Major publishers are having a hard time

When profits and sales soared in the first half of 2021, executives at major publishing houses knew they would face tough comparisons in 2022, and they largely do. As expected, demand for books has slowed this year, and the combination of weaker sales, high inflation and ongoing supply chain issues has significantly reduced revenues for three of the four major commercial publishers over the past few years. first six months of 2022. The same factors have kept publishers’ expectations for the rest of the year on hold.

Penguin Random House parent company Bertelsmann cited high inflation and supply chain challenges as key reasons why profits at the world’s largest commercial publisher fell 20.7% in the first half of 2022 EBIT (earnings before interest and tax) fell to €257 million from €324 million in the same period last year. Turnover increased by 6.2%, to 1.92 billion euros, but excluding the favorable exchange rate effect, sales were down compared to 2021.

Positives from the first half of 2022 included strong backlist and audiobook sales, and PRH Global CEO Markus Dohle said, “Our ever-expanding global audio business has become a solid growth pillar of our efforts to ‘editing.

Regarding trends, Dohle told PRH employees, “The long-term shift to online sales has resulted in strong order list growth and a technology and data-driven transformation of our instruments and tools. sales, marketing and advertising. We will continue to invest in this transformation and develop new competitive advantages to maximize the positioning, visibility and sales of our new publications and our rich catalogs on a global scale.

But Dohle doesn’t expect a quick profit rebound. “Around the world, significant cost increases, from paper and production to distribution and freight, among others, will not go away for the foreseeable future,” he wrote. “Therefore, we must all approach our business with a mindset of lean, efficient and productive execution while maximizing value for our authors and their works.”

HarperCollins’ sales rose 4.5% in the six months ended June 30 to $1.03 billion, but profits fell 10.9% from the same period in 2021. HC operates on a fiscal year ending June 30, and for the fiscal year, earnings increased. 1% on a 10.4% increase in sales, results that included a $149 million contribution from the purchase of the commercial division of Houghton Mifflin Harcourt.

While pleased with the results for the year, CEO Brian Murray said TP that since the start of the spring, higher freight and fuel costs have had a noticeable impact on the company’s results and have been the main reasons for the decline in profits in the first half of calendar year 2022. In the quarter ended June 30, for example, profits fell 2%, while sales increased 1%.

As a new fiscal year begins in HC, all costs, especially the cost of four-color printing in China, remain high, Murray said, and although container ship costs have come down, they are still much higher than they were before the pandemic. . He doesn’t see any real easing in costs until early 2023 at the earliest. While gasoline prices in the United States have fallen, he added, the cost of diesel fuel that truckers rely on shows no signs of falling, and fuel costs in Europe are likely to remain very high. because of the war in Ukraine. He was reluctant to discuss pricing, saying only that to make new books a success, higher costs must be factored in.

Murray is happy that despite supply chain issues last year, the majority of books “got where they needed to be” in time for the holidays, but he noted the effort was costly. There are still bottlenecks in the supply chain this year, especially in China. His biggest concern about the upcoming holidays, however, is whether consumer spending will hold up. Book sales have been strong during the pandemic, and while reading still appears to be above pre-pandemic levels, high inflation and more entertainment and travel options could dampen book spending, he said.

Lagardère Publishing’s turnover increased by 7.7% in the first half of 2022 compared to 2021, to 1.22 billion euros. Profits, however, fell 27.3% to 81 million euros, which the company attributed to “inflationary pressures on production, transport and labor costs”. The increase in sales reflects a gain of 59 million euros from the September 2021 acquisition of Workman Publishing and the purchase of Paperblanks, a publisher of notebooks and stationery, as well as a positive impact of 39 million euros due to exchange rate fluctuations.

In the United States, sales of Hachette Book Group, owned by Lagardère, increased slightly in the first half thanks to the acquisition of Workman; without Workman, sales would have fallen 1.9% from the first half of 2021. HBG CEO Michael Pietsch said sales of paperbacks and digital audio increased during the period, that backlist sales remained strong and sales to independent bookstores were strong. In addition, sales in Canada were good and HBG’s distribution business recorded an increase in sales.

Profits for the period remained strong, Pietsch said, but were lower than “extraordinary results for 2021 due to sharp increases in paper, manufacturing and shipping costs.”

Lagardère’s forecast for full-year results is unchanged from the start of 2022, forecasting sales roughly flat with 2021 and declining profits due to rising costs.

Simon & Schuster was the only publisher of the Big Four to report increased sales and profits in the first half of 2022, with sales up 26.2%, to $510 million, and profit of up 64.5% to $130 million. CEO Jonathan Karp said S&S “defied gravity” in the first quarter when results soared, and while earnings gains weren’t as big in the second period, he noted that all S&S divisions had double-digit revenue growth then, led by two key drivers: TikTok books and Colleen Hoover. Given the good first six months of 2022, Karp was optimistic for the rest of the year.

A version of this article originally appeared in the 09/19/2022 issue of Weekly editors under the title: A Rough Patch

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