Friday, November 23, 2012

Scholastic Corp (NASDAQ:SCHL) reduces profit forecast for 2013, Shares Slump

Publisher of children's books Scholastic Corp(NASDAQ:SCHL) on Wednesday reduced its profit guidance for 2013 on federal spending cuts, sending its shares down by about a fifth.

The company said revenue will be $100 million lower than expected because schools are spending money on curriculum and holding back on orders, due to apprehensions that the government would cut back on spending.

Will SCHL Rebound? Find Out Here

Shares fell $5.79, or 18.18 percent, to $26.05 in Wednesday’s session.

Scholastic now expects to earn $1.40 to $1.60 per share for the year ending May 31, down from its prior forecast of $2.20 to $2.40 per share.

It expects revenue of $1.8 billion to $1.9 billion, down from an earlier outlook for $1.9 billion to $2 billion.

To main reasons were cited by the company for trimming its guidance.

"One is that schools are spending money on training to get ready for Common Core, a set of uniform benchmarks for math and reading. That's leaving less money for spending that would go to its profitable educational technology products."

Scholastic also said schools are delaying spending decisions "due to continued uncertainty regarding the federal budget." A series of automatic spending cuts and tax increases are set to take effect at the beginning of 2013 unless Congress and the White House can make a deal to avert them.

The company is set to announce its fiscal second-quarter results in mid-December.

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