Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of Scholastic (NASDAQ: SCHL ) were flunking out of class today, falling as much as 15% after reporting a dismal third quarter.
So what: The children's education and publishing specialist said that the drop off in sales of Hunger Games books took a big chunk out of sales. For the quarter ending Feb. 28, Scholastic posted an adjusted EPS loss of ($0.57), down from ($0.33) a year ago. Analysts had expected a loss of ($0.39) per share. Revenue tumbled 19%, to $380.5 million, and the company cut its guidance for the fiscal year ending May 2013 to $1.10-$1.30, its second cut this year. The analyst consensus had stood at $1.52
Now what: The third quarter is generally a weak one for Scholastic, but these results are downright frightening. The children's book publishing business would appear to be in its demise as tablets and e-readers proliferate, and Scholastic may simply be another victim of creative destruction. Book sales fell by a whopping 59% in the quarter, yet its educational technology division only grew revenue by 5%. Scholastic expects digital products to increase profits next year, but long term, it looks like the deck is stacked against it.
Stay up to date on Scholastic. Add the company to your Watchlist by clicking right here.