Soft U.S. Results Hurt Quarto

by Jim Milliot, PW Daily -- Publishers Weekly, 8/14/2006

U.K-based publisher and packager Quarto Group had a mixed start to 2006, with sales inching up from £38.2 million last year to £38.3 million ($70 million), but operating income jumped 127%,to £2.0 million. The gains came entirely from the company’s international co-edition unit which reported a 4% sales gain and a 140% increase in operating income. Sales in the publishing segment, however, fell 2% and profits were off by 24%. While some of the sales decline was the result of the sale of some U.K. magazines, Quarto said the weak performance also reflected sluggish U.S. book sales. The majority of Quarto’s U.S. book sales come through its Quayside group, which includes Creative Publishing international, acquired in 2004.

In his letter to shareholders, Quarto chairman Laurence Orbach said sales of its home improvement titles had been hurt by distribution issues at Home Depot, while sales of its arts and crafts titles had been slowed by several issues at Michaels, including a change in its primary book distributor. The chain has also recently been sold. Sales of art books were down and sales at its promotional publisher Book Sales, fell by 25%.

Orbach was cautious about prospect for the balance of the year, pointing to a sluggish retail market in the U.S. as a top concern. Nevertheless, Quarto has no plans to cut back on its title output, he said, and while profit growth is expected to slow in the second half of the year, the company should meet its financial targets.