School Specialty Inc. (NASDAQ:SCHS) dropped more than 15% Wednesday after reporting much weaker first-quarter results than expected, driven by state budget cuts that have drastically hindered school spending.
The school supplier posted net income of $13.3 million, or 70 cents a share, compared with $28.43 million, compared with $1.51 a share, in the same quarter last year, and down significantly from average analyst estimates of $1.16 a share, according to a Thomson Reuters poll.
Revenue for the Greenville, Wisconsin-based company was $253 million, down from $330.4 million in the earlier-year period, and missing the Street’s view of $266.3 million.
Earnings were negatively impacted by continued delays in school purchases, increases in price competition in the furniture markets, all pained by state budget challenges and school spending cuts, as well as continued impact of execution issues created earlier in the year.
School Specialty CEO David J. Vander Zanden said it will most likely be more appropriate to combine results from the first two quarters of the year to gauge performance of the business.
“There was spending reluctance on the part of schools during the first quarter, however with most school budgets now set, we are seeing an increase in order activity,” he said.
The company, which saw a 31% drop last quarter in furniture sales, launched a new line of furniture in August, and said it expects the new initiative to improve price competitiveness.