Announcing Harlequin's Third Quarter Results

Tonight is the first night of the season for me at the Dallas Symphony (We share a subscription with several friends) so I'm posting this a little early. People to meet, places to go.

Torstar, the parent corporation of Harlequin, reported on November 1 on the book business' third quarter 2006 results.

First, the numbers. Let's start with the big picture. Here's the third quarter (July to September) for 2006 compared to the same period in 2005:

____________________ Year-to-date________Year-to-date
______________________ 09/06_____________09/05___
Revenue from
July to September_____$118,776,000________$136,868,000

Operating Profit from
July to September____________$14,439,000_________$24,979,000

Revenue is down 13% from the same period last year, but operating profits are down 42%.

Now that we've seen the performance for the last three months, let's look at year-to-date performance. Here is the nine month period (January to September) for 2006 compared to the same period in 2005:

___________Year-to-date________Year-to-date
_____________09/06___________09/05

Reported revenue year-to-date______$351,774,000________$396,441,000

Revenue is down 11% from the same period last year.

Publishers Weekly said: "The strengthening of the Canadian dollar continues to hammer results at Harlequin.

Publishers Lunch reported "Harlequin continues to struggle, and the company offers its usual complex breakdown of the issues, which regularly include the strong Canadian dollar and the absence of currency hedging profits that helped them out in the past. Still,'excluding the impact of foreign exchange, book publishing operating profits were down $4.8 million, primarily from weaknesses in the North American direct-to-consumer division.'"

Here are the sales figures for the divisions, excluding the currency fluctuations. Parentheses indicate a negative number:

Harlequin Sales______________Third Quarter
North American Retail________($3,300,000)
NA Direct-to-Consumer_______($1,700,000)
Overseas___________________$1,300,000
Total:________________Down ($3,700,000)

You can see that the bulk of the revenue problem was in the North American retail division although the direct-to-consumer sales also suffered. Had it not been for the upswing in the Overseas division, the loss would have been $5,000,000, not $3,700,000.

Here are the year-to-date operating profit figures by division:

Operating Profit_____________Third Quarter
North American Retail_________($600,000)
NA Direct-to-Consumer_______($4,300,000)
Overseas____________________$100,000
Total______________________($4,800,000)

Again, the overseas division was the only division to report a profit. Here the direct-to-consumer (book clubs) were the problem, accounting for the majority of the loss. I have to wonder if the fact that consumers can now order and download from the Internet isn't hurting Harlequin's mail order division.

On October 5, I reported that Torstar had announced Harlequin would be cutting forty jobs or 4% of their worldwide work force. By then, Torstar was anticipating these earnings, and you can understand why they ordered those cuts.

Having said all this, I have to admit that I think Harlequin has taken some bold steps in the last few months to turn things around. They're committing additional resources to online (downloadable) sales and setting up a means to download books to library patrons. Last year they moved into a new market in the U.S. with manga for young women (they've had manga in Japan for some years).

My biggest issue with Harlequin has always been their insistence that they could "script" a book with a formulaic recipe for each imprint--describing the hero and heroine, the setting and the type of story expected under writer guidelines for the various imprints. That's actually the dynamic that sent me running toward erotic romance and to publishers who accept erotic romance submissions. I want a more forgiving genre--permitting experimentation (and, no, I'm not talking about kinky sex). I want to decide when the hero and heroine meet and want to be able to cross genres with my romances. That same free-wheeling attitude is what is drawing me to urban fantasy.

I'm holding out hope for Harlequin. If they can continue to think outside of the box (and outside of those damn writers' guidelines), I think they'll pull this out.

Just one writer's opinion.