Harlequin suffers from Shades

Harlequin Sales and Profits Fall Again, Blaming 50 Shades of Grey

Harlequin's parent company Torstar reported third quarter results Wednesday. The book publishing unit had sales of $107.8 million (CA), down by $7.9 million, or 7 percent (including $1.9 million in foreign exchange impact.) EBITDA (earnings before interest, taxes, depreciation and amortization) was down $5 million in the quarter at $19.8 million, which Torstar attributed to "revenue declines in most markets and increased costs in the North American digital business." Harlequin also incurred a $500,000 restructuring charge so far in 2012 and has laid off 8 people.

As in the past, the sales drop was attributed to declines in print revenues that couldn't be offset by digital gains, though "the shift in retail sales from print to digital began to moderate in the second quarter and this trend continued into the third quarter of the year." Harlequin also cited "the timing of higher digital marketing spending in addition to the initiation of higher author royalties for digital sales." Interestingly, the company also pointed to "the exceptional performance of a competitor's bestseller" -- in other words, 50 SHADES OF GREY -- that "has had a negative impact on our market share."

Overseas revenues for Harlequin continue to decline because of "economic conditions in Europe," although "lower operating earnings in several countries were partially offset by strong results in Germany," again related to digital growth as it was in the second quarter. (Strong UK results, cited in the previous quarter, were not mentioned this time around.)

Global digital revenues, up $2.9 million compared to a year ago, remained stable at 20.3 percent of Harlequin's total revenue for the quarter (and 20.4 percent for the first nine months of the year), up from 15.8 percent in 2011.
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