书刊零售商来说显然是很艰难的一年，但公司相信在儿童品牌和分销方面的领导地位将使公司得以继续为股东创造价值。
现在的问题是，当哈利?波特引发的热潮平息后，该公司将以何种形象示人。Independence Investment LLC 的投资组合经理查尔斯．格拉伍斯基(Charles Glovsky)说，该公司的核心业务是购书会，但现在却出现了一些问题。截至3月31日，这位波士顿的投资经理持有3,5000股Scholastic股票。他说，如果该公司能解决这些问题，其目前的股价就是便宜的，如果不能，就不便宜。
由于经济低迷、学校削减开支以及书刊供应过多造成的订单疲软打击了该公司的业务。格拉伍斯基说，该公司非常了解自己的市场。他相信他们会采取措施解决这些问题，但问题是，在秋天到来前，无法知道这些措施是否有效。到时候学生将返校，并开始从Scholastic订购书籍。
对Scholastic在分销业务方面有法宝这件事，几乎没有人表示怀疑。维亚康姆(Viacom Inc.)旗下Simon & Schuster的执行副总裁、儿童精装图书发行人布伦达．鲍文(Brenda Bowen)说，他们的分销子公司是业务的一个巨大驱动器。该公司主导著书展和购书会业务，其地位是独一无二的，因为他们是在购书行为受到极大鼓励的这样一种环境下分销书刊的。鲍文曾经是Scholastic的员工，她认为该公司分销业务的价值被严重低估。
据高盛(Goldman Sachs)称，Scholastic在购书会市场的占有率超过80%，而且由于其唯一的全国性竞争对手上月向破产法庭递交申请，Scholastic的地位可能进一步增强。Scholastic希望收购该公司的部分资产，这还有待破产法院的批准。
由于Scholastic财政年度的起止时间很奇怪，返校销售情况要等到截至11月31日的第二财政季度结束后才能获得。从现在到那时之间，该公司将通过《哈利．波特》第五集赚取高额利润。瑞士信贷第一波士顿(Credit Suisse First Boston)说，如果这本书明年售出1,050万册，该公司将获得1.35亿美元收入，合每股收益58美分。据Reuters Research说，这几乎是分析师预计的该公司2004财政年度每股收益2.45美元的四分之一。这笔利润中的大部分将在未来两个季度获得。这可能推动股价上涨。如果受围绕《哈利．波特与凤凰令》展开的宣传攻势推动，前四集《哈利．波特》的销售量增长，利润可能更高。
还有迹象显示，Scholastic的管理层正在认真处理公司的问题。管理层上个月表示，将裁掉400个管理和行政职位，约占公司员工总数的4%。此举是在本财政年度收益低于预期之后开始推行的成本削减努力的一部分，受到分析师的欢迎。
但是投资者的记性很好，并期待具体的结果。在1992年首次公开募股以后，Scholastic一度是一只热门的成长股，受当时热销的儿童系列读物《鸡皮疙瘩》(Goosebumps)的强势推动，股价大幅上扬。但是到了1997年2月，Scholastic称《鸡皮疙瘩》的销售放缓，在投资者中投下了一枚炸弹。该股当天就下跌40%。
Scholastic说，现在的情形不同。公司规模扩大了，而且有盈利能力，目前的业务下滑是由经济低迷造成的，而不是产品缺乏吸引力。公司发言人考曼说，《鸡皮疙瘩》不是一件适合销售的产品。事实上，现在公司的主打产品是《哈利．波特》，
