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November 8 – November 15, 2007 Edition
Dip in Third Quarter;
TORONTO/11/2/07–Canada-based Harlequin Enterprises, a leading publisher of women’s fiction around the world, saw a 2.7% drop in sales for the third quarter ended September 30 to C$115.7 million ($122 million). However, operating profits rose 12.5% to C$16.2 ($17.2 million).
As part of the Torstar Corporation, Harlequin sells books through the retail channel and directly to the consumer by mail and the Internet. Harlequins womens fiction publishing operations are composed of three divisions: North America Retail, North America Direct-To-Consumer and Overseas.
Sales in the direct-to-consumer adult division were flat but profits were up due to lower promotional and advertising costs. Harlequin’s children’s continuity programs declined, while overseas sales rose 30%. Sales fell in Japan and were flat in the UK. During the first nine months of the year, revenues increased a modest 1.2% to C$356.1 million and profits were up 20.6% to C$47.9.
Excluding the impact of foreign exchange, overall Book Publishing operating profits were up $2.5 million in the third quarter of 2007. North America Retail was up $2.6 million, North America Direct-To-Consumer was up $0.5 million and Overseas was down $0.6 million. Year to date, Book Publishing operating profits were up $8.0 million excluding the impact of foreign exchange. North America Retail was up $6.8 million, North America Direct-To-Consumer was up $1.2 million and overseas was flat. Year to date, EBITDA was up $6.3 million excluding the impact of foreign exchange.
North America Retail had a strong third quarter with price increases on selected series product lines, a strong publishing program and cost savings. The number of books sold was down slightly in the quarter. Cost savings included lower advertising and promotional costs as well as $0.5 million of lower depreciation and amortization.
North America Direct-To-Consumer revenue was down in the third quarter of 2007 primarily from declines in a childrens direct-to-home continuity program. In the core Direct-To-Consumer business, revenue was flat in the quarter as the series price increase offset lower volumes. Lower advertising and promotion costs associated with the fall 2007 mailing provided the third quarter profit improvement.
The Overseas markets continued with mixed results during the third quarter. Year to date the Nordic group is up 30%, the U.K. is flat and Japan is down with 14 challenges in the core series book market more than offsetting growth in single titles and digital products.
Torstar projects a positive sales trend in its North American operations for the balance of the year, but declines in the direct market may offset trade gains in the other divisions and fluctuations in currency rates.
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