Pearson hit a three-month low on Thursday after weak results from two competitors deepened concerns that academic publishing is suffering from a structural downturn.
John Wiley and Barnes & Noble Education both reported sharp falls in textbook sales, with Wiley warning that its traditional publishing business was “under considerable pressure, particularly in education”.
Students are increasingly aware of textbook rentals and ebooks, and are getting books when needed rather than at the start of each academic year, Wiley said. Both companies also cautioned that campus bookstores have been keeping inventories tighter this year, having had a slew of returns in 2015.
The news “strengthens our conviction both that [Pearson] will both deliver another profit warning and that its problems are primarily structural in nature,” said Liberum. “Our biggest concern with Pearson is in its US Higher Education business (estimated 45 per cent of group profits) and, primarily, that students are shifting away from expensive textbook purchases. Wiley’s comments yesterday suggest that this shift is real and also that it appears to be gaining momentum.”
Pearson, down 7.7 per cent to 797p, was also affected by news this week that the for-profit college ITT Technical Institute had shut down its 130 campuses. Regulatory scrutiny of US colleges is increasing, which will hit enrolment numbers and cut the chance of a Pearson’s higher education business recovering, Goldman Sachs said.
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