SCHL earnings analysis
What we found in SCHL's 10-K: the parts that mattered, the offsets in the same document, and what the company said about what comes next.
Our reading of the filing · Free to read, no account needed
Scholastic’s FY2026 revenue declined 2.7% to $1.582B, driven primarily by a 13.6% Education contraction amid school-funding volatility, while Book Fairs growth and cost actions supported stable $15.2M operating income. Reported earnings inflected to $56.7M and $2.34 diluted EPS, but this was principally due to a $99.7M sale-leaseback gain; estimated free cash flow was only $2.5M ($50.9M operating cash flow less $48.4M capex), down from about $72.0M in FY2025 and $96.2M in FY2024. The company used property-sale proceeds to retire $175.0M of revolver borrowings and return $268.6M through repurchases, but FY2027 depends on execution in Book Clubs and literacy products against volatile education funding and new AI-related competition.
The parts that mattered.
Pulled out of the filing itself, with the figures the company reported.
- Margins improved despite lower revenue
- FY2026 revenue was $1.582B, down 2.7% from $1.626B in FY2025 but near FY2024’s $1.590B. Gross margin improved to 56.4% from 55.8%, as cost of goods sold fell to 43.6% of revenue from 44.2%.
- Core operating profit held roughly flat
- Operating income was broadly stable at $15.2M versus $15.8M in FY2025 and $14.5M in FY2024. Underlying profitability was helped by $15.1M lower SG&A, though the reported $56.7M net income and $2.34 diluted EPS included a $99.7M pre-tax sale-leaseback gain.
- Book Fairs and mix lift core book profits
- Children’s Book Publishing revenue was flat at $964.2M, but segment operating income increased 9.3% to $142.9M and margin rose to 14.8% from 13.6%. Book Fairs revenue rose $27.7M on higher fair count and revenue per fair, offsetting a $20.3M decline in trade sales.
- Proprietary-channel and IP strategy continues
- The strategy centers on proprietary school channels, content/IP, efficiency and portfolio optimization: Scholastic calls itself the leading U.S. school book-fair and book-club operator, serves schools in all 50 states, and is pursuing a combined Children’s Book Group to improve customer execution. FY2027 pipeline includes a new Dog Man title in November and new Harry Potter-related publishing tied to the HBO series.
- Asset monetization funded buybacks and debt paydown
- Capital allocation was exceptionally shareholder-focused: Scholastic sold its SoHo headquarters and Jefferson City facility for $481.0M, generating $452.4M of net proceeds and a $99.7M gain; it then repurchased $268.6M of stock, including 2.834M shares at $40.00 in a tender offer. Net debt under the revolver fell from $250.0M to $75.0M.
- Dividend increase and lower share count
- The dividend was raised 25% to $0.25 per share for FY2027 Q1 from $0.20, while $183.0M remained under the buyback authorization at May 31, 2026. Outstanding shares fell 25%, from 25.0M to 18.7M, which management expects to benefit FY2027 EPS.
And the other side of it.
The offsets in the same document — the things a summary that only listed the good news would have left out.
- Education funding pressure deepens
- Education revenue fell 13.6% to $267.6M, following a decline from $351.2M in FY2024 to $309.8M in FY2025, and segment profit moved from $6.3M income to a $4.1M loss. The filing newly highlights potential restructuring or elimination of U.S. Department of Education programs; federal Title I and related funding is described as a significant source for school customers.
- New generative-AI disruption risk
- A new dedicated Generative AI risk says AI can enable stories, illustrations, education content and scripts at lower cost and faster speed, potentially displacing traditional publishing and shifting education budgets to AI tutoring. The exposure is material given Children’s Book Publishing is 61.0% of revenue and Education is 16.9%.
- Tariff uncertainty remains a margin risk
- The filing newly emphasizes evolving tariffs and trade measures. While FY2026 tariff mitigation and $2.8M of IEEPA tariff refunds aided cost of goods sold, about $9.0M of prior tariff payments remain a potential refund not recognized; inability to offset future import costs could hurt gross margin.
- Sale-leaseback raises fixed lease burden
- Sale-leasebacks increased fixed occupancy commitments: operating-lease obligations total $547.3M, including $335.5M after year five, and operating lease expense rose to $43.6M from $31.7M. Management expects rental expense to increase again in FY2027 as a full year of headquarters and distribution-center lease costs is recognized.
- Entertainment investment is still loss-making
- Entertainment revenue rose 7.7% to $65.7M, but the segment’s operating loss widened to $16.1M from $12.1M after $5.2M of impairments, including $4.9M for film and TV programs in development. The 9 Story acquisition created $64.2M of goodwill and $85.3M of amortizable intangibles in FY2025, creating execution and impairment exposure.
What they reported.
What the company itself reported, taken out of the document.
- Earnings per share
- $2.34
- Gross margin
- 56.4%
- Operating margin
- 1.0%
- Segment
- Children’s Book Publishing and Distribution: $964.2M (61.0% of FY2026 revenue), flat versus $963.9M
- Segment
- Education: $267.6M (16.9%), down 13.6% from $309.8M
- Segment
- Entertainment: $65.7M (4.2%), up 7.7% from $61.0M
- Segment
- International: $277.2M (17.5%), down 0.9% from $279.6M
What they said about what is next.
No explicit fiscal 2027 numerical revenue or EPS outlook was provided in the 10-K. Management expects higher rental expense in FY2027 following the sale-leasebacks; it expects volatile school/district funding, while citing November Dog Man and 2027 PBS KIDS Clifford releases as pipeline catalysts.
The filing reads about the same as the one before it.
What came before.
- 10-Q · March 20, 2026
- Scholastic Corporation reported Q3 FY2026 with a diluted EPS of -$0.15, outperforming estimates of -$0.37 by $0.22. Revenue was slightly below expectations at $329 million compared to the estimated $331 million,…
- 10-Q · December 19, 2025
- Scholastic Corporation's Q2 results for 2025 showed solid performance with an earnings per share (EPS) of $2.57, surpassing expectations by $0.50, while revenue was slightly lower than anticipated at $551 million versus…
- 10-Q · September 19, 2025
- Scholastic Corporation reported a substantial decline in Q1 2026 with revenue dropping to $226 million, a decrease of 4.7% from the prior quarter and a dramatic 52.5% from the previous year’s Q1. The company faced…
- 10-K · July 25, 2025
- Scholastic Corporation reported a modest revenue growth of 2.3% year-over-year, totaling $1.625 billion for fiscal 2025. The negative net income of $1.9 million marked a substantial decline from the previous year's…
This is our reading of a public filing, not the filing. Read the original on SEC.gov · Educational only. Nothing here is investment advice.
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