Penguin Results Decline In First Half, With Profits Cut In Half

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Penguin's parent company Pearson reported results for the first half of the year on Friday morning, with Penguin the only unit that declined in the period. Sales of £441 million were down £16 million from a year ago (4%), and operating profit suffered more, at £22 million down from £42 million a year ago.
The company cited three factors in their performance: "A lighter publishing schedule, the exceptional performance of competitor bestsellers The Hunger Games and Fifty Shades of Grey and continued pressure on physical book publishing and retailing." As evidence of that lighter schedule, Penguin US had 132 bestsellers so far in 2012, compared to 157 a year ago. Also cited in a separate Penguin statement was their "large, strong backlist which is suffering from the loss of Borders and the disappearance of shelf space across the industry." Chief executive Marjorie Scardino commented: "They have distorted the overall books market; Fifty Shades of Grey has sold more than 30 million copies. The US is the only place we are down, those big best sellers really did take a lot of air out of the market." In other words, US sales declined even more than the companywide total--likely closer to 6 percent, since the US accounts for over 60 percent of Penguin sales.
Penguin CEO John Makinson told us it is "obviously disappointing that these results aren't better, but I think there are some perfectly sound reasons for them." He noted in a formal statement, "We always knew that we would struggle to match last year's exceptional performance in 2012 and that our publishing performance would be unusually weighted towards the second half this year. Both these factors have influenced the sales comparisons for our US company in the results we are announcing today. In other parts of the world sales are tracking in line with, or above, last year's levels and we remain confident, not just in the outlook for the second half of the year, but in our ability to capture the opportunities presented by new models, such as self-publishing, and by the proliferation of new digital products and channels."
Penguin USA ceo David Shanks reiterated that "where we were weak was really in our backlist," which remains highly profitable on a title-by-title basis, noting that "what we have not gotten back yet what we used to sell to Borders."