What happened
Shares of Scholastic(NASDAQ: SCHL) were down 12% as of 10:06 a.m. ET on Friday after the company delivered worse-than-expected financial results for the fiscal first quarter ending in August.
Revenue of $228.5 million came in well below the consensus analyst estimate of $269 million. Scholastic also missed on the bottom line, with a per-share loss of $2.35, worse than analysts anticipated.
So what
Consumer-facing companies have reported mixed results this earnings season, which has caused extra volatility for retail stocks. Scholastic was not immune to the cool macroeconomic environment that is still impacting consumer spending.
The company said revenue fell 13% year over year partly due to the "continued retail softness, which impacted trade sales in the U.S. and major international markets, as well as the timing and seasonality of sales in eduction solutions."
Weaker sales, along with investments to support expected growth in the school reading events business, contributed to an operating loss of $99 million for the quarter.
Now what
This is a stock that investors favor for the company's leading market position in children's book publishing, consistent sales history, and dividends. Scholastic continues to pay out about a third of its trailing free cash flow to shareholders in dividends, while also buying back shares.
The good news about the post-earnings drop in the stock is the dividend yield has increased to 2.35%. Scholastic generated average free cash flow of $70 million annually over the last three years, with trailing-12-month free cash coming in at $86 million. Further free cash production will support the dividend payout and provide management the resources to invest in growth initiatives.
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John Ballard has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
