Scholastic Shares Hit Hard by Cut in Earnings Guidance

Shares of Scholastic fell sharply after the publisher reported a smaller quarterly loss as the performance of its children's book division improved, but cut its full-year profit outlook to below Wall Street expectations.

Scholastic , publisher of the Harry Potter series in the United States, said results for its fiscal third quarter ended Feb. 28 were helped by lower promotion costs but hurt by higher bad debt.

As a result, it cut its forecast earnings for fiscal 2007, which ends in May, to between $1.40 and $1.60 a share, from between $1.55 to $1.85. It forecast full-year revenue at $2.1 billion to $2.2 billion.

Analysts were expecting $1.77 a share on revenue of $2.19 billion.

New York-based Scholastic is gearing up for the July 21 release of "Harry Potter and the Deathly Hallows," which author J.K. Rowling has said would end the series.

Fans are anticipating a big surprise in the seventh book, including the possibility that Rowling will kill off the boy wizard hero.

Scholastic has said it plans to release a record-breaking 12 million copies for the first U.S. printing of "Deathly Hallows."

It reported a fiscal third quarter loss of $7.7 million, or 18 cents a share, compared with a loss of $15.5 million, or 37 cents a share, last year. The latest results included a gain of 4 cents a share on the sale of an investment.

Analysts were expecting a loss of 8 cents a share, before special items, according to Reuters Estimates.

Revenue rose to $497 million from $487.7 million. Wall Street was looking for revenue of $499.7 million, according to Reuters Estimates.

The latest quarter is typically a slower one for Scholastic as schools typically hold Scholastic book fairs in the spring and fall rather than the winter.

Revenue at the children's book publishing unit rose 3 percent, and the company reported an operating income for the division of $4.4 million compared with a loss of $3.2 million a year earlier.